CALIFORNIA ATTORNEY'S FEES

Private Attorney General: Canyon Crest Conservancy Opinion Now Published

CUP/Oak Tree Dispute Only Producing Non-Merits Administrative Stay Did Not Qualify For CCP § 1021.5 Fees. 

            On February 20, 2020, we posted on Canyon Crest Conservancy v. County of Los Angeles (Kuhn), Case No. B290379 (2d Dist., Div. 4 Feb. 19, 2020), unpublished at the time.  We can now report that it was published on March 12, 2020.

            Plaintiff won a non-merits administrative stay under CEQA, but the county complied with vacating the permit approvals, and plaintiff dismissed the case.  The 2/4 DCA agreed with the trial judge that no private attorney general award was warranted because no public interest was involved based on a “status quo” administrative stay and because no significant benefit was conferred on a large class of individuals in light of the private interest involved on the part of plaintiff. 

Special Fee Shifting Statute: Attorney General Winning Charitable Trust Fiduciary Breach Action Was Entitled To Recovery Of $1,654,083.65 In Attorney’s Fees And Costs Against Trustee

Government Code Section 12598(b) Is Fee Entitlement Provision, With No Need To Gauge Success With Respect To Recovery.

            Government Code section 12598(b) allows the California Attorney General to recover (mandatory) from defendants named in a charitable trust enforcement action all reasonable attorney’s fees and costs incurred in conducting the action, with some discretion allowed as far as who pays in subdivision (c).

            This provision was the subject of a published decision, as far as interpreting its scope, in People ex rel. Becerra v. Shine, Case No. A155903 (1^st Dist., Div. 5 Mar. 11, 2020) (partially published). 

            AG won an action against a charitable trust trustee for fiduciary duty breaches to the tune of $1,421,598.  Later, AG sought to recovery section 12598(b) fees and costs of $1,929,757.50 against the trustee, with the lower court awarding $1,654,083.65 instead. 

            That award was affirmed on appeal.

            Trustee argued that the fee award had to be reduced because the scorecard was this:  trustee won on 12 claims while the People won 7, notwithstanding that the AG succeeded in removing trustee.  So, results and limited success had to be factored into the fee-shifting equation.  Wrong!  This was a very different fee-shifting provision such that the AG did not have to be a “successful party” under a private attorney general statute rubric and with the limited success only going to the reasonableness of amount of fees awarded.  No abuse of discretion as to the results reached by the trial judge, who did reduce the fee request in a reasonable exercise of discretion. 

Costs, Employment, Prevailing Party: $3,881.39 In Routine Costs, Out Of A Requested $38,813.96, To A Prevailing Wage Claim Plaintiff Was No Abuse Of Discretion

Reason Was That Plaintiff Only Had Limited Success, So No Abuse Of Discretion In The Reduction By The Lower Court.

            So, a plaintiff prevails on a wage/hour claim for unpaid wages under Labor Code section 218.5, but only gets a minimal award which was limited success when other claims are considered?  Does that plaintiff get full requested costs as the prevailing party?  Answer:  Of course not, not automatically.

            Pak v. Joo, Case Nos. G055470/G055978 (4^th Dist., Div. 3 Mar. 11, 2020) (unpublished) illustrates this point well.

            There, plaintiff appealed from a 10% routine costs award of $3,881.39 out of a requested $38,813.96, when she recovered only $12,500 on a Labor Code section 218.5 unpaid wage claim in a lawsuit seeking much, much more.  That award was affirmed on appeal.  Plaintiff only obtained limited success of her litigation objectives as a whole, such that the trial judge had discretion to reduce prevailing party routine costs based on this end result.  (Sharif v. Mehusa, Inc., 241 Cal.App.4^th 185, 192, 195 (2015).).

Consumer Statutes, Deeds Of Trust: Third District Affirms Fee Award For Borrower Obtaining TRO Under California Homeowner Bill of Rights Legislation

Fact That Preliminary Injunction Withdrawn Did Not Alter The Result; Its Prior Decision In Bustos Found Persuasive.

            In Abdulrahim v. Wells Fargo Bank, N.A., Case No. C085656 (3d Dist. Mar. 11, 2020) (unpublished), bank reiterated a lot of argument as to why a borrower prevailing under a California Homeowner Bill of Rights TRO should not be entitled to a fee award—and only $7,905 was at issue.  The Third District rejected the bank’s arguments, finding they were foreclosed by its 2019 opinion in Bustos v. Wells Fargo Bank, N.A., 39 Cal.App.5^th 369, 377-380 (2019) [discussed in our August 28, 2019 post].   The fact that borrower withdrew a preliminary injunction motion did not alter the result.

Homeowner Associations: $390,668 Fee Award To HOA Affirmed When Appellate Court Affirmed HOA Interpretation Of Palm Tree View CC&Rs And Accompanying Policies

HOA Interpretation Of Palm Tree View Policies Was Correct, Such That It Was The Prevailing Party.

            Over the years, because a lot of us live in common interest developments, we are used to seeing homeowner association fights with homeowners, many occurring based on view restriction or tree limitations—generating plenty of disputes by both sides.  In the next case, HOA prevailed and, with it, garnered a substantial attorney’s fees award under the CC&Rs prevailing fees provision and the Davis-Stirling Act fee-shifting section.  We have seen this before in our category “Homeowner Associations,” which can be easily accessed for prior decisions—many large, some for the HOAs and some for the homeowners.  But a lot are not good in the end, resulting in financial issues for the losing homeowners or special assessments for the HOA members bearing the brunt of a lot of HOA fights.

            In Maravich v. Dover Shores Community Association, Case Nos. G056152/G056965 (4^th Dist., Div. 3 Mar. 5, 2020) (unpublished), homeowners sued HOA because palm trees on other properties grew to detract from scenic views of the Eastbluff area of Newport Beach and dramatic night light views of Fashion Island.  The dispute centered on CC&Rs and policies granting the HOA discretion to take appropriate action for trees that “impede and block” views.  HOA sided with the downhill homeowners, finding it had discretion to allow the taller trees to stay. 

            The trial judge rendered a “split” type of decision, although awarding HOA prevailing party fees of $390,668 (yep, no typo here).  On appeal, the appellate court went with the HOA interpretation of the tree ordinances, so the fee award was sustained completely.  Just goes to show you how HOA disputes can be prohibitively expensive for homeowners where fee-shifting provisions are in place.

            Justice Ikola authored the 3-0 opinion. 

Judgment Enforcement: Because Judgment Was Not Satisfied, Post-Judgment Enforcement Fees And Costs Properly Awarded

Minor Remand Ordered For Appellate Work Scrutiny, Based On How It Was Brought.

            If you search on our blog under the “Judgment Enforcement” topical bar, you will see that the next case, Quiles v. Parent, Case No. G056687 (4^th Dist., Div. 3 Mar. 4, 2020) (unpublished) pops up quite often.  We now post on this most recent case.

            Plaintiff obtained compensatory and punitive damages in a case, with plaintiff being granted post-judgment enforcement fees of $493,017 and costs of $27,879.09.  Except to look over some appellate fee/costs on remand, the 4/3 DCA affirmed in an opinion authored by Justice Fybel.

            The main problem for the judgment debtor was that the judgment had not been satisfied, which led to the conclusion that post-judgment enforcement fees/costs/interest were still in play.  In this area, prejudgment interest begins to run at the time judgment is entered, such that an amended judgment adding fees and costs does not start a “new clock” for purposes of interest.  “No legal authority suggests the amount of that interest is wiped out instead of adjusted in light of the amendments to the original judgment as occurred here.”  (Slip Op., p. 16.) 

            The defense argued that plaintiff never served plaintiff (versus plaintiff’s counsel) with the post-judgment fees/costs motion, but this argument did not prevail given that defendant still opposed and there was no prejudice shown by the allegedly defective service.

            With respect to appellate fees/costs, the 4/3 DCA panel was careful to observe that the procedure for claiming appellate work is not governed under the Enforcement of Judgment Laws, but by CCP § 1034(b) and CRC 3.1702(c).  So, there was a reversal, but without prejudice to renewing under the proper procedural regimen.

SLAPP: $31,990 Fee Award To Winning SLAPP Cross-Defendants Had To Be Revisited When Appellate Court Found SLAPP Motion Only Partially Successful

A “Re-Do” Was In Order Here.

            SLAPP cross-defendants likely were pleased when a trial judge granted a SLAPP motion, followed by a $31,990 fee award based on the mandatory SLAPP fee-shifting statute.  Well, the result was tarnished a bit based on the appellate court’s decision in Sarao v. Barker, Case Nos. B294816/B296391 (2d Dist., Div. 1 Mar. 4, 2020) (unpublished).  On appeal, the 2/1 DCA affirmed in part and reversed in part the SLAPP ruling.  That meant that cross-defendants were only partially successful, such that the fee ruling had to be re-addressed based on cross-defendants’ partial success. 

Eminent Domain, POOF!: Appellate Court’s Reversal Of Substantial Inverse Condemnation Judgment Also Meant Substantial Fee Award Fell

$818,544 In CCP § 1036 Fees And $182,627 In Costs Went POOF!

            Code of Civil Procedure section 1036 provides:  “In any inverse condemnation proceeding, the court rendering judgment for the plaintiff by awarding compensation, or the attorney representing the public entity who effects a settlement of that proceeding, shall determine and award or allow to the plaintiff, as a part of that judgment or settlement, a sum that will, in the opinion of the court, 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.”

            A plaintiff winning a $1.2 million jury verdict (as well as $484,500 in prejudgment interest) in an inverse condemnation action against CalTrans later moved for a fee/costs recovery under CCP § 1036.  The trial judge accommodated that by awarding $818,544 in fees and $183,627 in costs.

           Alas, all of that went POOF! on appeal.  The 2/1 DCA in McChesney v. People ex rel. Dept. of Transportation, Case No. B295879 (2d Dist., Div. 1 Mar. 4, 2020) (unpublished) reversed the inverse condemnation merits judgment; and with that, the prejudgment interest, fee award, and costs award also fell. 

Special Fee Shifting Statutes, Unlicensed Contractors: $4 Million Fee Award Evaporates On Appeal Because Penal Code Section 496(B) Does Not Encompass Fraudulent Diversion Of Business Funds

Also, CCP § 1029.8 Did Not Apply, Because Defendants Were Neither Unlicensed Contractors Nor Broker-Dealers.

            Appellate practice can result in a reversal of fortunes.  In Siry Investment, L.P. v. Farkhondehpour, Case No. B277750 (2d Dist., Div. 2 Mar. 3, 2020) (lead case, published), a $4 million-plus fee award based upon Penal Code section 496(b) and Code of Civil Procedure section 1029.8 went away as a matter of law on appeal.

            The 2/2 DCA determined that attorney’s fees could not be awarded in a fraudulent diversion of business funds case because Penal Code section 409(b) only applied to trafficking in stolen goods.  In doing so, it expressly parted company with the contrary reasoning in Switzer v. Wood, 35 Cal.App.5^th 116 (2019). 

            With respect to the predicate that CCP § 1029.8 allowed for fees (a section allowing fee entitlement against unlicensed persons in California), that was not applicable because defendants were not unlicensed construction contractors (they may have used unlicensed contractors, but did perform the construction services themselves) and were not unlicensed brokers-dealers (given that the limited partnership was not a “security” under the unique circumstances of the case and plaintiff’s lack of pleading of passivity in the investment). 

Costs, Section 998: Most Of $137,559.43 Costs Award To Successful Defendant Property Manager Affirmed On Appeal As Against Unsuccessful Plaintiff Tenants

Property Manager’s 998 Offers Were Not Token, Although Some Expert Fees, Exhibits Not Used At Trial, And Attorney Lodging Costs Had To Be Excluded Or Revisited.

            Lewis v. RDM Mgt., Inc., Case No. B280728 (2d Dist., Div. 7 March 2, 2020) (unpublished) is a situation where plaintiff tenants in a 23-unit apartment obtained a $729,780 compensatory damages award against apartment owners for sewer spills, although a defendant property manager was exonerated completely.  The trial judge granted property manager $137,559.43 in routine costs based on CCP § 998 offers which were directed to various tenants.  Tenants appealed from denial of their motions to strike/tax costs.

            Tenants were somewhat successful on appeal, although property manager garnered a lot of the costs it sought.

            Plaintiffs first argued that there needed to be a reduction based on owner not prevailing under a “unity of interest” exception (put another way, a reduction for the costs incurred for representing the unsuccessful owners).  The 2/7 DCA found that this exception was no longer viable under Charton v. Harkey, 247 Cal.App.4^th 734, 742 (2016), authored by our local 4/3 DCA.

            The appellate court then found that property manager’s $35,000 in aggregate offers to the tenants were not “token,” but within the “range of possibilities” as the ultimate zero judgment validated with respect to the 998 offers. 

            However, the Court of Appeal did find that two reductions were in order: (1) expert fees for a first trial which were not incurred, and (2) attorney lodging costs, which were only convenient to the case.  With respect to exhibits not used at trial, a remand was in order to see if these expenses were justified.  Finally, trial technology costs were proper given that more and more trial lawyers are using this technology to present their cases to juries, as allowable under Bender v. County of Los Angeles, 217 Cal.App.4^th 968, 991 (2013).

Allocation, Reasonableness Of Fees: $272,637.50 Fee Award Was Reasonable For Plaintiff Defeating Cross-Claims And Ultimately Winning $59,005.50 Overall

Contract And Tort Cross-Claims Were Intertwined—So No Need For Apportionment.

            In Newport Beach Center for Surgery, LLC v. Acclaim Recovery Mgt., LLC, Case No. B290636 (2d Dist., Div. 5 March 2, 2020) (unpublished), plaintiff won a $59,005.50 compensatory verdict in a case with a contractual fees clause, also defeating contract and tort cross-claims.  Plaintiff sought to recover $317,637.50 in fees, with the trial judge discounting by 25% to arrive at a $272,637.50 fee award.  The 2/5 DCA affirmed the fee award, finding that there was no requirement to allocate between work on the contract and tort cross-claims because they were interrelated to claims won by the plaintiff in the litigation, when considered as a whole. 

Celebrities, Employment, Taxation: 2017 Tax Amendments Do Not Allow Tax Reporter To “Expense” Attorney’s Fees Expended In A Sexual Harassment/Abuse Nondisclosure Settlement

“Weinsten Tax” Meant To Disincentivize Sexual Perpetrators/Harassing Employers From Trying To Prevent Reporting By Victims.

            As a response to some sexual harassers/abusers requiring use of confidentiality agreements to silence victims, Congress in December 2017 amended the Tax Code in what has been dubbed the “Weinstein tax.”

            Several bloggers indicate the repercussions of this.

            Section 162(q) of the Tax Cuts and Jobs Act of 2017 disallows the deduction of any sexual harassment or abuse settlement and attorney’s fees related to such a settlement or payment if “such a settlement or payment is subject to a nondisclosure agreement.”  Going further in that same section, attorney’s fees related to such a non-disclosure agreement are not deductible as a business expense by the harasser/abuser/employer after December 22, 2017.  This means that the Act applies after adjusted gross income is calculated. Before that calculation, this “penalty” provision removes from income any attorneys’ fees paid “in connection with any action involving a claim of unlawful discrimination.” Under the Act, plaintiffs are not taxed on the attorneys’ fees recovered from an unlawful-discrimination lawsuit, while defendants cannot include the settlement and fees as an itemized deduction.

            Recently, based on some ambiguous “under this chapter” language, the IRS clarified that “recipients of settlements or payments related to sexual harassment or sexual abuse, whose settlement or payment is subject to a nondisclosure agreement, are not precluded by section 162(a) from deducting attorney’s fees related to the settlement or payment, if otherwise deductible.”   This means that the tax liability rests with the employer (given these situations most frequently occur in an employment setting).

            California itself has passed new laws relating to nondisclosure agreements.  Under Code of Civil Procedure section 1001, a claimant cannot be silenced in California from disclosing factual information concerning actionable behavior, although the claimant can keep his/her identity confidential.  Pursuant to Government Code section 12964.5, it is an unlawful employment practice to require an employee to sign a nondisclosure agreement that denies a claimant the right to disclose information about actionable conduct. 

Costs, Section 998: Two $50,000 998 Offers Were Made In Good Faith, Justifying Personal Injury Plaintiffs’ Receipt Of Postoffer Costs Of $99,833.53, With Two Minor Modifications On Appeal

Fifth District Struck $4,608.53 For Models/Blowups/Exhibit Photocopies And $2,850 Court Reporter Fee For Lack Of Particularized Detail.

            The Fifth District, in Childress v. Aaron, Case No. F077027 (5^th Dist. Feb. 28, 2020) (unpublished), did a nice, scholarly job of discussing Code of Civil Procedure section 998 good faith principles and Code of Civil Procedure 1033.5 costs substantiation requirements.

            There, two plaintiffs brought a vehicle personal injury action against defendant, who was intoxicated and hit them, causing continuing pain and need for medical treatment based on plaintiffs’ discovery and deposition testimony.  They both served $50,000 section 998 offers three and a half months after filing the complaint and extended the offers until 10 days after plaintiffs’ depositions were completed.  The defense did not accept the offers, with one plaintiff netting an aggregate damage award by a jury of $71,250 while the other plaintiff netted an aggregate of $115,050.  Based on “beating” the 998 offers, plaintiffs’ sought postoffer costs from defendant of $100,109.91 (which included expert witness fees of $49,320 as well as some prejudgment interest).  The trial judge disallowed $276.38 in costs, but otherwise granted the request in major part.  Defendant appealed.

            The Fifth District affirmed, except to strike two cost items for lack of specificity by the plaintiff claimants.

            Defendant could not surmount the governing abuse of discretion standard as far as whether the 998 offers were made in good faith and reasonable in nature.  Because the plaintiffs obtained a more favorable judgment than the 998 offers, the ensuing judgment was prima facie evidence that the offers were reasonable.  (Santantonio v. Westinghouse Broadcasting Co, 25 Cal.App.4^th 102, 117 (1994).)  The 998 offers were within the range of possible results given that plaintiffs continued to complain about pain despite some clinical test showing no obvious objective problems.  The defense also had sufficient evidence to assess the offers, given the offers were extended until completion of plaintiffs’ depositions and discovery responses showing that plaintiffs continued to have pain/suffering. 

            That brought the appellate court to the defense challenges to the reasonableness and necessity of the postoffer costs actually awarded.  The major items, especially the expert witness fees, were reasonable and listed on close to a line item basis.  Although arguing one expert’s costs were not reasonably necessary because the jury did not ultimately award a measure of damages advocated by the expert, “[d]efendant offers no authority for the proposition that expert testimony on a measure of damages not ultimately awarded by the jury is not reasonably necessary to the conduct of the litigation”—this would be hindsight reasoning not applicable to a jury verdict.  (Slip Op., p. 19.)

            However, the appellate panel did strike $4,608.53 for models/blowups/exhibit copies and $2,850 for court reporter fees based on lack of substantiating detail from plaintiffs in their costs papers.  Only a raw total for the first costs item was provided, which was not specific enough to show that the expenses were reasonable in nature.  With respect to the court reporter fee, plaintiffs also failed to provide details or indicate how they were awardable given that the lower court did not order transcripts of court proceedings.  So, with that, a postoffer costs award to plaintiffs, after a little trimming, was sustained to the tune of $92,375—almost the amount of the two 998 offers totaling $100,000. 

Appealability, Lis Pendens: Aggrieved Party Suffering $4,500 Fee Award With Respect to Lis Pendens Expungement Could Not Raise The Issue Through A Subsequent Appeal

Litigant Had To Raise The Issue In A Writ Petition, Which Litigant Did Not Do—Appellate Court Lacked Jurisdiction To Consider The Fee Award.

            A probate litigant in Wilkin v. Nelson, Case No. B294530 (2d Dist., Div. 6 Feb. 3, 2020) (certified for partial publication Feb. 26, 2020; fee discussion not published) was ordered to pay $4,500 in attorney’s fees incurred after the probate court successfully granted the other side’s motion to expunge a lis pendens on some real property.   The trial judge can make such a fee award under Code of Civil Procedure section 405.38. 

            The aggrieved litigant subsequently appealed the fee award after bringing an unsuccessful writ petition to challenge the lis pendens expungement.  The 2/6 DCA found it had no jurisdiction to consider the appeal of the fee award.  The reason?  Answer:  the litigant did not raise the issue of attorney’s fees in the writ petition, such that he waived the only recourse for appellate review. 

Allocation, Fee Clause Interpretation, Reasonableness Of Fees: Reducing Requested $1.36 Million Fee Award, By 25% To $943,028, Was No Abuse Of Discretion Based On $1.2 Million-Plus Recovery And Rejection Of Low Ball Defense Settlement Offer

Tort Claim Defense Fees On An Unsuccessful Cross-Complaint Were Interrelated, Thus No Allocation Required; Prevailing Party Clause In Lease Applied So As To Allow Fee Recovery In Broker’s Favor.

            Water Court, LLC v. Adams Wine Group, LLC, Case No. B290799 (2d Dist., Div. 6 Feb. 25, 2020) (lead appeal; unpublished) is an example of where significant attorney’s fees will be awarded and trial judge reductions affirmed where the defendant, a would-be tenant, breached a $1 million “build to suit” office lease and accompanying guaranty.  Landlord eventually was awarded $1,208,032.42 after a jury verdict which was reduced a little over $500,000 through a new trial remittitur.  Landlord was then awarded $943,028 in attorney’s fees under a lease fees clause, out of a requested $1,359,122.50—a 25% reduction (and a little more than the defense expert conceding that $872,441.31 was a reasonable fee award).  The broker was awarded $360,520.50 in fees under a contractual paragraph in the lease. 

          The 2/6 DCA affirmed the fee awards after a small compensatory damage modification for “twice counted” demolition costs.

            Landlord’s $943,028 fee award was proper given (1) a 25% reduction by the trial judge; (2) the guarantor making a low-ball offer to settle for $100,000 six weeks before trial, forcing Landlord to incur another $552,714 in fees/costs, and (3) the trial judge’s reduction such that the hourly rates claimed were “evened out” by the 25% haircut.   The fees incurred by Landlord to successfully fight the defense counter-claims did not have to be apportioned, because they related to common core facts and related legal theories involved in the overall litigation.

            Finally, the Brokers were entitled to $360,520.50 because the lease fees clause included brokers among the “prevailing party” definition, creating a tripartite contract between the lessor, lessee, and broker. 

Private Attorney General: $142,148 Fee Award Against Limited Partnership Property Owner And One Of Its Limited Partners Affirmed On Appeal Despite Petitioners’ Failure To Properly Notice Attorney General With Its First Amended Petition

Strict Adherence To Attorney General Notice Requirements Does Not Preclude Fee Awards, And Limited Partner Was Hit With Fees Because He Held Himself Out As Property Owner And Participated In Litigation As Real Party In Interest.

Gigantic oak tree on the Tejon Ranch, Kern county, Calif.; Indian man, woman and small girl in front of the tree. Carleton E. Watkins, photographer.  1888.  Library of Congress.

            Save the Agoura Cornell Knoll v. City of Agoura Hills, Case Nos. B292246 and B295112 (2d Dist., Div. 7 February 24, 2020) (unpublished), involves a CEQA (California Environmental Quality Act) action challenging the City’s approval of a proposed mixed-use commercial and residential development on vacant land – with the challenge centered around an Oak Tree Ordinance, tribal cultural resources, sensitive plant species, and insufficient mitigation measures.

            After succeeding on 2 out of 3 of their CEQA claims, Petitioners moved for post-judgment attorney fees pursuant to Code Civ. Proc. section 1021.5 – seeking $339,559 in fees which included a 2.0 lodestar multiplier.  The trial court granted the motion – without a multiplier – in the amount of $142,148, with 50% payable by the City and 50% payable by Agoura and Cornell Roads, LP (the property owner) and its limited partner, Doron Gelfand.  

            The LP and Gelfand unsuccessfully appealed the judgment and attorneys’ fees order –challenging the attorneys’ fees order on two grounds: (1) that Petitioners were not entitled to fees because they failed to provide notice of the CEQA action to the Attorney General pursuant to Public Resources Code section 21167.7 and Code Civ. Proc. section 388; and (2) that the trial court erred in concluding that Gelfand was personally liable for 50% of the fee award as Gelfand – who was one of 27 limited partners in the LP and the president of the LP’s general partner – merely acted as an officer of the general partner throughout the project’s development and approval process.

            As to the LP and Gelfand’s first ground, the 2/7 DCA found that failure to maintain strict compliance with Attorney General notice requirements did not necessarily preclude an award of section 1021.5 fees, and that such determination was within the discretion of the trial court.  Additionally, in this case, Petitioners timely provided notice to the Attorney General upon their initial filing.  Although their first amended petition – not materially different from the original petition – was not timely provided, this failure did not preclude the Attorney General from intervening in the case.  As the Attorney General had ample time to do so, but did not, private enforcement action was necessary.

            The LP and Gelfand’s second ground also went nowhere – with the 2/7 DCA finding it reasonable for the trial court to infer from the evidence that Gelfand was not acting solely in a representative capacity on behalf of the LP.  Gelfand was a real party in interest, was properly so named in the litigation, had pursued a direct interest in the project, and had actively participated in the litigation.  In the City’s Notice of Determination for its approval of the project, Gelfand was listed as the sole applicant, and Gelfand had identified himself as the owner of the property in a letter to the City.

Private Attorney General: Plaintiff Only Obtaining A Non-Merits Stay In A CEQA Action, In A Dismissed Case, Was Not Entitled To CCP § 1021.5 Fees

$289,544 In Fees Correctly Denied By The Trial Judge On Appeal.

            In Canyon Crest Conservancy v. County of Los Angeles, Case No. B290379 (2d Dist., Div. 4 Feb. 19, 2020) (unpublished), plaintiff obtained a minor conditional use permit and oak tree permit in connection with constructing a single-family house in undeveloped property in Los Angeles County, but then proceeded to file a CEQA action against the County and various other governmental entities in which plaintiff sought further environmental review.   Plaintiff did obtain an administrative stay to preserve the status quo to make sure the project approvals complied with CEQA, but dismissed the suit after running out of litigation funds once the appropriate governmental entity vacated the project approvals—but not a wholesale vacating based on general policy considerations (simply litigation specific to end plaintiff’s case).  Plaintiff then filed to recoup $289,544 in fees under the private attorney general statute, a request denied by the lower court.

            The 2/4 DCA affirmed.

            The first issue was the appellate standard of review.  The Court of Appeal decided that that the abuse of discretion prism was appropriate, given that there was no prior appellate court determination on issues requiring a de novo scrutiny.   That meant that the lower court determinations were entitled to deference on appeal.

            But the specific analytical dissection of section 1021.5 elements did not require any reversal under the circumstances of this case, in any event.

            First, no public interest was vindicated.  Plaintiff never obtained any additional environmental review under CEQA, so that its broader policy implications were not furthered in this matter.

            Second, there was no significant benefit to the general public.  The administrative stay was not on the merits (only to preserve the status quo) and only benefitted plaintiff’s single lot, with no indication that Los Angeles County could or would change its policies on tree issues.  In essence, this was a limited private matter which did not result in a policy change—not the stuff that justified a § 1021.5 fee award.

Prevailing Party, Private Attorney General: Private Attorney General Fee Denial Affirmed Based On Litigant’s Failure To File Appellate Opening Brief And Small Fees Award Against Governmental Entity Reversed As A Matter Of Law

Plaintiff Did Not Prevail Against Governmental Entity So That $7,500 Government Code Section 800 Award Went POOF! On Appeal.

            Ya know, appellate proceedings can really change results at the trial court level at different junctures of a case.  1041 20^th Street, LLC v. Santa Monica Rent Control Bd., Case No. B295812 (2d Dist., Div. 5 Feb. 18, 2020) (unpublished) exemplifies how this can occur.

            What happened here is that a plaintiff did prevail at the trial level with respect to obtaining a writ of administrative mandate, a determination which was reversed on appeal.  The trial judge denied a private attorney general fees motion by plaintiff, but it did decide that plaintiff was entitled to $7,500 against the Rent Control Board pursuant to Government Code section 800 (which allows a capped sum against a governmental decision for capricious actions, in essence).

            All of the fee exposure against the Rent Control Board went away on appeal.  Plaintiff failed to timely file an appellant’s opening brief such that its appeal of the fee orders went POOF!  Similarly, the Government Code section 800 award went POOF! because there needed to be a prevailing party—but plaintiff was not that based upon a reversal in a prior appellate court decision.  Simply put, outta luck, plaintiff, sorry ….. that is what can happen on appeal!

Appealability, Sanctions: Attorney, Although Not Appealing In Appeal By Client, Has Standing To Proceed Unless Prejudice To Opposing Party

California Supreme Court Indicate Prejudice, Not Per Se, Analysis Is Applicable.

            As indicated in our Year-End 2019 cases relevant to this blog, the only pending case on sanctions issue was still pending for decision.  Well, it is in.

            In K.J. v. Los Angeles Unified School Dist., Case No. S241057 (Cal. Supreme Ct., Jan. 30, 2020), the California Supreme Court decided that a sanctions motion against an attorney, although only appealed by the client, was proper where the circumstances showed that the attorney’s interests were at stake and no prejudice attended to the other side.  Again, prejudice—a key focal concern in any appeal—was front and center in the determinative ruling by our state supreme court.

Family Law: Section 271 Sanctions Requests Are Not Subject To Different Civil Deadlines

Rather, Laches Govern Whether the Section 271 Sanctions Motions Were Timely.

            George v. Shams-Shirazi, Case No. A155158 (1^st Dist., Div. 1 Feb. 11, 2020) (published) dealt with a $13,000 “sanctions” award against a litigant under Family Code section 271, which allows a family law judge great latitude to award attorney’s fees and costs against a litigant who does not attempt to move the family law case to a resolution or files needless motions.

            Well, the losing party lobbed procedural argument to reverse the award.  The basic argument was that the section 271 sanctions motion was filed too late, because it was “lock stepped” into civil court deadlines for filing fees motion.  Wrong.  The problem was that this was a family court case and one involving postjudgment sanctions fees which triggered a different deadline in family law cases.

            So, what is the rule?  Laches, said the appellate court.  “ . . . postjudgment requests for statutory attorney fees can be denied under the equitable principles of laches if the delay in filing unfairly prejudices the other party,” citing Crespin v. Shewry, 125 Cal.App.4^th 259, 271-272 (2004).  Under the circumstances of this case, laches did not apply such that the sanctions award was affirmed based the particular circumstances of this case.  It will be interesting to see if legal practitioners try to stretch this case beyond its narrow facts.  Who knows!

Civil Rights: 9th Circuit Holds 90% Discount Of Fees In Civil Rights Case Will Require Further Explanation By Trial Judge

Court Majority Believed "Punishing" Attorneys For An Initial High Demand By Slashing Fees Would Lead To "Perverse Incentives."

        A steep 90% discount of a senior litigator's fees led a panel majority of the 9th Circuit to demand further explanation from the trial judge. Vargas v. Howell, No. 18-15513 (9th Cir.  2/5/20) (maj: Miller, Watford; dsst: Benitez). Judge Alex Kozinski wrote in Moreno v. City of Sacramento, 534 F.3d 1106, 1111 (9th Cir. 2008), that "the district court can impose a small reduction, no greater than 10 percent — a "haircut" — based on its exercise of discretion and without a more specific explanation." In Vargas, the very large discount triggered a demand by the 9th Circuit for more explanation by the trial judge.

        The Court of Appeals disapproved of a "mechanical" approach to fees that discounted fees by 90% because the civil rights plaintiff only received 10% in settlement of his original claim. It suggested that such an approach, which "punished" the attorneys for stating a high initial demand, could lead to "perverse incentives" in civil rights cases: encouraging civil rights attorneys to make modest initial demands, and increasing demands as litigation continues, making it harder to settle cases. However, starting high can be a sensible negotiation strategy for plaintiff attorneys, giving them flexibility and the ability to make concessions in order to reach a favorable result. While a significant discount can be justified by poor results, here, the settlement amount of $99,999 was more substantial than nuisance value, and the court had not issued any rulings that doomed a successful outcome for plaintiff.

           Two other issues in the case were readily dispatched. First, the trial judge was within his discretion to reduce fees of a PI attorney who had co-counseled. Second, a law firm that sought fees for plaintiff, based on work done earlier by two attorneys who later joined the law firm, could do so, because ultimately fee entitlement belonged to the plaintiff, not to the attorneys.

        District Judge Roger Benitez, dissenting, believed the trial judge's explanation for the 90% fee reduction to a senior litigator was adequate, because the trial judge had spent several pages analyzing some but not all of the 12 Kerr factors, named after the case adopting the multi-factor test as guidelines for fee evaluation within the 9th Circuit. Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 70 (9th Cir. 1975). Judge Benitez worried Vargas will increase the writing burden for trial judges, without clarifying how much they must do to provide an adequate explanation for a fee discount.

        Co-contributor Marc has authored an article about Vargas in today's February 7, 2020 Daily Journal, entitled 'Mechanical' analysis of attorney fees award in civil rights case results in partial reversal'. (The Daily Journal is behind a paywall. Oh well). Marc also has a blog post today, 2/7/20, on the California Mediation and Arbitration blog.

Indemnity: When Judgment In Favor Of Cross-Defendant Defending Against Indemnity Claim Is Reversed On Appeal, So Too Is The $756,121.24 Awarded In Attorneys’ Fees And Costs

The Trial Court Erred In Concluding That Duty To Indemnify Was Not Triggered By The Filing Of Underlying Lawsuit Wherein Plaintiff Did Not Expressly Allege Negligence By Cross-Defendant.

            In Sierra Pacific Properties, Inc. v. Otis Elevator Co., Case No. A154578 (1^st Dist., Div. 5 January 27, 2020) (unpublished) a commercial office building employee was seriously injured when the elevator she was riding in suddenly malfunctioned – requiring her to undergo several surgeries.

            She sued the building owner and Schindler – the contractor that serviced the elevators at the time of the incident.  Building Owner tendered its defense to both Schindler and Otis Elevator Co.  Otis had maintained the elevators until approximately three months prior to the incident.  Schindler accepted Building Owner’s tender and defended it in the lawsuit, but Otis did not.    

            The jury returned a verdict finding negligence – allocated fault at 60% to Building Owner and 40% to Schindler – and awarded Plaintiff over $5.6 million in damages.  The jury found Otis was not negligent.

            After trial, the parties submitted briefs on the cross-complaint Building Owner and Schindler had filed against Otis for contractual and equitable indemnity.  While the parties agreed that Otis did not have to indemnify Building Owner based on the jury’s findings, Schindler alleged that Otis should have shared the costs of defending Building Owner.  However, the trial court found Otis had no duty to defend Business Owner because Plaintiff did not expressly allege negligence by Otis in her complaint.  Additionally, the trial court awarded Otis $756,121.24 in attorney fees and costs under Civil Code section 1717.

            The 1/5 DCA reversed – finding Otis had a duty to defend Building Owner pursuant to indemnity clauses in the contract between the parties, and that the duty had been triggered by Plaintiff’s complaint even though she had not named Otis as negligent.  Pursuant to Civil Code section 2778, which imposes a duty to defend when a plaintiff alleges facts that would give rise to a duty of indemnity, the 1/5 DCA determined the proper focus was not on who Plaintiff named in her complaint. Rather, the proper focus was on the facts alleged in Plaintiff’s complaint which clearly implicated Otis’s work and made it potentially liable on the indemnity.  That duty arose immediately upon Building Owner’s tender of defense and was not dependent on the outcome of the litigation.  (See also, Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4^th 541, 553-558 and UDC-Universal Development, L.P. v. CH2M Hill (2010) 181 Cal.App. 4^th 10, 21.)

            Reversal of the judgment in favor of Otis necessitated reversal of the attorney fees/costs it had been awarded.  On remand, the 1/5 DCA instructed the trial court to apply the equitable contribution doctrine in determining Schindler and Otis’s defense costs shares.

Deadlines, Retainer Agreements, Section 1717: 4/1 DCA Affirms $108,848.50 Attorney Fees Award To Prevailing Plaintiff Attorney For Work In Seeking Unpaid Fees And In Defending Against Former Client’s Cross-Complaint

Balance Of Unpaid Fees And Costs Were $31,147.17 When Former Client Stopped Making Agreed-Upon Monthly Installment Payments Of $200.

            In Delisi v. Wagner, Case Nos. D074728 and D075506 (4^th Dist., Div. 1 January 27, 2020) (unpublished), an attorney sued his former client for unpaid fees and costs when Former Client stopped making monthly installment payments of $200 agreed upon by the parties in an addendum to their retainer agreement.   

            Former Client owed $31,147.17 when he stopped making the $200 monthly installment payments.  When Attorney sued for the unpaid fees, Former Client filed a cross-complaint for general negligence alleging damages as a result of Attorney’s representation in Former Client’s divorce case, and seeking damages of $88,275.  The trial court found the cross-complaint was time-barred pursuant to the one-year statute of limitations set forth by Code Civ. Proc. section 340.6, and granted Attorney’s motion for summary judgment.  Later, the trial court also granted Attorney’s motion for summary judgment on his complaint for unpaid fees and costs – awarding $12,000 for 60 missed installment payments, plus interest from the date each installment payment became due.

            As the prevailing party, and pursuant to the attorney fees provision in the parties’ retainer agreement, Attorney then successfully moved for two awards of attorney fees and costs under Civ. Code section 1717 – receiving an award of $108,848.50, with $88,495.50 awarded for the fees/costs incurred in prosecuting his complaint, and $20,353 awarded for the fees/costs incurred in defending against the cross-complaint.  Attorney's motions for fees and costs were considered unopposed by the trial court due to the late filing of Former Client's opposition.

            Former Client unsuccessfully appealed the judgment and post-judgment awards of fees/costs – with the 4/1 DCA finding he failed to meet his burden of proving reversible error on both procedural and substantive grounds.  With regard to the summary judgment, Former Client – who had represented himself at both the trial and appellate court levels – had forfeited arguments on appeal by failing to support them with sufficient facts, citations to the record, and/or failing to raise them in the trial court.  As to the attorney fees orders, Former Client had forfeited appellate review by failing to timely oppose Attorney’s motions in the trial court.

Probate: Case Goes To The 4/3 DCA A Second Time For Trustee’s Attorney Fees With 4/3 DCA Overturning Lower Court’s Ruling To Reduce

4/3 DCA Declares The Reduction Undermined And Improperly Limited The Authority Of The Trustee To Pay Attorney Fees And Was An Abuse Of Discretion.

            Well, folks, in the famous words of Yogi Berra, “It’s déjà vu all over again.” 

            In a July 15, 2016 post, we reported on Shelton v. Larson, and now report on that case, again – this time as Kote v. Larson, Case No. G056820, (4^th Dist., Div. 3 January 27, 2020) (unpublished).

            Three siblings – Dana, Sharon, and Daniel – are beneficiaries under their deceased parents’ revocable trust. 

            In the original case, Sharon and Daniel successfully had Dana removed as trustee and her request for trustee fees/costs and attorney fees/costs denied – along with a requirement that she disgorge certain attorney fees, trustee fees, and costs already paid.  Dana successfully appealed the lower court’s order as to the fees/costs – with the 4/3 DCA reversing and remanding because trustees generally are awarded attorneys’ fees in contests involving accountings or beneficiary objections, unless some bad conduct is involved.  As bad conduct was not involved, some fees were justified.

            In the current case, heard by a different lower court judge, Sharon and Daniel successfully had the Successor Trustee – a professional trustee appointed by the lower court in the first case – removed and a reduction to the already paid trustee fees and attorney fees/costs.  Additionally, the lower court appointed Sharon as new successor trustee without requirement that she obtain a bond, and – on its own motion – ordered the Trust be court supervised.  Successor Trustee successfully appealed the lower court’s order as to the fees/costs and bond requirement – with the 4/3 DCA reversing and remanding.

            As to the bond issue - Probate Code 15602(a) requires a bond for a trustee not named in the trust excepting compelling circumstances.  The record did not reflect any compelling circumstances – so a remand for determination as to whether any exist, and an order for Sharon to obtain the bond if none exist. 

            As to the trustee’s fees - the lower court had reduced by about $12,466.18 based on its erroneous finding that there was no agreement for the Successor Trustee to charge a one percent (of the Trust assets value) fee.  The record clearly demonstrated that Successor Trustee presented a fee schedule that included the one percent fee to Sharon and Daniel before he was appointed.  Sharon and Daniel included that fee schedule as part of their Removal Petition and complained about the amount of trustee fees based on the fee schedule.

            As to the reduction in trustee’s attorney fees/costs – although the lower court found the billings to demonstrate reasonableness in time spent, matters handled, and hourly rates charged, it reduced by roughly $5,000 based on some ambiguities and vagueness in some of the descriptions of work performed.  In a 3-0 opinion authored by Justice Thompson, the 4/3 DCA found that “[r]eduction of the attorney fees on that basis had the effect of undermining and improperly limiting the authority of the trustee to pay them and was an abuse of discretion” in the context of this case.  The lower court was not reviewing a petition to pay attorney fees but was reviewing an accounting.  Successor Trustee had the power to retain and pay attorneys from the trust property, and had done so.  The attorneys hired by Successor Trustee to aid in administering the trust were entitled to reasonable fees paid from the trust assets (Kasperbauer v. Fairfield (2009) 171 Cal.App.4^th 229, 235) [reviewed in our January 27, 2009 post]. 

            Finally, as to the removal of Successor Trustee and placing the Trust under court supervision, the 4/3 DCA found no abuse of discretion nor error.  It was in the best interest of the Trust to remove Successor Trustee based on the substantial hostility between him and the beneficiaries, and the court holds authority to make necessary orders to supervise administration of a Trust.

            Interestingly, it seems the Successor Trustee may have missed a key argument.  As the 4/3 DCA pointed out, “The court did not reserve the issue of removal of the trustee or give notice it would make a ruling on it in the December Minute Order setting the 2018 hearing, thus raising the due process issue of lack of notice.”  However, because Successor Trustee did not argue that on appeal, nor raise it in his objections to the lower court’s 2018 Tentative Decision, he waived any potential due process claim.  This, too, applied to the appointment of a new successor trustee and court supervision of the Trust.

            So that’s it, folks.  Maybe there will now be a final resolution of this case without need for additional appeal.  But you know what Yogi Berra would say . . .  “It ain’t over ‘til it’s over.”

Sanctions, Section 998: 1/5 DCA Reversed And Remanded CCP § 998 Award In Favor Of Defendants, Although Reversing As A Matter Of Law CCP § 128.5 Sanctions Against Plaintiff

Lower Court’s 998 Award Needed Recalculation; 2017 Amendments To Section 128.5 Rendered That Award Against Plaintiff Invalid As A Matter Of Law.

            In Lee v. Harjono, Case No. A151656 (1^st Dist., Div. 5 Jan. 23, 2020) (unpublished), plaintiff (a lawyer) sued defendant driver and his wife in a car accident case, rejecting some CCP § 998 offers by the defense.  The jury found driver to be not negligent, even though defendants had to engage an expert witness as part of their defense.  The trial judge awarded defendants $2,100 out of a $14,516 expert witness fee request under section 998.  The lower court also imposed $3,070 out of a requested $31,809 in CCP § 128.5 sanctions against plaintiff for his frivolous prosecution of an unfair competition claim against defendants. 

            Both of those awards were reversed on appeal.

            CCP § 998 Award.  There were multiple problems with the section 998 award, likely compounded by voluminous filings by both sides.  The trial court awarded $1,400 for expert costs incurred before the first 998 offer was made, something which was improper.  Then, the lower court only awarded $700 out of the remaining request despite finding that the costs itemizations were reasonable.  The appellate jurists scratched their collective heads, sending the matter back for a recalculation because it could not make sense of what was awarded.

            CCP § 128.5 Sanctions Award.  This one was reversed altogether based on 2017 amendments to section 128.5 requiring safe harbor notice and proof of subjective intent.  The appellate panel found that the 2017 amendments clarified existing law, rather than change it, such that it applied to transactions predating its enactment.  Because the sanctions award could not be justified under the 2017 amendments, it had to be reversed as a matter of law.

Section 1717: Client’s Suit Against Disbarred Attorney’s Law Partner Was On The Contract Under Civil Code Section 1717

Trial Judge’s Denial Of Fees Was Error, But He Protectively Decided Only 10% Of Winner’s Claimed Fees Were Reasonable—With The Appellate Court Modifying The Judgment To Award This Amount!

            This next one is interesting to show how trial judges can “protectively” express what attorney’s fees should be even though denying the request.  By doing so, the appellate court did not have to remand, but simply modify the judgment in line with the trial judge’s “advisory opinion.”

            That is what happened in Jefferson Pointe Professional Center Property Owners Assn. v. Kriger, Case No. D075946 (4^th Dist., Div. 1 Jan. 23, 2020) (unpublished).  Ex-client sued his main attorney (since disbarred) and law partner for breach of contract and torts, with the ex-client obtaining a judgment against main attorney but getting defensed by his law partner.  The trial judge denied an attorney’s fees request to the law partner, but he did indicate that he would only award $46,923—10% of the requested fees—had he granted the motion. 

            On appeal, the 4/1 DCA reversed the fee denial, finding the winning law partner did base his motion “on the contract” under Civil Code section 1717 after winning a summary adjudication on ex-client’s contractual claim.  However, rather than remand, the appellate court found that the trial judge’s conclusion about the amount of fees was no abuse of discretion and modified the judgment to award fees in the amount of $46,923 to law partner.

Class Action, Ethics: One Counsel’s Failure To Disclose A Lack Of Professional Liability Insurance Invalidated Class Action Fee Division Agreement

However, Matter Was Remanded For Trial Judge To Consider Quantum Meruit Recovery.

            Hance v. Super Store Industries, Case No. F075852 (5^th Dist. Jan. 23, 2020) (published) is a very scholarly opinion exploring an ethics issue.  Briefly told, a plaintiff’s class action attorney was an experienced labor attorney, but he referred the matter to class action specialists under a fee division agreement.  At the end of the day, the case settled and $4.3 million was awarded to class counsel, with the lower court honoring a fee division agreement for the referring attorneys and other class attorneys.  On appeal, the fee division agreement was challenged as unenforceable on numerous grounds.

            The Fifth District agreed that it was unenforceable based on one ground.  Referring attorney had failed to disclose that he had no professional liability insurance, an ethics violation which did invalidate the fee division agreement.  (Rule of Professional Conduct, former Rule 3-410, now Rule 1.4.2).  However, not all was lost.  The matter was remanded for the trial judge to consider if quantum meruit recovery was allowable to the referring attorney, given that the record showed there was value in his referral services during the case.  The appellate court also agreed that the QM recovery was not necessarily limited to the lodestar hours billed by the referring attorney. 

Judgment Enforcement: It Was Abuse Of Discretion To Award Judgment Creditor Plaintiff Attorneys’ Fees For Voluntarily Dismissed Causes Of Action

Code Of Civil Procedure section 685.040 Entitled Plaintiff Only To Fees Incurred On The Single Cause Of Action On Which He Prevailed.

            Code of Civil Procedure section 685.040 allows a judgment creditor to recover reasonable and necessary attorneys’ fees incurred in enforcing a judgment if the underlying judgment includes an award of attorneys’ fees to the judgment creditor.

            In Hadaegh v. Khaligh, Case No. B291303 (2d Dist., Div. 7 January 22, 2020) (unpublished) Plaintiff filed an action to enforce a prior judgment – also alleging causes of action for fraud, fraudulent transfer, aiding and abetting fraudulent transfer, civil conspiracy, and resulting trust against Judgment Debtor and Other Defendants.

            The trial court granted Plaintiffs’ motion for judgment on the pleadings as to the enforcement of the prior judgment, and Plaintiff continued to litigate the remaining causes of action for another 15 months before voluntarily dismissing them without prejudice.

            Plaintiff then moved for attorneys’ fees in the amount of $204,575 pursuant to Code Civ. Proc. section 685.040 as the earlier judgment included attorneys’ fees.  After some reductions for fees incurred for actions against Other Defendants, the trial court awarded Plaintiff $171,687.50 against Judgment Debtor.

            Judgment Debtor appealed – arguing that a Chapter 7 Bankruptcy she had previously filed had discharged the attorneys’ fees and costs from the underlying judgment (although the underlying judgment was otherwise found to be nondischargeable) thereby “forever barr[ing] any claim for attorney’s fees, costs or expenses involved in or related to” the underlying judgment, and that the trial court had abused its discretion in awarding Plaintiff attorneys’ fees on the causes of action he voluntarily dismissed. 

            The 2/7 DCA agreed with Judgment Debtor’s argument as to the fees awarded on the dismissed causes of action – finding Plaintiff not entitled to fees incurred for causes of action for which he did not prevail.  However, Judgment Debtor’s argument related to her earlier Chapter 7 discharge of fees went nowhere.  Judgment Debtor had waived that argument by failing to timely raise it in the trial court.  Nonetheless, the 2/7 DCA included a nice discussion of this issue – ultimately finding the argument meritless.

            The judgment was reversed with direction to determine the reasonable and necessary attorneys’ fees Plaintiff incurred prior to the trial court’s grant of judgment on the pleadings.

Trade Secrets: No Abuse Of Discretion In Trial Court’s Denial Of Prevailing Defendants’ Attorneys’ Fees Request

Plaintiff Was Victorious In Its Other Claims And Trial Court Was Allowed To Consider Equitable Concerns – Such As Attorneys’ Fees Plaintiff Incurred To Preserve Its Business Against Defendants’ “Unscrupulous Behavior.”

            In Techno Lite, Inc. v. Emcod, LLC, Case Nos. B284989 and B289486 (2d Dist., Div. 4 January 21, 2020) (partially published), two partners in a company that sold lighting transformers were also employed – under the promises that they would run their company on their own time and not compete – by Techno Lite which also sold lighting transformers.

            When one of Techno Lite’s three owners died, the remaining two owners offered to gift the deceased owner’s Techno Lite shares to one of the employees.  He refused the shares, but he and other employee offered to purchase Techno Lite.  The purchase never came to fruition and the two employees quit.

            About a month later, based on breach of the employees’ promises, Techno Lite sued the two former employees, their company and one of its sales employees for breach of fiduciary duty, misappropriation of trade secrets, interference with contractual relationships, fraud, unfair business practices, interference with prospective economic advantage, conversion, injunctive relief, and constructive trust.  The two former employees and their company cross-complained – alleging interference with contract, interference with prospective economic relations, California unfair competition law and Cartwright Act violations, violation of the unfair business practices act, defamation and injunctive relief.

            The trial court dismissed the cross-complaint, found in favor of Defendants’ summary judgment motion against Plaintiffs’ trade secret claim, and ruled against Defendants on Plaintiffs’ other causes of action.  Defendants then unsuccessfully moved for attorneys’ fees for their summary judgment defeat of Plaintiffs’ misappropriation of trade secrets claim.

            Defendants appealed, and the 2/4 DCA affirmed in a partially published opinion.  As to the denial of attorneys’ fees – addressed in the unpublished portion of the opinion – the 2/4 DCA found no abuse of discretion in the trial court’s finding that Plaintiff had not brought the trade secrets claim in bad faith.  Civ. Code section 3426.4 provides that if a claim of misappropriation of trade secrets is made in bad faith, “the court may award reasonable attorney’s fees and costs to the prevailing party.”  The fee-shifting statute gives the discretion to award fees to the trial court – expressly stating the trial court “may,” not that it “shall” award fees.

Consumer Statutes, Section 998: Trial Court Erred In 40.4% Reduction To Prevailing Plaintiffs’ Song-Beverly Fee Request For Fraud Causes Of Action

Language in Defendant’s 998 Offer Was Ambiguous And Did Not Allocate Any Portion Of Payment To Any Cause Of Action Other Than The Song-Beverly Claim.

Miss Rose Cade – Queen of the Lemons – 1919 or 1920

            In Smart v. Ford Motor Company, Case No. C087422 (3d Dist., January 21, 2020) (unpublished), lemon law Plaintiffs filed an action against Ford alleging four fraud claims, violation of the CLRA, and a claim under the Song-Beverly Act.  Ultimately, Plaintiffs accepted Ford’s fifth 998 offer which provided a $55,083.09 buy-back of their Ford truck and $192,416.91 in incidental/consequential damages and a two-time penalty under the Song-Beverly Act.  The settlement also provided that Ford would pay Plaintiffs’ attorneys’ fees and costs either in the amount of $5,000 or an amount determined by the trial court on noticed motion.

            When Plaintiffs moved for $147,207.50 in fees and costs, Ford opposed – claiming that only fees allocated to the Song-Beverly Act claim could be awarded.  To this end, Ford claimed that the maximum Song-Beverly damages in this case were $147,493.48 – meaning 40.4% of the settlement was recovered under the fraud causes of action.  The trial court bought this reasoning and reduced Plaintiffs’ fee request by 40.4%, plus other reductions to Plaintiffs’ attorneys’ hourly rates and for appearances that could have been handled by phone – awarding Plaintiffs $46,631.78.

            Plaintiffs appealed, and the Third District reversed.  While the Third District found no abuse of discretion in the trial court’s reduction to the attorneys’ hourly rates, it found the trial court had erred by reducing Plaintiffs’ request by 40.4%.  A review of the 998 offer showed that the items for which payment was to be made were only identified as being recoverable under the Song-Beverly Act.  There was no mention of payment for any item under Plaintiffs’ fraud causes of action.

Homeowner Associations, Special Fee Shifting Statutes: Error In Lower Court’s Narrow Interpretation Of Civil Code Section 5975(c) Led To Reversal Of Attorney Fees Denial To Prevailing Defendants

Gravamen Of Plaintiff’s Complaint Was On Enforceability Of The Governing Documents.

            In Alexander v. Singletary, Case No. D075943 (4^th Dist., Div. 1 January 21, 2020) (unpublished), one of five homeowners in a common interest development unsuccessfully sought judicial declaration that the governing documents were unenforceable as to him, and for partition from the development.

            As prevailing defendants, the other four homeowners moved for section 5975(c) (Davis-Stirling Act fee-shifting provision) attorneys’ fees.  The lower court denied – concluding Plaintiff’s action did not seek “to enforce” the governing documents.

            Two of the four defendants appealed, and the 4/1 DCA reversed – finding Plaintiff’s entire action revolved around the enforceability of the governing documents within the meaning of section 5975(c), and that Plaintiff could not avoid the fee provision simply because he phrased his complaint to seek a finding that the governing documents are “unenforceable.”

            The 4/1 DCA’s reversal applied only to the two defendants who appealed, with judgment considered final as to the two non-appealing defendants.

Arbitration, Sanctions: 4/3 DCA Affirms $50,000 Code Civ. Proc. Section 128.5 Sanctions Awarded Against Client And Attorney For Their Frivolous Litigation and Dilatory Tactics

Broad Language In The Parties’ Retainer Agreement Authorized Arbitrator’s Review Of Ancillary Matters – Such As Litigation Conduct Rationally Related To The Underlying Dispute.

            In ATG Electronics, Inc. v. The Mulcahy Law Firm, Case No. G056931 (4^th Dist., Div. 3 January 16, 2020) (unpublished), Law Firm claiming Former Client owed almost $100,000 in outstanding legal bills demanded arbitration pursuant to the parties’ retainer agreement. In response, Former Client filed a complaint in O.C. Superior Court alleging fraud, breach of fiduciary duty, claims for restitution and declaratory relief – seeking compensatory and punitive damages, and attorney fees.  Law Firm successfully moved to compel arbitration. Former Client then filed a counterclaim against Law Firm, with the same allegations, and a response asserting numerous affirmative defenses against Law Firm’s claim.  In the end, the arbitrator found the case to be a simple dispute about unpaid attorney fees, Former Client’s actions as a “despicable effort to ‘stiff’” Law Firm, Former Client’s affirmative defenses nothing but “red herrings” intended to avoid payment of the legal fees, and Law Firm’s fees as “reasonable and extremely necessary” – awarding Law Firm $119,931.15 in damages, arbitration fees and future interest.  Additionally, the arbitrator awarded $25,000 in monetary sanctions, under Code Civ. Proc. § 128.5, against Former Client and its counsel for what he found to be “bad faith activities or tactics that are frivolous” for the lawsuit filed in superior court, and another $25,000 for asserting affirmative defenses and pursuing a counterclaim that were meritless.

            Former Client (and its counsel) fared no better on appeal of the sanctions award.  In a 3-0 opinion authored by Justice Moore, the 4/3 DCA found the arbitrator had not exceeded his authority – given the broad language in the arbitration provision of the parties’ retainer agreement did not limit the arbitrator’s review and thereby allowed his review of ancillary matters.  Additionally, pursuant to the principles underlying Moncharsch v. Heily & Blase (1992) 3 Cal.4^th 1 and Heimlich v. Shivji (2019) 7 Cal.5^th 350 [reviewed in our May 30, 2019 post], the 4/3 DCA reminded that an arbitrator’s decision is generally not reviewable for errors of fact or law, and that by voluntarily agreeing to arbitration in their retainer agreement, the parties had agreed to bear the risk of uncorrectable legal or factual error in return for a quick, inexpensive, and conclusive resolution to their dispute.

Family Law: No Abuse Of Discretion In $200,000 Section 271 Sanctions Award Against Wife Even If Amount Includes Future Fees And Costs To Be Incurred As A Result Of Wife’s Conduct

The 4^th District Ordered A Remand, However, To Allow The Lower Court To Review The Award To Ensure It Is Limited Only To Attorneys’ Fees And Costs, And To Prepare An Order That Includes Information Regarding The Basis For The Sanctions Amount

            Family Code § 271 authorizes a court to impose attorney’s fees and costs as a sanction to encourage cooperation between the parties and attorneys where a party’s/attorney’s behavior is such that it unnecessarily increases the cost of the litigation or frustrates settlement of the case.  These sanctions are limited only to attorney’s fees and costs – whether already incurred or to be incurred in the future.

            Such sanctions, including future fees/costs, were issued in Menezes v. McDaniel, Case No. D074434 (4^th Dist., Div. 1 December 18, 2019) (unpublished), certified for publication on January 15, 2020, where Wife had failed – for years – to comply with the lower court’s order to transfer title of a property in Brazil to Husband.

            On appeal, the 4/1 DCA found no abuse in discretion with the lower court’s finding that Section 271 sanctions were warranted – nor with its decision to award both past and future fees/costs, connected with Wife’s failure to comply, as sanctions.  However, the 4/1 DCA was unable to determine from the lower court’s order whether the $200,000 improperly included Husband’s travel costs to and from Brazil and/or calculations for  vacation time Husband was forced to take to travel to Brazil to deal with the property transfer issue.  For that reason alone, remand was necessary to allow the lower court to review the award amount and to prepare an order clearly delineating the basis for the sanctions amount.

Family Law: Ex-Husband’s Challenge To Denial Of $150,000 In Need-Based Fees Affirmed On Appeal

Both Sides Spent A Ton; Both Sides Had Income to Fight; Both Sides Got What They Got After Seven Years Of Litigation.

            Needs-based fees under Family Code sections 2030 and 2032 have to be based on a consideration of the total circumstances.  Some litigants ignore this basic reality, but Ettenger v. Ettenger, Case No. H044184 (6^th Dist. Jan. 13, 2010) (unpublished) reminds us that this is the reality in most situations.

            In this one, ex-husband spent $340,000 in the dissolution action (owing another $17,000), while ex-wife spent $400,000 (and owed another $18,000).  Yikes!  Ex-wife had the better cash-flow income, with ex-husband seeking another $150,000 in needs-based fees, a request denied by the lower court.

            That determination was affirmed by the Sixth District.  It sustained the lower court’s conclusions that (1) neither side lacked access to funds based on distributions made earlier in the case, (2) ex-wife did not unilaterally drive up the costs of litigation; and (3) both parties had contributed to the cost of the litigation.  The appellate court found nothing wrong in the denial of fees to ex-husband, independently finding that ex-husband had plenty of liquid of funds to engage counsel to fight in the dissolution—something he did, maybe not something which was prudent in the long run.  Finally, the lower court was not obligated to issue a statement of decision in ruling on a needs-based fee request or a Family Code section 271 sanctions request.  (In re Marriage of Fong, 193 Cal.App.4^th 278, 296 (2011) [section 271]); In re Marriage of Askmo, 85 Cal.App.4^th 1032, 1040 (2000) [pendente lite attorney’s fees].) 

Private Attorney General: Prevailing Petitioner In Drunk Driving Out-Of-State Conviction Case Was Properly Denied $240,459.72 In Attorney’s Fees Under CCP § 1021.5

Relatively Small Class Of Individuals Involved, Plus An Attenuated Public Interest, Justified Denial Of Fees.

            In Villarreal v. Gordon, Case No. B291027 (2d Dist., Div. 1 Dec. 19, 2019) (unpublished), certified for publication on January 10, 2020, a petitioner prevailed on a mandate writ petition by which the DMV was not going to give effect to his Arizona DUI conviction under a Driver License Compact between California and other states to identify out-of-state DUIs if certain conditions are met.  Petitioner then sought $240,459.72 in attorney’s fees under the private attorney general statute.  The lower court denied the request, reasoning that the benefit affected a reasonably small class of persons with multiple drunk driving convictions in California and other states and that the avoidance of increased sanctions for out-of-state convictions was not the type of public benefit to be vindicated under section 1021.5. 

            The 2/1 DCA affirmed, agreeing with the conclusions of the lower court.  Indeed, after reviewing the record below, the appellate court also found that petitioner could not competently prove the number of persons who were benefitted by the judgment below. 

Family Law: Preemptive Sanction Against Future Conduct Not Allowable Because It Impedes The Ability Of Litigation To Defend Litigant’s Interests And Gives No Opportunity To Withdraw The Offensive Conduct

Preemptive Sanction Order Reversed, Although Court Of Appeal Was Sympathetic To What Family Law Judge Was Attempting To Do.

           In the acrimonious dissolution case of Marriage of Richards, Case No. G056626 (4^th Dist., Div. 3 Jan. 9, 2020) (unpublished), ex-wife continually interrupted the family law judge and filed 11 matters in one month, prompting the lower court to issue an OSC re sanctions which ultimately indicated that ex-husband would be awarded sanctions for having to oppose any future motions.  The 4/3 DCA, in an opinion authored by Presiding Justice O’Leary, reversed.  CCP §§ 128.5 and 128.7 only deal with an existing action, tactic, or filing, such that the lower court’s order did not properly allow ex-wife an opportunity to withdraw an offensive motion.  Besides that, fundamental rights were involved:  “We conclude a preemptive award unfairly impedes the ability of a litigant to raise a defense or take appropriate legal action in the case,” which was illustrated by the fact that not all of ex-wife’s motions had been frivolous in the past.

Civil Rights, Costs: Winning FEHA Plaintiff Properly Awarded $64,356 In Expert Witness Fees Through Costs Memorandum Procedure

Plaintiff Did Not Necessarily Have To File Noticed Motion Where Trial Court Did Exercise Discretion In Awarding Them Through The Costs Memorandum Process.

            A FEHA plaintiff won a very nice jury verdict of $2 million in compensatory damages and $6.1 million in punitive damages (reduced on appeal to $4.264 million based on a net worth issue) against a defendant for whistleblower retaliation, disability discrimination, medical leave discrimination, wrongful termination, and intentional infliction of emotion distress.  The trial judge also awarded plaintiff $64,356 in expert witness fees after plaintiff filed a costs memorandum objected to by the defense but granted nonetheless by the lower court.   (FEHA allows these types of expert witness fees to prevailing plaintiffs in the discretion of the lower court.)

            The 2/7 DCA, in Joseph-Mitchell v. SEIU Local 721, Case No. B289210 (2d Dist., Div. 7 Jan. 8, 2020) (unpublished), affirmed.  Interpreting Anthony v. City of Los Angeles, 166 Cal.App.4^th 1011 (2008), the appellate panel concluded that a memorandum of costs or filed motion on FEHA expert witness fees will do the trick, especially where the trial judge did exercise discretion in awarding those fees.   So, a noticed motion was not necessary under the circumstances.

Section 1717, Settlement: Settlement Agreement Silent As To Allocation Of Attorney’s Fees/Costs Did Not Bar Section 1717 Fee Recovery By Prevailing Alter Ego Defendant

$15,806.50 Fee Recovery Affirmed, Plus Fees/Costs On Appeal.

            The next case shows how one needs to make fees/costs recovery explicit under a settlement agreement; if not, a later prevailing party not involved may get attorney’s fees and costs.

           In J Sylvester Construction, Inc. v. Standeford, Case No. G057337 (4^th Dist., Div. 3 Jan. 8, 2020) (unpublished), contractor sued a subcontractor performing unlicensed plumbing work under a subcontract with a prevailing party fees clause.  Later, both parties entered into a settlement agreement that was silent as to an allocation of attorney’s fees and costs.  However, contractor continued to prosecute a suit against individual defendant Standeford based on an alter ego theory, with defendant defensing that claim.  The lower court then awarded $15,805.50 in fees pursuant to the contractual fees clause and Civil Code section 1717.

            The 4/3 DCA, in an unpublished decision authored by Justice Moore, affirmed.  The problem for appellant was that the settlement did not address an allocation of attorney’s fees such that fees still could be awarded to the alter ego prevailing defendant.  The appellate court also directed that Standeford was entitled to fees on appeal for winning. 

History, Books: Co-Contributor Marc Reviews Miriam Pawel's Book, "The Browns of California"

Co-Contributor Marc Has Reviewed The Browns of California in the Most Recent Issue of California Litigation.

    The full title of the book is: The Browns of California: The Family Dynasty That Transformed a State and Shaped a Nation. The review appears in California Litigation, the journal of the California Lawyers Association, Vol. 32, No. 3, p. 46 (2019). With the permission of the California Lawyers Association and its publication California Litigation, we are republishing the article and making it available by clicking here.

Appealability, Discovery, Sanctions: $3,456.70 In Fee Sanctions Based On Denial Of Postjudgment Discovery Order Upheld On Appeal

Motion Denying Discovery Order Is Nonappealable, But 2/8 DCA Treated It As Mandate Petition; CCP § 128.5 Principles Were Not Involved, Because Discovery Sanctions Were At Issue Instead.

            The 2/8 DCA in Dalessandro v. Mitchell, Case No. B293472 (2d Dist., Div. 8 Dec. 17, 2019 unpublished), but certified for publication on January 3, 2020, dealt with a plaintiff who had a postjudgment discovery motion denied for failure to affix postage to the demand (making service improper) and who was also assessed (along with his counsel) with discovery sanctions of $3,456.70.  Plaintiff appealed.

            On a liminal jurisdictional issue, the appellate panel did agree that the postjudgment discovery was not appealable, acknowledging a split in authority but siding with the non- appealability decisions.  However, it did exercise discretion to treat the appeal as a mandate petition so the merits could be heard expeditiously.

            Because there was no postage attached to the discovery demand, service was improper such that sanctions were warranted.  Plaintiff’s argument that there was noncompliance with CCP § 128.5(f) by failing to give “safe harbor” leeway was bogus because the lower court issued fees as sanctions for discovery abuse.  Nothing demonstrated that an opposing party had to meet and confer with respect to alerting the demanding party to defects in discovery requests (such as improper service).  Finally, opposing party did request sanctions in his motion to compel opposition, a perfectly valid way of presenting the issue to the lower court.