CALIFORNIA ATTORNEY'S FEES

Consumer Statutes, Landlord-Tenant, Section 1717: Tenant Prevailing On Common Law Residential Inhabitability Claim Limited To Contractually-Capped Fees Of $1,600

Although More Fees Potentially Allowable Under Statutory Inhabitability Claim, Jury Did Not Base Its Verdict On The Statute Such That Contractually Capped Amount Was The Proper Award.

            This next case involves an intersection between the parties’ contractually capped fee recovery under lease agreements and potentially more expansive damages under a statute allowing recovery for a tenant if that tenant recovers under the statute (Civil Code section 1942.4(b)(2), which specifies recovery for a prevailing tenant if the elements of the statute are met).

            What happened in Brookshire v. HPG Management Inc., Case No. B269544 (2d Dist., Div. 1 Oct. 25, 2018) (unpublished) was that tenant prevailed on a common law implied warranty of habitability claim against landlord under four leases. Each lease did allow fee recovery to a prevailing party, but capped recovery at $400 per lease. Tenant moved to recoup $146,670 in attorney’s fees under both the lease fees clause and Civil Code section 1942.4(b)(2). The lower court determined that plaintiff was entitled to contractual fees, but only $1,600 ($400 under the four leases) and was not entitled to fees under the statutory implied warranty of habitability claim because the jury did not render findings under the statute (instead awarding recovery under the different, but somewhat related, common law implied warranty claim).

            The fee award was affirmed on appeal.

            On the lease fee clauses, there was nothing wrong with the cap because the limits applied to all parties equally.   The appellate court relied greatly on the reasoning in 511 S. Park View, Inc. v. Tsantis, 240 Cal.App.4^th Supp. 44, 48 (2015) [reported in our October 10, 2015 post], which did sustain a similar contractual cap on fees. There was nothing “one sided” about such a cap given that it applied to all parties.

            With respect to the claim for greater fees under the statutory claim, the problem here was that the jury only awarded recovery under a common law implied warranty claim with much different elements than the statutory claim. Given this reality, no greater fees were justified under Civil Code section 1942.4.

Costs, Private Attorney General: 4/3 DCA Affirms $409,000 Fee Recovery And Additional Costs Recovery Even Though CEQA Petitioners Only Prevailed On One Out Of Close To Thirty Issues

Clarification Of Success Facto Under CCP § 1021.5 Is Sorely Needed In This Area.

            Our local 4/3 DCA in Protect Our Homes And Hills v. County of Orange (Yorba Linda Estates), Case No. G054631 (4^th Dist., Div. 3 Oct. 25, 2018) (unpublished) was an appeal from a situation where CEQA petitioners “partially” prevailed in an action—winning one greenhouse emission issue out of close to 30 issues raised—and with the lower court awarding them $409,000 in fees under the private attorney general statute and additional costs. Developer was not happy and appealed, but the appellate court affirmed in a panel decision authored by Justice Thompson.

            In the court below, the trial judge found that an award of pre-administrative hearing petition work—which he did allow—was faced with a split in authority between Beach Colony II v. California Coastal Comm’n, 166 Cal.App.3d 106 (1985) (no) and Edna Valley Watch v. County of San Luis Obispo, 197 Cal.App.4^th 1312, 1317 (2011) (yes). The appellate court sidestepped the conflict by finding that the rulings in these cases were dicta or distinguishable. Instead, it found that the Public Records Act was not administrative proceeding work but directly related to the CEQA litigation.

            The reviewing court then had to face whether administrative record preparation work had to be claimed through a costs memorandum, or could be raised instead through a fee motion. The appellate court concluded that it could be done by either method under CCP § 1094.5, and that the developer faced no prejudice by it being raised through a fee motion.

            Developer also challenged that the A/R costs were unjustified because developer/City had to do them because CEQA petitioners were recalcitrant. Although not really disagreeing, the reviewing court found that trial judges on a “case-by-case review” could determine if costs should be awarded even if the 60-day deadline for certification record had been or was close to blown by CEQA petitioners.

            Finally, that brought the court to the lack of success issue. Even though CEQA petitioners only prevailed on one issue, the appellate court found that the possible qualitative value of the greenhouse issue allowed the lower court discretion to award substantial fees even though losing other issues which were not found to be frivolous in nature.

            BLOG OBSERVATION—Co-contributor Mike was the lead appellate attorney on the case and has no “sour grapes” with the opinion, although he does disagree with some of the determinations. The most glaring one is that there needs to be clarification on what constitutes success in CEQA litigation when petitioners lose a huge amount of their issues. No “frivolousness” benchmark determines success, such that allowing trial judges to use this test means CEQA petitioners have no incentive to not adopt a “kitchen sink” approach to raising issues.   There is a good “issue by issue” test enunciated in the SOURCE state court case, which builds on federal Sierra Club cases on this contention. This success argument needs to be clarified given that some intermediary appellate decisions have admitted that the distinction between “claims,” “issues,” and “theories” in this area is confusing at best and has no elucidating analytics.

Allocation: Contract/Tort Cross-Over Claims Did Justify $825,000 Fees/Costs Award Against Non-Prevailing Parties

Hybrid Cases Can Be Expensive.

            Keenan v. Souza, Case Nos. B276437 et al. (2d Dist., Div. 4 Oct. 24, 2018) (unpublished) was an LLC dispute with broad contractual fee recovery clauses. Needless to say, certain defendants/cross-complainants prevailed. The trial judge awarded over $825,000 in fees and costs to the prevailing parties, determining the contractual and tort claims were inextricably intertwined such that no allocation was necessary. The appellate court affirmed, especially given in the right case (this one) that apportionment was only discretionary where claims were interrelated.

Section 998: CCP § 473(b) Discretionary Vacate Motion Based On CCP § 998 Omission Of Material Term Denied On Appeal Based On Failure To Provide Reporter’s Transcript On Lower Court Determination

Adequate Record Is A Necessity.

            In Monoarfa v. Djie, Case No. B279593 (2d Dist., Div. 4 Oct. 24, 2018) (unpublished), the trial judge denied a CCP § 473(b) discretionary motion to vacate a ruling based on the CCP § 998 offer not containing a material term The result was affirmed because no reporter’s transcript was provided—reminding everyone an adequate record is required, including hiring a private (but superior court reporter on the certified list) to report hearings, and most especially on discretionary rulings.   Sorry it has come to this, litigators, but financial constraints require you are diligent in hiring YOUR OWN court reporters for important hearings. Only a sign of the times (no disrespect intended anywhere).

Mediation: Buyer’s Refusal To Engage In Mediation Under CAR Residential Real Estate Contract Did Not Support Adverse Attorney’s Fees Award Against Buyer—Buyer Did Not Refuse To Mediate!

Appellate Court Did Note Differences In CAR Mediation Provisions Leading To A Different Result In Earlier Iterations Of CAR Contract.

            In Dilonell v. Chandler, Case No. B282634 (2d Dist., Div. 2 Oct. 24, 2018) (unpublished), plaintiff/prospective buyer was dinged with an attorney’s fees award of $26,400—a reduced amount—after a lower court denied buyer’s petition to arbitrate. A key to this determination was the trial judge’s finding that no agreement to arbitrate existed between seller and buyer because there was no electronic transmission acceptance “agreement” to a deal, based upon the doctrine of amanuensis. (That doctrine provides that where the signing of a grantor’s name is done with grantor’s express authority, the person signing the grantor’s name is not deemed an agent but is instead regarded as the mere instrument or the grantor—it is the signature of the grantor, although here is a heightened scrutiny to determine whether the signature is truly valid.) Because there was coercion, there was no deal between the parties.

            But the reversal was on the fees award—so how did that happen? Very easy. Buyer did offer to mediate, but seller said there was nothing to mediate based on the absence of an enforceable contract. The lower court determined that a defendant, in seller’s position, did not need to mediate in order to be entitled to attorney’s fees under the CAR mediation clause.

            The appellate court determined this was incorrect reasoning. The applicable CAR clause indicated that mediation disqualification applied to “any party,” which applied to a defendant seller refusing to mediate. In reaching this result, the reviewing court distinguished Van Slyke v. Gibson, 146 Cal.App.4^th 1296, 1299 (2007) and also showed how the CAR form mediation clauses had evolved to reach parties other than just a plaintiff commencing litigation with respect to the mediation condition precedent. In this regard, defendant rejected mediation and was precluded from obtaining fee recovery from the plaintiff buyer—reasoning in Frei v. Davey, 124 Cal.App.4^th 1506, 1520 (2004) reigned supreme in this one.

Family Law: $75,000 Pendente Lite Attorney’s Fee Award To Ex-Wife Was No Abuse Of Discretion

There Was A Disparity In Assets/Cash Flow So As To Justify The Award.

            The appellate court in Marriage of Azmoon, Case No. B277654 (2d Dist., Div. 7 Oct. 23, 2018) (unpublished) affirmed a $75,000 pendente lite attorney’s fees award to ex-wife under Family Code sections 2030/2032/4320. It was made payable $5,000 per month and the record showed that wife’s monthly expenses outstripped her income, ex-husband had much more income and assets upon which to draw, and ex-wife was the primary caregiver for their daughter. Beyond that, ex-husband did not file an opposition such that there was no great basis for a continuance to allow for a future submission of opposing papers. The amount of the fee award was sustained because the court can use its own observations as to how much is needed given the conduct of the parties in the litigation.

In The News . . . . Plaintiffs’ Class Counsel In Vietnam Veteran Experimentation Case Agree To Stipulated $3.4 Million Fee Recovery, Which Was Approved By The Court

This Amount Was Reduction From $20 Million In Fees Expended And A Slice From The EAJA Lodestar Of $4.515 Million.

            Who says that class actions cannot have some happy endings in terms of the fee recoveries being reduced responsibly in public interest cases? The fee recovery result in Vietnam Veterans of America v. CIA, Case No. CV-09-0037-CW (N.D. Cal. Oct. 4, 2018 Order Approving Parties’ Stipulation On Fees) shows that this can occur where the parties are willing to engage realistically with each other.

            The case was a class action on behalf of Vietnam veterans who served as human test subjects for government-conducted chemical and biological weapons experiments. Plaintiffs prevailed ultimately, with the Army ordered to provide notice and medical care treatment to class members. Plaintiffs were represented by the San Francisco powerhouse firm of Morrison & Foerster LLP.

            Plaintiffs were entitled to fee recovery under the Equal Access to Justice Act (EAJA), but the hourly rates in such cases are much lower than MoFo’s published rates. However, the parties did something very smart here. They met and negotiated a lower fee recovery. MoFo had expended about $20 million in fees over nine years of contentious litigation, with the EAJA lodestar based on lower rates coming to $4.515 million.

            However, the parties stipulated that the class would recover $3.4 million, with MoFo “writing off” the balance of actual fees expended. Needless to say, U.S. District Judge Claudia Wilken of the Northern District of California had no problem approving the stipulation and making it the order of the court.

Class Action, Costs, Lodestar, Reasonableness Of Fees, Section 998: Trial Judge Properly Awarded Class $333,000 In Attorney’s Fees Out Of Requested $780,845.62

However, Lower Court Did Properly Award Voluntary Mediation Expenses And Expert Fees Incurred By The Class After Rejection Of A CCP § 998 Offer.

            In Diaz v. Grill Concepts Service, Inc., Case No. B284146 (2d Dist., Div. 2 Oct. 19, 2018) (unpublished), former restaurant employees of a Daily Grill brought a class action for being paid less than a “living wage” and eventually won a judgment of $300,751.31 after restaurant admitted a major degree of liability. The trial judge awarded the class $9,775 in voluntary mediation expenses and $7,497.80 in expert witness fees incurred by the class after restaurant rejected a CCP § 998 offer of $499,999 inclusive of fees and costs. The class moved to recoup $780,845.62 in attorney’s fees (which included a 1.5 multiplier) under CCP § 1021.5 and Labor Code § 218.5. However, the lower court only awarded $333,000 in fees, after reducing for duplication and block billing, consisting of a $222,000 lodestar augmented by a 1.5 multiplier. As a cross-check, the lower court found the fees reasonable because they equaled 71% of the benefits obtained by the class (which was well above a 33% contingency threshold).

            The restaurant appealed the costs awards, while the class appealed the fee award.

            Nothing changed on appeal.

          The lower court had discretion to determine the voluntary mediation expenses were “reasonably necessary” to the litigation, and no discretion was abused in this case. With respect to the expert witness fees, restaurant did reject a 998 offer which did not outstrip the judgment plus total fees and costs awarded (given the wording of the 998 offer). The fact that the 998 offer was structured as a firm number plus future fees/costs did not make the offer uncertain, given there is some “estimation uncertainty” always present in such offers. (Elite Show Services, Inc. v. Staffpro, Inc., 119 Cal.App.4^th 263, 266-270 (2004).)

            That shifted attention to the class fee award. Here is what the appellate court had to say in affirming the lower court’s ruling:

• The lower court did not have to accept, carte blanche, the requested fees numbers by a fee applicant, with the court making sufficiently clear why it made certain reductions based on duplication, block billing, and unreasonable hourly rates;
• Although opposing counsel’s work effort can be probative, it was not error to fail to compare defense work to the class work because the opposition work was not reviewed by the lower court for duplication, inefficiencies, and block billing;
• Use of a “blended rate” for class counsel is not per se impermissible and was not so in this case;
• Class counsel’s use of declarations from fellow “friends” did not have to be automatically credited but could be discounted based on bias; and
• Although the lower court “cross-checked” by the class benefits (not including the fee recovery), no sole methodology is proper; but, in any case, even if the benefits plus fee recovery was used, the fee recovery was still 41% of the total recovery—well above a 33% contingency or percentage-of-recovery measure.

Damages, Substantiation Of Reasonableness Of Fees: Using Client To Authenticate Attorney’s Fees Invoices Found To Be An Incompetent Showing, Requiring Reversal As A Matter Of Law

Case Is A Stark Reminder On How To Competently Introduce Attorney’s Invoices In A Trial Where Fees Are Claimed As Damages.

            Justice Fybel, a sitting justice on our local Santa Ana court (this year’s winner of the David G. Sills Award for Appellate Excellence Presentation by the Orange County Bar Association Appellate Law Section), has penned an unpublished opinion in Copenbarger v. Morris Cerullo World Evangelism, Inc., Case No. G054731 (Oct. 19, 2018) (unpublished), in which he shows how to properly introduce attorney’s fees in a case where there are damages that need to be presented before the trier of fact. The takeaway is that a client, most likely, cannot be the witness attempting to introduce them based on not knowing the extent of an attorney’s work (with only the attorney generally able to describe what was done and justify the reasonableness of the proffered fees).

            What happened in Copenbarger is that one party to a settlement agreement sued the other side for failing to dismiss an unlawful detainer action and sought, as damages, related attorney’s fees in line with the settlement agreement’s fees clause. The lower court awarded the suing party $118,000 in fees as damages.

            The losing party appealed, arguing that fees are costs of suit (not damages) and the suing party failed to present competent evidence sufficient to prove the amount of damages. Losing party lost the first argument, but it prevailed big time on the second.

            The appellate panel concluded that, by analogy to fees sought in the insurance context for wrongful denial of insurance benefits under Brandt v. Superior Court, 37 Cal.3d 813, 819 (1985), fees for breach of a settlement agreement are fees sought qua damages rather than fees sought qua costs of suit. It questioned whether contrary results in Olson v. Arnett, 113 Cal.App.3d 59, 63, 67 (1980) and Navellier v. Sletten, 106 Cal.App.4^th 763, 767-768 (2003) were correct, but did have to decide the issue based on the ruling on the second argument raised by appellant.

            The winning argument was an evidentiary one. Only the client attempted to introduce his attorneys’ invoices over the objection of the other side that the testimony was hearsay and violated the secondary evidence rule. The trial court overruled the objections, but the Fourth District, Division 3 agreed that client testimony was insufficient for purposes of admitting the invoices. The problems were that the client did not really know about the services received from his attorneys, had no independent recollection of what work was performed/specific dollar amounts, and did not remember clearly what he had paid—meaning the hearsay and secondary evidence rule (a rule which holds oral testimony to prove the content of the writing is inadmissible unless the original or copy was lost/destroyed/not reasonably procurable by court process or other means) objections should have been sustained. Beyond that, a fee proponent must prove the reasonableness of the fees sought, something a client likely cannot do alone in the vast majority of situations. The client should have called the attorneys as witnesses. Given that there was insufficient evidence to support the judgment, reversal as a matter of law and judgment in favor of the appealing party were the proper end results.

            BLOG CONGRATS—We congratulate Justice Fybel on a well-deserved award.

Mediation: Trial Judge’s Conclusion Party Did Not Receive Letter Offering Mediation, Coupled With Other Circumstances, Means That Prevailing Party In R.E. Water Damage Dispute Satisfied Mediation Condition Precedent Because He Never Refused Mediation

Factual Conclusion Below Was Dispositive.

            In Cohen v. Lavi, Case No. B279597 (2d Dist., Div. 3 Oct. 18, 2018) (unpublished), the parties entered into a real estate sale/purchase agreement with a mediation condition precedent clause, namely, fee recovery was not allowable unless a party attempted to resolve the matter through mediation or if a party refused to mediate after a request was made. The buyers encountered water damage, suing the seller for breach of contract, breach of the implied warranty of fitness, negligence, and fraud. Seller answered, asserting an affirmative defense that buyers failed to comply with the mediation provision. Seller eventually won, seeking contractual fees of $187,171.60. The lower court awarded $173,969.95 in fees under the agreement’s fee provision.

            On appeal, as they did below, buyers argued that seller refused to mediate. They claimed sending a pre-lawsuit letter which asked buyer to mediate. Seller argued that he never received the letter, corroborated by these other facts: (1) he was never verbally asked to mediate; (2) he indicated willingness to participate in mediation and a settlement conference in his case management statement; and (3) he raised mediation non-compliance as an affirmative defense. Even though the letter never came back to buyers, the presumption of delivery through ordinary mail is rebutted by a denial of receipt by the receiving party. (Bear Creek Master Assn. v. Edwards, 130 Cal.App.4^th 1470, 1486 (2005).) Given that the receipt issue was a factual one for the lower court to make, the appellate court could not disturb the result below.

Private Attorney General: Trial Judge Finding That Obstruction Of Justice Misdemeanor Conviction Did Not Disqualify Commerce City Councilman And Properly Rejected His Subsequent Request For CCP § 1021.5 Fees

Action Primarily Affected His Own Interests And Fees Incurred Were Not Out Of Proportion To His Paramount Personal Stake In The Situation.

            In People ex rel. City of Commerce v. Argumedo, Case Nos. B280814/285003 (2d Dist., Div. 1 Oct. 17, 2018) (partially published; fee discussion not published), City of Commerce through a quo warranto action sought to oust City Councilman Hugo Argumedo after he pled guilty to a misdemeanor obstruction of justice count. The City lost, because obstruction of justice was not a disqualifying conviction under California Constitution, article VII, section 8(b) and Government Code section 1021—a merits determination affirmed in the published part of the opinion. Later, Mr. Argumedo attempted to recoup the $193,547.50 in attorney’s fees he spent under California’s private attorney general statute. The lower court denied that request, finding that the action benefitted mainly Mr. Argumedo’s personal interests, with the benefit to the electorate only tangential and subordinate to his personal stake in the litigation. In the unpublished portion of the opinion, the appellate panel found this ruling to be no abuse of discretion under CCP § 128.5.

            BLOG OBSERVATION—Although the matter was a bench trial involving 60 exhibits and seven witnesses, this goes to show how expensive modern litigation can be for an individual party.

Appealability, Probate: $19,125 Attorney’s Fees And $537.94 Cost Orders Affirmed On Appeal For Beneficiaries’ Bad Faith Accounting Petition Directed Against Trustee

Decision Reminds Us That Probate Court Orders, For Appealability Purposes, Are Determined Under the Probate Code.

            Armstead v. De Macias, Case No. B284275 (2d Dist., Div. 4 Oct. 16, 2018) (unpublished) involved beneficiaries’ appeal of a probate court determination that $19,125 in attorney’s fees and $537.94 in costs should be awarded to trustee for beneficiaries’ bad faith filing of an accounting petition. The orders were affirmed on appeal.

            As far as appealability, this case reminds us that most probate court orders are governed by Probate Code section 1300. In this case, fixing of compensation or expenses of an attorney is appealable under Probate Code section 1300(e), while a final order under the bad faith accounting statute is appealable under section 1304(a) subject to exceptions which were not applicable in this particular matter.

            On the merits, beneficiary-appellants could not surmount the deferential substantial evidence standard applicable to the probate court’s factual findings that the accounting petition was in bad faith under section Probate Code section 17200. The trustee did report/provide an accounting to the beneficiaries, asked for form waivers to avoid further probate expenses, and was reasonable in rejecting options to keep a property in the family given that the siblings disagreed on how to dispose of it (resulting in an eventual sale).

Private Attorney General: $1.2 Million Fee Recovery Under CCP § 1021.5 Goes POOF! When Court Of Appeal Determines That Plaintiff’s Lawsuit Was Not Catalyst For Defense Withdrawal From Overall Project

Rather, A Non-Party’s Withdrawal Motivated The Project’s Demise, Not Plaintiff’s CEQA Action.

            We many times have posted on the fact that there are very distinct elements to be satisfied under California’s private attorney general statute, CCP § 1021.5, including other requirements where a “catalyst theory” is being pursued. The next case, AG Land Trust v. Marina Coast Water District, Case No. H043902 (6^th Dist. Oct. 15, 2018) (unpublished), illustrates how causation principles do indeed dominate analysis under the “catalyst theory.”

            There, the trial judge awarded plaintiff more than $1.2 million in CCP § 1021.5 fee recovery based on the defense abandonment of a desalination project in a CEQA action. The reversal happened because the real cause of the defense abandonment was the withdrawal of a non-party to the project, so that the plaintiff’s lawsuit did not motivate what really occurred here. That was hard to digest by plaintiff, but meant that the more than $1.2 million fee recovery went POOF! on appeal.

Prevailing Party, Probate, Section 1717: 1/1 DCA Affirms “No Prevailing Party” Determination In Hotly Contested Probate Promissory Note Dispute Between Two Siblings

Although Trial Court Lacked Jurisdiction Over The Dispute In California, Fee Denials On Dueling Motions Was Justified Because Siblings Had To Await Determination In Texas Action.

            In Savage v. Savage, Case No. A150984 (1^st Dist., Div. 1 Oct. 15, 2018) (unpublished) [parenthetically, maybe a good case name for court disputes – no?], two siblings had quite a dispute about promissory notes, with litigation over the dispute occurring in California probate court and then a Texas court. The California probate court determined the California notes were extinguished, but denied dueling motions for contractual attorney’s fees by both sides on the basis that no one prevailed.

            The appellate court affirmed, but for a very different reason. It first determined that the probate court had no jurisdiction to determine the sibling dispute, although having jurisdiction to determine the fee proceeding based on Barry v. State Bar of California, 2 Cal.5^th 318, 320-321 (2017). However, affirmance was required because no merits determination was made of the sibling dispute given that this required awaiting what occurred in Texas. (DisputeSuite.com, LLC v. Scoreinc.com, 2 Cal.5^th 968, 973, 977 n. 1, 981 (2017) [our Leading Case No. 21].)  

Class Action: Tenth Circuit Court Of Appeal Dismisses Challenge By Three Employee, Non-Equity Lawyers To Fee Allocations Made In Long-Time Class Action Case

They Lacked Standing, Federal Court Of Appeals Rules.

            In Roselle, et al. v. Berger & Montague, P.C., Case No. 17-1328 (10th Cir. Oct. 11, 2018) (nonprecedential), the Tenth Circuit dismissed an appeal by three attorney-employees of the now-defunct law firm of Waite, Schneider, Bayless & Chesley (WSBC) seeking personal compensation for work in a 27-year class action litigation. It concluded that the three attorneys lacked standing to challenge the fee allocation made by the district judge given they were only employees, not partners or equity-shareholders in the law firm.

Costs: Ship Vessel Owner’s Premiums For An Undertaking To Release Ship Under Custody Not Recoverable Under 28 U.S.C. § 1920 Or Other Statutory Authority

W.D. Wash. Local Rule To The Contrary Required Reversal Of Premium Costs To Prevailing Ship Vessel Owner.

            Bunker Holdings Ltd. v. Yang Ming Liberia Corp., No. 16-355539 (9th Cir. Oct. 11, 2018) (published) was a situation where a prevailing ship vessel owner in an admiralty/maritime case was awarded costs, under a W.D. Wash. Local rule, for premiums of an undertaking to keep in place a letter of undertaking that enabled the owner to secure release of the vessel (which had been arrested at the outset). The problem was that nothing in 28 U.S.C. § 1920 or any other statute allowed recovery for such costs, such that the local rule was unauthorized in nature. The Ninth Circuit did observe that this result was undesirable, but legislative action or SCOTUS action for admiralty/maritime cases was necessary to amend the governing statutes.

            BLOG OBSERVATION—The conclusion in this case is consistent with California state court cases which nullify superior court local rules or Judicial Council Rules of Court which are contrary to express contrary statutes.

Section 1717: Attorney’s Fees Award Under Asset Purchase Agreement Fees Clause Reversed As To Certain Losing Non-shareholder Plaintiffs Because They Could Not Sue Derivatively

Lack Of Derivative Standing Required Reversal Of Fee Award Obtained By Some Defendants Against Losing Non-shareholder Plaintiffs.

            In Jarrett v. Diversis Management LLC, Case Nos. B277855/B279242 (2d Dist., Div. 1 Oct. 10, 2018) (unpublished), plaintiffs filed a derivative suit against a number of defendants, losing on a summary judgment motion which was affirmed on appeal. The trial judge also awarded attorney’s fees under an Asset Purchase Agreement against plaintiffs and in favor of certain defendants. On review, the fee award in favor of certain defendants as to two losing plaintiffs was reversed because they were not shareholders having any right to sue derivatively on behalf of the company. Because these losing plaintiffs would not have been entitled to fee recovery, the same result occurred as to the prevailing defendants. (Santisas v. Goodin, 17 Cal.4^th 599, 611 (1998) [our Leading Case No. 6].)

In The News: Recent Report By Clio Reports Survey Of Solo Practitioners To Mid-Market Firms Show That Attorneys Only Bill About 30% Percent Out Of A Billable Work Day

NALFA and LAW360 Dub The Results As Surprising.

            Clio, a Canadian company that provides cloud-based practice management for firms, has presented a recent Legal Trends Report released Thursday last week with some very interesting findings, which some websites (NALFA and Law36) find to be surprising—as do we.

            Based on a survey of 70,000 legal professionals (many being Clio clients) which are solo practitioners or middle-market firms of about 200 lawyers, Clio reported that the average utilization rate for reporting legal professionals was only 30%, which is 2.4 hours of billable hours each workday. As we interpret these findings, that means that many lawyers only bill 30% of their total time in a day directly to clients. It also found that lawyers invoice clients for only 1.9 hours during an eight-hour workday and collect only 1.6 hours of that time. So where did the rest of the time go? Clio reported that lawyers spend their time on billing/financial matters, marketing/business development, as well as firm organization/administration.

Costs: Trial Judge’s Categorical Rejection Of Taxing Deposition and Trial/Other Travel Costs By Texas Counsel In California Case Required Reversal And A Restudy

Reimbursement Of Certain Expenses For Out-Of-State Counsel Can Be Entertained If Reasonably Necessary To The Litigation.

            Legendary Investors Group No. 1 f. Niemann, Case Nos. B281915 et al. (2d Dist., Div. 4 Oct. 9, 2018) (unpublished) was a situation in which the trial judge denied out-of-state (Texas) counsel’s costs for travel to deposition and trial/other proceedings (to the tune of over $74,000) in a Los Angeles action under the apparent perspective that these categorical costs were impermissible under the routine costs statute.

            Wrong, said the Court of Appeal, leading to a reversal and a remand. Code of Civil Procedure section 1033.5, subdivision (a)(3) does not limit reimbursement for deposition travel to travel by attorneys practicing in the court’s jurisdiction. (See, e.g., Thon v. Thompson, 29 Cal.App.4^th 1546, 1548 (1994); Chaaban v. Wet Seal, Inc., 203 Cal.App.4th 49, 59–60 (2012) [travel by California lawyers to out-of-state depositions]; Howard v. American National Fire Ins. Co., 187 Cal.App.4th 498, 541 (2010) [allowed meal expenses by out-of-state attorneys who traveled to depositions]; Seever v. Copley Press, Inc., 141 Cal.App.4^th 1550, 1560 (2006) [mileage expenses for San Diego attorneys driving to depositions in Los Angeles].) The same result attended to other expenses as long as they were reasonable and necessary to the litigation. So, the matter got remanded, although the appellate court put no strictures on how the trial judge should rule.

Appealability, Sanctions: Later Order Vacating Default Judgment Was Appealable But Stayed Where Prior Appealed Order Had Required $27,968.75 In Attorney’s Fees And Costs To Vacate Default Judgment

Result Was Defendant Had 25 Days After Remittitur To Pay Fee/Costs Vacate Award, With Dissenting Justice Believing That The Fees/Costs Award Should Be Reduced Down By Another $17,250.

            This next case, F&S Investment Properties v. Nguyen-Stevenson, Case Nos. B281031/B281973 (2d Dist., Div. 1 Oct. 9, 2018) (unpublished), is a 2-1 decision regarding stay appealability issues and how much discretion attends a lower court’s decision to condition a vacate of a default judgment based on payment of $27,968.75 in attorney’s fees and costs.

            Plaintiff obtained a default judgment against defendant, who moved to set aside under CCP § 473.5 (a section allowing this be done but with fee and cost shifting as the trial judge deems just and proper). The trial court granted the vacate of the default judgment on condition that defendant serve an answer and pay $27,968.75 in fees and costs. Defendant did not pay and appealed this order; later, the trial court ordered the vacate default and reinstatement of the default judgment, a second order appealed from by defendant.

            The 2/1 DCA majority agreed that the first order was appealable and that it was ambiguous—it either said the judgment will be set aside upon payment or was set aside no matter what, such that is was appealable. However, the majority decided that the conditional payment order was no abuse of discretion but that the lower court had no jurisdiction to make the second order given that the first order was not one for payment of money per se such that it was stayed on appeal.   The result was that the plaintiff had to pay the money 25 days after the remittitur issuance or else the default judgment would be reinstated.

            In dissent, Justice Johnson found the $27,968.75 amount was an abuse of discretion because there was no proper allocation of fees and costs for work to actually get the default judgment vacated; he would have reduced the amount of $17,250 at a minimum.

Section 998, Settlement: Vagaries In Acceptance By Offeree Cannot Be Adjudication Through Motion To Enforce A Settlement Under CCP § 664.6 And CCP § 998 Before Entering Judgment

Entry Of Judgment Based On 998 Offer Is A Ministerial Act That Cannot Involve Adjudication Of Dispute Over 998 Acceptance—Presumably An Independent Action Was The Remedy.

            In Coleman v. Sagar, Case No. B283005 (2d Dist., Div. 5 Oct. 9, 2018) (unpublished), there was a brouhaha over whether defendant properly accepted a CCP § 998 offer through an electronic signature by the defense attorney, but not the defendant party.   Defendant moved to enforce the settlement pursuant to CCP §§ 664.6 and 998. The trial judge determined the acceptance was valid, but the appellate court reversed.

            The 2/5 DCA determined that a trial court may not resolve 998 acceptance disputes when entering judgment based on the 998 offer, given that only a ministerial act is at issue. The problem here was an intersection of procedural principles which may want to guide litigants in such a circumstance in the future. The first is that a settlement agreement cannot be enforced under section 664.6 if just signed by a party’s attorney; that meant that the normal expedient enforcement motion procedure could not be used under 664.6. With respect to 998, the entry of a judgment is purely ministerial, but neither the court clerk nor trial court can resolve acceptance or other ambiguities.

            Where does that leave everyone is this case as far as a remedy? Footnote 2 of the opinion suggests the solution—probably a separate suit in equity or some amendment of the pleadings to set up the issue. There you go!

Sanctions: February 2017 Report By California Research Bureau On CCP § 128.5 and 128.7 Sanctions Motions Show They Are Not Filed In Very Many Cases

Report Also Shows That Reporting Attorneys Did Not Provide The “End Conclusions” To The Sanctions Requests.

            In February 2017, the California Research Bureau issued a mandatory report for 2015-2016 relating to the use of CCP § 128.5 motions (whether alone or combined with CCP § 128.7 motions) as required under section 128.5. Although attorneys are under a requirement to report to the California Research Bureau, its results show that even reporting attorneys do not provide the actual order on the 128.5 proceeding in 64.4% of matters for which initial motion submissions were made. However, we do give you a flavor for the conclusions reached by the Bureau:

• 128.5 requests, whether single or combined with 128.7 requests, totaled only .05% of all civil filings for 2015-2016;
• 129 sanctions motions were made during 2015-2016, as reported;
• Of those reported motions, 11.6% were granted, 24% were denied, and 64.4% of the motions never resulted in reporting the results on the sanctions requests;
• The county leaders as far as numbers of sanctions requests were, in order: Los Angeles; Orange; San Francisco; San Diego; Santa Clara;
• If one takes away the nonreporting anomaly, one-third of the frivolous action requests were granted (15 of 46), with 6 of 15 awarded for full attorney’s fees requests and with the average award being $8,833; and
• When one boils down both the Bureau and Judicial Council statistics, less than one-half of 1% of civil cases filings involved 128.5 requests (singular or combined with 128.7 requests).

Special Fee Shifting Statutes: 2/5 DCA Concludes That Catchall Language In Good Faith Improver Fee-Shifting Statute Allowed Trial Judge To Award Fees Againste An Unsuccessful Party

Split In Opinion On The Fee Entitlement Conclusion, With Dissenting Justice Concluding The Fee Award Was Not Equitable And Resulted In A Windfall.

            McCuien v. Davis, Case No. B276979 (2d Dist., Div. 5 Oct. 5, 2018) (unpublished) dealt with an appeal of a lower court’s award of $105,665 in fees under a good faith improver fee-shifting provision (Code of Civil Procedure section 871.5), which allows the court to adjustment rights, equities, and interests of the good faith improver, the owner of the land, and other interested parties “as is consistent with substantial justice to the parties under the circumstances of the particular case,” with the court allowed to take into consideration the expenses of the land owner such as reasonable attorney’s fees.

            What happened factually and procedurally below was that plaintiff filed a quiet title action against defendant Davis who was deeded a fee simple absolute interest by McCuien, who only held a life estate interest. Plaintiff sought to quiet title to the house as a trustee of the trust and cancel the grand deed, while defendant Davis cross-complained against plaintiff and McCuien to quiet title, or alternatively, for fraud and negligent misrepresentation. After a bench trial, the lower court quieted title in the house to plaintiff trustee, with McCuien holding a life estate. The lower court also rejected defendant Davis’ cross-claims, with defendant Davis ordered to pay McCuien $104,000 in restitution for the deprivation of his life interest. Also, defendant Davis was ordered to pay $105,665 in attorney’s fees to plaintiff trustee and McCuien pursuant to CCP § 871.5 as well as a lease agreement between defendant Davis and McCuien. In denying the cross-claims, the trial court did interpret that defendant was claiming to be a good faith improver, but it found that the equities did not favor recovery because defendant failed to provide sufficient evidence to establish the value of the improvements (although defendant did get restitution in the amount of $34,105.30 for property tax payments). Defendant Davis appealed.

            Everything was affirmed, but there was a 2-1 appellate split on the fees award.

            The majority found that defendant was seeking good faith improver recovery, such that section 871.5 was triggered. Defendant, as good faith improver, was denied compensation, but the majority found that nothing in the section “prohibit[s] a trial court from awarding fees to a landowner when it declines to award relief to an improver,” based upon the general adjustment of equities language in the statute. “Substantial justice to the parties under the circumstances of the particular case” is the primary statutory objective, which allows an award of fees even if the trial court declines to provide relief to a purported good faith improver. The majority also rejected the idea that fees were unavailable even where the principal motive in filing an action was to determine ownership rights.

            In dissent to the fee award, Acting Presiding Justice Baker found that the fee award was “unjustified on this record.” He found the fees award was not consistent with “substantial justice” principles because plaintiff trustee and McCuien would have litigated the quiet title regardless of the good faith improver claims such that awarding fees for all of the litigation efforts was unfair. Beyond that, the other parties were given back title and occupancy of the house, in better condition based on the improvements made by Davis (even if the valuation was not adequately shown). Put another way, the dissent found that the fees award was an unjustified windfall to plaintiff trustee and McCuien based on the overall circumstances.

Family Law: Denials Of Contempt Proceeding For Alleged Visitation Order Disobedience And Needs-Based Fees Request, Adverse To Ex-Husband, Were Proper

Trial Judge Denied Fees Request Without Prejudice, So It Could Be Renewed.

            In Jordan v. Binford, Case No. F075265 (5^th Dist. Oct. 5, 2018) (unpublished), ex-husband lost a contempt proceeding in which he alleged that ex-wife willfully disobeyed a custody and visitation order. Ex-husband also sought to recover attorney’s fees from his ex-wife. The lower court observed that usually a successful party in a contempt proceeding could obtain fee recovery (Code Civ. Proc., § 1218(a), but that situation was not present. However, the lower court asked ex-husband if he was seeking a needs-based award, to which he affirmatively responded.   But ex-wife objected because no income and expense declaration had been filed. The lower court denied the needs-based fees request without prejudice, indicating it could be refiled complete with an income and expense declaration. Ex-husband appealed.

            The Fifth District affirmed. The contempt order appeal had to be dismissed because the contempt ruling could only be reviewed by a writ of habeas corpus, given that the proceeding is quasi-criminal in nature. With respect to the fee order, there was no abuse of discretion because no financial evidence was presented so that the lower court could properly rule on the needs-based fees request and the lower court did not foreclose ex-husband from renewing the request with proper financial data. No costs were awarded on appeal, given that ex-wife did not even file a respondent’s brief.

Appealability: We Have Said It Many Times, But Repeat—Separately Appeal Fee Decisions Which Are Entered After Merits Judgments

Failure To Do So Doomed Appeal In This Case.

            We will admit that the jurisprudence in this area is somewhat confusing in nature and fact dependent. But it does not vary from the lesson that we have posted on before based upon results in actual cases: separately appeal postjudgment fee awards, do not take chances they are subsumed in prior merits judgments. If you take the chance, you may reap the risk in not appealing—the appellate court has no jurisdiction to entertain your appeal on the fee challenge!

            Appellant in Whitney v. Brothers, Case No. A146906 (1^st Dist., Div. 4 Oct. 3, 2018) (unpublished) sought to challenge a postjudgment fee award made through a November 2015 order, but instead only appealed from an earlier September 2015 judgment which contained no fee award at all. Instead, the later November 2015 attorney’s fees order and amended judgment did set forth the fee order. Any problem guessing what happened?   You are right—the failure to appeal the later fee order/judgment was fatal. The September 2015 judgment clearly stated that a prevailing party and fee award, “if any,” would be decided at a later date. This meant any appeal from this judgment did not preserve an appeal of the subsequent fee ruling. (Silver v. Pacific American Fish Co., Inc., 190 Cal.App.4^th 688, 691-692 (2010).)

Section 998: Fourth District, Division 3 Has A Very Precedential Decision On Pre/Post-Offer Costs Calculus Under 998 Offers

Court Itself Calls For Legislature To Clarify How The Pre/Post-Offer Mechanism Operates—Likely, A Good Thing, If It Happens!

            Our local Santa Ana Court of Appeal, in a very thoughtful opinion authored by Justice Ikola, has taken on a vexing issue—how pre-offer/post-offer fees/costs get allocated in CCP § 998 offers for purposes of future proceedings after a jury verdict comes out with a result in a 998 offer silent on fees and costs. The close to ending paragraph may summarize it all, “Having reached this disposition, we nonetheless believe the bench and bar would be well served if the Legislature amended section 998 to clarify how costs and fees should be addressed in a 998 offer.” Pay attention, lawyers and legislators—this observation has merit given some of the prolix law in the 998 area. Now to the specifics of this particular opinion.

           In Martinez v. Eatlite One, Inc., Case No. G055096 (4^th Dist., Div. 3 Oct. 3, 2018) (published), plaintiff sued defendant for employment discrimination and other claims, with a jury awarding her $11,490 in damages. Earlier, defendant made a 998 offer in the amount of $12,001, which was silent on how fees and costs would be allocated before the jury verdict and with plaintiff never responding to the offer. Dueling costs motions transpired, and plaintiff filed a motion for attorney’s fees. The lower court awarded plaintiff a little over $4,000 in costs and $60,000 in pre- and post-offer fees to plaintiff. In getting to this result, the lower court added plaintiff’s pre-offer fees and costs to the jury’s award and compared the total to the $12,001 offer, which easily showed an outstripping of the 998 offer given that the offer was silent as to fees and costs.

            Not so fast, said the 4/3 DCA panel.

            The problem here, according to the reviewing court, was that the lower court should have done parity—comparing the jury’s award plus plaintiff’s pre-offer fees/costs with the amount of the 998 offer plus plaintiff’s pre-offer costs/fees for purposes of determining whether the jury award was a “more favorable judgment.” When this math was done, plaintiff did not obtain a more favorable judgment, such that the lower court on remand had to award only pre-offer fees/costs to plaintiff, post-offer costs to defendant, and any expert witness fees the court determines to discretionarily award to defendant.

            We bet this decision will get a lot of attention, but let’s see what happens!

Class Action: $8.7 Million Class Action Fee Recovery In Limited Credit Settlement Was Reversed And Remanded Because Coupons Were At Issue And Redemption Rate Needed To Be Factored In

CAFA Coupon Feature Needed To Be Analyzed.

            In re EasySaver Rewards Litig., No. 16-56307 (9^th Cir. Oct. 3, 2018) (published) involved a $12.5 million approved settlement by which “credits” would be provided by the defendant for a limited list of products, with $8.7 million allocated as fees to class counsel and $3.5 million available for class distributions through credits.   The district court valued the “credit” settlement at $38 million. The Ninth Circuit reversed the fee award for two reasons: (1) the “credit” was actually a “coupon” settlement such that it had to be reevaluated under the Class Action Fairness Act (CAFA); and (2) redemption rates had to be factored into valuation of what the settlement was worth.

Family Law: Family Law Commissioner Did Not Err In Denying Most Of Ex-Wife’s 2030/271 Fee Or Sanctions Request Based On DissoMaster Showing Equal Net Spendable Income And Both Sides’ “Grossly Over-Litigated” Stances

No Abuse Of Discretion Shown.

            In Marriage of Elgin and Yenyk, Case No. B285857 (2d Dist., Div. 1 Oct. 2, 2018) (unpublished), the family law commissioner—except for one missed appearance by ex-husband’s attorney—did not award anywhere close to the needs-based fees or Family Code section 271 sanctions to ex-wife as she requested. The commissioner used the DissoMaster to show that each party had roughly the same net spendable income and observed that the case had been “grossly over-litigated” with “fault in both directions.”

            Ex-wife’s challenges on appeal could not overcome the abuse of discretion standard, given she had the burden of proof on both the fee and sanctions grounds. The DissoMaster showing was good enough alone, but ex-wife’s “trial tactics” could not go ignored—even though both parties were at fault in over-litigating the matter.

Minors: Schulz v. Jeppesen Sanderson, Inc. Opinion Now Certified For Publication

2/1 DCA Reverses 10% Fee Award To Attorneys Out Of Minor’s Compromise $18 Million Settlement Where Lower Court Did Not Properly Vet CRC 7.955(b) Factors.

            On September 8, 2018, we posted on the then unpublished decision in Schulz v. Jeppesen Sanderson, Inc., Case No. B277493 (2d Dist., Div. 1 Sept. 5, 2018). This opinion reversed a lower court’s award of only 10% in fees out of an $18 million settlement in a minor’s compromise case to the prosecuting attorneys based on the failure to properly consider all of the factors for such an award as set forth in California Rules of Court, rule 7.955(b). We can now report that the decision was certified for publication on October 2, 2018. We would guess that the attorneys will do better on remand given the contingency risks involved and extraordinary results achieved by the attorneys (some of whom happened to be pilots themselves, with expertise to get to the bottom of the issues in the underlying airplane crash incident in Germany).

Miscellaneous Reviews: Books By Sunstein, Tribe And Matz About Impeachment

Two Books Reviewed By Co-Contributor Marc In Latest Issue Of California Litigation.

        In the latest issue of California Litigation, Vol. 31, No. 2 (2018), p. 44, co-contributor Marc has reviewed Cass R. Sunstein's Impeachment: A Citizen's Guide, and Laurence Tribe and Joshua Matz's To End A Presidency: The Power Of Impeachment. You can read the review, which is republished with the permission of California Litigation, by clicking here.

Family Law: Family Code Section 2030(a) Requires Explicit Needs-Based Findings And A Mandatory Fee Recovery If The Findings Show Disparity In Financial Resources/Ability To Pay

Here, Appellate Court Determined Record Showed Financial Gulf Such That Fee Recovery Was Mandatory, Remanding To Determine Amount Of Fees To Be Awarded To Ex-Wife.

            In Marriage of Morton, Case Nos. F073689/F074243 (5^th Dist. Sept. 26, 2018; reposted for corrected version on Oct. 1, 2018) (partially published; fee discussion published), the Fifth District concluded that amendments to Family Code section 2030, the “needs-based” fee provision, require lower court to make explicit findings on the need factors set forth in section 2030(a)(2) and then require a mandatory fee recovery if those factors show a financial disparity or inability to pay by the moving dissolution litigant. The findings can be in writing or made orally on the record. In this instance, the findings were not made, so that left the remedy on appeal—either a remand to make the findings or remand to determine the amount of fees to be awarded to ex-wife. The Court of Appeal concluded that the record clearly showed disparity/lack of an ability to pay, so that the remand was made to determine the amount of fees to ex-wife plus any fees for winning the appeal as determined in the discretion of the lower court.

Prevailing Party, Section 1717: Trial Court Properly Denied Section 1717 Fees To Plaintiff Winning $338,750 And To Cross-Complainant Winning $32,960

Neither Side Obtained Complete Success, With Both Suffering Significant Defeats In The Overall Litigation.

            Both sides in 12400 Stowe Drive, LP v. Cycle Express, LLC, Case No. D069738 (4^th Dist., Div. 1 Sept. 28, 2018) (unpublished) were unhappy that the trial judge found neither to be the “prevailing party” based on a lease fees clause under Civil Code section 1717. Plaintiff landlord had won $338,750 in damages under a lease renewal fair market valuation dispute, while tenant on its cross-complaint won damages of $32,960 for a leaky defective roof as against landlord. The trial judge found neither side enjoyed completed success and both sides suffered significant defeats.

            The Fourth District, Division 1, affirmed. True, landlord did win some substantial damages under the complaint, but this amount was only 12% of the $2.9 million in additional rent sought from tenant and landlord also lost his argument that the lease renewal was ineffectual. These defeats justified the lower court determining landlord had not prevailed for section 1717 purposes. (See, e.g., Marina Pacifica Homeowners Assn. v. Southern California Financial Corp., 20 Cal.App.5^th 191, 206-207 (2018) [litigant only winning 40% of requested recovery properly determined not to have prevailed].) With respect to tenant (albeit it a closer call), tenant had claimed nothing should be due under landlord’s complaint, $500,000 was the roof repair cost, and suffered a defeat on a defective parking lot cross-claim—defeats also supporting the view it was not the “prevailing party.”

Class Action: Attorneys’ Failure To Disclose Separate Settlement For Fee Recovery With Defendant W/O Court Approval Gave Lower Court Exclusive Concurrent Jurisdiction To Order Disgorgement Of $5M Court-Escrowed Fees To Class Members Rather Than Attys.

Class Action Fiduciary Duties and Court’s Continuing Equitable Authority To Do Justice Justified The Lower Court’s Decision To Award Attorneys Nothing.

            Lofton v. Wells Fargo Home Mortgage, Case No. A146282 (1^st Dist., Div. 3 Sept. 28, 2018) (published) is a stark reminder to attorneys that trial courts have broad jurisdiction to administer justice and make sure that “secret” fee deals of a separate nature are cut in a related class action context unless there is court approval.

            What happened in a prior appeal was that the appellate court affirmed a TRO by which attorneys were ordered to deposit into court over $5 million in settlement proceeds claimed as attorney’s fees in cases brought against Wells Fargo, based on the theory that the attorneys were compensating themselves out of a separate settlement without court approval which really related to representing a class action which was resolved through a separate $15 million settlement. The appellate court in that prior appeal also remanded, based on the trial court’s continuing jurisdiction under various grounds (including the equitable authority to administer justice), to gauge whether disgorgement of all or some of the $5 million was in order.

            The lower court decided that no fees should be awarded to attorneys; instead, it ordered the escrowed moneys paid to class members who filed claims in the settled class action matter.

            Attorneys’ appeal did not disrupt the trial judge’s injunctive relief/disgorgement orders. The reason was that the trial judge did have exclusive concurrent jurisdiction given that a common fund settlement was at issue, since the settlement money belonged to the class subject to fee allocation to attorneys to prevent unjust enrichment by the court. The attorneys did not ask for fees, but really only challenged jurisdiction. Coupled with their nondisclosure of the separate agreement not subject to court approval, plenty of equities justified the disgorgement ordered by the lower court.

Fee Clause Interpretation, Reasonableness Of Fees: Appellant’s Failure To Discuss Fee Clause Entitlement Under Note Fees Clause And Failure To Provide Reporter’s Transcript (RT) Of Fee Hearing Doomed Merits Of Her Appeal

Absence Of RT Can Be Fatal Indeed, Meaning Inadequate Record On Appeal.

            Appellants need to address legal fee entitlement bases and provide a reporter’s transcript of a fee hearing when challenges are made to either the merits or the amount of fees awarded. We have posted many times about how appellate courts will rebuff fee award challenges where no reporter’s transcript is provided, something that the Second District, Division 5 is especially prone to do unless only legal issues are involved in the fee challenge. Vyas v. Berman, Case No. A149220 (1^st Dist., Div. 2 Sept. 27, 2018) (unpublished) follows that trend.

            Appellant argued that the post-judgment award of $46,820 in fees was in error. However, with respect to fee entitlement, she could not demonstrate any infirmity given the failure to discuss a promissory note fees provision which facially did allow for fee recovery to the prevailing party (appellant’s opponent below). On the claim that the amount of fees was excessive and unreasonable, appellant’s failure to provide a reporter’s transcript doomed the appeal based on the failure to present an adequate record for purposes of assessing this challenge. (Vo v. Las Virgenes Municipal Water Dist., 79 Cal.App.4^th 440, 447 (2000).)

Appealability, Special Fee Shifting Statute: Law Of The Case Did Not Prevent Lower Court From Considering Alternative Ground For Fee Entitlement Ignored Previously In Prior Appellate Decision

However, Fee Recovery Under Government Code Section 800(a) Limited To $7,500 Per Case, No Matter How Many Parties Or Whether Multiple Issues Were Involved.

            Fratus v. County of Contra Costa, Case No. A153424 (1^st Dist., Div. 1 Sept. 28, 2018) (unpublished) is a situation where the appellate court reversed the denial of attorney’s fees to winning plaintiffs against the County under Government Code section 800(a), which allows for a maximum recovery of $7,500 for arbitrary/capricious findings in an administrative proceeding. In their brief on appeal, plaintiffs also raised fee entitlement under a local County ordinance with a fee-shifting provision. On remand from the prior decision, the trial court awarded the $7,500 under the Government Code but believed it could not award fees under the local ordinance based on the law of the case (namely, the appellate court only issuing a disposition limited to the Government Code fee-shifting provision).

            The First District, Division 1, reversed. The reviewing court admitted that it had failed to address the local ordinance issue by oversight, given that it was raised by plaintiffs in the prior appeal such that the law of the case doctrine did not govern. However, plaintiffs also argued that they were entitled to more than $7,500 based on there being multiple parties and additional issues, plus were entitled to “fees on fees” and fees on appeal for winning the prior appeal under section 800(a).   To this argument, the appellate court said “no,” given the legislative cap of $7,500. The “end result” was the $7,500 award remained intact and the matter was remanded to address fees under the local ordinance.

SLAPP: Winning SLAPP Defendants’ $244,418.57 Fee Request Correctly Pared Down To $69,500 For The Final Fee Award

Fee Request Claimed High Hourly Rates And Inflated Work Requests.

            By now, readers will know that winning defendants in SLAPP motions are entitled to a fee recovery. (Code Civ. Proc., § 425.16(c)(1).) Despite this entitlement, however, the fee request must be reasonable under the lodestar analysis, allowing a trial judge to deny entirely or significantly reduce an inflated request. That is what happened in Dean v. Friends of Pine Meadow, Case No. A151256 (1^st Dist., Div. 4 Sept. 27, 2018) (unpublished).

            The trial judge was presented with a large fee request of $244,418.57 by winning SLAPP defendants, inclusive of a positive 1.5 multiplier request. That included lead work by a Los Angeles lead attorney and a request for hourly rates in the $750-775 range for a case venued in Contra Costa County (East Bay area). Plaintiffs challenged the fee motion as being untimely filed and unreasonable in amount, with lots of submissions by both sides in support of their respective positions. The trial judge found that defendants failed to show that a more local attorney learned in SLAPP issues could not be found, that $400-500 was the reasonable lodestar hourly rate for East Bay attorneys, that lead counsel was entitled to a $100 raise in his hourly rate (given that he carried work on a contingent basis for some time, which was the top $500 rate awarded by the lower court), and that some of the time charges were duplicative, unnecessary, or unreasonable.

            The appellate court sustained the result on both the defense appeal and plaintiffs’ cross-appeal.

            The lower court, based on the record, carefully followed the lodestar analysis, demonstrating that use of a non-local counsel was not required, that the claimed hourly rates were too high for the East Bay venue, and that an inflated request was presented—which means discretion was properly used to deny the fee request by the defense.

            With respect to plaintiffs’ cross-appeal, plaintiff did appeal timely from a later judgment which was the appealable order rather than an earlier minute order not even involving the defense SLAPP fee entitlement. However, with that being said, the trial court did not err by awarding defendants a reduced amount of fees.

Special Fee Shifting Statute: Government Entity Is Entitled To Actual Expenditures To Produce A Copy Of Police Body Camera Video Recordings, Including Costs Of Extracting Exempt Material With The Aid Of Computer Programming

Costs Are Allowed Under Government Code Section 6253.9(b)(2).

            The First District, Division 3, in National Lawyers Guild, San Francisco Bay Area Chapter v. City of Hayward, Case No. A149328 (1^st Dist., Div. 3 Sept. 28, 2018) (published), decided that a City’s actual expenditures to produce a copy of police body camera video recordings, including the cost of extracting exempt material from these video recordings with the aid of special computer programming in the form of the Windows Movie Maker software, is a cost allowable to the governmental entity under the California Public Records Act, specifically, Government Code section 6253.9(b)(2).

Employment: Under PAGA, Individual Officer/Agent Of Corporate Employer—“As Other Person” Specified In PAGA--Can Be Liable For Civil Penalties, Attorney’s Fees, And Costs To An Aggrieved Employee

Labor Code Section 2699(g) Is The Predicate Fee/Costs Entitlement Statutory Provision.

            The Fourth District, Division 1, in Atempa v. Pedrazzani, Case No. D069001 (4^th Dist., Div. 1 Sept. 28, 2018) (published) held that an individual officer/agent of a corporate employer can be held liable for civil penalties, attorney’s fees, and costs under PAGA for certain wage/hour violations. The fee/costs entitlement under PAGA was conferred by Labor Code section 2699(g).

Civil Rights, Reasonableness Of Fees, Substantiation Of Fees: Third Circuit Court Of Appeals Denies Unreasonable Civil Rights Fee Petition And Affirms Sanctions Of $25,000 Against Attorney

Entire Fee Motion Denied For Misconduct And Inflated Fees, A Companion To Our Post On The Clemens Decision.

            While co-contributor Mike was out on a short vacation, his legal assistant Shanna Strader was kind enough to post on Clemens v. New York Cent. Mut. Fire Ins. Co., No. 17-3150 (3d Cir. Sept. 12, 2018) [see our September 15, 2018 post], where the Third Circuit affirmed a district court’s entire denial of a fee petition where it was outrageously excessive in nature and was chock full of numerous substantiation flaws. That decision occurred under a discretionary Pennsylvania consumer statute, but its basic reasoning has now been extended to the federal civil rights arena.

            In Young v. Smith, Nos. 17-3190 & 17-3201 (3d Cir. Sept. 25, 2018) (precedential) [opinion linked here], attorney represented a group of students in civil rights claims against a school district and a teacher, obtaining an initial jury verdict but with the resultant judgment vacated based on her misconduct. The second trial, only against the school district, resulted in a complete defense verdict. The third trial schedule against teacher was settled when plaintiffs accepted a Rule 68 $25,000 offer of judgment, with the settlement allowing fees and costs against teacher only up until the date of the offer. However, attorney submitted a fee petition for all work against both defendants, requesting $733,002.23 in fees!

            No one was impressed. The district judge ordered an OSC as to why attorney should not be sanctioned for requesting such an excessive fee, with some of the requested fees connected to her vexatious conduct. The district judge denied the entire fee request and sanctioned attorney $25,000 for presenting such a fee petition (including doing so through pleadings with an inconsiderably small font size), finding that even a line-by-line review of entries was unproductive and not tied to nonvexatious work as limited by the settlement with the teacher. The district court also found that hundreds of entries in the fee petition were fraudulent.

            The Third Circuit affirmed. The fee petition was not honest and was not accurate in nature, allowing for a denial of a request in entirety under the federal civil rights fee-shifting statute where the fee petition sought outrageously excessive fees in egregious fashion. Just the fact that $733,002.23 was sought in a $25,000 settled case confounded the Court of Appeals as much as the district court. So, the reasoning in Clemens was extended to civil rights fee petitions, and the $25,000 sanctions was sustained too.

Request For Admissions, Section 998: Plaintiff Insured Losing Insurance Breach/Implied Covenant Lawsuit Had To Pay State Farm $167,861.50 In Costs-Of-Proof Sanctions For RFA Denials And $50,664.44 In Expert Witness Fees After 998 Offer Rejected

Substantial Costs Awards Are Becoming More Prevalent In Corporate Defendant Type Situations.

            In several recent posts in the last few months, we have noted a trend for personal injury or consumer plaintiffs to suffer adverse costs awards of a substantial nature. This, of course, counsels that CCP § 998 offers must be carefully assessed and that request for admissions need to be candidly answered. This next case continues the trend we have been reporting on.

            Huang v. State Farm General Ins. Co., Case No. B276878 (2d Dist. Div. 2 Sept. 27, 2018) (unpublished) was a situation where plaintiff insureds should have been aware of facts showing that damages to their residence resulted from long-term settlement rather than vibrations from some demolition work. Insured denied requests for admissions despite having prior reports and facts showing such inquiry notice and rejected insurance company’s pre-trial CCP § 998 offer to pay plaintiffs $5,000, with each side bearing their own attorney’s fees and costs.

            This conduct had disastrous consequences. The lower court granted summary judgment on the breach of implied covenant claim, and the jury found in favor of the defense on the contract claim. Then, the trial judge granted RFA costs-of-proof sanctions of $167,861.50 and post-rejection 998 expert witness fees of $50,664.44 (the total requests by State Farm).

            The appellate court affirmed based on the deferential abuse of discretion standard.   Plaintiffs did have enough data to know that preexisting damage was the culprit rather than the demolition vibrations. Even though some billings were redacted, plenty of substantiation was presented so that RFA costs-of-proof sanctions could be “settled” by the lower court as far as amount. The reasonableness of the 998 offer is not based on plaintiffs’ subjective belief but on information that was known or reasonably should have been known by them—and, in this case, they had lots of expert witness reports and other information to evaluate the offer and State Farm’s belief that their case was not worth much.