Overcoming the abuse of discretion standard on appeal of an attorney fee award: what did the trial court actually do?

Respondents use the “abuse of discretion” standard for all it’s worth when defending against appeals, and they should. Often, it’s one heck of a shield. But there are limits to relying on this standard of review, and the Court of Appeal will reverse in appropriate circumstances.

One such example is last week’s decision in McKenzie v. Ford Motor Co., case no. G049722 (4th Dist., July 10, 2015). Plaintiff rejected one settlement offer in this “lemon law” case, but settled a few months later. The settlement was entered as a judgment. It required Ford to buy back the “lemon” automobile and allowed the plaintiff the option of accepting payment of $15,000 for attorney fees or instead roll the dice with a fee motion. Plaintiff moved for nearly $48,000 in attorney fees, and appealed when the trial court awarded only $28,350.

The trial court explained its award by noting that it deemed all of the fees incurred following the plaintiff’s rejection of an initial settlement offer to be unreasonable, because the only difference in the initial offer and the settlement entered into was the provision allowing him to file an attorney fee motion. To the trial court, this indicated that the 42 hours billed to the case following the plaintiff’s rejection of the earlier settlement offer “amounted to ‘plaintiffs’ counsel exaggerating the amount of their fees to increase their prized fees.'” (Gee, attorneys concerned about getting paid. Who’d of thunk it?)

The Court of Appeal reverses, finding fault with the trial court’s reason for limiting the fee award. Its analysis is helpful to anyone facing the daunting “abuse of discretion” standard of review.

First, the Court of Appeal notes that the trial court erred as a matter of law in characterizing the differences between the initial settlement offer and the eventual settlement, because (1) the trial court was wrong about the first offer not including an option for plaintiff to accept $15,000 or make a fee motion; the settlement and prior offer were actually identical in this regard; and (2) there were many other material differences not noted by the trial court. “The trial court’s erroneous comparison of Ford’s initial compromise offer with the offer McKenzie later accepted fatally undermines its conclusion that the entire amount of hours billed by McKenzie’s counsel in the wake of that initial offer was unjustified.”

Second, the Court of Appeal demonstrates the limits of its duty to indulge all reasonable inferences in favor of the ruling:

Ford counters by first emphasizing our obligation to indulge all inferences in favor of the trial court’s ruling, and pointing out the trial court is not required to explain in detail the basis of its fee decision. Ford urges us to construe the court’s reduction of McKenzie’s fee as reflecting an assessment of the usual lodestar factors considered in determining fee amounts — e.g., the complexity of the case, the expertise of McKenzie’s counsel, and the early stage at which the case was settled — and a resulting determination that $28,350.08 was simply an overall “reasonable” fee for the work performed.
However, while we could certainly do that in the absence of any specific analysis provided by the trial court, we cannot ignore the court’s reasoning when detailed in the order. In this case, the court was quite explicit in explaining the basis for reducing McKenzie’s fees — rather than imposing a general reduction on the fees requested from the outset, on the basis the rates charged by McKenzie’s counsel were too high or the overall time claimed was unreasonable given the complexity of the case, the court characterized its reduction as “based on redaction of fees for duplicated and unnecessary services and billing performed after defendant’s service of its CCP Section 998 offer.” The court awarded McKenzie 100 percent of the fees he requested for the period before Ford’s initial offer, but found the entirety of “the subsequent billing was unreasonable” and excised that specific portion of the fees from McKenzie’s award. When the court states its reasons explicitly, we cannot infer its exercise of discretion rested on a wholly different basis.

(Italics did not appear in the trial court analysis and were added by the Court of Appeal.)

In short, what the court actually did is what matters for the abuse of discretion standard. As the court points out, it may be impossible to know what the court actually did. Had the record in McKenzie not made clear the basis of the court’s exercise of discretion, plaintiff probably would have been sunk on appeal, unless there was no rational basis for the amount of the award.

Having the trial court’s analysis in the record made all the difference in this case. Keep that in mind when your next fee motion approaches.