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.

Split of Authority re Mandatory Relief under CCP § 473(b)

The first time I read Code of Civil Procedure section 473(b) and the practice guides about it, it horrified me. There I was, a very young lawyer at a BigLaw firm, reading that the court must grant relief from a default if the attorney swears by affidavit that the default was due to the mistake, inadvertence, surprise, or neglect of the attorney. I thought that surely, from time to time, some attorney has relied on this provision, admitting fault, only to have the court deny relief because the relief sought did not fall within the mandatory provision of section 473(b). Shudder.

But I never read about that actually happening until the decision in Hossain v. Hossain, case no. 196198 (2d Dist. Nov. 30, 2007). Plaintiff’s opposition to a motion to enforce a settlement agreement and his cross-motion to enforce it on different terms were both untimely, and the trial court refused to consider them because of their untimeliness. Plaintiff filed a section 473(b) motion for relief from the order enforcing settlement and appealed from the order denying relief.

The court notes a split of authority regarding the orders to which the mandatory relief provision of section 473(b) applies. Section 473(b) provides for mandatory relief from a “default entered by the clerk against his or her client, and which will result in entry of a default judgment,” or “default judgment or dismissal” provided that the default or default judgment or dismissal results from the attorney’s “mistake, inadvertence, surprise, or neglect,” the attorney so admits in an affidavit, and application is made within six months. The split concerns interpretation of “default.”

Plaintiff cited several cases holding that mandatory relief applies to situations that are the “procedural equivalent of a default.” Those cases found mandatory relief from failure to appear for trial, failure to appear for arbitration, and failure to oppose a summary judgment motion.

But the Second District Court of Appeal adopts the position of English v. IKON Business Solutions, Inc. (2001) 94 Cal.App.4th 130, which, after examining the legislative history of the provision, held that mandatory relief applied only to defaults explicitly described in the statute, i.e., a default “entered by the clerk against his or her client, and which will result in entry of a default judgment.” Thus, it affirms the order denying relief.

I don’t know if this issue arises often enough to make this split of authority important enough for the Supreme Court to grant review. But it is certainly a significant split, not just for parties, but also for attorneys, who admit fault in the course of seeking relief. A scary proposition for those attorneys who are unsure of whether mandatory relief applies, even if the mistake, inadvertence, surprise or neglect was arguably excusable.

As a side note, the court only certified for publication the introductory paragraph, a section of its discussion, and the disposition. It did not certify the “Factual and Procedural Summary.” Oversight?

Are Stipulated Judgments Appealable?

Well . . . yes and no. Or better yet, mostly no, and occasionally yes. And to discover the difference between those that are and those that aren’t, an excellent starting point is yesterday’s decision in Harrington-Wisely v. State of California, case no. B190431 (2d Dist. Nov. 20, 2007).

Plaintiffs in this case alleged 10 causes of action for damages and one for injunctive relief, alleging that their constitutional rights were violated by overly intrusive x-ray technology (more about that later) used by the California Department of Corrections to search visitors at certain state penitentiaries. The CDC successfully moved for summary adjudication on the class damages claims on the ground that damages were unavailable, leaving only the injunctive relief claim. The court then issued a sua sponte reconsideration order specifying that the summary adjudication order only barred plaintiffs’ class claims to the extent they sought damages. Thus, all claims remained active to the extent they sought injunctive or declaratory relief.

The parties then entered into a stipulated judgment that entered judgment on the claims insofar as they sought damages but, rather than dismiss, enter an injunction, or otherwise finally dispose of the equitable claims, merely referred to the parties’ agreement concerning them. Among other things, the CDC agreed to curtail use of the machines and not to reinstitute use without giving notice that would provide plaintiffs an opportunity to move for a preliminary injunction first.

The stipulated judgment set forth 16 issues for potential adjudication and provided that the court retained jurisdiction “to enforce the terms of the agreement.” It also stated that it was “only appealable as stipulated.”

Plaintiffs appealed on the basis that summary adjudication on the damages claims was improperly granted. The appeal was clearly contemplated by both sides when they entered into the stipulation.

Nonetheless, the court dismisses the appeal for lack of jurisdiction because the stipulated judgment is not an appealable final judgment. A judgment is “the final determination of the rights of the parties in an action or proceeding.” (Code Civ. Proc. § 577.) The failure of the stipulated judgment to determine the parties’ rights on the equitable claims, either by an injunction to perform as agreed, by dismissal, or otherwise, prevents it from being an appealable judgment for purposes of Code of Civil Procedure section 904.1, subdivision (a)(1). Regardless of the parties’ intent in drafting the stipulated judgment in this way, and regardless of their obvious intent to allow appeal on the damages claims, the court lacks jurisdiction as a result of this missing element.

The court goes on to address and reject several arguments raised by plaintiffs.

First, the appeal cannot be “saved” by liberally construing of the notice of appeal. To do so, there must be another appealable order or judgment from which the appeal can be deemed to have been taken. Here, there is no such appealable order or judgment.

Second, plaintiffs could not invoke the exception to the general rule against appealability of stipulated judgments. Recognizing that most stipulated judgments are not appealable, the court concludes that this one does not fall within the exception for judgments entered into to facilitate appeal after an adverse determination of a critical issue. While the summary adjudication on the class damages claims was indeed critical, the failure of the stipulated judgment to dispose of all claims prevents the exception from applying. In other words, even the exception applies only to stipulated judgments that are final. Had plaintiffs, for example, dismissed their equitable claims as part of the stipulated judgment, thereby disposing of all claims, they could have invoked this exception.

Finally, plaintiffs unsuccessfully argued that the 16 issues for potential adjudication anticipated nothing more than proceedings to enforce the stipulation. The court finds these were complex questions of constitutional and statutory law that related to litigation of the equitable claims, not enforcement.

Now, about that technology. The x-ray machines were so sophisticated that they produced “a spectral-like computer image of the body, including an outline of breasts, genitalia and folds of skin.”

This juicy fact led to some great, funny posts. The post at Legal Pad includes a photograph that demonstrates the imaging capability of the x-ray machine (quite amazing) and made me chuckle. The post at California Appellate Report had me laughing out loud.

And I write about appellate jurisdiction. I am such a geek.

UPDATE (11/23/07):   My Dad was looking at this post (thanks for the traffic, Dad!) and told me that the links in the post at California Appellate Report are a bit . . . racy.  You might want to avoid them.  What I found so funny about the post was in the post itself.  Wrote Professor Martin: “I mean, sure, if I enter a prison, and am carrying a package, you can x-ray my package. But x-raying — and looking at the shape and size — of my package?! Crikey!”

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.

Potentially Void Judgment Reversed on the Merits

Here’s a post I’ve been saving for a time where I’m too busy to spend much time on new content. I may get a post up later in the day, but in the meantime, I’ll get on my soapbox about why I think the Court of Appeal blew it on a jurisdictional question in Holland v. Union Pacific Railroad Co., case no. C052833 (3d Dist. July 30, 2007, certified for publication August 29, 2007).

The case came up on appeal from a summary judgment granted on the ground that the plaintiff’s administrative complaint was untimely. The timeliness of the administrative complaint turned on whether the Department of Fair Employment and Housing caused plaintiff to miss his filing deadline for filing a verified administrative complaint (thus equitably tolling the limitations period) rather than whether there was a triable issue on the substantive allegations of his complaint against his employer. (Thus, the Court of Appeal deemed the substantive allegations of the complaint “largely irrelevant,” so we needn’t discuss them here.) The court found that equitable tolling applied, the summary judgment on timeliness grounds was error, and remanded to the trial court to consider the remaining issues

The most interesting aspect of the case (at least for this jurisdiction geek) is how the court addressed the plaintiff’s contention that the court commissioner lacked jurisdiction to decide the motion. After evaluating the competing evidence over whether plaintiff had consented to the commissioner and the legal positions of the parties, the court says that it is “immaterial” which side is right on the jurisdictional question.

Wow. The existence of jurisdiction is, in the eyes of this panel and in this particular case, immaterial. I think this is wrong, wrong, wrong.

The court deems the trial court’s jurisdiction immaterial because it figures that if it remands, the case will just come up on appeal again on the exact same papers, so remanding would waste judicial resources:

Even if we were to concur that the judge pro tem lacked jurisdiction to hear the motion, there would not be any purpose in reversing the judgment and remanding the matter, only to exercise de novo review of the same materials on appeal from a ruling of a judge of the trial court (as our remittitur would not authorize reopening the motion), if we believe the outcome would be the same on the substantive timeliness issue. This only wastes scarce judicial resources and causes needless expense to the parties. We therefore proceed to the matter of whether the plaintiff’s failure to file a timely administrative complaint is excusable.

I don’t think I’ve ever seen the potential lack of jurisdiction treated so casually. If jurisdiction is lacking, the grant of summary judgment is void. So the court of appeal is analyzing the merits of a potentially void judgment. That is a big deal, and hardly consistent with the court of appeal’s usually zealous protection of its jurisdiction.

I think the court should have been more diligent in determining whether there was jurisdiction. Had it determined a lack of jurisdiction by the commissioner, it should have reversed and remanded without an examination on the merits. The reasons the court offers for the immateriality of jurisdiction don’t stand up well to scrutiny.

First, the court’s position that it would be reviewing “the same materials” on a subsequent appeal seems misguided. It rests on an anticipated remittitur that “would not authorize reopening the motion.” While it might be appropriate to preclude new declarations in support or opposition to the summary judgment motion, there seems no reason to restrict the scope of review by the new trial judge on legal issues. Suppose the new judge hearing the motion sees a legal point that the commissioner missed and wants to ask for additional briefing on an issue? Would the remittitur also preclude that?

A second problem with the “same materials” rationale is that even if the summary judgment papers are unchanged, a second appeal would afford the parties an opportunity to revise their appellate briefs. One of the briefs might be substantially more persuasive, cite additional authority, or otherwise differ from the briefs on this appeal, potentially leading the court of appeal to a different result.

Even more obviously, it is uncertain whether the Court of Appeal would ever see the case again. Suppose the superior court judge on remand disagreed with the commissioner’s disposition and denied the motion. The defendant would have to file a petition for writ of mandamus (which has a 90% + chance of not being heard on the merits) or await final judgment before appealing on the ground that the motion was improperly denied. The case would have a decent chance of settling with a trial on the horizon, so the court of appeal might not see the case again.

All of these possibilities argue against what the Court of Appeal did here.

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.

Third Party Beneficiary to Contract May Invoke Attorney Fee Provision

A few days ago, in my post “Of Walnut Trees and Attorney Fees,” I took issue with the Third District Court of Appeal’s holding that a party suing on a contract that it alleges does not include an attorney fee provision is not entitled to recover attorney fees notwithstanding that the defendant alleges that additional written terms of the contract contain an attorney fee provision.  Yesterday, a different panel of the Third District Court of Appeal and I agree on the attorney fee issue in Laduca v. Polyzos, case no. C050757 (July 16, 2007).  The issue is whether the property owner, as a third party beneficiary of the contract between the general contractor and subcontractor, is able to invoke the attorney fee provision of the general-sub contract when the owner brings suit on the contract directly against the sub.

The court says the property owner is entitled to attorney fees under the general-sub contract.  The property owner is indisputably an intended third party beneficiary of the general-sub contract, the attorney fee provision is extremely broad, and the contract imposes no limitation on third party rights.  Thus, the third party beneficiary’s right to enforce the contract includes the right to enforce the attorney fee provision.

Of Walnut Trees and Attorney Fees

Two interesting and “bloggable” issues are raised and decided by the Third District Court of Appeal in Brittalia Ventures v. Stuke Nursery Co., Inc., case no. C0478374 (July 10, 2007).  One regards the proper standard of review when the terms of a contract are disputed.  The second, and more interesting, concerns post-trial motions for attorney fees.

Brittalia purchased walnut trees from Stuke and later sued for breach of warranty and other causes of action based on allegations that many of the trees were either the wrong variety or diseased.  There was no single, clearly identified written contract governing the sale.  The parties had a course of dealing during which they had agreed to a transaction, then canceled it, then agreed to a new transaction.  The documents (order confirmation, invoice) memorializing the canceled transaction contained warranty disclaimers and an attorney fee provision.  The documents memorializing the completed transaction (purchase proposal and check for down payment and 529 plans) did not.  The jury rendered a general verdict for Brittalia for $5.4 million, and the court awarded Brittalia $750,000 in attorney fees.  Stuke appealed the judgment and fee award . . .

The Standard of Review.

The Court of Appeal is very careful to identify the contract question at issue in order to arrive at the correct standard of review.  The issue is not one of law for the court because the issue is not what the contract means.  The issue is what the contract is. That is, does the contract include the earlier documents as well as the later ones?  That issue is a hotly disputed factual issue, thus subject to substantial evidence review.  The court affirms the judgment because substantial evidence supports the jury’s implicit finding that the warranty disclaimer in the documents regarding the canceled transaction was not a term of the completed transaction.

Availability of Attorney Fees.

Here’s the really interesting part of the opinion . . .  

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Raiders Lose on Independent Review of Order Granting New Trial

Congratulations!  The court has granted your motion for a new trial!

Now, just pray the trial judge doesn’t screw it up.

Yesterday’s Supreme Court opinion in The Oakland Raiders v. National Football League, case no. S132814 (July 2, 2007) demonstrates again that no winner of a new trial can have confidence in the order granting the new trial unless the court specifies its reasons in the order or files its specification of reasons within 10 days of the order, as required by Code of Civil Procedure section 657.  In this case, the court’s failure to specify its reasons results in a different standard of review on appeal that effectively shifts the burden of persuasion from the party appealing the order granting the new trial to the party defending the appeal . . .
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Unitherm Precludes Plain Error Review, Too

Watch rule 50 of the Federal Rules of Civil Procedure!

In Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc. (2006) 546 U.S. 394, the Supreme Court held that a party who fails to renew a Rule 50(a) pre-verdict motion for judgment as a matter of law by moving under Rule 50(b) post-verdict waives any review of the sufficiency of the evidence.  Prior to Unitherm, an appellant in the Ninth Circuit likewise waived sufficiency of the evidence review in such circumstances, but the Court of Appeals could review for plain error on the face of the record that would result in a “manifest miscarriage of justice” if not corrected  See Patel v. Penman (1996) 103 F.3d 868, 878.

In Nitco Holding Corp. v. Boukijian, case no. 05-16438 (June 25, 2007), the Ninth Circuit holds that such plain error review is likewise precluded by Unitherm.  In the absence of both a Rule 50(a) motion and a post-verdict Rule 50(b) motion either for judgment as a matter of law or for a new trial, the Court of Appeals cannot review even for plain error.

So don’t forget those post-verdict motions.

The Doctrine of Implied Findings is Serious Business

Under the doctrine of implied findings, the Court of Appeal will presume that the trial court made all findings necessary to support the judgment.  The only way for the appellant to avoid that presumption is to request a statement of decision pursuant to Code of Civil Procedure section 632, and then to object, pursuant to Code of Civil Procedure section 634 (either by objection prior to entry of judgment or by statutory motion for new trial or motion to vacate the judgment), to any statement that omits necessary findings or contains ambiguous findings.

There is a lot that can be written about this process, but this post is limited to points raised in last Friday’s decision in the Fourth District Court of Appeal case of Ermoian v. Desert Hospital, case no. E036982 (June 22, 2007).  The published portion of the case contains some good nuggets for trial counsel who may be involved in a bench trial.

First, the case is a pretty decent primer on the doctrine of implied findings.

Second, the case emphasizes that the doctrine of implied findings binds the hands of the Court of Appeal.  The court takes the doctrine seriously and is not likely to look for ways around it.  In fact, in this case, the court asked for supplemental briefing about whether the appellant had brought inadequacies in the statement of decision to the trial court’s attention.

Third, it holds that some purported objections to the statement of decision simply don’t count.  A notice pursuant to rule 8.130 (formerly rule 4), California Rules of Court, pursuant to which an appellant who orders less than a complete reporter’s transcript must state the points to be raised on appeal, doesn’t cut it.  It is intended for the clerk of the superior court, not the court itself, and the mere recitation of points to be raised on appeal would not put the superior court on notice of statement of decision deficiencies in any event.  Nor is it enough to object to the entire proposed statement of decision drafted by your adversary (at the request of the court) with a demand that the court prepare its own statement.  This amounts to nothing more than a second demand for a statement of decision.  Objections must be specific enough for the court to be able to take corrective action.

Fourth, the statement of decision need not respond point by point to every purported contested issue in the request for the statement of decision.  It is enough for the superior court to disclose its determinations “as to the ultimate facts and material issues in the case.”

Sound advice to trial counsel as to the doctrine of implied findings and the statement of decision process: Learn it.  Live it.  Love it.

Update (6/25/07): The Appellate Practitioner has a post about the case, with special mention of the court’s handling of the premature nature of the appeal.  You’ll recall I posted about “saving” premature appeals here, wondering whether the practice might someday be challenged in the Supreme Court.  The Appellate Practitioner’s point highlights the implication in the headline for this post — while the Court of Appeal seems often to go out of its way to preserve a procedurally improper appeal, it does not appear to be nearly as generous in construing various filings as proper objections to a statement of decision, at least not judging by the facts of this case.  Then again, the objections in this case were not substantively sufficient either.  In the right case, however, where the objections are specific enough and presented to the superior court, even by an improper procedure, might the court grant some leeway?

There is one other interesting aspect of the decision.  The appellant contended, for reasons the court opinion does not disclose, that she was entitled to de novo review of the evidence on negligence and causation.  The Court notes that the only situation in which de novo review of factual findings is appropriate is where only one reasonable inference can be drawn from undisputed facts, and finds way too many such disputes to apply the de novo standard.  Thus, the Court of Appeal evaluates the evidence under the venerable “substantial evidence” standard.  The disputes seem so obvious that I’m left to wonder if the appellant did not advance some other basis for de novo review that the court simply decided not to set forth in its opinion.

Time Travel Exists . . . if You’re a Judge

Code of Civil Procedure section 377.34 limits damages in the case of actions by a decedent’s personal representative to “the loss or damage that the decedent incurred before death.”  So what to do if you’re widowed days after a jury verdict awards your husband millions in damages for prospective loss but before judgment is entered?

You ask the court to invoke the judicial equivalent of time travel: the entry of an order nunc pro tunc to a date before your husband died.  In Cadlo v. Metalclad Insulation Corp., case no. A111353 (June 11, 2007), the First District Court of Appeal holds that a valid exercise of the court’s power to antedate the judgment makes the earlier date the one relevant for section 337.34 purposes.  Since the Cadlo decedent was alive on the date of entry nunc pro tunc, section 337.34 does not apply.

The Court of Appeal finds that the trial court validly exercised its power here.  The date of nunc pro tunc entry was a date on which judgment could have been entered, the delay in entry was not due to plaintiff’s inaction, and the trial court was within its discretion to decide that antedating the judgment was necessary to avoid injustice because the defendants would have earned a large windfall (relief from millions of dollars in liability) without it.

UPDATE (6/13/07): Professor Martin has some commentary on what this case says about our desire for “finality” and whether we might desire it just a little too much.

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Anti-SLAPP Attorney Fee and Costs Application is Timely any Time Prior to Final Judgment

In Carpenter v. Jack in the Box Corp., case no. B188707 (May 25, 2007) the Second District Court of Appeal holds that an application for anti-SLAPP attorney fees and costs under Code of Civil Procedure section 425.16(c) by a plaintiff who prevails against an anti-SLAPP motion is timely so long as it is made before entry of final judgment in the action, even if it is not made until after resolution of the appeal of the order denying the anti-SLAPP motion.

Carpenter brought an action for wrongful termination, defamation, and other tort and contract claims related to the termination of employment by Jack in the Box.  Jack in the Box brought an anti-SLAPP motion (special motion to strike) under Code of Civil Procedure section 425.16, claiming that plaintiff’s claims targeted Jack in the Box’s actions in the course of an investigation into allegations that plaintiff had sexually harassed another employee and that such actions were protected under the First Amendment.  The trial court denied the special motion to strike, and the Court of Appeal affirmed.

After remittitur to the trial court, plaintiff filed his application for fees and costs under section 425.16(c).  The court held that the trial court did not lose jurisdiction over the application simply because the remittitur of the case after the denial of the anti-SLAPP motion did not include instructions to determine attorney fees and costs.  The trial court retains jurisdiction to decide a motion for fees and costs even while the appeal is pending, and a statute authorizing an award of attorney fees in the trial court includes appellate fees unless the statute explicitly states otherwise.

Finding jurisdiction, the court next turned to the issue of whether the application was timely under rules 3.1702 and 8.104 of the California Rules of Court.  After a rigorous and complicated analysis of the rules to resolve a facial ambiguity, the court concludes that an application for fees under section 425.16(c) is timely so long as it is brought any time before final judgment in the action.

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Court Upholds $143,809 in Costs Awarded for Preparation of a Single Exhibit

It sounds crazy in the abstract, not so much in the context of the case decided in the Fifth District of the California Court of Appeal, El Dorado Meat Co. v. Yosemite Meat and Locker Service, Inc., ___ Cal.Rptr.3d ___, case no. F049334 (May 4, 2007).  The court characterized the action as a “complex suit” in which plaintiff alleged a variety of business torts including antitrust, RICO and unfair competition claims. The single exhibit was actually “a 37-page document containing charts and graphs that were projected on a screen during trial” and was prepared from 160,000 pages of business and financial records produced by the parties in discovery.  The costs included more than $111,000 for personnel to compile and enter data from the records, more than $30,000 for copying, and a little over $2,000 for the electronic equipment to project the exhibit on screen at trial.  Though it found some of the evidentiary support to be “light,” the court held that the trial court was within its discretion to award the costs: “Given the nature of the case, Yosemite could not mount its defense without presenting years’ worth of its own and El Dorado’s business data.  Given the volume of the data, Yosemite could not present it without summaries.

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