CALIFORNIA ATTORNEY'S FEES

Deeds Of Trust, Fee Clause Interpretation: Narrow Nature Of Lender Fee Clauses In Promissory Note And Deed Of Trust Did Not Allow Fee Recovery To Lender Based On Wrongful Foreclosure Tort Claims

Broader Fee Clauses Might Have Resulted In A Different Conclusion!

            Byun v. Loma Linda University, Case No. E069549 (4th Dist., Div. 2 July 25, 2019) (unpublished), although unpublished, does offer some drafting tips to lenders where wrongful foreclosure cases are brought by borrowers, who prevail and then want to recoup some attorney’s fees. 

            Borrower lost a wrongful foreclosure, declaratory relief, cancellation of instruments, and quiet title action against lender after losing real property in a foreclosure sale.  The defense prevailed at a bench trial, but the trial court denied the lender side’s request for attorney’s fees of $33,917.76 based on fees clauses under the promissory note and deed of trust.  The note provided that the lender was entitled to recovery attorney fees and legal expenses incurred in connection with “hiring or paying someone else to help collect this Note if Borrower does not pay.”  The deed of trust fees clause said this: “If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys’ fees at trial and upon any appeal.”

            The 4/2 DCA affirmed.  Analytically, it found that Civil Code section 1717 did not apply because it only dealt with contract actions, but that still left a consideration of whether the two fees clauses covered the non-contractual claims at issue.  The appellate court concluded they did not, based on their narrow breadth.  Lender conceded the note clause was not part of collecting on the note, but really only reached tort claims asserted by losing plaintiff.  With respect to the deed of trust, the problem was that lender did not institute an action so that the fees clause was not triggered.  However, the Court of Appeal, in distinguishing a different result in Jones v. Union Bank of California, 127 Cal.App.4^th 542, 544 (2005), did suggest the result might have been very different had the fees clauses extended to “reasonable attorney fees, and all expenses in connection with the protection or realization of the collateral securing the Note” or “proceedings involving Guarantors that in any way affect the exercise by Lender of its rights and remedies hereunder.”  Even unpublished decisions provide valuable drafting tips to future parties and litigants with respect to gaining fee recovery—in a word, use broad language!

Prevailing Party: Defendants Winning Five-Year Mandatory Dismissal Were Prevailing Parties For Attorney’s Fee Recovery Request Based Upon Lease Fees Clause

Lower Court Erroneously Allowed Plaintiff To Voluntarily Dismiss Without Prejudice.

            In Cole v. Hammond, Case No. B292331 (2d Dist., Div. 4 July 24, 2019) (partially published), a trial court denied a defense motion to dismiss the case with prejudice because it had not been tried within five years and granted plaintiff’s motion to voluntarily dismiss without prejudice.  The Second District, Division 4, on appeal, reversed those determinations, concluding that it was legally inevitable that the case had to be dismissed based on the five-year statute (CCP § 583.360, which can be very cruel at times).  Once this occurred, defendants on remand could choose to move for attorney’s fees as the prevailing party given the existence of a fees clause in the parties’ rental agreement. 

Liens For Attorney Fees, Retainer Agreements: Broad Retainer Lien Language Relating To A Lien For General Representation Did Allow For Attorney’s Lien Claim Work

Also, Lien Claim Work Can Encompass Unrelated Work To A Specific Litigation Case.

            In Callahan & Blaine v. Vogeler, Case No. G055912 (4^th Dist., Div. 3 July 24, 2019) (unpublished), attorney-defendant in pro per balked at a contractual breach lawsuit brought by Callahan & Blaine—a well-known Orange County law firm—based on broad attorney lien language in the retention agreement:  a lien on the client’s future recoveries, even if not representing the client, and with the lien reaching “general representation and litigation” which included the action at issue where a settlement was reached.  Appellant’s technical arguments on why the attorney’s lien did not attach were dismissed because (1) the broad language did give C&B a claim to general representation work, and (2) an attorney’s lien asserted in an action need not be limited only to fees or costs related to that action (Bluxome Street Associates v. Fireman’s Fund Ins. Co., 206 Cal.App.3d 1149, 1152-1154 (1988)).  Beyond that, C&B gave a discount on their lien in a settlement agreement releasing certain items, so equity did not favor appellant’s technical arguments to the contrary.  Acting Presiding Justice Moore was the author of the 3-0 opinion.

Reasonableness Of Fees, Special Fee Shifting Statute: Prevailing Defendant In Civil Harassment Proceeding Properly Awarded $10,000 In Fees And $1,100 In Costs

Trial Court’s Conclusion That $181,013.63 Request Was Unreasonable/Inflated Was Affirmed On Appeal.

            Folks, we can reiterate that you need to make opening fee requests which are reasonable and bear some semblance of reality to the case involved, subject to aggressive tactics by the other side or complexity/longevity of the case which usually will justify a substantial fee request.  The prevailing respondent learned that lesson hard in Felarca v. Worden, Case No. A153633 (1^st Dist., Div. 4 July 19, 2019) (unpublished).

            Petitioner filed a civil harassment restraining order against respondent, but she dismissed it before there was a merits ruling on her petition.  Respondent moved to recover attorney’s fees under CCP § 527.6(s), which is a discretionary fee-shifting provision in favor of a prevailing party in a civil harassment proceeding, CCP § 1032 (costs shifting provision), and CCP § 128.5 (sanctions provision).  Respondent sought $181,013.63 in fees, submitting redacted work descriptions and an invoice for work totaling $113,037.50.  The lower court found the submission was unreasonable and inflated, awarding $10,000 in fees and $1,100 in costs under the section 527.6(s) fee-shifting provision.  Both sides appealed, petitioner claiming that defendant did not prevail, and respondent claiming the fee award was woefully inadequate.

            The fee determination was affirmed on appeal.

            With respect to petitioner’s appeal, courts for section 527.6(s) fee-shifting purposes do use the CCP § 1032 prevailing party test (Adler v. Vaicius, 21 Cal.App.4^th 1770, 1777 (1993)); and, under that test, the respondent did prevail despite the voluntary dismissal.  The lower court expressly found that the petition lacked substantial justification, was inspired by “politics,” and the whole matter was unreasonably prolonged by petitioner’s conduct.  That was more than enough to establish prevailing party status in respondent’s favor.

            Respondent did not gain traction on trying to get more fees.  The lower court was not required to use the lodestar analysis in civil harassment proceedings.  The severely redacted fee submissions made it impossible to review the work performed, not to mention that asking for such a substantial sum in a non-complex civil harassment proceeding presented the different case of an inflated fee request which allowed for a stark reduction.  The appellate court ended with the observation that the lower court would have been within its right to deny the fee request altogether.  This brings us to the moral of this story, one we have repeated frequently:  when you make a fee submission, remember the nature of the case and what a trial judge will think when you present a greedy request!

In The News . . . . Judge In Largest Ohio Libel Judgment Of $25 Million Awards Plaintiffs’ Attorneys Almost $6.3 Million In Attorney’s Fees And $300,000 In Expenses

Fee Award Included A Positive 1.5 Multiplier For Plaintiffs’ Counsel.

            Gibson’s Bakery and its owners sued Ohio’s Oberlin College for libel/intentional infliction of emotional distress, winning a jury verdict of around $44 million (compensatory and punitive damages added together).  Later, Lorain County Common Pleas Judge John Miraldi reduced the judgment to $25 million—Ohio’s largest libel judgment.

            Plaintiffs’ attorneys, two law firms and a sole practitioner, then requested attorney’s fees of $9.5-14.5 million for 14,400 in billable hours as well as $404,000 in expenses.  Oberlin College countered that a proper fee award should be in the range of $2-2.25 million, although defense counsel admitted billing 15,600 hours on the case.

            Judge Miraldi determined that the proper lodestar for plaintiffs’ attorney work was $4,180,930, which he increased to $6,271,395 based on a positive 1.5 multiplier enhancement.  He also awarded $294,000 in expenses, about 75% of plaintiffs’ request. 

Class Action: July 2019 Paper By Three Law Professors Study Fee Award Trends In Mega-Settlement Federal Class Action Securities Cases

Multiplier Trends And Attorney “Make Work” Conclusion Are Among The Takeaways.

            Right around July 16, 2019, three law professors—Stephen J. Choi, Jessica Erickson and A.C. Pritchard--published a paper exploring fee recovery in federal securities cases involving big company defendants which result in mega-settlements.  They surveyed 1,719 federal securities cases between 2005 and 2016.   We link their paper here and summarize the findings which we found to be of interest:

• Institutional investors have reduced fee percentage recovery by plaintiffs’ counsel over time, but they have not been the active watchdogs intended by Congress.
• Judges award the fees requested by plaintiffs’ counsel in 85% of the cases.
• Judges award larger fees when the lodestar cross-check is done, rather than just using the percentage of recovery method alone.
• Average hourly rate in these cases is $688.
• The median multiplier is 1.105.
• The largest securities cases with respect to settlement amounts receive more scrutiny by district judges.
• Multipliers show an upward trend with the defendant company size.
• Multipliers go up if the case is likely to settle.
• Courts generally award multipliers in more egregious fraud cases, based on the conduct of the defense rather than for risk (especially in cases where dismissal is unlikely).
• Because district judges tend to award lower percentages of recovery in mega-settlement cases, the professors found that there was a larger frequency of “make work”—hours billed not to advance the case but support a big fee award—especially where multiple lead counsel is involved.
• They conclude: “Overall, our results suggest that plaintiffs’ attorneys are receiving windfall fee awards from mega-settlement cases at shareholders’ expense.”

Costs, Requests For Admissions: Jane Doe Plaintiff Losing At Trial Based On A Nonsuit Properly Assessed With $19,500 In Costs-Of-Proof Sanctions And With Routine Costs Of $107,440.35

Respondents Conceded $6,988.27 In Claimed Costs Were Not Allowable.

            Doe v. Dept. of Children & Family Services, Case No. B276699 (2d Dist., Div. 8 July 18, 2019) (published; previously issued as unpublished on June 20, 2019) is a case demonstrating how respondents, on appeal, can gain appellate credibility by conceding a legal issue for which there is no substantive response.

            In this case, plaintiff Jane Doe lost on a nonsuit at trial, after other claims were pared during pre-trial stages, to DCFS and other governmental defendants.  The lower court agreed that Jane Doe wrongfully denied 12 of 16 RFAs, imposing costs-of-proof sanctions for trial efforts in presenting evidence which led to the nonsuit to the tune of $19,500 (out of a requested $85,459.50).  Then, the lower court granted defendants $114,428.72 in routine costs after taxing $38,289.15 in claimed costs.  Jane Doe appealed.

            RFA Costs-of-Proof Sanctions.  The appellate court agreed that the 12 RFAs were wrongfully denied, especially ten of them in light of the County providing computer logs to refresh Jane Doe’s memory about certain visits. Her claim that she could not recall the exact dates did not resonate given the computer logs provided by the County.  Jane Doe also argued that none of the “denied” facts were used in the nonsuit determination, but the appellate court rejected this given that trial was under way and that defendants did have to present proof on the number of visits.  The nonsuit “twist” in the procedural context of this case was inconsequential.

            Routine Costs.  Respondents did a good thing upfront here.  They admitted that $6,988.37 in investigative costs were not allowable, which we believe added credibility to the defendants’ positions on appeal.  With respect to the other routine costs being challenged, they were sustained on appeal this way:  (1) filing fees were allowable because they were still “incurred” even though the government is exempt from paying such fees; (2) services fees for witnesses not called at trial are allowable in the lower court’s discretion; (3) section 998 expert fees for experts not called to testify are recoverable in the court’s discretion; (4) trial exhibit copying costs are authorized; (5) lodging and meal expenses for out-of-town depositions by attorneys and paralegals are discretionarily proper; (6) courier and messenger fees are recoverable in the lower court’s discretion; and (7) litigation support vendor fees and telephonic court appearance fees are authorized. 

Family Law: Section 271 Sanctions Of $1,000 Assessed Against Ex-Husband’s Counsel Was Reversed On Appeal

Section 271 Sanctions Can Only Be Awarded Against A Party; Proper Remedy Is To Seek CCP § 128.5 Sanctions Against Counsel.

            A family law judge assessed Family Code section 271 sanctions of $1,000 against ex-husband’s attorney.  That award was reversed in Martinez-Huff v. Huff, Case No. B284241 (2d Dist., Div. 3 July 18, 2019) (unpublished) because section 271 sanctions can only be assessed against a party, not a party’s counsel.  (Burkle v. Burkle, 144 Cal.App.4^th 387, 403 n. 7 (2006); Orange County Dept. of Child Support Services v. Superior Court, 129 Cal.App.4^th 798, 808 (2005).)  The proper remedy was to seek CCP § 128.5 sanctions against counsel, something which was not done.  (In re Marriage of Daniels, 19 Cal.App.4^th 1102, 1110 (1993) [construing predecessor statute].) 

Consumer Statutes: 2/2 DCA Reverses 50% Reduction Of Requested Lodestar Fees To Prevailing Lemon Law Plaintiff Based On Plaintiff’s Rejection Of Informal Settlement Offer

Defense Should Have Served A CCP §998 Offer As A Mechanism To Curb Requested Fees.

            Plaintiff prevailed in a Song-Beverly Act auto case by accepting a settlement offer for $72,000 plus allowing the lower court to determine prevailing party fees to plaintiff.  (The settlement amount was almost twice the amount of the car.)  Earlier, the defense had made an informal settlement offer for less (but to repurchase the car), which was not accepted by plaintiff.  Plaintiff moved for fees of $76,718 (which included a .25-.35 positive multiplier), but the lower court only awarded $38,359 (half of the request) based on its perception plaintiff had been unreasonable in rejecting the first informal offer.

            The 2/2 DCA reversed in Sabag v. FCA US LLC, Case No. B290072 (2d Dist., Div. 2 July 16, 2019) (unpublished).

            The fee-shifting provision, Civil Code section 1794(d), requires a mandatory award to a prevailing car buyer based on an attorney’s actual time expended, as long as it is reasonable.  Nothing in the statute contains a penalty for rejecting a settlement offer; rather, the way to shift the playing field differently is for the defense to make a valid CCP § 998 offer.  This situation was distinguishable from other cases where a plaintiff’s fees were reduced for rejecting a settlement offer and then recovering much less than the rejected offer.  Rather, a similar result reached in Etcheson v. FCA US LLC, 30 Cal.App.5^th 831, 840, 843 (2018) [discussed in our December 6, 2018 post] was found persuasive.  Requiring a trial court to determine if an informal settlement offer was in good faith would inject too much subjectivity into the process, which “could put pressure on plaintiffs and their counsel to settle for less than they believe the case is worth for fear that otherwise their attorney fees would be in jeopardy.”  So, the lesson from this one is for the defense to formulate a sound section 998 offer in an attempt to cut down on lemon law fee recovery to a suing auto buyer.

Section 998: Defense CCP § 998 Offer Was Too Uncertain Where It Referenced An Undisclosed Settlement Agreement With Releases To Plaintiff Offeror

Offeree, Although Might Prudently Ask For Clarification, Is Under No Legal Obligation To Ask For Clarification Of Section 998 Offer.

            The defense in an automobile personal injury accident case involving two plaintiffs made a CCP § 998 offer to the more severely injured plaintiff which was conditioned upon “the execution and transmittal of a Settlement Agreement and Release of All Claims by PLAINTIFF in favor of DEFENDANTS; that Settlement Agreement and Release of All Claims to be drafted by counsel for the DEFENDANTS.”  The trial judge, after the severely injured plaintiff obtained a favorable jury verdict, found the section 998 offer to be uncertain, awarding $29,000 in costs to plaintiff and denying the defense $160,000 in requested costs.

            The Fourth District, Division 2 affirmed the uncertainty determination in Soliz v. City of Big Bear Lake, Case No. E067555 (4^th Dist., Div. 2 July 16, 2019) (unpublished).

            Relying on Sanford v. Rasnick, 246 Cal.App.4^th 1121, 1131-1132 (2016), the appellate court concluded that the offer was invalid because it was conditioned on an undescribed and unrevealed settlement agreement, unlike the situation in Fasberg Construction Co. v. Housing Authority of City of Los Angeles, 152 Cal.App.4^th 720, 765 (2007) where the section 998 offer included the proposed settlement agreement so that the offeree could evaluate the full terms of the 998 offer.  The defense tried to argue that the offeree was obligated to seek clarification of the offer, but the 4/2 DCA panel found no such legal obligation to exist given that the offeror is responsible for ensuring that the 998 offer is valid.  In response to the argument that not requiring the offeree to ask for clarification would discourage settlement of lawsuits, the Court of Appeal answered that this was untrue because an offeree risks that a lower court might find an offer to be valid if the offeree does not ask for clarification—in a word, the offeree also has risks in not seeking clarification. 

Special Fee Shifting Statute: County’s Adherence To Privileges And Exemptions Until Last Moment Did Not Prevent California Public Records Act Petitioner From Receiving Prevailing Party Attorney’s Fees

Petitioner Was A Catalyst For Production Of Requested Documents.

            California Public Records Act has a fee-shifting statute in favor of a prevailing party petitioner under Government Code section 6259(d), one which is liberally construed in order to encourage governmental entities to produce documents to the public except for ones which fall under certain restrictions/exemptions.  In Saint-Fleur v. County of Fresno, Case No. F075060 (5^th Dist. July 15, 2019) (unpublished), plaintiff was declared the prevailing party and awarded fees against County, after the lower court ordered County to produce certain public records.  County claimed that it had produced documents in response to previous litigation, but the record showed that it had claimed privileges/exemptions and only at the eleventh hour confirmed that the documents ordered to be produced had indeed been produced in other litigation.  The Fifth District found the fee award appropriate given that petitioner could not have known this and was the catalyst for County’s confirmation about the nature of the responsive documents.

Special Fee Shifting Statute: Governmental District Properly Awarded $8,160 In Discretionary Attorney’s Fees Against Plaintiff Losing Brown Act Challenge

Plaintiff Wanted Agenda Detail Not Required Under The Brown Act.

            In Olson v. Hornbrook Community Services Dist., Case No. C086760 (3d Dist. July 15, 2019) (unpublished), plaintiff’s Brown Act challenge against the District was blown out when the lower court sustained a demurrer without leave to amend.  The Brown Act has a discretionary fee-shifting provision by which a trial judge can award court costs and reasonable attorney’s fees where a defendant prevailed in the action and the court finds that the action was “clearly frivolous and totally lacking in merit.”  (Gov. Code, §54960.5.)  The lower court must provide some written findings on what conduct was found “sanctionable” under this provision.  (Boyle v. City of Redondo Beach, 70 Cal.App.4^th 1109, 1120 (1999).)  The trial judge in Olson determined that the Brown Act did not require the agenda detail claimed by plaintiff, awarding $8,160 in discretionary fees to the District.  That determination was affirmed on appeal because it was based on the record and the trial court’s tentative was detailed in showing why the agenda specification advanced by plaintiff was not required.

Appealability: Plaintiff’s Filing Of A Cross-Appeal, Claiming Fee Award Was Too Low, Did Not Preserve Challenge To Fee Award

Proper Method Was To File A Separate Appeal, Although Fee Award Had To Be Reconsidered Due To Reversal Of Economic Damages Component Of Jury Verdict.

            Kealy v. Ford Motor Credit Co., LLC, Case No. B286410 (2d Dist., Div. 5 July 15, 2019) (unpublished) counsels to plaintiffs believing that a fee award is too low, where the defense has appealed from the underlying judgment, to preserve a challenge to the fee award by separately appealing it, not attempting to challenge it through simply filing a cross-appeal.

            In this one, plaintiff challenged an attorney’s fees award under the Consumer Credit Agencies Reporting Act in the amount of $325,709 because it was much lower than plaintiff’s requested $772,043.95, after winning a jury verdict with economic damages of $345,000, with non-economic damages of $25,000, and with punitive damages of $9,212.92.  The defense appealed the judgment and fee award, with plaintiff cross-appealing the fee award on the ground it was not enough.

            The appellate court reversed the economic damages award as a matter of law so that the fee award did have to be revisited, but affirmed the remainder of the judgment.  However, plaintiff’s challenge that the award was not enough could not be entertained because the proper vehicle to challenge was through a separate appeal, not a cross-appeal.  (Eisenberg et al., Cal. Practice Guide:  Appeals and Writs (The Rutter Group 2017) ¶ 3:175, p. 3-79.)

Appealability: Failure To Appeal From Separate Fee Award Required Dismissal Of Appeal

Appellate Court Had No Jurisdiction To Entertain Challenge To Fee Award.

            We have posted on this topic many times, but McKillop v. Wallace, Case No. B283783 (2d Dist., Div. 5 July 15, 2019) (unpublished) is yet another cruel reminder to litigants and counsel to separately appeal post-trial fee awards.  In this one, plaintiff was hit with adverse fee awards against two defendants totaling about $195,000 in an unsuccessful breach of contract suit.  However, plaintiff only appealed the underlying judgment, not the subsequent fee award.  Plaintiff’s appeal was dismissed because the appellate court had no jurisdiction to entertain the fee award absent a separate timely notice of appeal.  (Nellie Gail Ranch Owners Assn. v. McMullin, 4 Cal.App.5^th 982, 1007-1008 (2016).)

Intellectual Property: U.S. Court Of Federal Claims Senior Judge Lettow Awards Significant Attorney’s Fees, Expert Fees, And Costs In Favor Of Successful Patent Infringement Plaintiff And Against The USA

Senior Judge Found That Litigation Funding Did Not Divest Plaintiff From Fee Recovery And That AIPLA Survey Of Hourly Rates Was Most Relevant Starting Point For Gauging Rates.

           Because litigation funding is becoming an increasingly used tool to allow plaintiffs to prosecute complex civil cases, we post on FastShip LLC v. U.S., No. 12-484C (U.S. Court of Federal Claims June 27, 2019), authored by Senior Judge Charles F. Lettow.

            In this case, plaintiff FastShip sued the U.S. for patent infringement under 28 U.S.C. § 1498(a), which allows the patent owner to sue the U.S. under specified conditions for infringing a patent without a license.  Plaintiff eventually won almost $6.5 million in damages, which actually became larger after an appeal and other activities.  Plaintiff financed expenses partly through the use of a litigation funding entity (around $600,000).  Plaintiff then moved to recover almost $7 million in attorney’s fees, almost $1.75 million in expert fees, and $2.43 million in costs (mainly electronic discovery and specialized computer display expenses).

            The basis for fee entitlement was section 1498(a), which was amended in 1996, to allow recovery of an owner’s reasonable fees for attorneys and expert witnesses if the owner is an independent investor, a nonprofit organization, or an entity having less than 500 employees in a five-year period (which FastShip was), which costs are automatic if the action was pending for more than 10 years or if the court finds that the U.S.’s position was not substantially justified.  Under this fee-shifting provision, Senior Judge Lettow awarded FastShip $6,178,288.29 in attorney’s fees and related costs (mainly expert fees, with $5,713,339.60 being the attorney’s fees component) and $1,229,679.07 in costs.

            In doing so, he determined as follows:

• • FastShip was a real party allowed to recover fees and costs, with its utilization of litigation funding not making that entity the one who had to recover costs, reasoning that litigation funding in this instance allowed the plaintiff to take on the government in a daunting case fought hard on both sides;
  • Prelitigation administration activities do not count for calculating the 10-year automatic fee/costs time frame;
  • Based on pre-litigation positions and several mistaken litigation activities such as stubbornly relying on experts ultimately contradicting the U.S.’s positions, the government was not substantially justified in its defense of the case;
  • FastShip did not have to be successful on all subsidiary claims to be entitled to a fees and costs award;
  • The American Intellectual Property Law Association’s (AIPLA’s) hourly rate survey was found to be the most relevant and persuasive for patent attorney hourly rates; and
  • FastShip could not recover supplemental costs ad infinitum from each subsequent filing such that an omnibus supplemental request at the end was denied.

            In a footnote, Senior Judge Lettow did observe that the Third, Fourth, Fifth, Sixth, Tenth, and Eleventh Circuits have rules requiring the disclosure of litigation financing agreements with third parties that have a financial interest in the outcome, although nothing in these rules ban or disfavor litigation financing agreements.

Arbitration, Fee Clause Interpretation, Indemnity: Narrow Fee Clause, Allowing Recovery In Arbitration Only, Did Not Confer Fee Recovery For Fees Relating To Litigation

Indemnity Clause Gave No Basis For Fee Recovery, Because It Was Unilateral In Favor Of Unsuccessful Party, Not Allowing For Fee Entitlement--$628,587.50 In Fees Went Away!

            In Club Acacia Community Assn. v. Professional Community Management of California, Inc., Case No. G056313 (4^th Dist., Div. 3 July 11, 2019) (unpublished), a long-time dispute between an HOA, property manager, and contractor over the problematic installation of a fire alarm system at a condominium building resulted in property manager being found liable to HOA for $88,500 after allocation of comparative negligence against HOA and contractor in litigation, but no one pursuing claims in arbitration.  There were two potential fee entitlement provisions: (1) an arbitration clause, but fees to the prevailing party only applied to an arbitration; and (2) an indemnification clause between HOA and property manager, in favor of property manager, for claims arising out of performance of the HOA-property manager contract.  Eventually, the lower court awarded HOA fees in the amount of $628,587.50 against property manager based on the arbitration clause.  Property manager appealed the fee award, to its credit.

            First of all, the indemnity clause did not allow for fee entitlement.  An indemnity clause is not made mutual by operation of Civil Code section 1717, such that HOA could not get fees, because it only favored property manager.  (Building Maintenance Service Co. v. AIL Systems, Inc., 55 Cal.App.4^th 1014, 1029 (1997).)

            Most importantly, the arbitration clause only applied to arbitration activities, such that the litigation attorney’s fees award went POOF!  Respondent HOA offered numerous theories—conduct of the parties and drafting party adverse ambiguities (contra proferentem) arguments—but they were to no avail, based on the unambiguous language that only arbitration fees were to be awarded.  So, in the end, $628,587.50 in adverse fees went away on appeal, in a 3-0 unpublished decision authored by Justice Moore.

Appeal Sanctions, Arbitration: Broad Operating Agreement Fees Clause Justified $238,000 Fees/Costs Award To Arbitration Prevailing Party, Plus Fees For Winning On Appeal

Appealing Party Just Avoided Sanctions For Frivolous Appeal, But Fees On Appeal Found To Be The Appropriate Remedy.

            Walters v. Boustead Securities, LLC, Case No. G056250 (4^th Dist., Div. 3 July 11, 2019) (unpublished) is an interesting Fourth District, Division 3 opinion affirming a $238,000 fees/costs arbitration award in favor of a prevailing party where the compensatory award was $186,354.  The operative fees clause in an operating agreement between the parties was broad, fully supporting fees, costs, and expenses to the prevailing party in any litigation or arbitration.  The merits of the arbitration award, including the fees/costs components, were beyond review.

            That brought to the appellate court to a request for sanctions by the non-appealing party.  Admitting that silly arguments were advanced on appeal and that the matter was “a close call,” the 4/3 DCA panel, in a 3-0 opinion authored by Justice Moore, believed that the respondent was entitled to attorney’s fees on appeal (in remand proceedings before the lower court), because the other side made no argument why the operating agreement fees clause did not allow for this result.  So, in the end, a less restrictive alternative was adopted, even though we could say that sanctions were narrowly averted.

            HAT TIP—We give a hat tip to Richard A. Jones, who is a local attorney known by co-contributor Mike.  He is a locally-based Santa Ana attorney who successfully represented respondent on appeal.  Congrats!

Discovery, Family Law: $2,500 Discovery Sanctions Order Reversed In Favor Of Responding, Prevailing Party Because No Competent Declaration Of Incurred Expenses Was Presented

CCP § 2023.040 Was The Key Statutory Provision.

            Just to show you that technicalities can matter in the discovery area, the First District, Division 2 reversed a $2,500 discovery sanction against ex-wife in Marriage of Stupp v. Schilders, Case No. A154396 (1^st Dist., Div. 2 July 10, 2019) (unpublished).  What happened is that a party moving to compel discovery responses lost, and the lower court awarded the successful responding party with $2,500 in discovery sanctions.  This one had to be reversed because the trial judge, earlier, had stricken a declaration filed by the responding party because it was not signed by the actual declarant and that was the only proof of what was expended in responding to the motion to compel.  Given the lack of evidence on expenses incurred in responding to the discovery motion, the sanction award had no support at all.  (Code Civ. Proc., § 2023.040.) 

Appeal Sanctions: 2/4 DCA Imposes $21,366 Against Counsel Payable To Other Side And $8,500 Payable To Appellate Clerk For Frivolous Appeal

Appealing Nonappealable And Abuse Of Discretion Orders Led To The Result.

            In Turner v. The Rule Co., Case Nos. B248667 et al. (2d Dist., Div. 4 July 10, 2019) (unpublished), an appeal was taken from several nonappealable orders and discovery sanctions/routine costs orders where abuse of discretion was the governing review standard.  The appellate panel concluded that the appeal was frivolous, imposing $21,366 against appellate counsel payable to the other side as well as $8,500 payable to the appeals clerk.

Homeowner Associations: Homeowners Were Not Catalysts For Easement Agreement Assumption, Because They Wanted A More Expansive Amendment

HOA Was Prevailing Party Under Easement Agreement Fees Clause, Awarded Its Fully Requested $51,460 In Fees. 

            In Lemley v. Aliso Homeowners Assn., Inc., Case No. B288789 (2d Dist., Div. 3 July 3, 2019; posted July 5, 2019) (unpublished), HOA and homeowners got entangled in an easement agreement dispute in which homeowners wanted specific performance/declaratory relief to enforce an amendment to the agreement, while HOA defended on the principal grounds of mootness because it recorded an assumption of obligations in the original easement agreement.  HOA won, was declared the prevailing party, and was awarded $51,460 in attorney’s fees under the easement agreement fees clause.  Homeowners appealed, claiming they were actually the prevailing parties as the catalyst for the HOA’s easement agreement assumption.  The appellate court affirmed the result below, determining that homeowners wanted an amendment, not an assumption, and that HOA did prevail by obtaining dismissal of homeowners’ suit.  (In fact, homeowners’ failure to appeal the prior dismissal on the merits cemented that they were not the catalysts for the assumption by the HOA.)

Sanctions: $16,000 CCP § 128.7 Sanction Against Successor Counsel, Based On Motion Not Specifying The Improper Conduct Before He Formally Substituted In, Was Reversed

Simply Filing A Declaration Saying “Retained” Was Not Tantamount To Presentation Of Complaint Filed By Predecessor Counsel.

           Timing can be everything, and it was in the next case considering a CCP § 128.7 sanctions award in Primo Hospitality Group, Inc. v. Haney, Case No. B283030 (2d Dist., Div. 5 July 5, 2019) (published).

            Predecessor counsel had filed a legal malpractice action against certain attorneys relating to a commercial lease water intrusion matter in which there was a $2.5 million-plus award against the malpractice plaintiffs.  (About half of total award was attorney’s fees.)  After the prior attorney successfully withdrew, malpractice plaintiffs retained another attorney despite the existence of a slew of section 128.7 motions.  Successor counsel finally formally substituted into the case, but he did not file a new complaint and only filed a previous declaration saying he was “retained” with respect to the germane motion for sanctions.  Successor counsel filed opposition to two summary judgment motions, with one being dispositive on a causation defense.  Then, based on the last section 128.7 motion, the lower court sanctioned successor counsel to the tune of $16,000.

            Successor counsel’s appeal was successful.  Timing was everything here.  Successor counsel’s filing of a “retention only” declaration was not the equivalent presentation of a complaint to the court, which had been signed by earlier counsel.  Although the summary judgment opposition might have been sanctionable, the relevant sanctions motion did not specify that conduct as the basis for sanctions.  With respect to the time of filing the “retention only” declaration, it was not crystal-clear successor counsel was proceeding on the extant complaint, based on reasoning in the federal decision of Bakker v. Grutman, 942 F.2d 236, 240 (4^th Cir. 1991).  Sanctions award reversed.

Section 1717: Borrower’s California Homeowners Bill Of Rights Claims Were Not “On The Contract” For Civil Code Section 1717 Fee Recovery Purposes

Borrower Did Not Invoke Directly The Terms of Agreements With Fee Clauses.

            In Thomas v. Seterus, Inc., Case No. A155170 (1^st Dist., Div. 2 July 2, 2019) (unpublished), lenders moved for post-trial attorney’s fees based on note and trust deed fees clauses against a borrower bringing claims based on the California Homeowners Bill of Rights (HBOR).  Lenders sought to recoup $334,557.50 in fees, but the trial court concluded that borrower’s claims were not “on the contract” under Civil Code section 1717.  The appellate court agreed.  Even though the note and trust deed were in the background all along the way, borrower was careful only to invoke HBOR rather than invoking the fee clauses under the loan agreements. 

Fee Clause Interpretation: “Collection Costs” Fees Clause Of A Narrow Nature Was Interpreted Against Drafting Party And Did Not Include Fees For Defending Counterclaims

Fee Award Remanded For A Restudy, But A 50% Reduction For Overlitigation By Prevailing Party Likely Stands On Remand.

           To take us back to law school days, contra proferentem is Latin for interpreting a contract against the drafter.  That principle was at play in contractual interpretation of the scope of a lender fees clause in Cavalry SPV I, LLC v. Watkins, Case No. D072299 (4^th Dist., Di. 1 July 1, 2019) (published).

            Lender prevailed in a debt collection dispute, including turning back tort and other claims based on borrower’s cross-complaint (counterclaims).   The operative fees clause said this: “Collection Costs.  To the extent permitted by law you are liable to us for our legal costs if we refer collection of your account to a lawyer who is not our salaried employee.  These costs may include reasonable attorney’s fees.  They may also include costs and expenses of any legal action.”  Based on this clause, the lower court awarded lender its costs of prevailing on the debt and in defensing plaintiff’s cross-claims.  The fee award was $134,604.86, with reductions for overlitigation by the lender.

            The 4/1 DCA reversed and remanded based on the conclusion that fees clause did not allow for recovery of work relating to the defense of counterclaims.  The appellate court agreed that the provision was not broad enough to encompass this work, because the counterclaims were much more than a legal action “to collect on the account.”  Given the clause appeared in a one-sided adhesion contract, the terms had to be construed against lender.  However, because the matter had to be remanded anyway, the appellate court did not adopt the 50% reduction for overlitigation per se, although indicating that it could be considered again upon the “re-do.”

Consumer Statutes, Multipliers: $327,782.75 Lemon Law Fee Award, Inclusive Of A 1.5 Positive Multiplier, Affirmed On Appeal Where $109,357.05 Was Compensatory Award

Plaintiff’s Counsel Showed Why Defense Maneuvers And Jury Verdict Made The Case Beyond A Typical Lemon Law Case.

            We have said this frequently in the past on prior blogs, but for clients and practitioners defending Song-Beverly Consumer Warranty Act “lemon law” cases, you need to be attuned to fee exposure, including positive multipliers, when engaging in battle with an auto purchaser plaintiff.

            Fuller v. FCA US LLC, Case No. B286224 (2d Dist., Div. 4 July 2, 2019) (unpublished) involved a situation where an auto purchaser plaintiff in a “lemon law” case obtained a jury award of $109,357.05,  She then moved for attorney’s fees under a pro-plaintiff fee shifting statute, Civil Code section 1794(d) as well as a positive 1.5 multiplier.  After expressing doubt about whether a multiplier was justified, the trial court awarded the lodestar and requested multiplier to the tune of $327,782.75.

            The 2/4 DCA affirmed.  Plaintiff’s counsel did a good job of showing why this was not a typical lemon law case based on strategic decisions made by defense counsel and getting the trial judge to admit she was surprised at the verdict (which showed good trial skills).  The record at the fee hearing was crucial, getting the lower court to find this was not your typical lemon law case, resulting in a positive multiplier which the defense could not change on appeal. 

SLAPP: Mandatory Defense Award Of Only $1,875 In Fees For Five Hours Of Work Reversed

Appellate Court Had No Problem With $9,000 SLAPP Request For 24 Hours Of Work.

            Just to show you that abuse of discretion is not an unlimited deferential standard of review, we post on Kohanbash v. Specialty Baking, Inc., Case No. B283117 (2d Dist., Div. 1 July 1, 2019) (unpublished).  What happened in this case is that the lower court granted a successful SLAPP prevailing party only $1,875 in fees for five hours of work on the SLAPP motion, about an 80% reduction from the $9,000 in fees claimed for 24 hours of work.  This case was not only reversed, but it was remanded with appellate instructions to grant the entire $9,000 fee request.  The appellate court had real difficulty determining that five hours only in SLAPP work was all that should be compensated given that overall reasonableness of the fee request.

In The News . . . . Recent Corporate Counsel Global Benchmarking Reports Offers Clues For What Is Kept In-House And What Goes Outside

Hourly Billing Rate Still Prevails For Legal Work Referred By Corporations To Outside Counsel.

            The Association of Corporate Counsel and recruiting firm Major, Lindsey & Africa partnered up to release a 2019 Global Legal Department Benchmarking Report, which can be obtained freely through a Website search.  It involved interview responses from 508 corporate law departments, operating across 30 countries and 71 industries.  Here is a summary of the results which interested us:

• • Two-thirds of corporate departments hire outside firms using standard hourly or discounted hourly rates, followed by nearly 45% that use flat fees, and 31% that use “capped fees.”
  • Most in-house legal teams accounted for a small percent of their company’s total staff, about 0.3% of employees.
  • Contract management internal work stayed in-house, at 97%. This work generally was performed by lawyers, versus paralegals or other legal assistants, in more than 80% of the surveyed departments.
  • The median legal department used 10 firms, listing three as “significant” firm relationships.

Eminent Domain: Inverse Condemnation Plaintiffs, With Contingency Arrangement, Could Only Recoup Fees Actually Incurred Under Contingency Arrangement With Counsel

Sixth District Agreed With Third District’s Analysis On The Scope Of CCP § 1036.

            The Sixth District, in Herrera v. City of San Jose, Case No. H042211 (6th Dist. June 28, 2019) (unpublished) had to face an inverse condemnation fee issue which pops up frequently when the plaintiff “condemnee” is entitled to some amount of fees but then moves for what was “actually incurred” under Code of Civil Procedure section 1036.  Most of the time, plaintiffs moved for the lodestar amount billed by their attorneys, even if the contingency award of fees is much, much less.  We now explain how the Sixth District steered through these interesting judicial waters on what to award plaintiff.

            City’s main sewer main flooded most of the first floor of plaintiffs’ residence in San Jose, triggering an inverse condemnation action against the City.  A jury awarded her damages after some offsets by the trial court for insurer settlement amounts.  Plaintiff moved for attorney’s fees of $450,915 (later reduced to $395,940) as the prevailing party under section 1036, which provides that in inverse cases a lower court should reimburse “the plaintiff’s reasonable costs, disbursements, and expenses, including reasonable attorney, appraisal, and engineering fees, actually incurred because of that proceeding in the trial court or in any appellate proceeding in which the plaintiff prevails on any issue in that proceeding.”  The lower court only awarded main plaintiff $20,066.67, representing 40% of her recovery pursuant to the contingent fee agreement she had with her attorney.

            Plaintiffs appealed, but the Sixth District affirmed.  Although relying on Salton Bay Marina, Inc. v. Imperial Irrigation Dist., 172 Cal.App.3d 914, 954-955 (1985) [allowing fees incurred not tethered to the contingent fee agreement], the Sixth District found that the lower court got to the right conclusion by relying on contrary Third District decisions in Andre v. City of West Sacramento, 92 Cal.App.4th 532, 536-537 (2001) [remanding to consider what plaintiff actually incurred, with consideration of the contingency arrangement with counsel] and Pacific Shores Property Owners Assn. v. Department of Fish & Wildlife, 244 Cal.App.4th 12, 61-62 (2016) [contingency fee arrangement was a “cap” on what could be awarded to plaintiff under section 1036].  The Sixth District sided with the Third District, although being sympathetic to the regard for fairness and reasonableness expressed by plaintiffs.  However, the language of section 1036 was clear, limiting fee recovery to what was actually incurred under the terms of the contingency agreement with legal counsel. 

Prevailing Party, Section 1717: Only One True Prevailing Party Can Exist Under Civil Code Section 1717

One Litigant Cannot Partially Prevail At Trial, And Another On Appeal, For Purposes Of Ultimate Prevailing Party Determination Under Section 1717.

            The Sixth District in Gambord v. Galli Produce Co., Case No. H043872 (6^th Dist. June 28, 2019) (unpublished) faced an interesting issue based on a contractual fees clause under Civil Code section 1717:  Can there be more than one prevailing party based on partial success at trial and on success on a later appeal?  The answer:  No.

            What happened here is that landlord won on unpaid rent award of a little over $45,211 against tenant although it was much less than its claim of more than $200,000.  Landlord appealed the damages calculation, but the trial court award was affirmed.  Later, landlord moved for attorney’s fees of $78,931.75 under the lease agreement fees clause, for efforts pre-lawsuit through trial/posttrial.  Tenant opposed on the basis that it was the prevailing party at trial based on landlord only obtaining less than 20% of its unpaid rent claim.  The lower court ruled that landlord was the prevailing party, awarding it $67,161.75 (about a $10,000 reduction).  Tenant then brought a motion to recoup attorney’s fees of $27,481 for “winning” on appeal, because it believed the lease fees clause (talking about fees “on trial or appeal”) allowed for a dual prevailing party result.  The lower court did not buy it, and the appellate court agreed.

            First, Civil Code section 1717 does not authorize parties to agree to more than one prevailing party “on the contract,” with the final resolution dictating who is the true prevailing party.  (Dispute.Suite.com, LLC v. Scoreinc.com, 2 Cal.5^th 968, 977 (2017) [our Leading Case #21].)  Specifically, “section 1717 does not support an award to the prevailing party on appeal, but only the prevailing party in the lawsuit.”  (Wood v. Santa Monica Escrow Co., 176 Cal.App.4^th 802, 808 (2009).)  Second, in order to come to the 1717 prevailing party “end” determination, the lower court must engage in a comparative analysis, and its determination here that landlord obtained the greater relief justified denying appellate fees to tenant.  Third, tenant relied greatly on dicta in Snyder v. Marcus & Millichap, 46 Cal.App.4^th 1099, 1104 n. 1 (1996) suggesting that the parties could agree that a prevailing party could be based on fees clause language allowing that result for a successful partial appeal.  The Sixth District disagreed with this dicta in no uncertain terms, finding it would be inconsistent with contrary reasoning in DisputeSuite.com. 

Private Attorney General: Sweetwater Union High School Decision Now Published

$166,027.05 In CCP § 1021.5 Fees Awarded In Charter School Dispute.

            On June 9, 2019, we posted on Sweetwater Union High School Dist. v. Julian Union Elementary School Dist., Case No. D073878 (June 4, 2019) (unpublished), which was unpublished at the time.  It involved a $166,027.05 CCP § 1021.5 to a partially successful plaintiff in a charter school dispute where claimant showed that the net revenue gain from success was outstripped by litigation costs to vindicate public interests relating to charter school issues.  We can now report that the case was certified for publication on June 28, 2019. 

Class Action: 2/3 DCA, In A 2-1 Opinion, Reverses An Award Of $5,886.50 To Class Counsel In Wage Statement Class Action Where Parties Had Stipulated To $85,000 In Fees To Class Counsel Under Settlement Agreement “Clear Sailing” Provision

Dissent Found That Most Of Counsel’s Efforts Were Trivial On Wage Statement Claim, With Most Of Fees Expended On An Unsuccessful Meal/Rest Break Claim.

            Just to show you how class actions producing a lack of real-life benefits draw very different judicial reactions, one needs to go no farther than Ebo v. The TJX Companies, Inc., Case No. B285404 (2d Dist., Div. 3 June 28, 2019) (unpublished).

            There, a former employee/putative class representative sued clothing retailer TJ Maxx/Marshalls for meal/rest break alleged violations and failure to provide accurate itemized wage statements.  Class certification was denied on the meal/rest break claims, but certification on the wage statement claim was granted although limited to non-exempt employees of Marshalls.  Ultimately, with the help of a settlement judgment, the action was settled by which the defense agreed to a “clear sailing” provision to not challenge an $85,000 fee award to class counsel, given that the class counsel lodestar was $588,650 (obviously, quite a bit on the meal/rest break claims).  The trial court preliminarily approved the settlement agreement, but soon changed courses when the final fee approval hearing came to bat.

            Based on the claims experience, where no class member could prove any injury from the wage statement claim, the lower court thought there was zero value to the settlement and only awarded $5,886.50 in fees, a 99% reduction of the $588,650 lodestar. 

            Plaintiff appealed and, based on a 2-1 opinion, was granted another shot at it.  The majority determined there was value in the settlement, given that the defense changed its wage statement policies.  It also believed that the final approval fee reduction was contradictory of the prior preliminary approval determination finding the settlement was in good faith and reasonable. 

            Justice Egerton dissented and would have affirmed the fee award.  He observed that a lot of the lodestar time was consumed on the unsuccessful meal/rest break claims.  If one did some math on the amounts of the lodestar devoted to the wage statement claim, they supported what the trial court did in awarding fees, according to the dissenting justice.  Here are his ending thoughts: “But when courts reward lawyers who file class actions with little or no merit by awarding tens of thousands of dollars in attorney fees, the result will be more class actions with little or no merit.  The public will begin to view class actions with skepticism and cynicism.  Here, ultimately, the individuals who will pay the $92,500 Ebo and Van Vleck seek [i.e., fees for class counsel and a $7,500 enhancement fee for the class representative] are Marshalls shoppers—the teen buying a dress for the school dance, the single mother outfitting her three children for Easter.” 

Family Law: $37,679.50 Needs-Based Award To Ex-Husband Reversed, Husband’s Sanction Request Was Not Appealed, And Denial Of Further Needs-Based Fees To Ex-Wife Reversed For Failure To Make Findings

Evidence in Record Did Suggest Ex-Wife Had Disparity In Ability to Pay.

            In Huynh v. Cao, Case No. A154556 (1^st Dist., Div. 4 June 27, 2019) (unpublished), the 1/4 DCA had to review several fee/sanctions awards and rulings in a dissolution matter.  First of all, it reversed a $37,679.50 fee award to ex-husband because he never asked for needs-based fees, only discovery sanctions against ex-wife’s counsel (not fees).  With respect to the lower court’s denial of fees as sanctions, ex-husband did not appeal that ruling such that he was not entitled to this type of relief.  Lastly, the appellate court reversed a denial of additional fees to ex-wife because the lower court failed to make findings about the existence of a disparity in access and ability to pay, with the failure being prejudicial because evidence did demonstrate a disparity in income between the parties.  (In re Marriage of Shimkus, 244 Cal.App.4^th 1262, 1279-1280 (2016).) 

Landlord-Tenant, Reasonableness Of Fees, Section 1717: $428,175 Fee Award To Winning Landlord In Tort Condo Damages/Fraud Case Against Tenants Affirmed On Appeal

Residential Security Deposit Scheme Did Not Preempt Tort Fee Award; But Landlord Correctly Reduced Landlord’s Fee Request Of $659,367.56 For Various Reasons

            Los Angeles County Superior Court Judge Weingart, sitting by assignment on the 2/1 DCA, has penned a nice decision in Sweeney v. Scully, Case No. B284915 (2d Dist., Div. 1 June 27, 2019) (unpublished) where a landlord won tort damages against a tenant for condominium damages, but was granted a scaled-back fee award based on inefficiencies, duplication, and block billing.

            In this one, tenants sued for return of a $60,000 security deposit for renting a luxury oceanfront condominium, with landlord cross-claiming for tort damages relating to misrepresentations about past tenancies and use of a so-called service dog.  Landlord prevailed, awarded $287,581.75 in construction, loss-of-use, moving/storage, and furnishings damages by a jury.  Landlord then moved for contractual attorney’s fees of $659,367.56, but the lower court awarded $428,175.  This prompted an appeal by both sides, with the award affirmed on appeal.

            Tenant principally argued that Civil Code section 1950.5, the residential landlord security deposit scheme, preempted any tort claim award in landlord’s favor.  The appellate court disagreed, determining that nothing in the security deposit statutory language barred tort claims or provided an exclusive measure of damages for any dispute after a lease terminates.

The tort claims did give rise to fee entitlement under a broadly-worded lease fees provision.

            That brought the 2/1 DCA to landlord’s appeal for more fees than awarded by the lower court.  The problem here was that the record indeed showed the following:  (1) inefficiencies in the form of two partners at trial and even the jury complaining about the excessively slow examinations by landlords’ attorneys at trial (Rey v. Madera Unified School Dist., 203 Cal.App.4^th 1223, 1244 (2012)) ; (2) tenants’ counsel expended 890 hours versus landlord’s counsel’s 1,300 billable hours, with the comparative analysis of each side’s litigation costs being a check on the reasonableness of a fee request (Donahue v. Donahue, 182 Cal.App.4^th 259, 272 (2010)); and (3) reduction for  blockbilled fee submissions which had the effect of making it difficult to determine fee compensability of certain entries (In re Marriage of Nassimi, 3 Cal.App.5^th 667, 695 (2016); Christian Research Institute v. Alnor, 165 Cal.App.4^th 1315, 1320, 1325 (2008)).  So, the lower court’s reductions were no abuse of discretion.

Sanctions: Although Lower Court’s CCP § 128.5 Order Failed To Be Sufficiently Detailed In Writing, Bad Faith Finding Became Law Of The Case For The Remand Proceeding

$6,400 Sanctions Award Against Attorney Was At Issue For Going Away On A European Vacation Rather Than Reporting For Trial.

            In Mid-Centry Insurance Company v. Mazarei, Case No. G056643 (4^th Dist., Div. 3 June 27, 2019) (unpublished), plaintiff insurer was suing to recoup defense expenses to an insured, with the lower court determining that no duty of defense was owed.  That meant the matter was going to trial to see what should be reimbursed to the insurer.  The trial was continued several times, with defendants’ counsel not showing up for trial after losing an ex parte continuance request based on a fictional medical condition attributed to one of the defendants.

One of the defendants did show up for trial call, prompting the lower court to continue the matter for an OSC re sanctions against defense counsel and recognition that trial had to be continued because defendants had been “stranded.”

           Defense counsel did appear at the OSC, with the trial court imposing $6,400 in sanctions under CCP § 128.5.  However, the sanctions order was not detailed as required under section 128.5 such that a remand was in order.  But there was one important caveat:  given that the record below did show bad faith, that finding became law of the case and did not have to be revisited on remand.  (West Coast Development v. Reed, 2 Cal.App.4^th 693, 706 n. 6 (1992).) 

            Acting Presiding Justice Bedsworth authored the 3-0 opinion for a 4/3 DCA panel. 

Requests For Admission: Plaintiff Entitled To Costs Of Proof Sanctions Expenses, With Lower Court Improperly Shifting Burden Of Proof On Exceptions To Propounding, Rather Than Responding, Party With Respect To RFA Responses

Record Showed That Defense Failed To Prove Exceptions For Its RFA Denial Responses.

           In Samsky v. State Farm Mutual Automobile Insurance Company, Case No. B293885 (2d Dist., Div. 8 June 26, 2019) (published), a lower court denied plaintiff’s request for “costs of proof sanctions” based on defense denial of requests for admissions under CCP § 2033.420.  That RFA costs of proof sanctions denial order was reversed on appeal, remanding with directions that the trial court had to grant reasonable costs of proof sanctions under the circumstances. 

            The overarching infirmity was that the lower court improperly shifted the burden of proof in this area.  Specifically, the lower court impermissibly required the propounding party, not the responding party, to show the nonexistence of RFA denial exceptions such as immateriality and good faith denial.  That was the responding party’s burden, not the burden for the propounding party—with this published decision clarifying the burden of proof under CCP § 2033.420.  But there was more.  Substantial evidence showed that the defense failed to show justifiable grounds for denying certain requests such that the matter was remanded for a hearing to award reasonable “costs of proof sanctions” to plaintiff. 

Sanctions: $35,000 Sanctions Order Payable By Plaintiffs’ Attorney To Opposing Defense Counsel Affirmed On Appeal

Plaintiffs’ Counsel Wanted Sanctions Award “Offset” Against Judgment Obtained By Counsel For Fees Judgment Adverse To His Clients, But It Was Not In The Cards!

            Talk about an interesting card game, the next case—Petrik v. Mahaffey & Associates (Berger Kahn), Case No. G055779 (4^th Dist., Div. 3 June 25, 2019) (unpublished)—exemplifies this in spades.

            Plaintiffs’ attorney represented his clients in a large construction defect case, which was settled for $400,000 even though plaintiffs did not like the settlement, but it was sustained in an earlier proceeding.  Plaintiffs, represented by Berger Kahn (BK), sued for malpractice and contractual breach against their ex-counsel, which filed a cross-complaint.  During this secondary dispute, a discovery referee imposed a $35,000 sanction against plaintiffs’ former counsel, made payable to BK, not the ex-client.  Plaintiffs’ ex-counsel paid the sanctions for a while to BK, but then defaulted.  However, a jury did find that Plaintiffs’ ex-counsel was entitled to substantial fees which Plaintiffs did not pay during the CD case representation.  In essence, there were further bickering proceedings between Plaintiffs’ ex-counsel and BK over whether the sanctions award was satisfied, with Plaintiffs’ ex-counsel arguing that the sanctions award should be offset against his judgment against his ex-clients. 

            The trial and appellate court did not accept this reason for reversal proffered by Plaintiffs’ ex-counsel.  After observing that setoff is an equitable defense allowed as early as the 17^th century by English chancery courts, see Granberry v. Islay Investments, 9 Cal.4^th 738, 743-744 (1995), it found that Plaintiff’s counsel had no right to recover anything from BK such that setoff was inappropriate.  There also was no “implicit assignment” by Plaintiff to BK such that BK still was owed money, which was cemented by Plaintiffs’ ex-counsel’s course of conduct in paying BK over an extended period of time.  Presiding Justice O’Leary penned this decision on behalf of a unanimous 4/3 DCA panel. 

SLAPP: Defendant Was Entitled To Mandatory Attorney’s Fees Under SLAPP Statute Despite Voluntary Dismissal By Plaintiff

Trial Court Would Have Granted SLAPP Prior To Dismiss, Such That Amendment Nuanced Argument Did Not Change The Result.

            In Contreras v. Contreras, Case No. G056710 (4th Dist., Div. 3 June 25, 2019) (unpublished), a plaintiff dismissed a slander title cause of action while a SLAPP motion was pending although the trial court would have granted the SLAPP motion on that claim.   Subsequently, the lower court granted the defense entitlement to fees and costs based on finding the dismissed claim would allow for same even though the claim was dismissed.

            The 4/3 DCA, in a 3-0 opinion authored by Justice Aronson, affirmed.  Despite the dismissal, the trial court retained jurisdiction to entertain on a SLAPP mandatory fee request, relying on Law Offices of Andrew L. Ellis v. Yang, 178 Cal.App.4^th 869, 879 (2009).  Appellant argued that this result was not right because a plaintiff amending a complaint to avoid a SLAPP motion was akin to dismissing a complaint, leading to a different result.  Naught!  Amending a complaint and dismissing a complaint are very different “animals,” such that the dismissal in this case put this matter into the Ellis “square peg” such that SLAPP fees and costs were in play for the defense.

Civil Rights, Reasonableness Of Fees: Guillory v. Hill Decision Now Published

$2.4-3.8 Million Fee Request In Civil Rights Case Properly Denied In Entirety.

            On June 7, 2019, we posted on Guillory v. Hill, Case No. G054027 (4^th Dist., Div. 3 May 31, 2019) (unpublished), where a $2.4-3.8 million fee request under a section 1988 was denied in entirety based on minimal success and what the lower court perceived to be inflated billings—a result affirmed on appeal.  Based on four publication requests, this decision was certified for publication on June 25, 2019. 

Prevailing Party: Trial Court’s “Prevailing Party” Fee Determination Before Final Resolution Was Reversed And Remanded

$108,935.37 Net Recovery Went POOF!; However, Result May Be Academic Because Fee Motion Can Be Renewed Following Entry Of A Final Judgment.

            Prematurity of a “prevailing party” determination for fees and/or costs is a good ground to deny a litigant’s motion for the same, but it may just postpone some award in that litigant’s future depending on what finally happens.  County of Napa v. Wesner, Case No. A154839 (1^st Dist., Div. 1 June 24, 2019) (unpublished) illustrates that principle, although a future fee/costs proceeding may well end in the same result which was reversed because it was premature.

            In Wesner, County sought to set aside a settlement agreement reached by the parties in an earlier federal action regarding an alleged public/private nuisance on the Wesners’ land.  The lower court found in favor of the County’s declaratory relief claim, against the County for the nuisance claims, and reserved jurisdiction to determine rescissionary damages for the Wesners.  After entering a “judgment” but before actually awarding rescissionary damages to the Wesners, the trial court awarded County attorney’s fees and costs as the prevailing party in the amount of $128,965.37, before it awarded Wesners $20,030 in damages.  Later following the fee award, the trial court entered a final judgment of $108,935.37 after offsetting the $20,030 damages in the Wesners’ favor.

            The 1/1 DCA reversed and remanded.  It clearly did not like the sequence of events.  The lower court fixed fees before there was a final resolution or judgment, which cannot pass muster.  (Hsu v. Abbara, 9 Cal.4^th 863, 876 (1995) [our Leading Case #2]; DisputeSuite.com, LLC v. Scoreinc.com, 2 Cal.5^th 968, 876 (2017) [our Leading Case #21].)  Even though the lower court alluded to a future determination of rescissionary damages in awarding fees/costs, it had not done so, making it impossible to compare relief for prevailing party purposes.  So, a reversal and remand were in order so that the lower court could now weigh how the litigants did in achieving their litigation objectives.  (In a footnote, the appellate court observed that if the fee motion had been made/adjudicated after the rescissionary damages award, the issue would not have been considered narrowly as it was in this appeal.) 

Prevailing Party: Defendant Tenant Vacating Space And Beating Landlord’s Damages Claim Was Prevailing Party Entitled To Contractual Fees Award

$182,000 Fee Award To Defendant Affirmed On Appeal.

            In Newport Harbor Offices & Marina, LLC v. High Seas Yacht Charters, LLC, Case Nos. G054706/G054877 (4^th Dist., Div. 3 June 24, 2019) (unpublished), plaintiff landlord and defendant tenant got involved in a major tussle over office space and bloat slips leased to tenant defendant.  Landlord filed an unlawful detainer action, tenant vacated, and the evolving court dispute for eviction was consolidated with landlord’s suit for damages.  Landlord lost; tenant won, beating landlord’s claims for damages. 

            The trial court was then barraged with dueling fee motions.  It found that both parties prevailed, such that landlord was entitled to fees of $47,000 and tenant was entitled to fees of $232,000, resulting in a net fees award of $182,000 to tenant.  Landlord appealed.

            The 4/3 DCA, in a 3-0 opinion authored by Justice Thompson, affirmed.  The panel believed it was error for the lower court to determine that both parties partially prevailed for purposes of a contractual fees award.  However, it was clear that tenant indeed prevailed:  possession was no longer at issue and landlord gained no victory on damages at all.  So, tenant achieved its main litigation objectives, see de la Cuesta v. Benham, 193 Cal.App.4^th 1287, 1295-1296 (2011), such that the ending award was correct even if based on incorrect reasoning. 

In The News . . . . Recent Article By Todd C. Scott Nicely Summarizes The Nine Rules For Billing Ethically And Getting Paid On Time

Communication/Clarity At All Stages Pervade These “Rules.”

          We thank NALFA for summarizing an article by Todd C. Scott, Vice-President of Risk Management at Minnesota Lawyers Mutual, entitled “Nine Rules For Billing Ethically and Getting Paid on Time” (which came from an ABA website article).   Here are the rules, to which we have added some gloss based on the commentary accompanying them (but with our takeaways):

1. Communicate the fee arrangement before you start      the case — usually, in writing (sometimes required        depending on the jurisdiction, unless you want to          be relegated to quantum meruit recovery).

                 2. Your fee better be reasonable.

                 3. “Nonrefundable” does not mean that you can be                             paid for doing nothing.

                 4. Verbal flat fee arrangements are as good as the                               paper they’re written on.

                5. Availability (“true retainer”) fees are separate and                          distinct from legal services fee.

                6. If the fee is shared with someone outside the firm,                          the client should know exactly where it is going.

                7. Three keys for effective invoicing: detail, detail,                              detail — including “no charge” entries for services                          which are not being billed for payment.

                8. When the payment is late, be direct. Clients like                               direct — lawyers need to communicate they need                           payment as much as any other service provider.

                9. Foonberg’s rule: If you’re going to get burned, get                          burned cheap — if the client bill starts to spiral too                        high, get payment or get out unless a short-term                              catch up can be done. (Jay Foonberg is author of a                            popular publication, “How to Start and Build a Law                            Practice.”)