CALIFORNIA ATTORNEY'S FEES

Fees As Damages: Denial Of Defendant’s Cross-Complaint Claim For Attorney’s Fees As Damages, Based On Trial Court’s Belief That It Was Constrained Under Copenbarger From Exercising Its Discretion, Reversed And Remanded For Retrial

The Trial Court Misunderstood The Scope Of Its Own Discretion Where It Was In The Middle Of An Active Trial And Could Have Ordered Unredacted Copies Of The Attorney’s Bills To Be Provided And Allowed Time For Opposing Parties To Depose Attorney.

            When the owner of an apartment building was sued for breach of contract regarding the sale of her property, she invoked the “tort of another” doctrine in her counter-suit against her real estate agent and the agent’s employer.  In her counter-suit, which proceeded to bench trial, owner mainly sought to recover the nearly $200,000 in attorney’s fees she incurred defending against the breach of contract action as the agent had forged her signature to the sales contract and related documents after owner rejected the buyer’s offer.  Just before trial, however, agent/employer filed a motion in limine to exclude the partially unredacted attorney billing records owner attempted to mark as trial exhibits – arguing unfair surprise as the billing records were not produced during discovery, and citing Copenbarger v. Morris Cerullo World Evangelism, Inc., 29 Cal.App.5th 1 (2018) [discussed in our October 20, 2018 and November 13, 2018 posts].  Then, during owner’s direct examination at trial, agent/employer objected to her testimony regarding the amounts paid to her attorney – claiming hearsay and citing Copenbarger. Ultimately – based on its interpretation of Copenbarger and belief that Copenbarger constrained it from exercising its discretion – the trial court sustained agent’s/employer’s objection to owner’s testimony, precluded judicial notice of the pleadings and papers in the court file to provide at least some evidence of the work performed by owner’s attorneys, and very reluctantly denied in entirety owner’s claim for fees as damages.

            In a 3-0 opinion, authored by Justice Dato, the 4/1 DCA reversed and remanded for retrial on the issue of fees as damages in Mai v. HKT CAL, Inc., Case No. D076708 (4^th Dist., Div. 1 July 12, 2021) (partially published – Copenbarger and evidence supporting fees as damages discussions published).  The panel disagreed with Copenbarger – concluding there is a critical distinction between the evidence necessary to support “attorney fees sought qua damages and attorney fees sought qua costs of suit.”  (Brandt v. Superior Court, 37 Cal.3d 813 (1985); Sooy v. Peter, 220 Cal.App.3d 1305 (1990).)  In a claim falling under the “tort of another” doctrine, which allows for the recovery of fees as damages when a plaintiff is forced into litigation with a third party due to the tortious conduct of defendant, the attorney fees are a type of compensatory damages and are recoverable in “the same way that medical fees would be part of the damages in a personal injury action.” (Brandt, supra, 37 Cal.3d at p. 817.)  As such, a prima facie case regarding the fees owner incurred and their reasonableness can be established by her testimony, and a hearsay exception for invoices exists for the limited purposes of corroborating a party’s testimony that he/she incurred a liability, and – if the charges were paid – as evidence that the charges were reasonable.  (Pacific Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 42-43 (1968).) Additionally, judicial notice of attorney-prepared documents in the court file was an available means to provide some evidence of the work performed. (Bruckman v. Parliament Escrow Corp., 190 Cal.App.3d 1051 (1987).)

            The panel also found the trial court misinterpreted Copenbarger as stripping it of its own discretion.  Copenbarger was assessing evidentiary errors after a trial concluded and judgment had been entered.  However, the trial court in this case was presiding over an active trial and could have paused the proceedings, ordered unredacted copies of the attorney’s bills to be provided to agent/employer, and allowed time for them to depose owner’s attorney.

Fees As Damages: 1/2 DCA Unpublished Decision Reminds Us That Litigation Expenses Alone Can Be Awarded As Special Damages In Slander Of Title Actions

In The Unpublished Case, $784,285.78 In Fees Were Awarded As Damages By The Lower Court, A Determination Affirmed On Appeal.

            In Burlingame Investment Corp. v. Kwai, Case No. A144944 (1^st Dist., Div. 2 May 18, 2018) (unpublished), plaintiffs won a slander of title cause of action against defendants, with the trial judge awarding defendants $784,285.78 in damages for the attorney’s fees work of two law firms to cure the harm caused by defendants’ injurious disparagements. The appellate court affirmed.

            This decision reminds us that litigation expenses alone, with no other damages, are available as special damages in slander of title actions, where the fees were incurred to cure the harm caused by injurious disparagements. (Rest.2d Torts, § 633, Comments a, k; Sumner Hill Homeowners’ Assn., Inc. v. Rio Mesa Holdings, LLC, 205 Cal.App.4^th 999, 1030, 1032 (2012).) Although fees cannot be awarded for pursuit of other general damages in a slander of title lawsuit, they can be awarded for removing the doubt cast by defendants’ actions and can be awarded where they overlap with fees for general damages where the issues are inextricably intertwined (such that no apportionment is required).

            Interestingly enough, the 1/2 DCA panel in Kwai decided that, while the general rule was that litigation expenses were awardable in situations involving land or recorded instruments, the reasoning in the cases also justified an award of fees as special damages in the situation before it involving defendants filing disparaging corporate documents with two government entities. Given that plaintiff had to counteract these publications by way of litigation, it was inconsequential that neither land nor recorded instruments were involved under the unusual circumstances of the case it was deciding.

Fees As Damages: Latham & Watkins Look Like It Won $1.6 Million in Fees, As Damages, In Long-Standing Malicious Prosecution Suit

Trial Judge Found Fees, Although Labeled “Obscene,” Were Normal For Los Angeles Cases Of This Sort.

            As reported by Law360, a California state judge recently ruled that Latham & Watkins tentatively was entitled to an award of attorney’s fees to the tune of about $1.6 million as damages in a malicious prosecution case against litigants Messrs. Parrish and Fitzgibbons, in a case which produced quite a bit of appellate activity (including a published California Supreme Court decision).  We assume the parties stipulated to the trial judge deciding the issue.  Although the losing side characterized the request as “obscene,” the trial judge found it was not that uncommon for a hard-fought Los Angeles case with high-powered counsel. 

Damages/Trade Secrets: Cal Sup. Ct. Holds Interim Adverse Judgment Rule Means Attorneys Not Exposed To Costs And Fee In Malicious Prosecution Action Even If Client Eventually Found Liable But Beat Underlying SJM Though Trial Ct Found Bad Faith

In Dicta, State Supreme Court Does Not Pass On Trade Secret Fee-Shifting Principle

            We believe that all attorneys might breathe a little easier after the recent decision of our California Supreme Court in Parrish v. Latham & Watkins, Case No. S228277 (Cal. Supreme Court Aug. 10, 2017) (published).

            In this one, plaintiff lost a trade secret misappropriation case, although they initially successfully fought back a defense summary judgment motion, but eventually lost after a trial with the trial judge granting the defense $1.6 million in costs and fees under the uniform trade secret fee-shifting statute based on the perception the case was brought/prosecuted in bad faith.  The defense was not done, suing plaintiff’s attorneys for malicious prosecution.  The California Supreme Court in Parrish ruled that the “interim adverse judgment rule” precluded the malicious prosecution suit with respect to the probable cause element.  After all, plaintiff did defeat a summary judgment motion and it was inconsequential that a later trial came to a different result.

            For our fee blog, the Parrish court expressly refused to pass on the propriety on the Gemini test applied to the California’s trade secret fee-shifting statute (see our category “Trade Secrets”), so this issue is still ripe to further litigation.

            BLOG COMMENTARY—We noticed that attorneys we know, Ben Shatz at Manatt Phelps and Jeff Scott of Greenberg Traurig, seemed to be involved on the winning side, amicus briefing considered.  Congratulations, gentlemen!

Section 1717: Fees As Damages Under Breach Of Contract Claim Must Be Decided By The Jury At Trial, Not The Trial Judge On Noticed Motion

Jury Right Implicated, With Brandt Being Persuasive On The Issue.

Jury.  1918-20.  Library of Congress.

            In Monster, LLC v. Superior Court (Beats Electronics, LLC), Case No. B278289 (2d Dist., Div. 7 June 21, 2017) (published), cross-complainant brought a breach of contract cross-claim, alleging that the cross-defendants had caused the company to incur attorney’s fees and other litigation costs.  After cross-complainant gained a summary judgment against cross-defendants’ own primary claims, it asserted that the trial judge, not the jury, had to determine its attorney’s fees as a form of contract damages based on a noticed motion under Civil Code section 1717.  The trial judge agreed, but was overturned on appeal in a writ proceeding.  The appellate court found that fee entitlement was based on fees being damages, implicating jury trial rights and not simply adjudging fees as costs so as to invoke a law and motion procedure for determination of fees.  Among other authorities, it placed reliance on analogous reasoning in insurance bad faith cases, particularly Brandt v. Superior Court, 37 Cal.3d 813 (1985). 

Insurance: On Remand, Intermediate Appellate Court Includes Brandt Fees And Then Finds $475,000 In Punitive Damages Rather Than $19 Million Justified Based On Prior Trial Court Remittitur

 

Case Was On Remand From California Supreme Court.

    On June 9, 2016, we posted on Nickerson v. Stonebridge Life Ins. Co., 63 Cal.4th 363, 368, 371, 377 (2016), which decided that Brandt fees should be added to compensatory damages for purposes of determining the compensatory damages ratio for purposes of adjudging the reasonableness of a punitive damages award. 

    The Second District, on remand in Nickerson v. Stonebridge Life Ins. Co., Case No. B234271 (2d Dist., Div. 3 Nov. 3, 2016) (published), considered the impact of the California Supreme Court’s decision on the punitive damages award.  What happened below is that plaintiff was awarded $35,000 in compensatory damages, $12,500 in Brandt fees, and $19 million in punitive damages.  The trial court found the punitive damages excessive, fashioning a remittitur based on a 10:1 punitive/compensatory damages ratio such that the punitive damages award should be $350,000 instead.  However, the Brandt fees were not included in the calculus, even though the state supreme court subsequently decided they should have been.  On remand, the 2/3 DCA panel decided the 10:1 ratio comported with due process such that the judgment was modified to allow for $475,000 in punitive damages ($35,000 compensatory award plus $12,500 Brandt fees equals $47,500, multiplied by 10 to reach $475,000).

Insurance: California Supreme Court Rules—Do Brandt Attorney Fees Get To Be Considered In Punitive-To-Compensatory Damages Ratio On The Compensatory Side?

 

You Betcha, State Supreme Court Decided.

    In Nickerson v. Stonebridge Life Ins. Co., Case No. S213873 (Cal. Supreme Court June 9, 2016), the California Supreme Court confronted the issue of whether attorney’s fees awarded to a prevailing plaintiff in a “bad faith” insurance lawsuit should be considered where attorney’s fees under Brandt v. Superior Court, 27 Cal.3d 813, 817 (1985) were awarded post-trial by the lower court via the parties’ stipulation rather than by the jury as damages in the primary case.  Our state supreme court said “yes,” they should be considered no matter the procedural context in which Brandt fees were awarded.  Because these attorney’s fees are essentially compensatory in nature, they can be considered by trial and appellate courts as far as adjudging whether the punitive/compensatory ratio was reasonable under state guidepost standards (absent circumstances, 9-10 to 1).  Justice Kruger penned the unanimous decision by the court.

Damages/Deadlines/Equity/Prevailing Parties: Dueling Prevailing Parties Remain That Way After Appeal

 

Remand to Determine if Offseting is Appropriate; Each Note Claim Judged on its Own.

     Williams v. Meyer, Case No. B243491 (2d Dist., Div. 6 June 4, 2013) (unpublished) involved a debtor plaintiff/cross-defendant and creditor defendant/cross-complainant having dueling claims on two notes delivered in favor of defendant and secured by plaintiff’s house (with fees clause existing in both notes). Plaintiff sued to invalidate both notes, claiming the first note was usurious and had been repaid by the labor of her estranged husband. Plaintiff further claimed that the recording of the second note constituted slander of title to her home, causing her to lose refinancing opportunities. On the eve of trial, the parties settled the dispute over the first note by reducing the face amount a little over $1,500 and lowering the interest rate/resetting the interest accrual date. Then, after a two-day bench trial, the lower court ruled that defendant had slandered title to the tune of $29,639 in lost refinancing opportunities. Plaintiff was declared the prevailing party entitled to costs, and she filed an unopposed costs bill asking that $7,121.75 in costs and the $29,639 in damages be offset against the first note’s outstanding balance.

     Now we come to the fee awards. Both sides moved for fees, with defendant being awarded $43,750 for prevailing on the first note and with plaintiff being awarded $122,500 in fees as damages for slander of title/Civil Code section 1717 fee recovery with regard to the second note.

     Both sides appealed to the Second District, Division 6 reviewing court.

     Although plaintiff did get a little lowering of the terms on the first note based on usury, defendant nonetheless prevailed when the court determined that $33,450 (out of $35,000) was owed on the note--rebuffing the theory that estranged husband’s labor had paid it off. Also, simply because plaintiff was the prevailing party for costs did not matter, because the concept is not the same when it comes to section 1717 fee recovery (“net monetary relief” for costs versus “greater relief” on the contract under section 1717).

     Defendant claimed plaintiff’s fee request was four days late, but the lower court can implicitly extend the deadlines for “good cause” even after the deadline has run, which it apparently did. (Lewow v. Surfside III Condominium Owner Assn., Inc., 203 Cal.App.4th 128, 135 (2012).)

     Alternatively, plaintiff was entitled to fee recovery for prevailing on the second note slander of title claim either under section 1717 by virtue of the fees clause or as damages under the title slander claim. (Sumner Hill Homeowners’ Assn., Inc. v. Rio Mesa Holdings, LLC, 205 Cal.App.4th 999, 1030-1031 (2012) [fees are damages under slander of title].)

     Finally, although the fee awards were affirmed, the matter was remanded for the lower court to consider whether it would honor plaintiff’s request for an offset of the damages/fee recovery against what was owed under the first note--an equitable consideration for the trial court in the first instance.

Fees As Damages: Stearman Investigative Costs In Construction Defect Matter Awarded To Plaintiff--But Well Under A Third Of Requested Expenses

 

Award Affirmed, Because They Have To Be Reasonable And Bear A Logical Relationship to the Successful Claims.

     Altman v. John Mourier Construction, Inc., Case No. C064340 (3d Dist. Jan. 10, 2013) (unpublished) is an interesting construction defect case involving an award of Stearman expenses, a specialized issue to which we now turn with some extra commentary.

     We may have alluded to Stearman expenses, because they actually include litigation expenses that are not normally awardable as routine costs under Code of Civil Procedure sections 1033.5 [routine litigation costs encompass only court-ordered experts, in the absence of a CCP § 998 offer, to which we refer you to our Home “Section 998” category for more information]. So, we give a quick primer and then survey the Altman decision--of special interest for any practitioners or jurists involved in construction defect matters.

     The primer, first. Civil Code section 3333, in tort actions, allows recovery for compensatory damages, whether or not anticipated (meaning that Hadley v. Baxendale contractual principles do not usually apply). In construction defect matters, case law has recognized that prevailing tort plaintiffs may recover, as part of their tort damages, expert fees incurred for investigative services that are not recoverable as routine litigation costs--CCP §§ 1033.5 and 998 notwithstanding, so-called Stearman costs from the landmark decision so deciding. (Gorman v. Tassajara Development Corp., 178 Cal.App.4th 44, 81-85 (2009); El Escorial Owners’ Assn. v. DLC Plastering, Inc., 154 Cal.App.4th 1337, 1361-1362 (2007); Stearman v. Centex Homes, 78 Cal.App.4th 611, 624-625 (2000).) However, as with many fees/costs-shifting provisions, the expenses claimed must be reasonable. (Gorman, 178 Cal.App.4th at 183.)

     Okay, now that the table is set, we go to the facts and decision in Altman.

     Plaintiff homeowners lost strict liability/warranty claims, won a contract claim (reversed in this appeal), and won a negligence claim totaling about $263,000. They then requested Stearman investigative expert costs of a little over $287,000. To their chagrin, the lower court awarded only $82,334 in investigative costs, prompting plaintiffs‘ appeal from this award.

     The appellate court affirmed. The problem here is that Stearman claimants do not get carte blanche authority on their requests, but are subject to the same reasonableness requirements applicable generally to most fee/cost-shifting disputes. Here, the trial court did not err by apportioning out certain expenses, taking into account what claims plaintiffs actually prevailed upon. When this was done, the reduction was no abuse of discretion. Reasonableness, which may require an apportionment, was the focal substantive anchor point that led to the affirmance of the result in this case.

Costs/Fees As Damages: Costs Of Appraisal Sought To Be Recovered Under Contractual Fees Clause Not Obtainable Based On Failure To Provide Proof At Damages Stage Of Case

 

     The prevailing party in Gardner v. McCoy, Case No. C067564 (3d Dist. Nov. 13, 2012) (unpublished) was bummed when the lower court did not award him the costs of an appraisal under a lease clause saying that the successful party would recover his “costs and expenses.” That ruling by the trial judge was affirmed on appeal because prevailing party improperly sought recovery through a costs memorandum, rather than putting on proof of expenses at the trial stage--showing the difference between what must be done when potentially seeking contractually allowable costs of a broader nature than routine costs, especially depending on the venue in which you are litigating. (See Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., 47 Cal.App.4th 464, 492 (1996) [must be plead and proven as damages].)

     BLOG UNDERVIEW--This issue is far from settled. Our local Santa Ana court has ruled that these type of costs can be sought and recovered through a costs memorandum, not following the logic that they have to be pled and proven as damages. (Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC, 185 Cal.App.4th 1050 (2010).) However, to add further fuel to the fire in this area, see our February 1, 2012 post on the Harbison-Mahony-Higgins Builder unpublished decision that suggests Thrifty Payless may not have been correctly decided.    

               I’m thinking it over. . . 

Fees As Damages/Allocation: Fifth District Rules That Attorney’s Fees Expended To Clear Title Are Compensable Slander Of Title Damages Where Slander Contained In Recorded Instrument

 

Dicta in Decision May Be Broader, But No Apportionment Required.

     For all of you real estate buffs out there, we report on the Fifth District’s 76-page decision in Sumner Hill Homeowners’ Assn. v. Rio Mesa Holdings, LLC, Case No. F058617 (5th Dist. Apr. 2, 2012) (certified for partial publication, slander of title fee discussion published), which was a wild fight over subdivision rights by a private community to San Joaquin River access. There are tons of issues for you real estate attorneys--easements, Map Act rights and statute of limitations, and navigable water concerns. Justice Kane wrote a very eloquent decision here on behalf of a 3-0 panel.

     However, for attorney’s fees purposes, the issue under consideration was whether attorney’s fees/costs alone could be compensable damages under a slander of title claim where there was no add-on damages of impairment to vendability. The answer was “yes,” but with a caveat. The appellate court held that attorney’s fees, as damages, were allowable without any proof of vendability impairment in a case where the slander arose from a recorded instrument. Yes, that is the direct holding. We bloggers would argue that the reasoning from this case might be extended more broadly to encompass fees as allowable compensatory damages in any slander of title case, but we do respect the Court of Appeal’s holding which was restricted to “the particular facts of this case.” (Slip Opn., p. 66.) Read it and see if you agree with us that there might be broader implications here.

     The appellate court rejected that any fee apportionment was required, because the jury was instructed on the pros and cons, including the exception that “inextricably intertwined” fee work does not have to apportioned out. Because fees were claimed as damages, this issue was addressed by the jury in the absence of a stipulation for it to be heard by the court. Compensatory damages were $803,951, with punitives of $2,419,800 also being assessed by the jury.

     BLOG UNDERVIEW--Attorney Jerry H. Mann was an expert witness used by plaintiffs, successfully, on the apportionment issue. Co-contributor Mike was a law clerk on the Fifth District with Jerry quite a while ago, with Jerry staying in Fresno to build his practice. Mike sends his greetings.

Costs/Fees As Damages: Nonspecific Expert Witness/Other Costs In Contractual Fee/Costs Provision Had To Be Pled And Then Proven Before Posttrial Stages

 

First District, Division 1 May Have Intimated Disagreement With Thrifty Payless in Recent Unpublished Decision.

     Way back in our June 23, 2010 post on Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC, 185 Cal.App.4th 1050 (2010), we knew that this case would engender some further judicial feedback. It basically held that expert witness fees are available under a contractual provision expressly awarding them and that such fees could be claimed in a posttrial memorandum of costs without the necessity of pleading and proving them during the litigation. (Id. at 1065-1067.) Well, we feel vindicated in a way, because it has engendered some feedback in the recent unpublished decision of Harbison-Mahony-Higgins Builders, Inc. v. Argonaut Constructors, Case No. A131575 (1st Dist., Div. 1 Jan. 31, 2012) (unpublished).

     There, a successful subcontractor garnered an award of expert witness fees and other costs not specifically authorized by the routine costs statute, CCP § 1033.5, but did so through a posttrial costs memorandum based on an indemnification contract clause in the parties’ agreement. (Incidentally, the total fees/costs award was a little over $1 million, although appellant did not contest the fee award. However, the costs being challenged did amount to nearly $400,000.)

     On appeal, appealing contractor won a reversal on this aspect of the costs award.

     After a scholarly survey of the jurisprudence in this area, the appellate court in Harbison-Mahony-Higgins Builders concluded the trial court erred in awarding these non-section 1033.5 costs through a posttrial cost proceeding. Rather, it ruled that these expenses had to be pled and proven, suggesting in the process that (1) Thrifty Payless may have wrongly departed from existing precedent, and (2) even under Thrifty Payless, pleading and proof was required because the case before it dealt with a nonspecific costs provision (unlike the situation in Thrifty Payless, which involved a contractual provision expressly allowing for expert witness fees to be awarded).

Damages/Family Law: “Somewhat Unusual” Case Involving Pro Tem Judge Conflict Cost Transitory Winning Litigant’s Attorney $780,482 In Damages For Attorney’s Fees Expended In Dissolution Proceeding Tainted With The Conflict

 

No, Love Lost as Fourth District, Division One Reverses JNOV Disfavorable to Initially Losing Litigant, Who Won a Jury Verdict, Was Then Overturned Post-trial, and Was Vindicated on Appeal.

     This one caught our attention because of the appellate court’s rather subdued characterization of it being a “somewhat unusual case.” Wow! This is one unusual case in our view, but we will let you be the judges.

     Rogozienski v. Love, Case No. D056857 (4th Dist., Div. 1 Oct. 5, 2011) (unpublished) involved an underlying dissolution proceeding where husband and wife agreed to have the matter heard by a family law practitioner sitting as a pro tem judge. (Respondent Love was wife’s attorney, and Appellant Rogozienski was the husband.) After pro tem judge entered a judgment decidedly adverse to husband’s interest after a three-phase trial, husband discovered that pro tem judge had a conflict--while the dissolution action was pending, Love transferred his interest in a vacation home to a third party, which then transferred the interest to pro tem judge. Once husband obtained discovery of this transaction and made a fuss about it, the pro tem judge withdrew from the case and his rulings were vacated in entirety after further trial and appellate court proceedings.

     Husband then sued both pro tem judge and Love (wife’s attorney) for civil damages, mainly claiming as damages the attorney’s fees he incurred in the first round of litigation due to Love’s conduct after previous proceedings resulted in a consensus that the pro tem judge had judicial immunity. Husband’s case proceeded to a jury trial where he won $780,482 in damages against Love. However, Love won a JNOV on the theory that husband did not prove that the gift was the real legal cause of his lost litigation expenses.

     The Fourth District, Division 1 reversed and reinstated the jury’s verdict. Although basic equities did pervade the appellate court’s decision, it did not buy the argument that the gift of the home was not instrumental in husband’s targeted loss and that other attacks would have necessarily resulted in vacating of the pro tem judge’s rulings.

     BLOG UNDERVIEW--Although not referenced in the decision, we did some public searches because this dispute did catch our attention. The California State Bar filed a Notice of Disciplinary Charges against both the pro tem judge and Mr. Love, both of whom responded in 2007 to the Bar charges. The latest we could find was that a status conference in the matter was scheduled for January 18, 2011; otherwise, nothing else to report.

Damages: $655,306.99 Attorney’s Fees Damages Award By Jury Vacated For Lack of Substantial Evidence

 

Second District, Division 3 Found Hearsay Evidence Did Not Underpin Award.

     Here is a procedurally interesting case, although the opinion does not shed light on why a jury awarded attorney’s fees as damages pursuant to a fee clause in a note purchased by an attorney from a bank. (Usually, this exercise takes place under a post-trial motion procedure.) It also goes to show you that fees, as damages, must be supported by competent, substantial evidence. If not, vacation of the award may well happen, as it did in the next case.

     Soni v. Neman, Case No B222133 (2d Dist., Div. 3 Mar. 7, 2011) (unpublished) was a case where a plaintiff attorney bought a note and two guarantees in a situation where he felt that the property had plenty of equity so that he could reap some sort of profit, whether handsome or slim. He sued to collect, but defendant raised an interesting defense--Penal Code section 6129, which provides that “[e]very attorney who, either directly or indirectly, buys or is interested in buying any evidence of debt or thing in action, with intent to bring suit thereon, is guilty of a misdemeanor” (a champerty inspired statutory provision).

The trial court concluded there was no evidence to justify giving section 6129 as a defense (although it has been recognized as a defense in the right circumstances), resulting in a jury verdict award of a little under $3.5 million. Included in that amount was $655,306.99 in attorney’s fees under a contractual fees clause in the promissory note.

     Although affirming most of the judgment, the appellate court modified it to delete the fee award. Reason? Plaintiff only produced hearsay evidence that fees were expended by predecessor bank or his law firm on related title litigation potentially covered under the fees clause. The trial court should have sustained the hearsay objection, which meant there was no evidence plaintiff incurred fees at all. This lack of substantial evidence was dispositive as far as the fee award is concerned.

Fees As Damages: Civil Code Section 3334—Wrongful Use/Occupancy Statute—Does Allow Attorney’s Fees As Damages

Second District, Division 6 So Rules in Unpublished Decision.

     This next one should interest any litigators or courts involved in boundary line/encroachment/easement disputes, involving the breadth of the damages provision contained in Civil Code section 3334.

     Section 3334 provides that in non-eminent domain cases the detriment caused by wrongful occupation of real property includes the value of the use of the property for 5 years previously, the reasonable costs of repair/restoration, and “the costs, if any, of recovering the possession.” It was this last quoted language that was issue in the next case we discuss.

     What happened in Papageorge v. LaMarca, Case No. B216821 (2d Dist., Div. 6 Sept. 9, 2010) (unpublished) is that neighboring landowners tussled in property line encroachment litigation, with plaintiff prevailing in an action against defendant. Plaintiff was awarded $21,251 in damages and a total of $53,300 in costs and attorney’s fees as prevailing party (with $40,000 being the fee tally). Both sides appealed, with defendant claiming the whole thing was wrong (including the fee award) and with plaintiff arguing the fee award should have been greater.

     Except to remand for a recalculation of the damages for a shorter time period, the end result was affirmed by a 3-0 decision by Justice Coffee on behalf of the Second District, Division 6.

     Plaintiff indeed was entitled to fees under Civil Code section 3334. The judicial referee relied on a Miller & Starr commentary indicating that fees to successfully prosecute a wrongful occupation real property dispute were recoverable under the language we quoted above. Defendant cited no other authority to the contrary, so entitlement did exist. That was a significant hurdle cleared by plaintiff.

     Plaintiff did not fare so well on the cross-appeal.

     Plaintiff did not get any sympathy that her $40,000 fee award was too low. Plaintiff had requested $92,144.15, but the $40,000 award was upheld under the deferential abuse of discretion review standard applied to the amount of a fee award.

Costs: Second District, Division 7 Seems To Part Company With Fourth District, Division 3 Over Procedure For Recovering Non-statutory Costs

 

Division 7 Seems To Favor Trial Proof Method Over Post-Judgment Costs Hearing Approach in Unpublished Decision.

     On June 23, 2010, we reported on Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC, __ Cal.App.4^th __, 2010 WL 2473831 (4^th Dist., Div. 3 June 21, 2010), where a panel of the Fourth District, Division 3 (in a 3-0 opinion authored by Justice Moore) found that non-statutory expert witness fee costs did not have to be specifically pled and then proved up during trial even though the expert fees are explicitly included in the contract as recoverable costs. In doing so, the Thrifty Payless panel expressly parted company with contrary appellate authority exemplified by the “pleading and proof at trial” approach required in Carwash of America-PO LLC v. Windswept Ventures No. I, 97 Cal.App.4^th 540, 544 (2002). Now, we apparently have the Second District, Division 7—albeit in an unpublished decision—adhering to the Carwash approach. Sometime in the future, the California Supreme Court likely may need to resolve the conflict. 

     Unzipped Apparel, LLC v. Apparel Distribution Services, LLC, Case No. B212775 (2d Dist., Div. 7 July 7, 2010) (unpublished) was one of three appellate decisions issued on July 7 in protracted litigation featuring an 11-week jury trial over the manufacture, distribution, and sale of Bongo jeans (a brand of jeans for junior girls).

Expert Fees Under Fees Clause: Fourth District, Division 3 Rules They Are Recoverable Through Routine Costs Procedure

Appellate Panel Disagrees With “Pleading and Proof” Approach in Carwash.

     Many attorney fees clauses have language that allows the prevailing party to recover both attorney’s fees and “witness and expert fees.” Although Code of Civil Procedure section 1033.5 does not permit expert witness fees to be recovered as statutory costs, case law does recognize that sophisticated parties can choose a broader standard via contract so that expert fees can be recovered. (Arnaz Contracting Co. v. St. Paul Fire & Marine Ins. Co., 47 Cal.App.4^th 464, 492 (1996). However, the questions then shifts to how do you procedurally recover them?

     Well, there now is a definitive split of opinion on this particular question.

     In Carwash of America-PO v. Windswept Ventures No. 1, 97 Cal.App.4^th 540, 544 (2002), an appellate panel concluded that such expert witness fees could only be recovered if pled and proven at trial rather than submitted in a cost bill.

      Recently, the Fourth District, Division 3—in a 3-0 opinion authored by Justice Moore—expressly disagreed with Carwash on this point in Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC., Case No. G041414 (4^th Dist., Div. 3 June 21, 2010) (certified for publication).

Fees As Damages: Fees Incurred In Prior Action And Malicious Prosecution Action Properly Awarded As Damages

   Second District, Division 6 Affirms Substantial Fees As Damages, Minus An Offset.

     Substantial fee awards do not necessarily always arrive in the form of postjudgment costs awards. Rather, they can be, and often are, awarded as damages by a trier of fact in certain actions, especially malicious prosecution lawsuits.

     Saby v. Louks, Case No. B209906 (2d Dist., Div. 6 Nov. 23, 2009) (unpublished) is a good example of when fees are awarded as damages.

     There, neighbors were engaged in quite a donnybrook. Briefly stated, neighbors with dogs believed their other neighbors “ratted” them out to local animal control authorities, causing wife of the dog owners—who worked at Blue Cross—to hack into the health insurance records of one of the other neighbors and then threatening to cancel that health insurance through actions outside of the employment authority of the Blue Cross employee. Litigation and a related arbitration ensued, with dog owners eventually dismissing their action against other neighbors with prejudice. Non-dog neighbors brought a malicious prosecution and abuse of discretion suit against dog-owning neighbors and their litigation attorney, with the attorney settling with non-dog neighbors for a pretrial amount of $17,500 and non-dog owners “lighting” up their neighbors with an award of $305,106.04 in economic damages (consisting of attorneys fees paid by non-dog owners to their counsel in the prior proceedings and malicious prosecution suit) and $25,000 in economic damages. Among other things, losing neighbors appealed the award of economic damages to non-dog owners as attorney’s fees and argued that the judgment had to be offset by the $ 17,500 settlement paid by their attorney.

     On appeal, both sides did get something.

     Dog owners lost the challenge to the $305,106.04 in economic damages. Legal fees incurred in the prior underlying proceedings and the malicious prosecution action were properly awarded as damages in the malicious prosecution suit brought by non-dog neighbors. However, the $17,500 settlement by losing neighbors’ attorney should have been allowed as an offset under Code of Civil Procedure section 877(a). So, a substantial award was sustained on appeal, minus a prior settlement offset, in favor of non-dog-owning neighbors. (BLOG OBSERVATION—Co-contributor Mike cannot comment on the merits, because Labrador Riffle does not bark very much, unless she is not getting enough Milk Bones.)

SLAPP/Malicious Prosection Damages Interplay: SLAPP Fee Ruling Is Not Collateral Estoppel On Awarding Special Damages In Subsequent Malicious Prosecution Case

Second District Determines SLAPP Ruling Does Determine Amount of Motion to Strike Fees, But Remaining Attorney’s Fees Are Fair Game and Defendant Bears Burden of Allocating Out Unreasonable Fees.

The next decision is an interesting one that we predict will have more and more play as SLAPP motions and later malicious prosecution awards interact in seriatim litigation involved between bitterly engaged parties. The case is Jackson v. Yarbray, Case No. B204321 (2d Dist., Div. 7 Nov. 10, 2009) (certified for partial publication), authored by Presiding Justice Perluss on behalf of a 3-0 panel of the Second District, Division 7.

Plaintiffs (earlier, successful defendants) won a substantial $3.1 million malicious prosecution award against certain defendants (earlier plaintiffs suing and losing to the malicious prosecution plaintiffs) in a Los Angeles bench trial, arising from plaintiffs’ successful defense of an action commenced in Riverside. (An attorney firm was exonerated in the L.A. malicious prosecution action.) Malicious prosecution plaintiffs appealed the trial court’s refusal to award further special damages in the form of fees and costs incurred in their defense of the Riverside action, keeping in mind the plaintiffs (defendants at the time) did partially win an anti-SLAPP motion after the Fourth District, Division 2 so held and were awarded fees of $77,000 by the Riverside judge for prevailing on the motion. (See ComputerXpress, Inc. v. Jackson, 93 Cal.App.4^th 993, 1020 (2001).) [As a quick aside, the SLAPP victors had requested $300,720 in fees, but were only awarded $77,000.] In the malicious prosecution trial, the attorney firm successfully moved to preclude introduction of fees other than the $77,000 fee award, a motion granted by the trial court—but with the understanding that this did not preclude introduction of fees as special damages.

At trial, malicious prosecution plaintiffs introduced unrebutted evidence they expended $379,000 in defense of the prior Riverside case eventually dismissed by the malicious prosecution defendants. Although deciding that the $77,000 SLAPP fees award had to be offset from this and did have collateral estoppel effect, the trial judge eventually denied any fees as malicious prosecution special damages because plaintiffs failed to allocate fees from the overall amount spent and show that they were not included in the SLAPP award.

Malicious prosecution plaintiffs appealed and obtained a reversal/remand on this issue.

Justice Perluss, on behalf of the panel, initially noted that all reasonable fees incurred in defending a malicious prosecution action are recoverable as special damages, contrasted with the situation in SLAPP motions—only reasonable fees spent on the motion to strike are recoverable as fees under the SLAPP fee-shifting statute.

The real error identified by the appellate court was the trial court’s reversal of the burden of proof on the allocation issue. Malicious prosecution defendants, not plaintiffs, are the ones having the burden of showing that fees in a malicious prosecution action were not reasonably incurred in defense of the prior case. (Bertero v. National General Corp., 13 Cal.3d 43, 60 (1974).) Although agreeing that the $77,000 SLAPP fee was an appropriate offset, the matter had to be reversed and remanded for a proper calculation of special damages in the malicious prosecution action based on the improper application of the burden of proof by the lower court.

Tort of Another and Equitable Indemnity Claims to Fees Founder

Second District, Division Seven Affirms Denial of Motions for Attorney's Fees and Sanctions

     We have written from time to time about tort of another and section 1021.6 as bases for attorney's fees.  Justice Perluss, author of a 3-0 opinion, has written a conveniently concise primer on the subjects.  State Farm Mutual Automobile Ins. Co. v. Martinez, Case No. B205248 (2nd Dist. Div. 7, July 27, 2009) (unpublished).

     Mr. Martinez, dba Manny's Transmissions, rebuilt a transmission for a truck used by Prime Building to haul construction materials.  The truck caught fire and was a total loss.  State Farm stepped into the shoes of Prime Building, its insured, and filed a subrogation claim against Mr. Martinez.

     Mr. Martinez did not believe he was responsible for the fire, and asked State Farm to preserve the evidence.  Eventually, State Farm did not wish to pay the storage costs, and the the truck was dismantled and the parts sold for salvage value.  Additionally, records relating to the claim were lost.  At this point, it did not look so good for State Farm, but be patient, dear reader, and read on.

Tort of Another: Purchasers Of Challenging Driveway Recoup Fees From Prior Action Against Prior Owner/Contractor For Negligent Construction Of Driveway Impairment

Sixth District Determines Trial Court Properly Applied “Tort of Another” Doctrine in Favor of Landowners With the Challenging Driveway.

     Co-contributors Marc and Mike have written an article on when attorney’s fees may be awarded as damages in certain cases. (See “When the American Rule Doesn’t Apply: Attorney’s Fees as Damages in California Litigation,” California Litigation, Vol. 21, No. 3 (California State Bar 2008), available for reading with thanks to the State Bar on our November 13, 2008 post.) One such instance occurs if the “tort of another” doctrine applies. The next opinion affirmed a fee award based on this doctrine.

     Bennett v. M. Lewis, Inc., Case No. H032813 (6^th Dist. May 29, 2009) (unpublished) involved residential purchasers who had to sue when their adjoining neighbors tried to prevent them from using a driveway turnout. The parties reached a settlement in which residential purchasers obtained legal title to the turnout area. Residential purchasers subsequently sued the prior owner and contractor which constructed the driveway for nondisclosure and negligent construction. Following a bench trial, residential purchasers were awarded damages against defendants on the negligent construction claim in the amount of $32,531.31, some of which included attorney’s fees they had incurred in the prior litigation against their adjoining neighbors. Among other challenges, defendants challenged the award of fees under the “tort of another” doctrine.

Tort of Another: Plaintiffs Suing For Expenses In Suing Successor Property Owners Under Nuisance/Trespass Theories Not Entitled To Recover Fees From Predecessor Property Owners

 

Sixth District Narrowly Construes Scope of “Tort of Another” Fee Exception.

     In our November 13, 2008 post, we noted that co-contributors Marc and Mike wrote an article on recovering attorney’s fees as damages in the Vol. 21, No. 3 issue of the 2008 California Litigation. One of the discussed topics was the “tort of another” exception to the American Rule for recovery of attorney’s fees. We discussed how narrowly this exception has been construed by the relevant jurisprudence. The next recent case reinforces this conclusion.

Attorney’s Fees Not Recoverable As Compensatory Damages Under Uniform Fraudulent Transfer Act or “Tort of Another” Doctrine

 

Fourth District, Division Three Reverses Wide-ranging Fee Award and Remands For Narrower Determination.

     We have seen the litigants in the next case before. (See our posts of June 2, 2008 and August 27, 2008, where the McMahons have suffered adverse fee awards and sanctions in a long-standing battle with a homeowners association.) Here, they obtained a reversal of a substantial fee award made as part of a compensatory damage “prove-up” and a remand for a new trial on the damages issue. In the process, Justice Ikola, writing for a 3-0 panel of our local Court of Appeal, faced some interesting legal issues relating to fee entitlement under the Uniform Fraudulent Transfer Act (UFTA) or the “tort of another” doctrine.

     In Palacio Del Mar Homeowners Assn. v. McMahon (Palacio VI), Case No. G039731 (4^th Dist., Div. 3 Dec. 1, 2008) (unpublished), after McMahons failed to appear at trial, Palacio (the HOA) introduced evidence and was awarded $570,000 in compensatory damages, $250,000 in punitive damages, and an unspecified amount of attorney’s fees and costs. McMahons lost their motion to set aside the judgment, prompting the appeal in Palacio VI.

     They did better this time, because the five other appeals were losses for them.

     The bulk of the compensatory damage award—around $500,000—represented attorney’s fees and costs by Palacio in maintaining the fraudulent transfer action after the much smaller judgment was satisfied. Justice Ikola initially concluded that Palacio could not recover its attorney’s fees as compensatory damages under the UFTA. Because the UFTA authorizes “any other relief the circumstances require subject to the applicable principles of equity and in accordance with applicable rules of civil procedure” (Civ. Code sec. 3439.07(a)(3)(C)), it does not authorize recovery of fees because “applicable rules of civil procedure” include the American rule requiring each side to bear his own costs unless a statute specifically provides otherwise. Nothing in the UFTA specifically provides for fee recovery, with many out-of-state authorities supporting this result. (See, e.g., Gardiner v. York, 153 P.3d 791, 795 (Utah Ct.App. 2006); Volk Constr. Co. v. Wilmescherr Drusch Roofing Co., 58 S.W.3d 897, 901 (Mo.Ct.App. 2001); Morris v. Askeland Enterprises, Inc., 17 P.3d 830, 833 (Colo.Ct.App. 2000); Selvage v. J.J. Johnson & Associates, 910 P.2d 1252, 1264 (Utah Ct.App. 1996); Golconda Screw, Inc. v. West Bottoms Ltd., 894 P.2d 260, 266 (Kan. App. 1995); Spanier v. U.S. Fid. & Guar. Co., 623 P.2d 19, 28-30 (Ariz.Ct.App. 1980).)

     That turned attention to Palacio’s reliance on the “tort of another” doctrine emanating from Prentice v. North Amer. Title Guar. Corp., 59 Cal.2d 618, 620 (1963).

     The problem with McMahons’ reliance on this doctrine is that it properly focuses only upon fees incurred in an action against a third party. (See Golden West Baseball Co. v. Talley, 232 Cal.App.3d 1294, 1302-1303 (1991) [doctrine inapplicable where plaintiff sought to recoup fees from principal for fees incurred against agent; only one true party involved].) If “tort of another” could be stretched this far, Justice Ikola observed, “attorney fees could be recovered in every civil action.” (Slip Opn., at p. 10.) Palacio did not fare better in arguing that fees could be recovered against joint tortfeasors; the doctrine did not allow Palacio to recover from McMahons any fees incurred in prosecuting UFTA claims against any transferees who were joint tortfeasors. (Vacco Industries, Inc. v. Van Den Berg, 5 Cal.App.4^th 34, 57 (1992); but see Filip v. Bucurenciu, 129 Cal.App.4^th 825, 837 (2005).) However, the “tort of another” doctrine did allow potential recovery to Palacio for fees incurred in connection with transfers to innocent transferees (third parties who are not joint tortfeasors), requiring remand to see if Palacio could prove any such fees as “compensatory damages.”

     BLOG UNDERVIEW—Co-contributors Marc and Mike recently surveyed the “tort of another” doctrine in an article entitled “When the American Rule Doesn’t Apply: Attorney’s Fees as Damages in California Legislation,” which was published in Vol. 21, No. 3 of California Litigation (which came out in November 2008). The article can be found on our post of November 13, 2008, and we thank the California State Bar (whose Litigation Section publishes California Litigation) for allowing us to link to it. Our discussion of “tort of another” is at pages 20-22 of the article; for another case that holds that the doctrine does not apply in essentially a two-party lawsuit (even though there may be more nominal parties), see David v. Hermann, 129 Cal.App.4^th 672, 689 (2005).

     Some of you may wonder what happened to the punitive damage award in Palacio VI. That, too, was reversed because Palacio had failed to submit meaningful current evidence of McMahons’ income, expenses, assets, or liabilities, something that is required in California in order to recover punitive damages. (See Baxter v. Peterson, 150 Cal.App.4^th 673, 680 (2007).) Palacio relied on McMahons’ sale of two properties in 2000 and appraisal of their house in 2004, but this information was outdated and said nothing about the sales proceeds/equity involved in the respective situations. No retrial was allowed, because Palacio had a “full and fair opportunity to present [its] case for punitive damages,” citing Baxter, supra, 150 Cal.App.4^th at 681 and Kelly v. Haag, 145 Cal.App.4^th 910, 919-920.

     McMahons finally won an appeal that will likely prevent them from being exposed to the brunt of the $750,000-plus judgment overturned upon review.

     The opinion’s discussion of fees under UFTA and the “tort of another” doctrine is must reading for parties or practitioners confronting these issues.

“TORT OF ANOTHER,” “TORT OF ANOTHER,” NO, NO, NO, NO.

Second District Confirms That the “Tort of Another” Exception Applies to Third Party Actions, Not Direct Actions Against Joint Tortfeasors.

            Infac Mgt. Corp. v. Infac India Group LLC,Case No. B195247 (2d Dist., Div. 4, May 19, 2008) (unpublished) reminds us that the “tort of another exception” to the American Fees Rule—the rule that fees are not recoverable unless allowed under a contract or by statute—is not broad in nature.  Rather, this exception only applies to recovery of attorney’s fees necessitated by having to participate in true third-party actions.  No more, no less, but an indispensable element nonetheless.

            In Infac, plaintiff sought recovery of attorney’s fees in prosecuting an action against others in order to obtain relief from a prior judgment.  The only problem is that the action was against joint tortfeasors, not third parties. 

            Were fees awardable in such circumstances?  No, said the Second District, in an unpublished decision which happens to be a stark reminder about the constraints of this narrow doctrine.

            The Court of Appeal observed that the “tort of another” exception applied only where a plaintiff prosecuted or defended an action against a third party to protect his interests, citing Prentice v. North American Title Guar. Corp., 59 Cal.2d 618, 620 (1963).

            In the case before the Infac court, the plaintiff had brought a direct suit against joint tortfeasors, not third parties.  (Slip Opn., at p. 29.) 

            The result:  no, no, no, to triggering of the “tort of another” exception; the plaintiff was not allowed to claim fees under this exception, a result reached by a lower court and affirmed on appeal by the reviewing court.