IT CAN BE NO SURPRISE THAT THE LITIGATION PRIVILEGE BARS

 

In Bergstein v. Strook & Strook & Lavan LLP, 2015 DJDAR 5177, the California Court of Appeal for the Second District ruled that a plaintiff cannot establish the requisite “probability of success on the merits” in a SLAPP suit motion where the claims are barred as a matter of law by the litigation privilege.

The Plaintiff sued the Defendants’ attorneys, alleging among other things that they aided and abetted another party’s alleged breach of fiduciary duty. The allegations focused on an alleged improper attempt to obtain the Plaintiff’s proprietary information to use in litigation. The Defendants’ attorneys moved to strike the complaint under the anti‑SLAPP statute. The court granted the Defendants’ motion and awarded reasonable attorney fees.

The Plaintiff appealed and the court affirmed. The court noted that under California Code of Civil Procedure Section 425.16(b)(1), the anti‑SLAPP statute, a defendant may bring a special motion to strike a cause of action arising from that person’s rights of free speech under the United States and California Constitutions. To prevail, the moving party has to show that the challenged cause of action arises from protected activity. “Statements made in litigation, or in connection with litigation, are protected” by Section 425.16(c). If the moving party meets its burden, the other party has to show a probability of prevailing in the litigation. In this case, the court ruled that the Defendants’ litigation activities were at the “core” of the Plaintiff’s claims and were thus protected. Thus, the court of appeal concluded that the trial court correctly granted the Defendants’ SLAPP suit motion.

FEE AWARD RENDERED IN DEFENSE OF FEE APPLICATION IS OVERTURNED

 

In Baker Botts LLP v. ASARCO LLC, 2015 DJDAR 6509, the United States Supreme Court ruled that Section 330(a)(1) of the U.S. Bankruptcy Code does not authorize an award of attorney fees for defending a fee application.

ASARCO hired law firms to assist in a Chapter 11 bankruptcy. The two law firms prosecuted fraudulent‑transfer claims against ASARCO’s parent company. After the victory, the law firms sought compensation for their fees and filed applications in bankruptcy court. The parent company challenged the fee petitions and lost. In addition to receiving an award for the services performed, the Court also awarded the firms fees for the services incurred in “defending” a fee application. The Court of Appeals for the Fifth Circuit reversed that part of the decision and on appeal to the high court, SCOTUS affirmed.

The Court referenced the often cited to American Rule, which states that “[e]ach litigant pays his own attorney’s fees” unless otherwise provided by contract or statute. Here, the firms cited Section 327(a) of the Bankruptcy Code, which states that fees can be awarded to “professionals . . . hired to serve the administrator of the estate for the benefit of the estate.” The Court noted, however, that litigating fee applications against the bankruptcy administrator are not services performed for the benefit of the estate. The Court noted that if the legislature wanted to shift the burdens of fee‑defense litigation, it could have done so as it has in other Bankruptcy Code provisions.

CCP § 998 FEES ARE RECOVERABLE DESPITE CLAIM FOR INDEMNITY

 

In Litt v. Eisenhower Medical Center, 2015 DJDAR 6921, the California Court of Appeal for the Fourth District ruled that CCP § 998 fees were recoverable by a defendant even though another defendant had an obligation to indemnify the party for the very same costs incurred.

The Plaintiff sued Eisenhower Medical Center (EMC) for negligence. EMC served the Plaintiff with a CCP Section 998 (CCP § 998) offer. The Plaintiff rejected the 998 offer. The Plaintiff then added another entity as a Defendant. That entity owed an indemnity obligation to EMC.

Ultimately, the jury returned a verdict in the Plaintiff’s favor and against both Defendants jointly and severally. The Defendants then jointly requested costs and expert fees. The court ruled that EMC was the prevailing party. The court, however, declined to award EMC its § 998 expert fees because the later named defendant owed EMC an indemnity obligation, including the § 998 fees. The court entered an order striking all of EMC’s costs incurred after the new entity was named a Defendant.

The court of appeal reversed that part of the trial court’s ruling. The court stated that CCP § 998 is a fee‑shifting provision that allows the court to require the plaintiff to pay “a reasonable sum to cover costs…of expert witnesses…actually incurred and reasonably necessary…” (where an offer is made by a defendant and rejected, and the plaintiff fails to obtain a more favorable judgment). The court focused on language in Code of Civil Procedure Section 1033.5, which states that “costs are allowable if incurred, whether or not paid.” The court stated that the only interpretation of that language required payment of the § 998 fees, even where an indemnity obligation covered the same costs.

TROPE DOCTRINE DOES NOT APPLY IN PUBLIC RECORDS ACT PROCEEDING

 

In Law Offices of Marc Grossman v. Victor Elementary School District, 2015 DJDAR 8356, the California Court of Appeal for the Fourth Appellate District ruled that the Trope Doctrine did not apply in litigation under the California Public Records Act. The Trope Doctrine states that a law firm that represents itself is not eligible to recover attorney fees.

A law firm represented a student in an action against an elementary school following an incident at the school. The firm pursued a mandamus petition pursuant to Government Code Section 6259, commonly known as the California Public Records Act (CPRA), to obtain documents specifying the amount of money the elementary school district had spent on its defense related to the incident. The Superior Court denied the petition. The law firm then filed an appeal.

The Fourth District granted the petition for writ of mandate and ordered the court to grant the request for information, as well as costs and attorney fees. After remand, the trial court denied the law firm’s request for attorney fees. The law firm filed another appeal, arguing that the court erred when it denied the attorney fees on the grounds an attorney representing himself could not recover such fees (the Trope Doctrine).

The Fourth District reversed the trial court a second time. The court noted that under the CPRA, members of the public can seek judicial enforcement to inspect public records. The court must award court costs and reasonable attorney fees to the prevailing plaintiff pursuant to Section 6259(d). Here, the law firm was the prevailing party in the underlying mandamus proceeding and should have received a fee award. The court stated that the Trope Doctrine did not apply as that action was based on CCP § 1717 which permits an award based on an action on a contract. This case was brought pursuant to the CPRA and involved completely separate public policy considerations.

PREJUDGMENT INTEREST ON COSTS IS IMPROPER

 

By David McMahon

and

Susan Ye

In Bean v. Pacific Coast Elevator Corp. (2015) 234 Cal.App.4th 1423 , the California Court of Appeal for the Fourth Appellate District held that a trial court erred when it granted prejudgment interest on costs awarded in a personal injury lawsuit.

Plaintiff Daniel Bean was victorious in a personal injury lawsuit in which the jury awarded the him more than $1.2 million in damages. Subsequently, the trial court entered judgment in favor of the plaintiff for $1,306,425, which included $34,830 in costs that the trial court found to be proper. The trial court, however, also ordered prejudgment interest to be calculated on the entire amount of the judgment and the costs.

The Court of Appeal reversed the award of prejudgment interest on the entire sum. The court noted that pursuant to Civil Code Section 3291, the statute provides authority for a party to recover “interest on the damages” in “any action brought to recover damages for personal injury.” Also, where a plaintiff makes a pretrial offer under CCP 998, where the defendant does not accept the offer, and plaintiff then obtains a more favorable judgment, Section 3291 provides that “the judgment shall bear interest” pursuant to CCP 998.

The Court of Appeal analyzed the statutory language and concluded the wording was ambiguous. The court then reviewed applicable case law and concluded that no case has ever held that prejudgment interest may be awarded on costs. The court reasoned that awarding prejudgment interest on costs was improper because costs are not ordinarily considered part of the judgment. Hence, the court found that the trial court erred in awarding prejudgment interest on costs.

CCP § 998 FEES REJECTED AS JUDGMENT WAS LESS THAN OFFER TO COMPROMISE

 

In Lee v. Silveira, 2015 DJDAR 5287, the California Court of Appeal for the Fifth Appellate District ruled on an interesting tort case involving the interpretation of CCP § 998. In the appeal, a personal injury plaintiff contended the trial court erred in denying her request for expert witness fees and prejudgment interest under Civil Code Section 3291. The Plaintiff argued she was entitled to such fees and interest, which totaled over $350,000, because the defendants “fail[ed] to obtain a more favorable judgment” (citing CCP § 998). The Plaintiff had previously made a § 998 offer in the sum of $1 million but the Defendant ignored the offer.

At issue in the case was the holding in the California Supreme Court case of Howell v. Hamilton Meats & Provisions Inc. (2011) 52 Cal.4th 541, 548.  In that case the court interpreted the “negotiated rate differential.” The differential is the difference between the billed rate for medical care and the actual amount paid for the services. However, the court concluded that a plaintiff was not entitled to recover the differential as economic damages in a personal injury lawsuit.

At trial, the Plaintiff received a verdict in excess of the $1 million § 998 offer. However, the court made specific findings that the Plaintiff’s judgment was subject to amendment concerning the reduction for the Plaintiff’s past medical expenses under the rate differential. The Defendant moved to reduce the jury verdict by the differential, which put the verdict under $1 million. The trial court sided with the Defendant and entered judgment for $887,098, which excluded the Plaintiff’s fees and interest. The Plaintiff filed an appeal of that decision.

The court of appeal affirmed. The court noted that under CCP 998, a party who declines an offer to compromise and fails to obtain a more favorable settlement may be compelled to pay the offeror’s expert witness fees incurred during trial. Because the judgment of more than $1 million expressly stated that it was subject to the stipulated reduction for the Plaintiff’s past medical expenses, the Defendant was only liable for $887,098. Because the net verdict was less than the Plaintiff’s CCP 998 offer, the court concluded that the Defendant was not liable for the Plaintiff’s fees under CCP 998.

THE ABUSE OF DISCRETION STANDARD APPLIES TO THE APPELLATE REVIEW OF REASONABLE ATTORNEY FEES

 

In Calvo Fisher & Jacob LLP v. Lujan, 2015 DJDAR 1965, the California Court of Appeal for the First Appellate District decided another case in the ongoing saga arising out of litigation concerning the Estate of Larry Hillbroom, the founder of DHL Worldwide Express (“DHL”).

David Lujan (“Lujan”) was a Guam attorney who represented Junior Hillbroom (”Junior”). After hotly contested litigation, Lujan proved that Junior was an heir of Larry Hillbroom, which resulted in a significant award. Subsequently, however, Junior sued Lujan in federal court in California alleging legal malpractice and other claims. Lujan hired the law firm of Calvo & Clark (“Calvo”) to defend him against Junior’s lawsuit. Subsequently, Lujan failed to pay Calvo’s fees. Calvo then sued Lujan for breach of contract. Ultimately, a jury found in favor of Calvo in a sum approaching $1 million. The trial court also awarded the firm prejudgment interest plus $1,532,675 in attorney fees.

Lujan appealed the rulings of the trial court, which were affirmed by the first appellate district. The Court of Appeal noted that an appellate court may disturb an attorney fee award only where there has been a “manifest abuse of discretion” or where the attorney fee award “shocks the conscience.” Because the parties’ agreement provided that Calvo would be entitled to reasonable attorney fee and costs in connection with an action seeking to collect fees and costs, the court of appeal reviewed the record as to the reasonableness of the fees sought. The court noted that the record was replete with evidence establishing the reasonableness of the fees sought. Because the trial court was in the “best position” to value the services, it upheld the award and concluded that the trial court did not abuse its discretion.

ATTORNEY FEES INCURRED IN ENFORCEMENT OF ANTI SLAPP ATTORNEY FEE AWARD ARE RECOVERABLE COSTS

 

By David McMahon

and

Susan Ye

In York v. Strong (2015) 234 Cal.App.4th 1471, the California Court of Appeal for the Fourth Appellate District reviewed an attorney fee award and a post‑judgment attorney fee award under the SLAPP suit statute.

The Defendant successfully defended a SLAPP suit brought by the Plaintiff. The judgment contained an attorney fee award of $21,840.00. The Defendant incurred additional fees incurred in attempts to enforce the original judgment. The Defendant filed a petition seeking an additional award of post‑judgment fees for those expenses, arguing such fees were recoverable under California Code of Civil Procedure Section 685.040. The trial court denied the motion.

The Court of Appeal reversed the trial court’s decision, noting that Section 685.040 provides that attorney’s fees incurred in enforcing a judgment are “not included in costs collectible…unless otherwise provided by law.” The statute does, however, include an exception: when the underlying judgment includes an award of attorney fees pursuant to Section 1033.5(a)(10)(A). Section 1033.5(a)(10)(A), in turn, lists types of attorney fees recoverable as costs, which are those “authorized by…(A) Contract, (B) Statute, or (C) Law.”

The Court of Appeal also noted that in Ketchum v. Moses (2001) 24 Cal.4th 1122, 1141, n. 6, the California Supreme Court held that attorney fees incurred in an effort to enforce a fee judgment obtained under the anti‑SLAPP law do qualify as recoverable costs under Section 685.040. The appellate court noted that the court’s clear interpretation rendered it unnecessary to undergo a further statutory interpretation of Sections 685.040 and 1033.5. The court ultimately concluded that the trial court’s denial was improper.

APPELLATE COURT'S DISPOSITION AND REMAND OF MATTER

 

By David McMahon

and

Susan Ye

In Ducoing Management Inc. v. Superior Court (2015) 234 Cal.App.4th 306, the California Court of Appeal for the Third Appellate District emphasized the importance of clear and understandable instructions to a lower court as part of a remand proceeding.

The plaintiffs created a painting company, Ducoing Enterprises Inc. (DEI). DEI sued an insurance broker, alleging it failed to procure appropriate insurance coverage for the painting company and a noted business. During the initial jury trial, the court granted the broker’s motion for nonsuit against the plaintiffs and their companies. The court also awarded the broker reasonable costs. Although the appellate court affirmed the judgment as to one of the companies, it reversed the judgment “in all other respects” and remanded for a retrial as to that entity. Upon remand to a different trial judge, the broker sought to enforce the entire joint cost award. The trial court granted the broker’s request for costs, and a writ petition followed.

The Court of Appeal granted the writ, noting that an appellate court’s disposition “is not intended to be a riddle” and must be followed by the trial court on remand. The court noted that such disposition should be “construed according to the wording of its directions” and in conjunction with appellate opinion. The court noted that the “ ‘unqualified’ (‘[i]n all other respects’)” reversal necessarily included the cost award. Thus, a preemptory writ issued directing the trial court to vacate the denial of the plaintiffs’ motion.

UNDER CALIFORNIA LAW, ATTORNEY BILLING STATEMENTS ARE CONFIDENTIAL COMMUNICATIONS

 

In County of Los Angeles Board of Supervisors et al. v. The Superior Court of Los Angeles, 2015 DJDAR 4085, the California Court of Appeal for the Second District ruled that attorney invoices may be confidential communications and are immune from production during discovery.

The attorney‑client privilege is fundamental to the practice of law.  It encourages the client to be honest with his attorney for the purposes of obtaining the best legal advice and advocacy.  Such protection of communications between an attorney and client foster an environment where the client may divulge all relevant information, which he may have otherwise withheld without this safeguard.

But, just how far does this privilege reach?  In County of Los Angeles Board of Supervisors et al. v. The Superior Court of Los Angeles, a California Court of Appeal clarified an issue not previously decided by California courts, holding that attorney invoices are confidential communications.

This may be surprising since many practitioners would likely conclude that billing invoices are not the type of confidential communications reflecting significant decisions with potentially lasting legal consequences.  What made these bills different?  Nothing, but they were communicated in the course of an attorney‑client relationship.  In its decision, the court broadly interpreted Evidence Code section 952, which defines “confidential communications” in the context of attorney‑client privilege, and determined that attorney‑client communication does not have to include legal advice or opinion in order to be protected communications.

The court explained that “…the proper focus in the privilege inquiry is not whether the communication contains an attorney’s opinion or advice, but whether the relationship is one of attorney‑client and whether the communication was confidentially transmitted in the course of that relationship.”

Since the invoices were transferred in the course of the attorney‑client relationship, the court ruled that they fell within the zone of privacy.  Thus, under this recent precedent, attorney invoices are confidential communications and immune from production during discovery.