CALIFORNIA ATTORNEY'S FEES

Allocation, Reasonableness Of Fees: $45,000 Fee Award To Prevailing Party In Civil Harassment Restraining Order Case Affirmed On Appeal

Neighborhood Squabble Involving Dogs . . . . ARF!

            Kinda hard to believe that neighbors can get into such nasty squabbles, but we chalk it up to human nature.  Unfortunately, dogs—which we believe to be great gifts to mankind—often times are at the center of these disputes.

            In this one, Thomas v. Olshansky, Case No. B289502 (2d Dist., Div. 8 May 30, 2019) (unpublished), a neighborhood squabble over dogs and other things escalated into five separate proceedings for a civil harassment restraining order, animal control proceeding, etc.  In the end, the civil harassment proceeding respondent prevailed, then requesting $45,000 in fees given that the civil harassment scheme does have a fee-shifting statute (not contested by anyone).  The lower court denied losing petitioner’s request for $51,000 in fees.  Appellant claimed that it was error not to apportion fees between the five different cases, but this argument was rejected under the circumstances because everything was wrapped up in a massive factual heap.  The $45,000 fee award was affirmed—but can you believe almost $100,000 in fees between the two sides were spent on this squabble?  Apparently so.

Fee Clause Interpretation: “Successor/Agent” Provision In Purchase Agreement Properly Led To Fee Award In Favor Of Prevailing Defendant Agent, Where Plaintiff Did Not Object To Instruction Stating Defendant Was An Agent

$143,775 Was The Fee Tally/$11,438 Was The Costs Tally, With The Appellate Court Chiding Losing Plaintiff For Disparaging Trial Judge And Engaging In “Apophasis.”

            In Mayhew Plaza Woodland Hills II, LLC v. Kelsey, Case No. G055668 et al. (4^th Dist., Div. 3 May 30, 2019) (unpublished), plaintiff purchaser sued defendant seller and defendant agent Kelsey for fraud in connection with the sale of a Hemet shopping center when plaintiff was facing a 1031 exchange deadline in order to avoid a tax hit.  The jury determined that the case was barred by the statute of limitations.  The trial judge awarded defendant Kelsey $143,775 in attorney’s fees and $11,438 in costs based on provisions in the written purchase agreement.

            The 4/3 DCA, in an opinion authored by Justice Bedsworth, affirmed the fee award.

            The purchase agreement had a fees clause as well as a clause indicating that the agreement applied to heirs, successors, agents/representatives, and assigns.  Plaintiff was judicially estopped to deny that defendant Kelsey was an agent, because it did not object to a jury instruction to the effect that Kelsey was an agent.  So, fee entitlement was established.

            However, plaintiff/appellant chose an unwise tactic to disparage the trial judge, but then engaged in “apophasis” by then implying that the trial judge’s personal relationship with several people directly or indirectly involved with the case led to the adverse result.  (In a footnote, “apophasis” was explained as a rhetorical device through which the speaker can deny a subject while bringing it up, with an example being “Far be it from me to suggest ….”).  The 4/3 DCA panel did not countenance the disparagement at all, observing it was a “shabby effort to deflect responsibility” by playing the personal relationships card and defendant was “passing the buck” in an ill-advised attempt to attribute a negative outcome to a judge who presided well over a complex case.

Arbitration, Section 998: California Supreme Court Announces Bright-Line Rule For Presentation of Rejected CCP § 998 Offers To Arbitrators—Within 15 Days After Issuance Of Final Award

However, Arbitrator Still Has Wide-Ranging Discretion To Allow Costs-Shifting Or Not.

            The California Supreme Court, in Heimlich v. Shivji, Case No. S243029 (Cal. Supreme Court May 30, 2019), in a 7-0 opinion authored by Justice Corrigan, established a bright-line rule for presentation of a rejected CCP § 998 offer to an arbitrator for fee/cost-shifting purposes.  “Consistent with practice in civil litigation, for 15 days after issuance of a final award, a party to an arbitration may submit a cost request asserting rejection of an earlier 998 offer.  The arbitrator has implicit power under section 998 to consider the request and amend any award accordingly.”  (Slip Op. at p. 15.)  Our state supreme court also indicated that the 998 offer should not be presented before issuance of a merits award.  Finally, in an interesting twist, the arbitrator’s cost denial was sustained anyway, because the merits of the costs refusal decision could not be reviewed and did not fall within the “refusal to hear material evidence” vacatur ground. 

Appealability: Denial Of Motion To Compel Mandatory Fee Arbitration Act Arbitration Is Not An Appealable Order

2/1 DCA Also Refuses To Treat It As An Extraordinary Writ Petition From The Denial Order.

            The Mandatory Fee Arbitration Act (MFAA) establishes a system for a client to arbitrate attorney’s fee disputes before local bar associations, with it being mandatory for attorneys if clients so initiate an arbitration but optional if clients do not wish to do so.  Co-contributor Mike was involved in one recently before the Orange County Bar Association, with the arbitration chair indicating that the arbitration panel’s ruling usually conclusively determines about 85% of disputes in that chair’s experience.

            The Second District, Division 1 (in an opinion authored by Los Angeles County Superior Court Judge Weingart, sitting by assignment), confronted the narrow issue of whether a trial court’s denial of a petition to compel a MFAA arbitration is appealable.  In Levinson Arshonsky & Kurtz LLP v. Kim, Case No. B289308 (2d Dist. Div. 1 May 29, 2019) (partially published), the appellate court decided that the denial order was not appealable.  It also declined to characterize the appeal as a petition for mandamus because substantial evidence showed that the client indeed waived his right to arbitration under MFAA by failing to request arbitration within the 30 days after receipt of the attorney MFAA notice pursuant to Business and Professions Code section 6201(a). 

Settlement: Seventh Circuit Court Of Appeals Affirms $10,875 Fee Award To FDCPA/FCRA Prevailing Plaintiff Who Requested $187,410 In Fees But Won Only $1,000 In Damages

Rejection Of FRCP 68 Offers And Unnecessary Running Up Of Fees Sustained The District Judge’s Conclusion Below.

            This next case is a cautionary warning for all litigants and their attorneys—settlement is sometimes the only reasonable option when the defense makes every effort to do so.  Here are the beginning two sentences of the opinion we now post on: “Sometimes settling a case is the only course that makes sense.  This case provides a good example.”

            Paz v. Portfolio Recovery Associates, LLC, No. 17-3259 (7^th Cir. May 15, 2019) (published) was a Fair Debt Collection Practices Act and Fair Credit Reporting Act case brought by plaintiff defaulting on a $69 credit card debt as against defendant debt collector which purchased the debt and attempted to collect.  Defendant made a FRCP 68 offer to settle for $1,001, plus reasonable attorney’s fees, with the parties eventually agreeing to $4,500.  However, because defendant continued to report the debt to credit reporting agencies, plaintiff filed a second lawsuit under the FDCPA and the FCRA.  Defendant again attempted to resolve the second case by making Rule 68 offers of $1,500, $2,500, and $3,501, with each including reasonable attorney’s fees and costs up through the date of acceptance.  You can guess what happened—plaintiff never responded to any of these offers. 

            Except for one violation of FDCPA and FCRA, plaintiff’s case got gutted on a defense summary judgment motion such that the case was worth a maximum of $6,000 in actual and statutory damages under the two statutory schemes (although plaintiff claimed emotional distress damages).  On the eve of trial, defendant offered to resolve all of plaintiff’s claims for $25,000 plus his attorney’s fees and costs to date.  Plaintiff rejected that offer, with a jury awarding just $1,000 in statutory damages on his FDCPA claim.  Plaintiff then sought $187,410 in fees and $2,744 in costs relying on FDCA’s fee-shifting provision (15 U.S.C. § 1692(k)(a)(3)).  The district judge awarded him fees of $10,875, which was the amount of his attorney’s work up to the point at which the $3,501 settlement offer was made.  In doing so, the district judge underscored that plaintiff’s rejection of meaningful settlement offers precluded a fee award in such disproportion to his trial recovery (put another way, plaintiff only had limited success).  Plaintiff also received costs totaling $3,500.

            The Seventh Circuit saw no abuse of discretion in the challenged fee award.  The defense was reasonable along the way, attempting to settle at most junctures of the case.  Although the defense settlement offers disclaimed liability, they also allowed for a judgment to be entered so that the liability disclaimer effectively was a “dead letter.”  The $187,410 fee request was wildly disproportional to the eventual $1,000 damages award, with there being very little chance plaintiff would obtain much of a “bigger payoff.”  Reduced fee award affirmed.

Reasonableness Of Fees: Trial Court’s Allowance Of Reduced Lodestar For Individual Cross-Defendant’s Win On Alter Ego Issue Was No Abuse Of Discretion

Simplicity Of Issue And Minimal Time Expended On It Justified The Final Fee Award.

            In a commercial lease dispute where the sole owner of landlord was sued as an alter ego via cross-complaint, sole owner won and was awarded $12,250 in fees and $703.23 in costs, but less than he wanted.  Owner appealed to the Third District, in TAL Redding, LLC v. Cheesecakes Unlimited, Inc., Case No. C082078 (3d Dist. May 29, 2019) (unpublished).  The fee award was affirmed.  The lodestar on the alter ego work was $17,500 which was reduced 30% for inefficiencies not to mention that the issue was not complex and minimal efforts were spent on the defense relating to the alter ego issue.  The Court of Appeal discerned no abuse of discretion based on the record before it, affirming the reduced, less-than-requested fee award.

Civil Rights, POOF!: $185,000 Jury Verdict And $308,582 FEHA Fee Award Went POOF! On Appeal

Reason Was That Gender Discrimination Was Not Proven As A Matter Of Law At Trial.

            Hughes v. County of Humboldt, Case Nos. A148940/A150526 (1^st Dist., Div. 4 May 28, 2019) (unpublished) shows how an appellate court can affirm but also take away where a jury verdict is not supported by legally sustainable evidence.  Here, plaintiff obtained a $185,000 jury verdict and then $308,582 in FEHA fees after winning a gender discrimination claim.  However, on appeal, the reviewing court determined that plaintiff failed to present a prima facie case of sexual discrimination such that the merits judgment and fee award went POOF! as a matter of law. 

Fee Clause Interpretation, Section 998: Parking Lot Operator Entitled To Attorney’s Fees From Losing Lessee, But Whether Expert Witness Fees Allowed Had To Be Determined On Remand

Trial Court Erroneously Allowed Them Under CCP § 998, But Parking Lot Contract Clause Needed To Be Restudied On Remand To See If Operator Obtains Expert Witness Fees.

            In PCAM, LLC v. Bally Total Fitness of California, Inc., Case No, B277637/B285308 (2d Dist., Div. 8 May 28, 2019) (unpublished), parking lot owner, operator, and lessee got entangled in litigation over responsibility for personal injury settlements, with indemnification and fees clauses in the parking lot contract figuring into the mix.  Operator prevailed against lessee, with the lower court awarding $253,808.55 in fees and $49,925 in expert witness fees based on a rejected CCP § 998 offer.

            The 2/8 DCA affirmed the fee award, finding that the billings submitted were admissible and that the trial court did not abuse its discretion in not apportioning for work associated on different claims.  However, the expert fee award had to be reversed and remanded.  The lower court decided that pre-offer expert expenses were recoverable under section 998, but that was legal error—the statute specifies only post-offer expenses can be recouped.  Nonetheless, the parking lot contract had a clause allowing the prevailing party “to receive attorney fees, costs and expenses from the other party.”  The appellate court believed the fair thing to do was remand for purposes of determining if “expenses” included expert witness fees given that the lower court did not focus on this contract interpretation issue. 

Homeowner Associations: Homeowner Prevailing In Unlawful Foreclosure Of Condo Unit Case Was Entitled To $434,000 In Damages And $720,000 In Attorney’s Fees

Both Civil Code Section 1354 (Now Section 5975) And CC&R Fee Clause Were In Play. 

            Yikes!  Talk about a change in fortune based on a prior appeal.  Homeowner finally won, obtaining damages and substantial attorney’s fees for hanging in there to the end.

            In Multani v. Castle Green Homeowners Assn., Case No. B278397 (2d Dist., Div. 7 May 28, 2019) (unpublished), HOA earlier won a summary judgment and $90,000 in attorney’s fees in connection with foreclosing on a HOA assessment lien.  However, that victory went away in an earlier appeal against the HOA.  Then, after a bench trial on remand, homeowners won—the lower court concluded that the HOA unlawfully foreclosed on an assessment lien by not giving a 90-day notice of the right to redemption in proper matter such that homeowner was entitled to $434,000 in damages for loss of the condo unit.  (The unit was sold at the assessment lien nonjudicial foreclosure for $20,200).  But that was hardly the end of the story.  Homeowner moved for fees under the Davis-Stirling Act fee shifting provision (former Civil Code section 1354, now section 5975) and the CC&Rs’ fees clause.  The lower court awarded them about $720,000 in fees as the prevailing party.

            Both the merits and fee rulings were affirmed on appeal.  What really sealed the deal for the appellate court was that the HOA argued the same bases for fee entitlement when winning them after the summary judgment motion—it could hardly shift course when the tide turned against it. 

Costs, Employment: Defendant Winning Against Plaintiff’s Employment-Based Claims, Although Losing Cross-Claims, Entitled To Routine Costs, But Not Costs Under Labor Code Section 218.5

No Finding That Claims Made Or Prosecuted In Bad Faith Failed To Trigger Section 218.5 Cost-Shifting.

            Plaintiff and defendant/cross-complainant lost both of their suits after a bench trial, plaintiff losing wage/hour claims and cross-complainant losing fiduciary duty/joint venture cross-claims.  The lower court determined both sides should bear their own costs, with no determination made that plaintiff’s employment claims were brought in bad faith.  Defendant appealed, claiming entitlement to routine costs under Code of Civil Procedure section 1032(a)(4) and Labor Code section 218.5.

            The 4/1 DCA, in Thompson v. Fuhrman, Case No. D075129 (4^th Dist., Div. 1 May 28, 2019) (unpublished), determined that defendant was entitled to costs under section 1032(a)(4), but not Labor Code section 218.5.

            Even though losing his cross-claims, defendant qualified as a prevailing party for routine costs under section 1032(a)(4), because he is a defendant in a situation where neither plaintiff nor defendant obtained any relief.  It did not matter that he lost the cross-claims.  (McFarland, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn., 231 Cal.App.3d 1450, 1454 (1991); Cussler v. Crusader Entertainment, LLC, 212 Cal.App.4^th 356, 371 (2012).)  Nothing In Labor Code section 226 prevented a costs award to defendant, with the 4/1 DCA panel relying on the analogous reasoning in Plancich v. United Parcel Services, Inc., 198 Cal.App.4^th 308, 313 (2011) with respect to Labor Code section 1194. 

            However, defendant was not entitled to costs under Labor Code section 218.5.  As a nonemployee party “victor,” there had to be a determination that plaintiff’s employment claims were brought in bad faith, with that not occurring here.  So, on remand, defendant will receive some routine costs under CCP § 1032(b), but not Labor Code section 218.5.

Consumer Statutes, Section 998: $101,848.75 Fees/Costs Award Under Lemon Law Statute Was No Abuse Of Discretion

Underlying Settlement Amount Was $40,197.88.

            We have many times posted that attorney’s fees/costs can easily eclipse the underlying merits determination.   Here we have a case demonstrating that exact result in a car “lemon law” case.

            In Muro v. Chrysler Group, LLC, Case No. B285747 (2d Dist., Div. 1 May 28, 2019) (unpublished), plaintiff settled a car “lemon law” matter with defendant for $40,197.88 after a lot of litigation activity (even including a CCP § 998 offer by Chrysler).  Later, after a settlement entered into at the final status conference, plaintiff moved for an attorney’s fees award of $157,517.50 (inclusive of a 1.5 positive multiplier), given that the lemon law has a pro-consumer fee-shifting statute.  The defense argued that no more than $2,982.50 in fees were justified based on a 998 offer which was subject to some debate.  Ultimately, the trial judge awarded $101,848.75 in fees and costs to plaintiff (with $96,937.50 being fees under the lemon law fee-shifting statute).

            The problem here was that Chrysler’s section 998 offer was found to be deficient because it was unclear, such that plaintiff’s rejection of the offer was not unreasonable.  (Etcheson v. FCA US LLC, 30 Cal.App.5^th 831, 836, 838-839 (2018).)  Once that hurdle was surmounted, Chrysler did not challenge specific fee requests such that the amount awarded was no abuse of discretion.

Fee Clause Interpretation, Prevailing Party: Defendant Properly Denied Attorney’s Fees Where Plaintiff Really Obtained All Of Its Relief As The Prevailing Party Under Broad Fees Clause

Defendant Was Denied Fees, But It Did Not Independently Appeal—Maybe Should Have!

            In MBK Properties LLC v. San Diego Beer Co., Inc., Case No. G055856 (4^th Dist., Div. 3 May 28, 2019) (unpublished), seller/plaintiff sold a commercial parcel to buyer/defendant under a written purchase and sale agreement (PSA) which had a contractual fees clause allowing fees to a party “that receives a desired remedy …. substantially equal to the relief sought in an action” or “determined to be the prevailing party by a court of law.”  Seller prevailed based on an equitable subrogation rationale adopted by the lower court.  The lower court determined that seller was the prevailing party, but it denied fees because the trial judge did not believe seller prevailed “on the contract” under Civil Code section 1717—a determination not appealed by seller.  However, the trial judge also denied buyer’s fee request based on the theory that buyer prevailed.

            The 4/3 DCA, in a 3-0 opinion authored by Justice Goethals, affirmed the fee denial by appealing buyer.  The seller, not buyer, prevailed in this action because the fees clause was broad and extended to noncontractual claims such as equitable subrogation.  So, buyer was out of luck because it did not prevail within the meaning of the fees clause.

            BLOG OBSERVATION—Too bad that seller did not appeal the fee denial; might have gotten relief despite the lower court fee denial!

Section 998: California Supreme Court Rules Request For Costs Timely Under Section 998 If Filed With The Arbitrator Within 15 Days Of Final Award

A Question Of Timing: Case Explains  How To Handle Costs Under Section 998 In An Arbitration.

        Heimlich v. Shivji, S243029 (Cal. S.Ct.  5/30/19) (Corrigan, J.) is good news for practitioners, because it settles a timing issue, but it is no help to the hapless appellant who helped make law. Code of Civil Procedure section 998 authorizes an award of costs to a party that makes a pretrial settlement offer when the opponent rejects the offer and obtains a lesser result at trial. Heimlich v. Shivji holds, "a request for costs under section 998 is timely if filed with the arbitrator within 15 days of a final award." The question had been somewhat in doubt, because for most purposes, an arbitrator's power to act terminates once the final award issues.

    However, the ruling makes sense, because section 998 applies to arbitration, as well as to litigation, and allowing a request for costs to be made under section 998 after the award is final puts arbitration and litigation on an equal footing. In a court case, a memorandum of costs is typically filed within 15 days of the final judgment, and the rule in Heimlich v. Shivji allows a parallel practice in arbitration. Furthermore, it is good policy not to require the party who will be asking for costs to make a settlement offer known prior to the final award, for fear it might influence the arbitrator in undesirable ways.

    The issue in Heimlich v. Shivji arose because Shivji  had a fee dispute with his attorney Heimlich, and Shivji made a settlement offer that Heimlich could not best in arbitration. Within 15 days after the final award issued, Shivji informed the arbitrator that he would request costs under section 998. Unfortunately for Shivji, the arbitrator concluded that after issuing the final award, he no longer had jurisdiction to take any further action in the matter. The trial court confirmed the arbitration award that did not include Shivji's requested costs. The Court of Appeal reversed, holding that Shivji's request was timely, and that the trial court could vacate the arbitrator's award because the arbitrator had "'refuse[ed] . . . to hear evidence material to the controversy'" when he rejected Shivji's attempt to raise the issue. (We blogged about the Court of Appeal opinion on August 30, 2017 and June 14, 2017). And the Supreme Court agreed with the Court of Appeal that Shivji's request was timely.

    So that all sounds like it would be good for Shivji. But not so fast. The arbitrator made a mistake of law when he concluded that he lacked jurisdiction to rule on the post-award request for costs. His refusal to consider further evidence resulted from the mistake of law. And a mistake of law is not a basis for overturning an arbitration award. So hooray for Shivji and his attorney: they were right that Shivji's request was timely, and they made law in the California Supreme Court. Unfortunately, it won't help Shivji.

    PHRASE OF THE DAY. Apparently Heimlich relied on the ancient doctrine of "functus officio." "At common law," the Supreme Court explained, "the issuance of an arbitration award was treated as functus officio, an act that terminates the actor's authority." Here, however, the doctrine only applied after the arbitrator's assigned duties ended -- and apparently those post-final award duties can now include awarding costs to a party that prevails under section 998. "Further, common law rules are subject to legislative revision." And pursuant to the California Arbitration Act, arbitrators do have some vestigial powers after issuing an award, so the doctrine of functus officio is not absolute. And section 998 "is intended to place parties to arbitration and court proceedings on equal footing and should be read to grant arbitration parties the same shield against premature disclosure of settlement offers that parties in court enjoy."

    PRACTICE TIP. What should the practitioner do about making a request for costs under section 998 in an arbitration? The Court notes, "Shivji did not seek a stipulation that would allow the parties jointly to advise the arbitrator of a 998 offer." That could have been done before the final award was issued. If the arbitrator had then refused to accept evidence on an issue of costs that he had to decide pursuant to a joint stipulation, that might have been a solid ground for challenging the award, for squarely refusing to consider important evidence would have been more than a mistake of law. Of course, in the absence of a stipulation, the next person requesting costs within 15 days after issuance of the final award can present the arbitrator with a copy of Heimlich v. Shivji, and hope the arbitrator does not go off the rails.

    This post also appeared today on co-contributor Marc's California Mediation and Arbitration blog.

    

Laffey Matrix: D.C. Circuit Court Of Appeals, In 2-1 Opinion, Reverses District Judge’s Use Of USAO’s Updated Laffey Matrix Rather Than LSI Laffey Matrix In IDEA Fee Case

USAO’s Updated Matrix Had Too Large Of A Community Pool For Fee Shifting-Purposes.

            In DL v. District of Columbia, No. 18-7004 (D.C. Cir. May 21, 2019), the D.C. Circuit was faced with determining whether plaintiff was properly awarded attorney’s fees in an Individuals with Disabilities Education Act (IDEA) case after the district judge accepted the U.S. Attorney’s Office’s (USAO’s) updated Laffey matrix rather than the LSI’s Laffey matrix for purpose of determining the reasonable hourly rates for plaintiff’s counsel.  The “swing” was that use of the USAO matrix reduced the fee award from $9.76 from $6.96 million in light of the refusal to use the LSI’s Laffey matrix. 

            On appeal, there was a split opinion authored by Circuit Judge Tatel for the majority, with a dissent authored by Senior Circuit Judge Sentelle.

            The LSI’s updated Laffey matrix focuses predominantly on litigators in just D.C. with some adjustments for inflation.  In contrast, the USAO’s matrix based hourly rates on a survey of all attorneys (not just litigators) from the broader D.C. metropolitan area inclusive of Virginia, Maryland, and West Virginia. 

            The majority reversed because the two judges found, given that IDEA requires that prevailing attorney’s rates be tethered to community rates for the same kind of services (20 U.S.C. § 1415(i)(3)(C)), it was improper to use a survey involving all practitioners (not just complex litigators) and involving a broader metropolitan area (not just D.C.).

            The dissenting justice believed that the matrix choice was a factual call for the district judge and that the community should not necessarily just be comprised of the most highly-priced professionals from D.C. 

Reasonableness Of Fees: Trial Court Did Not Abuse Its Discretion In Denying Plaintiff Creditor His Requested Fees Where Debtor Invalidated A “Penalty” Structured Settlement

Creditor Properly Recovered Only $2,500 Out Of A Requested $15,730 In Fees Against Debtor.

            In Murphy v. Combat Sports Academy, LLC, Case No. A153937 (1^st Dist., Div. 5 May 24, 2019) (unpublished), a plaintiff creditor structured a settlement with defendant debtor by which a stipulated judgment would be entered for $150,000 from a “true” discounted settlement amount of $32,800 if debtor failed to timely pay under a specified payment schedule.  Debtor did pretty well, but it owed about $6,600 before not paying anymore.  Creditor then sought to obtain entry of the $150,000 after crediting debtor for its actual payments.  The lower court, after reversing itself from prior rulings, finally determined the settlement arrangement was a penalty, and that only $6,600 was owed by debtor based on the “true” settlement amount after credit for payments.  Creditor also was awarded $2,500 out of a requested $15,730 in attorney’s fees for his efforts in obtaining the lower judgment amount.  The appellate court affirmed the trial court’s reduced award based on debtor winning the penalty argument and on creditor only obtaining a much reduced judgment than what was being sought all along. 

Employment, Section 1717: Labor Code § 218.5(a), Requiring Bad Faith For Losing Plaintiff In Wage Nonpayment Case To Face Fee Exposure, Prevails In Wage Claim Case Inextricably Intertwined With Contract Fees Clause Allowing Fees to Prevailing Employer

Section 218.5(a)’s Policy Prevailed Over Section 1717 In This Instance.

            Dane-Elec Corp. v. Bodokh, Case No. G055312 (4^th Dist., Div. 3 May 24, 2019) (partially published; fee discussion published) involved the collision between two fee entitlement provisions—Labor Code section 218.5(a) and Civil Code section 1717.

            Labor Code section 218.5(a) is a unilateral-fee shifting provision in wage nonpayment cases prohibiting prevailing employers from recovering fees unless the trial court finds the employee brought the wage claim in bad faith.  (However, the prevailing plaintiff would be entitled to fee recovery.)  So, what happens in the context of where this provision comes into “collision” with a prevailing employer’s right to recover contract-based fees from the employee where the wage claim was inextricably intertwined with the contract claim?  Answer:  Unless a bad faith wage claims is involved (which would trigger fee entitlement to the prevailing employer), section 218.5(a)’s prohibition controls over the contractual fee provision where no bad faith is shown on the Labor Code front.

            Acting Justice Fybel authored the 3-0 decision on behalf of our local 4/3 DCA. 

Probate, Section 1717: Prevailing Trustee Lost Bid Against Sister Beneficiary Because Sister’s Trustee Removal Petition Was Not Brought In Bad Faith And No Contract Provided Fee Entitlement Basis Against Sister Under Civil Code Section 1717

Probate Code Section 15642(d) Was Other Fee Entitlement Basis, But Rejected Below.

            In Meyers v. Meyers, Case No. A154912 (1^st Dist., Div. 5 May 23, 2019) (unpublished), two sisters—one of which was trustee and other of which a beneficiary along with the trustee sister—got entangled in a battle when trustee sold a property to a third party in order to pay for trustor mother’s care.  Beneficiary lost her bid to remove trustee sister and the quiet title action as to the property sale was resolved against trustee sister and the property’s current owner.  Trustee moved to recover attorney’s fees against losing sister on two bases:  (1) Probate Code section 15642(d), authorizing entitlement to fees where a petition for removal of a trustee is filed in bad faith; and (2) Civil Code section 1717, based on fees clauses in the real estate contracts between trustee-prior buyer and then prior buyer-current property owner.

            The trial court denied trustee’s request for fees under either basis.

            The 1/5 DCA affirmed.  The problem with the trustee removal fee entitlement provision was that the lower court found the removal petition was not filed in bad faith, which was a factual conclusion reviewed under an abuse of discretion (and there was no such abuse based on the record).  The flaw in the section 1717 request was that beneficiary was not a party to either real estate sales agreement because she was not trustee, and the quiet title action was not “on the contract” as it had to be.  The quiet title also was based on trust documents, not the contracts transferring the property. 

Arbitration: Arbitration Claimants Losing Real Estate Dispute With Different Respondents Could Not Obtain Review Of Arbitrator’s Rulings By Which $1.3 Million In Adverse Fee Awards Were Granted

Merits Of Fee Rulings Were Beyond Review.

            As we have posted on many occasions, contractual interpretation or merits rulings are generally beyond trial court or appellate review in a vast majority of situations under Moncharsh v. Heily & Blaise, 3 Cal.4^th 1, 11-12, 33 (1992).  The arbitrator, in a real estate dispute, found against claimant and in favor of two respondents, awarding respondents altogether about $1.3 million in attorney’s fees.  This was affirmed on appeal in Pacific Pinnacle Real Estate Services, Inc. v. Melton, Case No. D073475 (4^th Dist., Div. 1 May 23, 2019) (unpublished).  Nothing in the arbitration agreement or ADR rules prohibited the arbitrator’s interpretation of the fees clause, even if the ultimate decision contradicted the terms of the parties’ agreement.  (Gueyffier v. Ann Summers Ltd., 43 Cal.4^th 1179, 1185 (2008).) 

Fee Clause Interpretation: Fee Clause In Rental Agreement Enforced As To Additional Appellate Fees Assessed Against Losing Party

However, Losing Party’s Failure To Appeal Earlier Fee Award Led To The Equitable Resolution By The Appellate Court.

            Adams v. Easley, Case No. C081016 (3d Dist. May 23, 2019) (unpublished) is an interesting case where an in pro per tenant plaintiff was assessed with additional appellate fees of $7,548 in favor of landlord in connection with an earlier appeal.  Previously, plaintiff had been hit with $97,677.50 in fees at the trial court level, something that he apparently did not appeal and was final long ago.  However, plaintiff did appeal the additional fee award, obtaining some measure of relief.  There was an $800 fee “liability cap” in the rental agreement, which the appellate court honored.  Although it could not undo the prior $97,677.50 fee award, the Third District panel decided it could honor this cap by not assessing the additional appellate fees awarded later.

Equity: Trial Court Did Not Abuse Its Discretion By Striking Substantial Fee Prayer Where Requesting Party Engaged In Misconduct During The Course Of The Litigation

Appellants Did Not Help Themselves By Calling Lower Court Rulings “Gibberish” and “Legal Nonsense.”

            In United Grand Corp. v. Malibu Hillbillies, Case No. B283833 (2d Dist., Div. 8 May 22, 2019) (unpublished), landlord sought unpaid rent of less than $50,000, but then sought $2 million in fees for post-judgment work over the course of three years.  The problem was that this garden variety commercial rent dispute was one in which landlord actually accepted interpleaded funds after engaging in some misconduct during the course of the litigation.   The trial judge, especially learning about the acceptance of funds after continued activities, decided to strike the fee prayer in the complaint.  The appellate court affirmed, finding that evidence of misconduct was of record and that the lower court retained jurisdiction to pass on post-judgment fee proceedings while merits determinations were pending for appellate determination.  Appellants did not help their cause by labeling the trial judge’s findings as “gibberish” and “legal nonsense.”

            BLOG COMMENT—Are there any hillbillies in Malibu?  That one is tough to believe.  However, we do commend our readers to read “Hillbilly Elegy” by J.D. Vance for a poignant memoir of Rust Belt hillbillies.  References to Mamaw and Papaw are especially poignant.

Private Attorney General: Public Works Contractor On 23 Projects, Although Obtaining Reversal Of Interference Case At California Supreme Court Level, Had A Significant Financial Interest So As Not To Recover Section 1021.5 Fees

$281,577 Paid For Public Work Contractor Appeal Work Did Not Begin To Match Potential Fallout If Things Went Differently.

           Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc., Case No. B291036 (2d Dist., Div. 8 May 22, 2019) (unpublished) is an interesting example of how the financial interest prong of CCP §1021.5, the private attorney general statute, is analyzed by intermediate appellate courts where a “prevailing” defendant eventually won, but had a significant stake and then still tried to recoup fees from the losing litigant—even though the successful party obtained no affirmative recovery.

            Here, a bidding contractor sued the lowest bidder on 23 public work contracts for interference and other claims.  The trial court sustained a demurrer on all claims, but the intermediate appellate court reversed on the interference count.  Eventually, the California Supreme Court granted a petition by the lowest bidder, which won at a highest level.  However, not content to let things stand, the “prevailing” lowest bidder sought attorney’s fees of $603,308.22 even though it had only paid its attorneys $281,577.  The trial court denied the fee request.

            The 2/8 DCA, in a 3-0 decision authored by Presiding Justice Bigelow, affirmed, although on different grounds.  The lower court found that no public interest was implicated; however, affirmance nonetheless was appropriate because the financial interest prong of § 1021.5 was not satisfied.

            The lowest bidder argued that there should be a “special” standard of review because of the California Supreme Court decision in its favor.  Not really, said the appellate court, the appellate court is in the same position as the trial court, so why would things go any differently?

            But that really took things into the financial interest prong of section 1021.5, putting the Whitley analysis front and center.  (See our Leading Case No. 14 on Whitley.)  Lowest bidder put a lot of reliance on Los Angeles Police Protective League v. City of Los Angeles, 188 Cal.App.3d 1 (1986), but this Court—in line with others—refused to apply the methodology in a case where the party seeking fees obtained no financial recovery—the case here, with the party only avoiding $14 million in connection with respect to 23 public work contract and avoiding plaintiffs’ alleged lost profits of $1.5 million.  The interference claim, if adjudicated to the end, could have had an adverse impact on lowest bidder given an indication in its prior appellate pleadings (even before the California Supreme Court) about the possible draconian results of the interference claim if not reviewed.  So, in the end, $280k-plus was not a bad investment, but it could not be shifted adversely so as to tag the opposing party for its advocacy otherwise. 

Arbitration, Ethics: Ethics Lapse Not Violating Any Rules Of Professional Conduct Did Not Disqualify Law Firm From Collecting Unpaid Receivable

However, Arbitrator’s Decision Not To Award Almost $1 Million In Arbitration Fees Based On Trope Prohibition Was Nonreviewable “Arbitrator Judgment Call.”

            In eGumball, Inc. v. Call & Jensen, et al., Case Nos. G055852 and G055989 (4^th Dist., Div. 3 May 17, 2019) (unpublished), a well-known Orange County law firm initiated arbitration to collect unpaid fees from a client, with the client’s subsequent malpractice suit also ordered to arbitration.  After a lengthy arbitration in which the law firm used internal attorneys and expended close to $1 million in seeking to recoup fees, the arbitrator found that one attorney’s failure to advise the client he might be a witness based on an “advice of counsel” defense, albeit below the standard care, was not egregious enough to impede collection of fees.  However, he denied the firm’s request for about $1 million in arbitration fees and expert witness fees, prompting appeals by both firm and ex-client.

            Everything was affirmed on appeal, in a 3-0 decision authored by Justice Fybel.

            Using the analytical framework set forth in Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc., 6 Cal.5^th 59 (2018), client could not show a violation of any Rules of Professional Conduct such that fee forfeiture was not appropriate.  With respect to the denial of arbitration attorney’s fees to the law firm, the appellate court did not believe it could review the merits of the arbitrator’s conclusions that fee recovery butted up against the Trope prohibition (collecting attorneys who litigate fee recovery cannot obtain fees for collection efforts) and that the retainer letter did not have an applicable Lockton v. O’Rourke, 184 Cal.App.4^th 1051 (2010) waiver (in essence, a Trope waiver).  The reason is that questions of contract interpretation by an arbitrator, on the merits, are not subject to general review.  Finally, on the denial of expert witness fees, nothing in the arbitration agreement or JAMS rules required such an award, meaning that the denial, too, was unreviewable. 

Trade Secrets: Equities Determine Whether A Prevailing Plaintiff Obtains Fee Recovery Under CUTSA’s Fee-Shifting Provision

Civil Code Section 3426.4 Allows A Prevailing Plaintiff Recovery For Willful And Malicious Misappropriation.

            In trade secrets cases, Civil Code section 3426.4 allows for a discretionary court award of reasonable attorney’s fees and costs to the prevailing party “[i]f a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or willful and malicious misappropriation exists.”  Most of the case law relates to a prevailing defendant’s discretionary entitlement to fees under the first part of section 3426.4.

            What about prevailing plaintiffs?  We suggest that you consult two cases on the third part of the fee entitlement under section 3426.4.  A recent decision, Bladeroom Group Ltd. v. Emerson Elec. Co. (N.D. Cal. March 11, 2019) by District Judge Edward J. Davila, suggests that the plaintiff inquiry is closely intertwined with proof that a defendant acted willfully and maliciously so as to justify punitive damages under CUTSA.  However, that decision also quoted reasoning from Mattel, Inc. v. MGA Entertainment, Inc., 801 F. Supp.2d 950, 956 (C.D. Cal. 2011) (Carter, D.J.), which found that fees to a prevailing party is based on equitable concerns, especially where there is a well-heeled defendant engaging conduct to undermine legitimate competition and innovation.  In Bladeroom Group, defendants were alleged to lure plaintiff to divulge trade secrets based on “false pretenses” of a proposed merger/acquisition, only to call things off and use the confidential information later, with one defendant settling during the trial and another defendant riding it out so as to be “stung” with a $30 million lost profits/unjust enrichment adverse jury verdict.

Family Law: $10,000 Sections 271 Sanctions Order Based On Declarations Was Not Erroneous

Losing Party’s Right To Live Testimony Under Family Code Section 217 Is Forfeited Unless Party Requests Party To Appear At Hearing.

            The 4/1 DCA, in Marriage of George & Deamon, Case No. D073667 (4^th Dist., Div. 1 May 17, 2019) (published), decided that a trial judge can decide a Family Code section 271 sanction motion based on declarations.  The lower court ordered sanctions against ex-wife based on declaration testimony.  She primarily argued on appeal that live testimony was required under Family Code section 217.  Although agreeing up to a point, the appellate court determined that ex-wife forfeited the right to live testimony by not requesting the other side (her ex-husband) to appear at the OSC pursuant to a notice to appear pursuant to CCP § 1987(b), which is incorporated into family law proceedings via Family Code section 210. 

Appealability, Section 1717: $9,000 SLAPP Fee Award Affirmed Given That Trial Court Invited It Through An Amended Motion

Appeal Of Prior Merits Addition Of New Judgment Debtor Order Did Not Divest Trial Court Of Jurisdiction To Rule On Fee Motion.

            In SMA Liquidating Corp. v. Leech Tishman Fuscaldo & Lampl, LLP, Case No. B287960 (2d Dist., Div. 7 May 13, 2019) (unpublished), the trial judge allowed a second request for consideration of promissory note contractual fees and awarded $9,000 to the prevailing party/judgment creditor after a new party was added as a judgment debtor (although an earlier fee request was denied, but with the lower court inviting a renewed fee request).  On appeal, the party hit with the fee award argued that the trial judge lacked jurisdiction to decide the second motion and it was an improper reconsideration request.

            The fee award was affirmed by the 2/7 DCA.  The lower court invited a renewed request such that it was not an improper reconsideration motion, falling within an exception under Le Francois v. Goel, 35 Cal.4^th 1094, 1096-1097 (2005).  Given that the first judgment debtor was not aggrieved by the initial denial of the fee request, no appeal could be had by it such that the judgment debtor’s appeal of the addition of a new judgment debtor did not impact either the first fee denial or the second fee grant.  Trial judges routinely retain jurisdiction to enter fees after entry of a judgment or order (Varian Medical Systems, Inc. v. Delfino, 35 Cal.4^th 180, 189 (2005); Carpenter v. Jack in the Box Corp., 151 Cal.App.4^th 454, 462 (2007)), and that is the case here. 

Books: Co-Contributor Marc Reviews "We the Corporations: How American Businesses Won Their Civil Rights"

Co-Contributor Marc Has Reviewed The Book For California Litigation.

        In the latest issue of California Litigation, Vol. 32, No. 1 (2019), p. 25, Marc reviewed Adam Winkler's We the Corporations: How American Businesses Won Their Civil Rights. You can read the review, which is republished with the permission of California Litigation, by clicking here.

Allocation: Intertwined Contract/Tort Work Justified Fee Award

Prevailing Party Was Entitled To Fee Recovery Of $67,830 Based On Fee Clauses In Notes.

            In R&J Construction, Inc. v. Abadir, Case Nos. A153301/A154101 (1^st Dist., Div. 5 May 10, 2019) (unpublished), prevailing party obtained a $67,830 fee recovery based on contractual fees provisions in several notes.  On appeal, the losing party argued that fees were improperly awarded for claims sounding in tort versus contract.  However, given that intertwined work on tort claims can support recovery of work on non-contractual claims, that was the case here, resulting in affirmance of the fee award. 

Section 998: Client’s “Waiver Of Costs” CCP § 998 Offer Was Enforceable Where Client Defenses To Law Firm Fee Collection Disputes Were Revealed And Where Firm Voluntarily Dismissed The Case Many Months After Not Accepting The Offer

Expert Fees Of $21,377.08 Were Assessed Against Law Firm Under 998 Cost-Shifting Feature.

            In Ellis Law Group, LLP v. Nevada City Sugar Loaf Properties, LLC, Case No. C080930 (3d Dist. May 8, 2019) (unpublished), client disputed a law firm’s contention it was owed for unpaid legal fees based upon a conflict of interest and nonreceipt of a billing statement (for work the client said it never authorized).  Well into the case, after client’s affirmative defenses were revealed to the law firm, client served a CCP § 998 offer by which client would waive costs if law firm dismissed the suit with prejudice, an offer not accepted by the law firm.  Fourteen months later, law firm dismissed the matter without prejudice.  Client moved for recovery of $21,377.08 in expert fees (mainly for professional ethics experts) based on section 998’s cost- shifting feature.

            The Third District affirmed the expert fee award against law firm.

            A voluntary dismissal without prejudice will trigger section 998 cost shifting.  (Mon Chong Loong Trading Corp. v. Superior Court, 218 Cal.App.4^th 87, 93-94 (2013).)  Given that client notified law firm about significant affirmative defenses and provided detailed discovery responses in support of the defenses, there was a probability that client would win such that a “waiver of costs” offer was not unreasonable under the circumstances.  Retaining professional experts based on a conflict of interest defense should not have been a surprise to the law firm, such that the waiver of the eventually-awarded expert fees did have “value” to the law firm.  There is no “reasonable rejection exception” to the operation of section 998, such that the lower court award of expert fees was no abuse of discretion.  (Arno v. Helinet Corp., 130 Cal.App.4^th 1019, 1027 (2005).)

Miscellaneous: NALFA Is Hosting An Attorney Fee CLE Program

National Association of Legal Fee Analysis Is Hosting A Program On May 30, 2019.

        NALFA hosts CLE programs on attorney fee and legal billing issues.  NALFA is hosting an upcoming CLE webinar, “View From the Bench: Awarding Attorney Fees in Federal Litigation” on May 30, 2019 from Noon-2pm (Central).  This CLE program features an all judicial panel of sitting federal judges.  Panelists include the Honorable Eduardo C. Robreno, Senior Judge, U.S. District Court for the Eastern District of Pennsylvania, the Honorable James G. Carr, Senior Judge, U.S. District Court for the Northern District of Ohio, and the Honorable Nanette K. Laughrey, Senior Judge, U.S. District Court for the Western District of Missouri.  This CLE program is approved for 2.00 credit hours in CA, FL, GA, IL, OH, PA & TX.  For more details or to register, visit http://www.thenalfa.org/CLE-Programs/.

In The News . . . . City Of San Juan Capistrano Seeking To Recoup $1.9 Million In Legal Fees From Insurer In Equestrian Center Contamination Settlement

Lawsuit Claims Insurer Only Paid 25% Of Total Fees.

            As reported in the May 8, 2019 edition of The Orange County Register, San Juan Capistrano has sued its insurer Tokio Marine Specialty Insurance Company to recoup $1.9 million in unpaid legal fees the City incurred in reaching a settlement respecting water contamination at the Rancho Mission Viejo Riding Park. The suit claims that the insurer only paid about 25% of the $2.3 million the City spent on reaching the equestrian center settlement.

Probate: $1.867 Million Probate Fee Award To A Prevailing Party Was No Abuse Of Discretion Based On Complexity Of The Case

Fee Entitlement Existed Under Probate Code Sections 21351 And 17211.

            In Estate of Ashlock, Case Nos. F076941 et al. (5^th Dist. May 3, 2019) (unpublished), a prevailing party in a complex probate case with high stakes was awarded $1.867 million out of a requested $2.885 million, which included a positive 1.5 multiplier. Losing party was aghast and appealed, but no different result followed.

            With respect to the argument that the appeal was not timely filed under CRC 3.1702(a), the Fifth District agreed with prevailing party that those deadlines did not apply to probate cases, but any error was harmless because the lower court had good cause to extend the deadline filing date anyway.

            Losing party argued a statement of decision was required on the fee issues, but that was dismissed because it is not the case under existing California law.

            Fee entitlement bases did exist for a fee award. Because losing party was a drafter of the germane trust and a putative beneficiary, Probate Code section 21351(d), (e)(1) did have a statutory fee provision applying to this same situation where there was fraud/undue influence by the trust drafter. Beyond that, Probate Code section 17211, a statutory fee provision relating to trustee challenges, was intertwined with other issues so as to provide a second basis for fee entitlement.

            The billing records provided adequate substantiation, with losing party failing to raise the proper hearsay objection that the records were not properly authenticated as business records.

            Finally, the lodestar and multiplier awards by the lower court was not erroneous, with this opinion having a good survey of multipliers in complex cases.

Partition: Trial Judge Did Not Abuse Her Discretion In Allocation of Fees In Partition Dispute

Fees Were Proportionally Allocated, Although Decreased For One Party A Little More For Vague Billings.

            The lower court in Orien v. Lutz, Case No. B289959 (2d Dist., Div. 8 April 30, 2019) (unpublished), apportioned attorney’s fees in a partition dispute for a common benefit proportionately between three parties under Code of Civil Procedure section 874.040. However, the trial judge also reduced one sibling’s fees by a quarter based on vague billings. That reduction from the proportionate amount was no abuse of discretion, because vague billings can justify such a further decrease from the one-third/one-third/one-third allocation made by the lower court. Affirmed.

Probate: Fees Of Probate Administrator Wrongfully Not Given Administrative Priority Over Other Estate Distributions

Probate Code Section 11420 Dictated, Although Appellate Court Was Disturbed By Administrator’s Counsel’s Potential Conflicts Of Interest.

            In Estate of Steinberg (Hooy & Hooy v. Steinberg), Case No. A150046 (1^st Dist., Div. 2 April 30, 2019) (unpublished), a law firm serving as counsel for an initial administrator of a probate estate had payment of its fees subordinated by the probate court to other payments from the estate’s assets. That result was reversed on appeal based on Probate Code section 11420, which allows ordinary and extraordinary expenses to have priority over other expense distributions from an estate. However, although the parties did not really raise the issue or the fee disgorgement implications, the appellate court was disturbed by potential conflicts of interest and ethical violations by the appealing counsel, such that the question did not have to be confronted—but observing in the process that “this probate matter is an issue-spotting exercise in professional ethics that could rival a law school exam.”

Fee Clause Interpretation, Section 1717: Post-Arbitration Fee Request Denied Because Contract For Which Entitlement Sought Was Never Submitted For Judicial Review

Myriads Of Other Bases For Fee Entitlement, First Introduced On Appeal, Rejected.

            If you are going to seek fee recovery, make sure you put forth all of your bases for fee entitlement at the trial court level. The fee claimant in Glass v. Veros Credit, LLC, Case No. G055257 (4^th Dist., Div. 3 April 30, 2019) (unpublished) learned this lesson the hard way.

           After winning an auto installment contract dispute in an arbitration and gaining a $170,294.50 fee recovery, the winning party sought post-arbitration fees of $17,204.50 for confirming the arbitration award. However, the winner only sought fees based on a contract, never providing it in lower court fee hearings. Both the trial and appellate courts rejected the fee request. Pure and simple, the failure to provide the contract was dispositive. Although winner had a lot of additional fee entitlement bases on appeal, the appellate court thought it unfair to resolve alternate theories never advanced below and to make the appellate court engage in “new” adjudications on appeal. Justice Goethals was the author of the 3-0 opinion.

Class Action: $41,732,889 Fee And $3,184,274.38 Expense Awards To Class Counsel In NCAA Grant-In-Aid Cap Antitrust Litigation Affirmed By Ninth Circuit

20% Settlement Fund Fee Award Was No Abuse Of Discretion, Cross-Checked By Lodestar.

           A class of college student athletes sued the NCAA over its capped maximum grant-in-aid prior policy which did not cover the full cost of school attendance. Both sides reached a settlement under which a mega-fund settlement of $208.664 million was reached, which would make payouts to 53,000 class members and, for students playing all four years in college, would produce a payout of $6,000 each. Class counsel moved for recovery of fees and expenses. The district judge supervising the case awarded $41,732,889 in fees and $3,184,274.38 in expenses. The fee award was 20% of the gross settlement fund and was the product of a 3.66 positive multiplier applied to a lodestar of about $11.4 million. One student objected in an appeal to the Ninth Circuit.

            On April 17, 2019, the Ninth Circuit affirmed in In re National Collegiate Athletic Assn. Athlete Grand-In-Aid Cap Antitrust Litig., No. 8-15054 (9^th Cir. April 17, 2019) (unpublished memorandum decision).

            Given that the Ninth Circuit follows a 25% percentage-of-recovery benchmark, the 20% award in this case was no abuse of discretion. It also was cross-checked by detailed billing records which justified an enhancement to the lodestar. Finally, with respect to expenses, the objector argued that those had to be subtracted from the gross settlement for purposes of the ultimate fee calculation. However, the Ninth Circuit rejected that argument because the district court had discretion to base the fee award on either the gross or net settlement funds figure.   (In re Online DVD-Rental Antitrust Litig., 779 F.3d 934, 953 (9^th Cir. 2015).)

Sanctions: Respondents Concede That $1,110 Sanctions Award Against Opponent Had To Be Reversed Under CCP § 128.5

2/2 DCA Follows Sister Division 7’s Reasoning In Nutrition Distribution.

            In Kleidman v. Hilton & Hyland Real Estate, Inc., Case No. B285692 (2d Dist., Div. 2 April 26, 2019) (unpublished), $1,100 in sanctions were awarded against appellant and in favor of respondents based on a request in a motion to strike costs. Commendably, respondents conceded that the sanctions were improper because they were not made separately from the motion to strike costs and did not follow the 21-day safe harbor provision in CCP § 128.7(c)(1). That was based on the reasoning in Nutrition Distribution, LLC v. Southern SARMs, Inc., 20 Cal.App.5^th 117 (2018), a 2/7 DCA decision holding that CCP § 128.5 motions must comply with the section 128.7 safe harbor requirements. The 2/2 DCA apparently sides with Nutrition Distribution on this issue in the sanctions area.  

Homeowner Associations, Private Attorney General, Section 1717: Defendant Homeowners Winning A Tree Dispute With Another Homeowner Neighbor Rightfully Denied Attorney’s Fees Under CC&Rs, Civil Code Section 1717, And Private Attorney General Statute

However, A Dissenting Justice Would Have Found Fee Entitlement Under CC&Rs And Section 1717.

           The next case, Shah v. Ross, Case No. B286783 (2d Dist., Div. 5 April 25, 2019) (unpublished), involved a situation where defendants/homeowner neighbors won a tree dispute initiated by fellow plaintiff homeowner. Defendants then sought fees under a CC&Rs fees clause, Civil Code section 1717 mutuality principles, and the private attorney general statute (CCP § 1021.5). The trial judge denied fees on all bases.

            A 2-1 majority of the 2/5 DCA affirmed, with a lengthy dissent by Presiding Justice Rubin.

            On a preliminary basis, the appellate court determined that the lack of a reporter’s transcript of the fee motion did not impede review because only legal construction of fee or statutory entitlement provisions was involved.

            The majority found that the CC&Rs fees clause did not apply to disputes between homeowners, but only a where the HOA was involved. They saw no reason to disturb reasoning to the same effect in Mount Olympus Property Owners Assn. v. Shpirt, 59 Cal.App.4^th 885, 893, 896 (1997). Section 1717 did not afford relief because mutuality only applied where there were putative persons who could be impacted by the fees clause, which was not the case. Finally, the private attorney general statute request properly was denied because the winning parties were vindicating their private interests in preventing a blocking of views by trees.

            Justice Rubin, in an 18-page dissent, believed that the CC&Rs were ambiguous such that fees were allowable in inter se homeowner disputes because certain provisions needed to be read together and other provisions where only the HOA was mentioned made no sense such that homeowner disputes had to be included within the ambit of the CC&Rs fees clause. He also did not like the analysis in Shpirt, which he felt was based on incomplete reasoning such that a “clean slate” approach was warranted. Lastly, Justice Rubin engaged in a section 1717 analysis by which he determined that it should be applied in this particular context based on amendments to the “parties” language in the statute some time ago.

Indemnity, Prevailing Party, Section 1717: Trial Court Erred In Denying Contractual Fees To Owner And General Contractor’s Surety Such That A Remand Was Required—There Was A Fees Clause, Not Just An Indemnity Provision

However, Appellate Court Acknowledged That Results Were Decidedly Mixed, But Any Prevailing Party Determination Was To Be Made By Lower Court

            Driving multiple trips to the appellate court were the parties’ claims for attorney’s fees, something we have seen often and one of the things which inspired this blog.

            In John Russo Industrial Sheetmetal, Inc. v. City of Los Angeles Dept. of Airports, Case Nos. A151597/A151682 (1^st Dist., Div. 5 April 23, 2019) (unpublished), owner won $1 against general contractor’s construction bond surety after a 6-week jury trial, while the general contractor actually won attorney’s fees under a frivolous False Claims Act count. However, both owner and surety moved for contractual attorney’s fees under a clause of the governing contract. The trial judge denied fees to both sides, determining that the clause was an indemnity clause rather than a real fees clause.

            The appellate court reversed. It determined that the clause was a fees clause based on these factors: (1) the section did not focus exclusively on third-party claims, but applied to a situation where owner was “made a party to any litigation commenced by” general contractor; (2) the section was labeled “Attorney’s Fees”; and (3) there was a separate indemnity provision separate and apart from the fees provision. Based on Civil Code section 1717 reciprocity principles, the bond surety was also entitled to the benefit of the fees clause. (First National Ins. Co. v. Cam Painting, Inc., 173 Cal.App.4^th 1355, 1367 (2009).)

            However, the 1/5 DCA did give some telling remand reasoning. Although leaving it to the trial court to determine if there was any prevailing party, it did observe that “the results were decidedly mixed”—owner won only one dollar (compared to the $3.4 million it was seeking as damages), while the surety was found jointly/severally liable to owner for the one dollar but owner lost its claim for enforcement of the performance bond. If we were to predict things, there is going to be no prevailing party in this situation after remand—just sayin’. . . ., and not meaning to be clairvoyant.

Section 1717: Rescission Of A Retail Installment Auto Sales Contract Did Trigger Appellate Fee Recovery Under Civil Code Section 1717 For Earlier Appeal Win By Plaintiff

Appellate Court Did Not Have To Address Fee Entitlement Under The Automobile Sales Finance Act.

           This next case demonstrates how appellate courts do not have to address all fee entitlement issues advanced by a prevailing party if one fee entitlement basis can support fee recovery.

            Plaintiff won an earlier appeal by which the superior court was directed to rescind an automobile retail installment sales contract based on the defendant car dealer’s failure to provide a copy of the sales contract in Spanish in violation of Civil Code section 1632. Plaintiff then moved to recover appellate fees as the prevailing party under both the Automobile Sales Finance Act and a contractual fees provision under Civil Code section 1717. The trial judge denied appellate fees to plaintiff.

            Plaintiff appealed and won in Esparza v. Joe MacPherson Ford, Case No. G055699 (4^th Dist., Div. 3 April 23, 2019) (unpublished). Because rescission is “on the contract” under section 1717 and a contract was indeed involved here, this required a reversal and determination of what appellate fees should be reasonably awarded to plaintiff. The 4/3 DCA, in a decision authored by Justice Thompson, did not have to reach fee entitlement under the Automobile Sales Finance Act.

Taxation: Plaintiffs Obtaining Narrow Remand Relief In Tax Refund Dispute Were Not Entitled To Fee Recovery Under Revenue And Taxation Code Sections 1611.6 And 5152

Material Points Behind Initial Decision Were Disclosed And No Recovery Of Taxes Occurred.

            In SSL Landlord, LLC v. County of San Mateo, Case No. A151318 (1^st Dist., Div. 3 April 23, 2019) (published), plaintiffs appealed a denial of attorney’s fees to them, as against County, under Revenue and Taxation Code sections 1611.6 and 5152. In essence, after a bench trial from an appeal of an adverse administrative decision, plaintiffs won a very narrow remand on some deductions even though the County’s income approach to tax valuation was generally sustained. Section 1611.6 allows fee recovery if the County’s findings were arbitrary and capricious by failing to give a reasoned bases for the findings; but, here, that did not occur—the County Board did disclose its material points in the decision below. Section 5152 allows fee recovery to a plaintiff where a tax assessor ignored the law (unless in good faith thinking the governing law was unconstitutional or invalid) and there was recovery of taxes by plaintiff. In this one, plaintiff had yet to recovery taxes, the assessor did not ignore the law, and the unconstitutional/invalidity prong was not at issue. Fee denial affirmed.