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.

Attorney fee review standard isn’t always abuse of discretion

Appealing from an attorney fee award is usually a tough slog. Unless you are arguing a pure issue of law, such as whether any attorney fee-shifting statute applies to the case at all, the Court of Appeal usually reviews only for abuse of discretion. However, an important exception is noted in the recent case of Samantha C. v. State Department of Developmental Services, case no. B232649 (2d Dist., Div. 1, June 21, 2012).

In Samantha C., attorney fees were sought under the “private attorney general statute,” Code of Civil Procedure section 1021.5, in which plaintiffs who enforce an “an important right affecting the public interest” can recover attorney fees under certain conditions, namely:

(a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any.

Plaintiff had originally lost her Xarelto Class Action Lawsuit seeking state services, but appealed the judgment. The Court of Appeal reversed in a published decision that construed certain statutory and regulatory language governing eligibility for services. Nonetheless, on remand, the trial court declined to award private attorney general attorney fees, finding that the benefits of the lawsuit were limited to the plaintiff.

Are you wondering, How can that be, when the published decision involved the interpretation of statutory language that applies to all such cases? If so, give yourself a gold star. The Court of Appeal finds that the precedent set by the statutory and regulatory construction in its first decision necessarily extend beyond plaintiff to all applicants, and that the actual size of that class of persons need not be proven:

Although our underlying decision was phrased in terms of substantial evidence, it rested on determinations of statutory and regulatory construction that were not specific only to Samantha.


Although the record does not reflect the number of individuals that might be directly benefited by our decision in Samantha C., nevertheless, by defining the class of benefited persons to include those in Samantha‘s position, the Legislature has demonstrated its determination that such a need exists, in a quantity that is of sufficient size to require its legislative protection.  In light of the Legislature‘s statement of purpose, we cannot justifiably conclude that such a group of potential claimants is nonexistent, or even minimal.

The point of this post, however, is not just the court’s decision, but how the Court of Appeal got there. Instead of deferring to the court’s discretion on the applicability of section 1021.5 in this case, the Court of Appeal found itself well situated to review applicability of section 1021.5 de novo, i.e., without any deference afforded to the trial court’s decision:

“A trial court‘s decision whether to award attorney fees under section 1021.5 is generally reviewed for abuse of discretion.” [Citation.] But where, as here, our published opinion provides the basis upon which attorney fees are sought, de novo or independent review is appropriate because we are in at least as good a position as the trial court to determine whether section 1021.5 fees should be awarded. [Citations.]

Not many appellants will be able to take advantage of this reasoning to obtain de novo review of their entitlement to fees.

There is one curious point to the decision. Although the Court of Appeal did not strongly emphasize it, implicit in its conclusion that the first appeal resulted in a benefit for a large class of persons is that its prior decision was a published one. Odd that its original opinion on the fee issue was not published.

By the way, if you’ve stumbled across this post looking for answers on attorney fees that are not addressed in this post, poke around at the California Attorney’s Fees blog, where they’re all attorney fees, all the time!

The “Poof” Principle

I don’t know if they coined the phrase — kudos to whoever did — but “the ‘poof principle” is the phrase the guys at California Attorney Fees use to sum up one aspect of Sanai v. Saltz, case nos. B198217 & B202787 (2d Dist. Jan. 26, 2009).  What better phrase to apply to a case where the defendant sees a million dollar attorney fee award evaporate because the underlying judgment is reversed?

A Judgment that Nobody Noticed Sinks an Appeal

How can the parties and the court all miss the fact that the court entered a judgment?  Well, when the document that operates as such isn’t labeled “judgment,” I guess one can occasionally slip by . . . to the appellant’s great misfortune in Melbostad v. Fisher, case no. A119514 (July 23, 2008, ordered published Aug. 4, 2008), in which the court of appeal dismisses the appellant’s challenge to a fee award as untimely.

In Melbostad, the trial court granted defendant’s special motion to strike under California’s anti-SLAPP statute (Code of Civil Procedure section 425.16) and entered an order dismissing the complaint “with prejudice.” It subsequently granted a motion for fees brought by one of the defendants, then entered a judgment that “recapitulated” the previous orders granting the special motion to strike and granting the motion for attorney fees.

Appellant challenged the fee award by appealing from this second “judgment” rather than from the order granting the fee motion.  Which is what brought the timeliness of the notice of appeal into play.  His notice of appeal was untimely as measured from the order granting the fee motion, but timely as measured from the final “judgment.”  Appellant conceded that his time to appeal the order granting the special motion to strike ran from the original order granting that motion (see Code Civ. Proc. sec. 904.1, subd. (a)(13)), but contended that his time to appeal the fee award ran from entry of the subsequent judgment.  Even the respondent agreed.

Not so.  The court finds that because the order dismissing the complaint disposed of all the substantive claims between the parties, it was an appealable judgment under Code of Civil Procedure section 904.1, subdivision (a)(1), and thus the fee award was a separately appealable order after judgment pursuant to section 904.1, subdivision (a)(2).  The subsequent judgment “appears to have served no purpose here, and appellant’s appeal from it does not save his otherwise untimely appeal.”

There was some clever, but unavailing argument from the appellant, and the decision goes into some depth on why the order granting the section 425.16 motion is a “judgment.”  In reading the case, you’ll also discover important differences in appealability based on whether the plaintiff or defendant prevails on the section 425.16 motion.

Lawyers Must Eat — Getting Your Attorney Fees on Appeal

You’d be hard pressed to find a better overview of federal appellate review of attorney fee awards than Moreno v. City of Sacramento, case no. 06-15021 (9th Cir. .July 28, 2008). Judge Kozinski’s analysis begins with the truism “lawyers must eat,” then goes on to analyze the district court’s attorney fee award under 42 U.S.C.§ 1988, and thus looks at the issue from the perspective of the policies underlying attorney fee awards in civil rights cases.

Of particular interest is the section on fees for the appeal. Here’s a two-question quiz.

Do you know the proper forum for making your application for fees on appeal? If you said the court of appeals, you’re wrong! Fee applications are brought in the district court after remand.

You probably already know that the standard of review on a fee award is abuse of discretion. Is it any different when reviewing an award for fees on appeal? Well, yes and no. The award is still reviewed for abuse of discretion but the court of appeals will “look more closely” at fee awards involving appeals. Call it an enhanced review for abuse of discretion, if you will.

The district court trimmed the appellate fees by a third! But it did so without offering a good explanation . . . a problem that pervaded its fee determination. It’s interesting to see how Judge Kozinski analyzes the time and fees on appeal versus the time and fees for a summary judgment motion in the case:

The district court noted that plaintiff’s counsel spent twice as long on the appeal than on the summary judgment, but this does not mean the additional time spent on appeal was unjustified; after all, plaintiff lost claims at summary judgment that he won on appeal. More fundamentally, preparing summary judgment motions and appeals are not commensurate tasks, though they have some elements in common. What matters is whether spending more time winning on appeal than losing on summary judgment was an imprudent use of hours. The district court points to nothing to support the conclusion that it was.

Then there is the discussion of the “cost effectiveness of various law firm models” for staffing cases, and which personnel get assigned which tasks at which rates. As I read through it, I thought, “All this concern over hourly rates and who did what! What would the court do if the firm charged a flat fee and didn’t keep track of anyone’s hours?”

I haven’t seen a fee decision based on a flat fee without time records. But the courts still appear to be in love with the “lodestar” system: reasonable hourly rate times reasonable time expended. Which is why I tend to keep time records even when I charge a flat fee.

Now I’m really curious. If anyone knows of a case analyzing the propriety of a fee award based on a flat fee, please send me the cite.

UPDATE (8/7/08): California Attorney’s Fees examines some of the standards employed by the Moreno court to fees incurred prior to appeal, notes the significance of the case, and responds to my query about flat fees.

California Attorney Fee Recovery Preempted by ADA – and a Note on Missed Issues

It’s quite common for plaintiffs to sue under similar state and federal provisions.  The disabled plaintiffs who sued under both the federal Americans with Disabilities Act and the California Disabled Persons Act in Hubbard v. Sobreck LLC, case no. 06-56870 (9th Cir. June 27, 2008) did themselves a favor by doing so, as the court finds that the prevailing defendant’s right to attorney fees under the CDPA is preempted by the more stringent fee provision in the ADA.

The ADA fee provision makes fees discretionary, but that has led to a practice of awarding fees to defendants only where the plaintiff’s case is frivolous.  The CDPA, on the other hand, makes fees recoverable by the “prevailing party.”  Since liability is coextensive – a violation of the ADA is a violation of the CDPA  –  the   federal provision wins out.

From an appellate angle, the interesting thing about the case is that the court addressed the preemption issue even though it was not raised in the district court.  Because it is an issue of law, the Ninth Circuit had discretion to consider the issue for the first time on appeal.

More interesting yet, this wasn’t the first time a district court missed the issue.  The defendants cited two district court opinions that awarded fees to prevailing defendants sued under both the ADA and the CDPA, but the Ninth cites a major flaw in both of them: “Neither of these cases, however, considered the issue of preemption.”  The Ninth finds a third district court decision consistent with its own, but even that decision failed to address preemption.

I suppose it’s easy to say that at least one of the lawyers or judges in these three cases should have seen and dealt with the preemption issue.  But in the the throes of litigation, the parties and the court sometimes miss an issue that later seems obvious in hindsight.  That can be dangerous, as the appellate court won’t always be able or inclined to address the missed issue.

Appeal That Fee Award

I don’t usually review unpublished decisions for material for this blog.  But unpublished decisions, even if they don’t create new law, can have some interesting points.  (Just ask Bisnar | Chase.)

California Attorney’s Fees has a good post, based on an unpublished decision filed last Monday, reminding everyone to appeal separately from a fee award in addition to any appeal from the judgment.  The appellant in the case filed an untimely notice of appeal from the judgment that did not include an appeal from the subsequent fee award, then filed an untimely notice of appeal from the fee award.  Result: untimely appeal, no jurisdiction, appeal dismissed.

Blogroll Addition: California Attorney’s Fees

Regular readers know I am fond of covering attorney’s fee cases.  Now there’s a blog about nothing but California attorney’s fees, and it’s called, oddly enough, California Attorney’s Fees.  Started less than a month ago, California Attorney’s Fees is a comprehensive blog that reports on both published and unpublished cases and includes several categories related to the appeal of fee awards, including appealability, appeal sanctions, and deadlines.  And, they invite you to help add more.

California Attorney’s Fees demonstrates that it is not only newer lawyers who are blogging.  The junior of the two contributors, Marc Alexander, has 25 years of law practice under his belt, and his co-blogger, Mike Hensley, has nearly 30.

Welcome aboard, guys.

Hat tip: Cal Biz Lit.

Remember, Don’t Be Shy

I told you last October not to be shy when you move to recover attorney fees. Steele v. Youthful Offender Parole Board, case no. C053553 (3d Dist. May 15, 2008) is the most recent case in point.

Defendant appealed from a judgment for plaintiff on a retaliation claim under the Fair Employment and Housing Act (Govt. Code, § 12900 et seq.). Damages were barely $9,000, but plaintiff’s attorney was awarded more than $146,000 in fees, which is almost certainly what drove the appeal.

Defendant’s only contention regarding fees on appeal, however, was that the fee award must be reversed because the underlying judgment must be reversed. No claim that the fees were excessive, just that the fee award must fall with the underlying judgment.

The judgment survives substantial evidence review, however. Which means that the fee award of more than 16 times the judgment survives, too.

Who Knows Why Some Parties Appeal?

Sometimes a decision just makes no sense, at least to someone looking at it from the outside. Such is the case with Profit Concepts Management, Inc. v. Griffith, case no. G039077 (4th Dist. May 5, 2008).

Oh, the merits make sense. California-based Profit Concepts sued former employee Griffith in California under an employment agreement that contained an attorney fee provision. But Griffith lived in Oklahoma and successfully moved to quash service for lack of personal jurisdiction. The trial court awarded Griffith contractual attorney fees as the prevailing party.

Reasonable enough. The court rejects Profit Concept’s argument that because the lawsuit, which it had resumed in Oklahoma, left contract issues pending resolution, Griffith could not be considered the prevailing party under Civil Code section 1717. Griffith clearly prevailed on the claims in California, and that is all the award was concerned with.

The part that’s hard to understand is the reasoning employed by Profit Concepts in pursuing the appeal, both legally and practically.

Legally, it’s hard to understand why Profit Concepts cited case authority interpreting an older version of Civil Code section 1717 that had changed in a very material respect. Specifically, while the former statute defined a “prevailing party” in terms of obtaining a final judgment, the current version defines prevailing party as, among others, a party that obtains a dismissal. That’s a pretty clear and relevant distinction.

The practical part is just as hard, if not harder, to understand. The attorney fees awarded were barely $3400. What made this appeal practical?

Attorney Fee Program Coming Up in Los Angeles

One of the organizers of an upcoming attorney fee CLE program in Los Angeles was lucky enough to reach me by phone this morning before I was too embroiled in my work, and asked if I would be kind enough to help publicize the program. Well, I’m a sucker for a request like that, and especially so in this case, since attorney fees are of particular interest to me (and The Pro Bono Road to Riches is still one of the most traffic-generating posts I’ve had).

So, here’s the skinny:

This description of coverage comes straight from straight from the promotional materials (PDF download) from the presenting organization, the National Association of Legal Fee Analysis:

  • Fee‐Shifting Provisions & Prevailing Party: Statutes & Case Law
  • Fee Recovery in Commercial Litigation
  • Attorney Fees in Class Action Litigation
  • Attorney Fees & Legal Billing: A Practical Guide
  • Reasonable Fees in Cumis Counsel Situations
  • Recovering Attorney Fees in Insurance Bad Faith Litigation

Looks promising. The PDF materials include a link to th registration site, or just click here.

What Happens to the Trial Lawyer’s Contingency Fee when an Appeal is Taken?

The Texas Appellate Law Blog has done all appellate lawyers and contingency fee trial lawyers a favor with a post urging trial lawyers to include in their contingent fee agreements a provision explaining how the fee is affected if an appeal is taken:  “There really is no right or wrong way to do it, but in my view, contingent-fee agreements should always spell out what happens in the event of an appeal.”  He also covers a number of different ways to do it.  Please check it out.

Attorney Fees in a $44 Case?

What do you suppose the high end of “reasonable” is for attorney fees in a successful lawsuit based on about $44 in damages? Supposing that $44 claim settled for $10,500?

If you said attorney fees of $500 are about right, give yourself a gold star. In Harrington v. Payroll Services, Inc., case no. B198883 (2d Dist. Feb. 28, 2008), the trial court found that once class certification was denied, the case was so simple that plaintiff was not entitled to fees at all, let alone the $46k sought.

The court of appeal reverses on entitlement to fees, finding they are statutorily mandated, but that $500 is reasonable. It fixes fees in that amount rather than remand for determination in the trial court.

This case might seem contrary to Cruz v. Ayromloo, decided by another division of the same district, which awarded fees far in excess of the damages awarded and the fee schedule set out in the local rules. But there, the court found nothing unreasonable about the time spent on the case. By contrast, the court in Harrington found the hours unreasonable on their face: “At the risk of understatement, there is no way on earth this case justified the hours purportedly billed by Harrington’s lawyers.”

California Labor & Employment Law Blog has some commentary on how this “levels the playing field” in wage and hour cases.

I’m very curious how this $44 case settled for $10.5k. Any wage & hour practitioners out there — or anyone else — care to speculate?

Another Private AG Fees Case Headed for the Supremes?

Well, we just had one Supreme Court opinion on the private attorney general statute (about which I posted here), and at first, I suspected that the Third District Court of Appeal was trying to tee up another one for potential Supreme Court review in Marine Forests Society v. California Coastal Commission, case no. C052872 (3d Dist. Mar. 4, 2008). To my mind, its public policy implications are significant.

At issue is the scope of the “catalyst” theory for recovering attorney fees under California’s “private attorney general” statute, Code of Civil Procedure section 1021.5. The catalyst rule provides that a party can recover fees under the statute even if it is not the prevailing party “if the lawsuit was the ‘catalyst’ that caused ‘the defendant [to] change[] its behavior substantially because of, and in the manner sought by, the litigation.’ (Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 560 . . . .)”

Does that rule allow a plaintiff to recover fees if its lawsuit is the catalyst for change in how the public entity defendant operates if the change is mandated by the legislature in response to the suit, rather than instigated internally by the public entity? The Court of Appeal says no. Reading the catalyst rule of Graham literally, it holds that the change must be implemented unilaterally by the defendant, rather than be imposed on the defendant by a third party like the legislature, to bring the change within the catalyst theory. Thus, the fact that the legislature changed the law in response to a Supreme Court ruling in an earlier appeal from the case does not support fee recovery under the catalyst theory.

It was this statement in the opinion’s introduction that made me think the court of appeal was trying to set the case up for Supreme Court review::

To the extent it can be said that the rationale of the catalyst theory should apply to a lawsuit like this, which was the moving force resulting in a change in statutory law that conferred a significant benefit on the general public regarding important rights affecting the public, the argument must be made to the California Supreme Court because we are bound by the ruling in Graham, supra, 34 Cal.4th at p. 560. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)

But there were other obstacles to a fee recovery in this case. The court of appeal found first that the plaintiff had not achieved the primary relief it sought. That is the first condition of a “catalyst” – based fee recovery, and plaintiff’s failure to meet it should have been enough to deny fees. The impetus for the changed behavior was merely an additional reason to deny fees.

By the way, Tom Caso at The Opening Brief has had a number of interesting posts on section 1021.5 in the last few months.

Expert Witness Fees May Not Be Awarded Under Private Attorney General Statute

In a decision being closely watched by many, the California Supreme Court holds today in Olson v. Automobile Club of Southern California, case no. S143999 (Feb. 28, 2008), that Code of Civil Procedure section 1021.5, the state’s “private attorney general” statute, does not authorize a court to award expert witness fees in addition to the attorney fees explicitly authorized by the statute.

As the court notes, the statute explicitly authorizes an award of “attorney fees” and is silent about expert witness fees. Which should have made for an easy decision.

Yet the court is compelled to delve behind the plain language of the statute. The decision is a good primer on how to read behind the lines of a statute by examining its enactment and amendments relative to existing case law.  That doesn’t work to change the plain meaning in this case, though.

There is sure to be more posted by other bloggers. I’ll provide links as I find them.

Self-Represented Attorney May Not Recover Fees on Anti-SLAPP Motion

In Taheri Law Group v. Neil C. Evans, case no. B192828 (2d Dist. Feb. 26, 2008), the Court of Appeal holds that the attorney fee provision in the anti-SLAPP statute (Code Civ. Proc., § 425.16) does not entitle a self-represented attorney to recover fees for bringing a successful anti-SLAPP motion.

This is merely an extension of the similar holding in Trope v. Katz (1995) 11 Cal.4th 274, which held that a self-represented attorney could not recover fees under a contractual fee provision. The Taheri court makes clear that an attorney-client relationship is necessary before fees may be recovered.

The identical issue of anti-SLAPP attorney fees was treated in much greater detail, and with the same result, in a 2004 decision by the same district (but different division) of the Court of Appeal. That decision was depublished when the Supreme Court granted review on a different issue. But you can find the case in the California Reporter (at least on Westlaw), and I recommend doing so if you are interested in a more detailed rationale than the Taheri opinion provides. Soukup v. Stock (2004) 15 Cal.Rptr.3d 303.

It would be a mistake to extrapolate from Taheri and Trope that fees are not recoverable in every situation in which they are not actually “incurred.” Regular readers will remember that when it comes to attorney fees, “incurred” doesn’t always mean “become obligated to pay” for. Courts have awarded fees in pro bono cases under fee shifting statutes, and will probably do the same someday under a contractual fee provision. As Taheri notes, the touchstone for recovery is an attorney-client relationship.

Review of “Private Attorney General” Fee Awards

Kimberly Kralowec at The Appellate Practitioner points out a case from earlier this month, Roybal v. Governing Board of the Salinas City Elementary School District, case no. H030596 (Jan. 11, 2008, ordered published Feb. 6, 2008), in which the Court of Appeal neatly summarizes the proper standards of review to apply when reviewing attorney fee awards made pursuant to California’s “private attorney general” statute, Code of Civil Procedure section 1021.5. The case recognizes the Supreme Court’s 2006 departure from the one-size-fits-all “abuse of discretion” standard in recognition that some awards may be due more deferential review in light of their fact-intensive nature, while those revolving around legal issues like statutory interpretation should be closely scrutinized. See her post for the money quote from the case.

Pro Bono Attorney Fees in the News Again

Dollar SignNational Law Journal has a new article called Pro Bono Case Triggers a Fee Fight on the controversy surrounding the attempt of a Seattle BigLaw firm (Davis Wright Tremaine) seeking to recover its attorney fees under a fee-shifting statute even though it took the case pro bono. The case was the closely watched “Seattle Schools” case decided by SCOTUS last year. (If you want some background from the view of the losing party, the school district’s press release from the day of the decision is available as a PDF download.)

In a very detailed post entitled The Pro Bono Road to Riches! last October, I discussed the issue in the context of a California case, in which the dictum of the Court of Appeal seemed to indicate a predisposition to awarding fees in pro bono cases. In that case, the trial court trimmed the fee request by 50% right off the top because it deemed the engagement “mildly pro bono,” and ultimately awarded less than one third of the amount requested. The Court of Appeal’s dictum leaves little doubt that the firm left plenty of money on the table by not cross-appealing to contest the amount awarded. (My earlier post includes several links to information about the Seattle Schools case, by the way.)

My post caught the attention of the Overlawyered blog, which sent me a ton of traffic when they linked my post. In fact, the traffic from Overlawyered was responsible for my highest traffic ever for a single day, and accounts for the anomalous bump in traffic during October that you see in the chart to the right. Clearly, this is a hot issue. So I also followed it up with an article in our local bar publication, CITATIONS.

I continue to believe that a large part of the controversy in the Seattle Schools case is driven by the nature of the party from whom fees are sought: a school district. Obviously, many members of the public are going to think that the district has better uses for the money. (Of course, there were probably a lot of people who said the same thing about the money spent by the district in fighting the case.) I wonder, though, if the people who are outraged at the firm seeking fees from the school district would have been just as angry with the firm in the case I profiled, which successfully represented more than 30 tenants seeking damages on various causes of action arising from the landlord’s refusal to let the tenants return to their units after they were evacuated from an unsafe building by the city. That firm, too, was a BigLaw heavy-hitter, but I’m sure the landlord of an unsafe building is going to get far less sympathy from the public than a school district.

One commentator in the NLJ article raises a point I made to a reporter who called me about my post: Is it right for well-heeled firms who often burnish their images by conspicuously accepting pro bono engagements to then seek fees for those engagements? This is an especially valid question if the firm announces the engagement with some fanfare but keeps the fee request rather quiet. It makes one wonder whether anyone honored for their pro bono work has actually been collecting fees for part of it.

Actually, that wouldn’t bother me, as long as fees were disclosed. A semi-pro bono case — in which an attorney agrees to an engagement for which he is paid only if he can recover fees under a contractual or statutory provision — is really just another form of contingency fee case, with all of the same risks.

Hat tip to How Appealing for the link to the National Law Journal article.

Recovery of Fees for Pre-Litigation Activities

In this post at The Opening Brief, Tom Caso discusses an attorney fee case that I missed last month (geez, it hurts to admit that). The case, Hogar v. Community Development Commission, case no. D049452 (4th Dist. Dec. 14, 2007), involves the issue of whether fees for pre-litigation activities may be recovered under California’s private attorney general fee provision, Code of Civil Procedure §1021.5. Tom’s post also discusses a key difference between attorney fee recovery under Section 1021.5 and recovery under its federal counterpart.

Tom knows about attorney fees in public interest cases, having been chief counsel for Pacific Legal Foundation.

Post-Arbitration Petition Attorney Fee Order is Appealable

In Otay River Constructors v. San Diego Expressway, case no. D049612 (4th Dist. Jan. 7, 2008), the Court of Appeal holds that an order denying an award of contractual attorney fees to a party who succeeded in defeating a petition for arbitration in an action brought solely for that purpose is appealable.

The court reasoned that where an action is brought solely to enforce a contractual arbitration provision, then a defendant’s defeat of that petition is effectively a final judgment because it disposes of the only issue before the court, even if further litigation is contemplated.

Thus, an order denying an award of attorney fees to the party who successfully opposed the petition for arbitration is appealable as a “special order after final judgment” under Code of Civil Procedure section 1294, subdivision (e). Section 1294 controls, rather than Code of Civil Procedure section 904.1, subdivision (a)(2), which makes appealable an order made after a final judgment, because the former is part of legislatively created “comprehensive procedural scheme to govern arbitration proceedings.”

On the merits, the court of appeal reverses the order denying fees. Since the order denying the petition to compel arbitration disposed of the only issue before the court, the defendant was the “prevailing party” for purposes of Civil Code section 1717, notwithstanding that the parties may later litigate the substance of their dispute in a later action.

My Attorney Fee Article in CITATIONS

I have an article in this month’s issue of CITATIONS, the monthly magazine of the Ventura County Bar Association, and for which I serve on the editorial board. The article is an expanded version of this post on Cruz v. Ayromloo, 155 Cal.App.4th 1270 (2d Dist. Oct. 3, 2007).

The article, titled“Pro Bono Attorney Fees” Is Not an Oxymoron, highlights the Cruz court’s dictum on the recovery of attorney fees in pro bono cases and examines the implications of that reasoning for future cases. You can download a PDF copy of the article here.

Appeal after Remand to State Court: Was Removal Reasonable?

The Ninth Circuit reminds us in Gardner v. MEGA Life & Health Ins. Co., case no. 06-55045 (9th Cir. Nov. 19, 2007), that even though no appeal lies from an order remanding a removed action to state court, the removing defendant may appeal an order to pay costs and fees imposed in connection with the remand under 28 U.S.C. § 1447(c). Here, it pays off.

MEGA was ordered to pay costs and fees when the action was remanded. It claimed the only non-diverse defendant, an individual, had been fraudulently joined for the purpose of defeating diversity jurisdiction because the statute of limitations had run as to that defendant.

Applying the rule that fees and costs should ordinarily not be awarded where the removing defendant had an objectively reasonable basis for removing, the Ninth Circuit reverses the award of fees and costs. Interestingly, it finds that MEGA had a reasonable basis for removal purely on its own analysis of whether the claim against the non-diverse defendant was barred under California law and without considering one of the reasons MEGA cited for the reasonableness of removal — that on remand, the California court sustained MEGA’s demurrer.

That makes sense, in a way, since reasonableness should be measured as of the time of removal. On the other hand, it seems like the state court dismissal is pretty solid evidence of the objective reasonableness of MEGA’s fraudulent joinder contention.

Know Who Your Client Is

When you’re suing a client for your attorney fees, it might be helpful to know who your client is. A law firm’s failure to establish that prevents its recovery of fees in Shimko v. Guenther, case no. 05-16847 (9th Cir. Oct. 12, 2007).

The Guenthers were limited partners in two limited partnerships (“the CORF entities”). When the CORF entities were sued, the Guenthers and other owners sought counsel regarding their potential personal liability for the liabilities of the CORF entities. On that much, the parties agreed.

But the Guenthers claimed that the CORF entities were the clients, and that, as limited partners, they were not liable for fees. The attorneys argued the Guenthers were liable because: (1) the owners, not the CORF entities, were the clients so the fees were attributable to representing the Guenthers personally, and (2) even if the fees were for representation of the CORF entities, the Guenthers were liable because the attorneys reasonably believed the Guenthers were general partners.

After a one-day bench trial, the district court entered judgment in favor of the attorneys on claims for contract and action on account, even though it found that the attorneys represented the CORF entities, on the ground that the attorneys reasonably believed the Guenthers were general partners. It did not reach the unjust enrichment claim.

The Ninth reverses. Because advice regarding the personal exposure of the owners was a subject of the engagement, the attorneys had a duty to review the organic documents of the CORF entities to determine if any limited partners had exposed themselves to liability by acting as a general partner. Since those documents identified the Guenthers as limited partners, that information was imputed to the attorneys. Thus, the attorneys could not reasonably believe the Guenthers were general partners.

The attorneys don’t appear to be entirely out of luck. The Ninth remands for consideration of the unjust enrichment claim because the Guenthers are liable to the extent they were billed for services that benefitted them.

UPDATE (10/17/07):   For coverage of this and ethical/professional legal issues generally, the Legal Profession Blog is a good resource.

Important Update re Pro Bono Attorney Fees

I’ve addded a very important update to my post entitled The Pro Bono Road to Riches! The update clarifies that the court’s discussion in Cruz v. Ayromloo, case no. B190959 (2d Dist. Oct. 3, 2007) regarding the availability of attorney fees for pro bono representation is dictum (though an unusually detailed and lengthy example of such) and notes an important distinction between Cruz and earlier California cases upholding such fee awards.

Both points are important to keep in mind.

That post has generated a lot of attention. It’s been linked to by two very prominent law blogs, Overlawyered and The UCL Practitioner. It also earned me a phone call from a reporter.

I think this is evidence that although the Cruz court’s discussion of the issue is dictum, it carries weighty implications. Which is why, I suspect, the court went through the trouble to write in such detail and cite so many cases from other jurisdictions. Its discussion may encourage a litigant to bring up the issue on appeal and get a definitive ruling in a future case. I doubt that will take long.

UPDATE (10/10/07): Overlawyered, tha tagline of which is “chronicling the high cost of our legal system,” has been following this issue for some time. Type “pro bono” in the search box at Overlawyered to see what I mean.

UPDATE #2 (10/10/07):  I’ve added a second update to the original post, The Pro Bono Road to Riches!

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“Big Law” Comes to a Small Town

Last week’s attorney fee case of Nichols v. City of Taft, case no. F051147 (5th Dist. Oct. 2, 2007), has been written about by several blogs — Legal Pad, The Opening Brief, and California Appellate Report among them — so I’ll summarize it very briefly before giving my take.

The plaintiff had hired some “big gun” attorneys from the big city to litigate her employment case in a small town. The case was settled, and the settlement provided for attorney fees to be fixed by the court. The essential holdings are that (1) before seeking statutory attorney fees in excess of fees that would be charged in the local community, a party must demonstrate that it sought local representation before being forced to use outside counsel; (2) whether the fees should be adjusted upward from what would be reasonable in the small town location is within the discretion of the court. In the end, the big guns may have to be satisfied with the small town fees.

I got to wondering if courts will allow an attorney from outside the local area to seek rates reasonable for that area if they are higher than the rates that attorney charges in his hometown. In my town of Ventura, for example, hourly rates tend to be significantly lower than they are for attorneys of similar experience in Los Angeles, which is barely an hour’s drive away (an hour away in time, but a world away in lifestyle). If I prevail in a case in a Los Angeles court and seek fees under a fee-shifting statute, am I entitled to recover at a higher hourly rate — the one I would charge if I were an L. A.-based attorney?

In my exchange with Tom Caso at The Opening Brief in the comments to his post covering the case, he seems to think that I could. I agree with him that the reasoning in Nichols leads to that result. Better than that, Tom has some real world experience with the question.

UPDATE (10/9/07):  Cal Biz Lit has a very detailed, and highly recommended, post on this topic generally, including comments on Nichols. Here’s a line from it that will make litigants cringe:  “And, on top of everything else, the plaintiff attorneys are likely entitled to their fees incurred in obtaining fees.”

The Pro Bono Road to Riches!

Don’t be shy about asking for attorneys fees. Don’t be shy to ask for more than 100 times the suggested schedule in the local rules. Don’t be shy to ask for an amount that far exceeds the amount of damages awarded to your client. Don’t be shy about anything, including the fact that you’re asking for several hundred thousand dollars in fees for a case you took on pro bono.

Had O’Melveny and Myers been more forward, they might have received more than the roughly $124,000 in fees approved by the trial court and affirmed by the Court of Appeal in Cruz v. Ayromloo, case no. B190959 (2d Dist. Oct. 3, 2007).

The Case

The landlord in Cruz was sued by more than 30 tenants on several causes of action arising from landlord’s refusal to let the tenants return to their units after they were evacuated by the city because the building was unsafe. The trial court awarded a per-rental-unit measure of damages, plus damages individual to each tenant, such as the return of security deposits, loss of personal property, and emotional distress.

Four of the tenants — apparently the only ones with written lease agreements that included an attorney fee provision — moved for attorney fees of more than $400,000. They insisted this figure excluded fees unique to the remaining plaintiffs (such as for discovery relating only to other plaintiffs or for trial time related to issues exclusive to the other plaintiffs).

The trial court significantly trimmed the amount but awarded nearly $124,000 in fees. The Court of Appeal affirms in full.

The Rejected Challenges to the Attorney Fee Award

First, the fact that the award exceeds the amount set forth in the schedule of suggested fees in the local rules (specifically, Los Angeles Superior Court Local Rule 3.2) — indeed, the landlord contends the amount of fees awarded is 39 times the guideline in the schedule (and the fees awarded were less than a third of what was requested!) — doesn’t mean the court abused its discretion. The rule itself allows the court to depart from the guidelines and Civil Code section 1717 says fees shall be “fixed by the court.” It was reasonable for the court to use a “lodestar” method of calculation: hours times hourly rates.

Second, the court did not abuse its discretion in awarding fees in an amount greater than the damages awarded. “It is not uncommon to award attorneys’ fees in an amount higher than the total damages awarded to a plaintiff or plaintiffs in a particular case.”

Third, the court did not err by awarding fees for the non-contract claims as well as the contract claim. The fee provision in this case applied to any action “in connection with” the lease. Since all the claims and damages, including those in tort, arose from the breach of the lease, there was no need to apportion fees between contract and tort causes of action.

Fourth, the decision confirms that fees for work done regarding issues of fact or law common to all the plaintiffs do not have to be reduced to the requesting plaintiffs’ pro rata share:

In any event, respondents sought fees for legal work performed solely on their behalf and the fees were awarded only to them and not to the other tenants. Respondents and the other tenants all lived in the same building, were evacuated from the building, and were not allowed to return to the building by appellant. All tenants asserted the same causes of action. The attorneys conducted legal research pertaining to the overarching legal issues common to all tenants, including the Los Angeles Rent Stabilization Ordinance and the claims for forcible detainer, wrongful eviction, and negligent infliction of emotional distress. The attorneys had to do the same legal research and analysis in preparing their case on behalf of respondents, irrespective of the number of potential tenants benefiting from the legal work performed.


[T]he fact other tenants incidentally benefited from the legal work performed on behalf of respondents does not diminish respondents’ contractual right to recover attorneys’ fees litigating issues common to all.

(Footnotes omitted.)

The Pro Bono Angle

Finally, it’s very interesting that the trial court trimmed the $413,000 request by half right off the top because “counsel knew this was a mildly pro bono type of work.” Mildly pro bono?

Plaintiffs did not cross-appeal to contest the amount of the award. I’m sure O’Melveny now wishes they did:

Finally, we find it important to emphasize something we are not deciding in this case. Respondents elected not to appeal the trial court’s ruling the fee award should be reduced in part because respondents’ counsel had agreed to provide representation on a “pro bono” basis. This court’s affirmance of the judgment should not be construed as signifying our approval of this particular element of that judgment. We do not find it self-evident a law firm’s commendable willingness to provide its services on a pro bono basis to low income clients should necessarily justify a diminishment in the fee award when that pro bono representation proves successful. Because respondents did not directly challenge the court’s decision to reduce the fee award based on the pro bono nature of the litigation, we had no reason to invite the parties to brief the issue. Our research indicates courts reduce a fee award to adjust, for example, for duplicative work, for lack of success on certain issues, or the like. However, our research uncovered no case in which a trial court reduced a fee award simply because of the “pro bono type of work” involved. Moreover, in the analogous situation of contingent fee and legal aid lawyers—where again the clients are not responsible for paying legal fees out of their own pockets—the majority of courts have approved awards at a full level of “reasonable” fees.

(Footnotes omitted.)

This is very interesting in light of the fact that the attorneys who represented the plaintiffs “pro bono” in the recent U.S. Supreme Court case against Seattle Public Schools have generated some controversy for seeking $1.8 million in statutory fees.

Admittedly, the cases do implicate somewhat different concerns. In Cruz, no one is going to complain much about sticking it to a landlord who is seen as stealing his tenants’ homes out from under them. In the Seattle Schools case, however, much of the controversy centers around the fact that the attorneys are seeking fees from a public entity, and specifically from a school district. The argument against recovery is that if pro bono representation is indeed for the public good, then the attorneys should not take funds from education.

Might the Cruz court have felt differently in the case of a public sector defendant?

For more on the Seattle schools case

From the Seattle Times: If attorneys get paid for pro bono work, is it still pro bono?

From the Seattle Post-Intelligencer: “. . . a little contrary to the idea that pro bono is for the public good” and some letters to the editor that include several on the side of the attorneys.

And here’s some coverage by the ABA, the Sound Politics blog, and Overlawyered.

UPDATE (10/9/07): I did not make this point as clearly as I should have – the court’s discussion on recovering fees in pro bono cases is dictum, as is made plain by the court’s opening words: “Finally, we find it important to emphasize something we are not deciding in this case.” (Emphasis added.) This is all interesting discussion, but not something that can result in Supreme Court review of the issue.

One other item to note in the decision is that the trial court’s award of fees was pursuant to a contractual provision rather than a fee-shifting statute. The California cases cited in the court’s dictum in support of the proposition that fees should be recoverable in pro bono cases were all concerned with fee-shifting statutes. One wonders whether a party who agrees to a contractual fee provision contemplates paying out fees where none actually accrue.

UPDATE # 2 (10/10/07): I am writing an article on this case, and so looked at it yet again.  Relevant to my contract provision/fee statute dichotomy, the fee provision in this case entitled a party to recover “any reasonable attorney’s fees,” much like many fee statutes do.  It did not explicitly require fees to be “incurred” to be recoverable.  The existence of “incurred” as a modifier of “fees” in a fee-shifting statute, however, has seldom, if ever, been an obstacle to recovery in a California pro bono case.  I’ll elaborate in the article.

Ninth Circuit: Anticipated Attorney Fees on Appeal Can be Considered in Calculation of Appeal Cost Bond — Sometimes

In Azizian v. Wilkinson, case no. 05-15847 (August 23, 2007), the Ninth Circuit faced, for the first time,  an issue on which other circuits have split: “whether, or under what circumstances, appellate attorney’s fees are ‘costs on appeal’ that a district court may require an appellant to secure in a bond ordered under Federal Rule of Appellate Procedure 7.”  It provides its conclusion at the outset of the opinion:

We conclude that a district court may require an appellant to secure appellate attorney’s fees in a Rule 7 bond, but only if an applicable fee-shifting statute includes them in its definition of recoverable costs, and only if the appellee is eligible to recover such fees.

Appellant Wilkinson is a class member who objected to the class action settlement approved by the district court between the certified class of consumers and a number of retail stores accused of antitrust violations with respect to cosmetics.  She appealed from the order approving the settlement.

Plaintiffs sought a bond under FRAP 7 of nearly $13 million, which included a $600,000 component for twice the plaintiffs’ anticipated attorney fees on appeal.  FRAP 7 provides that the district court “may require an appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal.”

The district court ordered a bond of only $42,000, but it included a $40,000 appellate attorney fee component.  It reasoned that appellate attorney fees could be considered “costs” on appeal because: “(1) the fee-shifting provision in Section 4 of the Clayton Act, 15 U.S.C. § 15, defines attorney’s fees as among the costs recoverable, and (2) ‘the Court of Appeals [was] likely to find that the instant ppeal[ ] [was] frivolous.’”

Regarding the district court’s first justification, the court goes through a very detailed analysis of the cases from other circuits, then states that “[w]e agree with the Second, Sixth, and Eleventh Circuits and hold that the term ‘costs on appeal’ in Rule 7 includes all expenses defined as ‘costs’ by an applicable fee-shifting statute, including attorney’s fees.” The court gave four reasons for its holding:

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The Addition of Fees and Costs to a Judgment Does Not Restart The Clock on Time to Appeal from the Judgment

Torres v. City of San Diego, case no. D049111 (4th Dist. July 25, 2007, ordered published August 17, 2007), presents some curiously unique facts.  The City of San Diego approved a resolution for the indemnification of pension board members against amounts incurred by them in actions relating to their scope of performance as board members.  The board members later found themselves in need of indemnification — because of two lawsuits brought against them by the City!  When their demand for indemnification under the resolution and under Government Code section 995 was refused, the members sued the city.  The members prevailed on summary judgment, and the judgment entered on the motion contained blanks for the fees and costs to be awarded in the indemnification action.  The City filed an untimely appeal from the judgment, which was dismissed.

The members filed a motion for attorneys fees under Government Code section 800 and Code of Civil Procedure section 128.5.  On reply, they also argued they were entitled to fees under the resolution.  After giving the City an opportunity to file additional briefing on the issue, the court granted the motion, finding that the resolution entitled the board members to fees in the indemnification action.

The City appealed from the order awarding attorney fees.  The board members moved to dismiss the appeal insofar as it purported to challenge the underlying judgment.

The Court of Appeal grants the motion to dismiss, and its opinion invokes a rule it would be good to remember: an amendment to a judgment does not “restart the clock” on the time to appeal from it unless the amendment amounts to a “substantial modification” of the judgment.  It is well-settled that the insertion of the amount of fees and costs into an existing judgment does not constitute the requisite substantial modification.

The City tried to get around this general rule in three ways.  First, it contended that the blanks were left for fees and costs in the two underlying actions for which indemnification was sought and that the insertion of fees and costs from the present action therefore constituted a substantial change.  The language of the judgment itself contradicted this argument.  Second, it argued that because fees were sought under the City resolution rather than under an unambiguous statute or contract provision or the code sections raised in the prayer of the complaint (Government Code section 800 and Code of Civil Procedure 128.5), that the motion raised “new legal issues” and thus the award of fees and costs was a substantial modification of the judgment.  This argument is also easily rebuffed:

The legal basis for a fee award, however, is reviewed in the appeal from the order awarding fees; it does not resurrect a stale appeal of the judgment.  The legal basis for the award has nothing to do with the propriety of the underlying summary judgment.

Finally, the court also easily disposes of the City’s due process argument, which the City based on the fact that the board members only raised the resolution as a basis for the fee award in their reply memorandum.  Since the trial court afforded the city an opportunity for supplemental briefing, there was no due process violation in awarding fees on a basis raised for the first time on reply.

UPDATE (8/21/07): The Opening Brief blogs the case with an eye on the irony of the decision on the merits.

Attorney Fees in Public Interest Case

I added Anthony “Tom” Caso’s “The Opening Brief” to my “Appellate Blogs” blogroll a few weeks ago.  Tom is a Sacramento appellate attorney and new appellate blogger.  (By the way, Tom, welcome to the blogosphere.)

Today, he has an excellent post entitled “Can Fees Exceed Damages?”  He discusses yesterday’s decision in Estrada v. Fedex Ground Package System, Inc., case no. B189031 (2d Dist. August 13, 2007), in which the Court of Appeal reverses an attorney fee award for plaintiff and remands for reconsideration of the amount.  This was no “small potatoes” case.  From the opinion:

Estrada’s motion asked for $619,691 in costs and $6,789,325 for his attorneys’ fees, a total of $7,409,016 — plus a 2.0 multiplier as compensation for delay and contingency, a total of $14,818,032. The trial court reduced the fee by 18 percent (finding the amount “slightly bloated”) but otherwise granted the motion (including the 2.0 multiplier) and gave Estrada a total of $12,373,875 for costs and fees, noting the risk inherent in a contingent fee, the “financial burden of private enforcement,” and the years of “long, hard-fought” and “labor intensive” litigation involving “enforcement of an important right” that conferred a “significant benefit on a large class.”  FedEx contends the award is erroneous because Estrada was motivated primarily by his own financial interests, that any benefit to a larger class was incidental, that no significant benefit was conferred on the public or a larger class, and that the trial court’s dual use of the same reasons to both calculate the fee and justify the multiplier created a windfall.

Tom provides the highlights of the court’s resolution of the issues at his blog, including an excellent tip for any attorney briefing a fee motion in a public interest case, especially any attorney considering requesting a multiplier.