Trial Court Fails To Adequately Explain Basis for Cuts. Reduction in Fee Award Reversed.

In Carter v. Caleb Brett LLC, 2014 DJDAR 1412 (2014), the US Court of Appeal for the Ninth Circuit reversed a decision of the district court, making a significant reduction in a fee award. The Ninth Circuit ruled that the district judge’s decision was not supported by a sufficient explanation for the downward modifications taken.

After the adverse decision on the fee petition, the plaintiff appealed to the Ninth Circuit. The Ninth Circuit reviewed the district court’s award of $14,268.50 in attorney fees and costs. The full amount requested by the plaintiff was $22,585.00. The record on appeal revealed that the district court determined that the reasonable hourly rate for the type of work at issue in the relevant geographic area was $400.00. The district court, however, reduced the number of compensable hours from 60.9 to 35 hours. On appeal, the plaintiff argued that the reduction was inappropriate as the court failed to provide an appropriate explanation for the cuts.

The Ninth Circuit noted that the district court has latitude on determining fee awards. However, the award and any reduction must be supported by specific explanations of the reasons for both the award and any reductions. Courts must reach an attorney fee decision by considering the factors enumerated in Kerr v. Screen Extras Guild Inc., 526 F.2d 67 (9th Cir. 1975).

The main factors set forth in Kerr include the time and labor required, the novelty and difficulty of the questions presented, the skill required to perform the legal services properly, the preclusion of other employment due to the acceptance of the case, and the attorney’s customary fees. 

The Ninth Circuit noted that the district court referred to some of the Kerr factors in its analysis, but did not explain which factors justified a significant reduction in the fee request. The district court’s decision was vacated on that basis.

Can lawyers contractually agree to preclude a court from reviewing an arbitration award?

In Burton v. Class Counsel, 2013 DJDAR 16253 (2013), the Ninth Circuit Court of Appeal decided a unique case under the Federal Arbitration Act (FAA). The court decided the issue of whether lawyers can contractually agree to preclude a court from reviewing an arbitration award. The question was of first impression in the Ninth Circuit. The Ninth Circuit concluded that the statutory grounds for review of an award under the FAA may not be waived or eliminated by contract by the parties involved in litigation.

The appeal arose from a protracted dispute. It involved multidistrict litigation relating to employees’ wage‑and‑hour claims against Wal‑Mart. The matter settled for $85 million, and the parties agreed to have a special master resolve any fee disputes that might arise between the attorneys representing the plaintiffs.

The lower court granted almost $28 million in attorney fees to the plaintiffs. The co‑lead counsel then disputed the proper allocation of the fee award. The fee dispute was submitted to arbitration, and the arbitrator allocated $6 million to the Burton firm and $11 million to the Bosignore law firm.

Bosignore moved to confirm the award in federal district court.  Burton filed papers to overturn the decision of the special master. The district court confirmed the decision. After Burton appealed, Bosignore argued the Ninth Circuit had no jurisdiction to hear the appeal, as the lawyers privy to the arbitration agreement had a contractual agreement which precluded any appeals.

The Ninth Circuit affirmed the trial court’s decision. The court noted that the FAA provides that federal district courts have the power to review arbitration awards. Under the FAA, a district court can reverse an award but only under specified circumstances. Some examples include where the award was obtained by misconduct of the arbitrator.

After reviewing the record, the Ninth Circuit could find none of the justifications for vacating an arbitration award. The Ninth Circuit also concluded the court held that the FAA does not allow parties to waive the grounds for vacating an arbitration award. The court noted that allowing such a result could undermine the important public policy goals of the FAA.

Are "pro hac vice" counsel entitled to recover costs?

In Kalitta Air LLC v. Central Texas Airborne System Inc., 2013 DJDAR 16393 (2013), the Ninth Circuit Court of Appeals decided a unique issue which other federal circuits have reached different conclusions on. The main issue related to whether attorneys who are temporarily admitted to practice in a jurisdiction (pro hac vice) are entitled to recover the costs incurred to allow the pro hac vice representation.

Kalitta Air LLC (Kalitta) sued Central Texas Airborne System Inc. (CTAS). The district court ruled favorably for CTAS. CTAS then filed a cost bill seeking $691,591.73 from Kalitta. The cost bill included $1,310 in costs paid by CTAS’s counsel to be admitted as counsel “pro hac vice.”

Kalitta petitioned the district court to review the award, arguing that the court incorrectly awarded CTAS $1,310 in pro hac vice admission fees. The trial court affirmed the decision, stating that such an award was appropriate.

Kalitta appealed and the Ninth Circuit reversed the decision of the trial court. The Ninth Circuit noted that when a party wins a civil lawsuit, that party should be awarded recoverable costs. The Ninth Circuit noted that costs are appropriately awarded for fees paid by attorneys to be “permanently admitted.”  No such award is allowed for counsel admitted pro hac vice.

The Ninth Circuit noted that the Seventh and Eighth Circuits have rendered decisions allowing costs for pro hac vice admission of counsel. The Ninth Circuit noted the recent ruling by the U.S. Supreme Court in Taniguchi v. Kan Pac. Saipan Ltd.  There the Court ruled that “costs are limited to relatively minor, incidental expenses.” The Ninth Circuit overturned the district court’s ruling on that basis.

Third Party is Liable For Attorney Fees to Party Damaged by Fraudulent Conveyance

In Cardinale v. Miller, 2014 DJDAR 252 (2014), the California Court of Appeal for the First Appellate District decided a unique civil procedure issue arising out of an attorney fee award to a judgment creditor. The court granted an award to a creditor for fees incurred in enforcing a judgment.

The case arose out of contentious litigation regarding alleged improper consumer loans. The plaintiff filed suit to enforce judgments she had previously won against the defendants in a fraud case. The plaintiff alleged that the defendants were engaged in a Ponzi scheme to shield their assets from collection of the judgment. She further alleged that specified third parties aided the attempts to hide the potentially recoverable assets. After trial, the jury found in favor of the plaintiff.

The jury awarded compensatory damages of $2,170,593, in addition to $900,000 in punitive damages, and $293,937.50 in attorney fees to the plaintiff against the direct defendant and the third party. The third party argued that he should not be required to pay attorney fees, because he was not found culpable as a judgment debtor.

The court cited to Code of Civil Procedure Section 685.040 in support of the award. The court of appeal noted that the statute authorizes a judgment creditor to recover fees incurred in enforcing a judgment, if the underlying judgment included an award of fees as costs. Two prerequisites must be met before a motion for an award of attorney fees is appropriate:

  1. The fees must have been incurred to enforce a judgment, and
  2. The underlying judgment must have included an award of attorney fees. 

Here, the court noted that the plaintiff’s action satisfied both of the necessary criteria.

The court stated that it did not matter that the third party was not the “original judgment debtor.” Because the statutory language did not prohibit the plaintiff from recovering attorney fees from the culpable third party, this court saw no reason to impose such a limitation. The court of appeal concluded that the attorney fees award against both defendants was appropriate under the circumstances.

Attorney Fees Are Not Proper Where Plaintiff Dismisses Claims for Unlawful Debt Collection Practices

In Tourgeman v. Nelson & Kennard, 2014 DJDAR 587 (2014), the California Court of Appeal for the Fourth Appellate District decided an interesting collection case which resulted in an attorney fee award. The Court of Appeal disagreed with the lower court decision and reversed the trial court award of fees.

In 2012, the plaintiff filed a class action against Nelson & Kennard (NK). The suit alleged improper debt collection practices concerning the purchase of a computer. The plaintiff alleged that NK sent collection letters to consumers that misrepresented the identity of the creditor. The plaintiff sought an injunction to prevent NK from engaging in alleged improper debt collection practices, prospectively.

In response, NK filed a special motion to strike, seeking to dismiss the plaintiff’s lawsuit pursuant to California’s Anti‑SLAPP statute. In response, and to avoid the special motion to strike, the plaintiff filed a voluntary dismissal “without prejudice.”

NK then petitioned for attorney fees under the anti‑SLAPP statute. The plaintiff objected, arguing that NK would not have prevailed on the anti‑SLAPP motion as the cause of action fell into the “public interest” exception of the statute. The trial court disagreed, and awarded NK attorney fees and costs.

The Court of Appeal reversed the decision of the trial court. The Court of Appeal stated that if an action is brought “solely” in the public interest, the anti‑SLAPP statute generally does not apply. To satisfy the “public interest” exception, the plaintiff must not seek any relief greater than, or different from, the relief sought for the general public and the action must enforce an important right affecting the public interest. Also, private enforcement must be necessary due to the financial burden on the plaintiff.

When a defendant is successful on an anti‑SLAPP motion, the statute authorizes an award of attorney fees and costs to the prevailing defendant. The Court of Appeal noted that here, the plaintiff’s putative class action sought injunctive relief to benefit the general public. As such, this court concluded that his claim was brought “solely in the public interest” and fell squarely within the public interest exception. The Court of Appeal concluded that the attorney fees were not appropriate on this basis.

 

Standing in the shoes of a third party? Plan to pay the attorney fees.

In Apex LLC v. Korusfood.com, 2014 DJDAR 248 (2014), the California Court of Appeal for the Fourth Appellate District affirmed an attorney fee award rendered by the trial court. The court of appeal concluded that a third party who “stands in the shoes” of the contracting party can be liable for fees to the same extent as the original contracting party.

The plaintiff sued Sharing World Inc. (“SW”) and Felix & Sons Inc. (“Felix”), alleging the parties failed to pay for seed that it ordered. Felix later became Korusfood.com (“Korusfood”). The trial court first ruled in favor of SW and Korusfood, but later reversed its ruling.

Following its appellate victory, Apex moved for contractual attorney fees. The defendants argued that Apex could not recover attorney fees from Korusfood, because Korusfood was separate from SW and was not a party to the contract. The trial court granted Apex’s request for attorney fees against both of the entities.

The court of appeal affirmed the trial court’s decision. The court held that even a party who has not signed an agreement may still be bound to an attorney fees provision in a contract if it “stands in the shoes of a party to the contract.” The nonsignatory party can be held liable for a fee award, if it would have been entitled to attorney fees as the prevailing party. This is a commonsense conclusion. Here, even though Korusfood was not a party to the contract, it stood in the shoes of Felix. Thus, the trial court correctly ordered both Korusfood and SW to pay Apex’s attorney fees.

 

Plaintiff Entitled To Appeal Fee Award Despite Bankruptcy Court Plan Confirmation

In Edwards v. Broadwater Casitas Care Center, 2013 DJDAR 15911 (2013), the California Court of Appeal for the Second Appellate District decided an interesting case involving the interplay of a petition for attorney fees rendered in state court and the U.S. Bankruptcy Code.

Broadwater Casitas Care Center LLC (Broadwater) won a case following an arbitration. The state court affirmed the arbitrator’s award, and further held that Broadwater was entitled to $20,000 in costs and approximately $150,000 in attorney fees. The plaintiff then filed a Chapter 13 bankruptcy petition. The bankruptcy petition “scheduled” the cost award, but omitted the fee claim.

In the bankruptcy, Broadwater asserted claims to both the cost and fee awards. The plaintiff did not initially argue against the merits of those claims. Subsequently, the plaintiff filed an appeal in the state court, regarding both the cost and fee awards.

The bankruptcy court then confirmed a repayment plan. The plan required the plaintiff to pay a percentage of both awards.  Broadwater moved to strike the plaintiff’s appeal as moot. Broadwater argued that the bankruptcy court’s order precluded any further challenge of the judgment.

The court of appeal concluded that the confirmation of a Chapter 13 bankruptcy plan will only preclude a litigant from subsequently raising an issue under very specific circumstances. The court of appeal stated that the bankruptcy court did not have to decide whether the lower court had the authority to impose costs and attorney fees, thus the plaintiff was allowed to subsequently challenge the trial court’s awards. The reasoning for a subsequent challenge is somewhat murky and the holding of this case is perhaps best limited to these specific facts.

 

Contract dispute leads to award of attorney fees

In Eden Township Healthcare District v. Eden Medical Center the California Court of Appeal for the First Appellate District decided a dispute giving rise to an attorney fee award pursuant to California Civil Code Section 1717.  That statute is California’s reciprocal attorney fee statute.

A local Healthcare District (the “District”) was formed as a public agency to provide health care services to the local community. Eden Medical (“Eden”) operated two hospitals in the same community, Eden Hospital (“EH”) and San Leandro Hospital (“SLH”). 

The first entity, EH, had financial difficulties and consideration was given to shutting that hospital down. The District then decided to replace EH with a new facility. 

Another nonprofit, Sutter Health (“Sutter”), initially agreed to build the new hospital. Later, Sutter scrapped that plan. Then Sutter and the District entered into negotiations and entered into a series of contracts. One of those agreements purported to allow Sutter an option to purchase the second community hospital, SLH.

The agreements between the District and Sutter also included an attorney fees clause. Sutter later decided to exercise its option to buy SLH; however, the hospital was to be modified to provide specialized health care services. The District opposed that plan and it refused to allow Sutter to exercise the option.

Sutter brought a lawsuit, seeking specific performance of the agreement from the District. The District then filed a cross‑complaint for declaratory and injunctive relief seeking to invalidate the agreement with Sutter. The trial court ruled in favor of Sutter and ordered the District to perform the contract and sell SLH. Sutter’s request for attorney fees was denied.

The court of appeal reversed the decision of the trial court on the fee issue. The court of appeal noted that under Civil Code Section 1717, a contract may provide for an award of attorney fees to a prevailing party in a contract dispute. Because the nonprofit was unquestionably the “prevailing party” under Section 1717, a fee award was entirely appropriate.

A technical variance in a "998 offer" can preclude an award of costs

In Rouland v. Pacific Specialty Insurance Co. the California Court of Appeal for the Fourth Appellate District decided an interesting case under California’s cost shifting provision, Code of Civil Procedure Section 998.

The Plaintiffs sued their insurer, Pacific Specialty Insurance Company (Pacific), for breach of contract after the insurer refused to cover damages incurred in a landslide. 

Prior to trial, Pacific served the Plaintiffs with separate offers to settle pursuant to Code of Civil Procedure Section 998. The offer directed them to respond with an “Offer and Notice of Acceptance” with the trial court within 30 days of the offer date. The Plaintiffs ignored the 998 offers.

Then a jury returned a verdict in favor of Pacific. The trial court entered judgment against the Plaintiffs and Pacific sought $331,000 in expert fees incurred in discovery and trial. 

The Plaintiffs argued that a 998 award was improper as the offer did not “strictly comply” with requirements of 998. The trial court did not award Pacific any expert fees. The insurance carrier appealed.

The court of appeal reversed the decision of the trial court. The court of appeal noted that Section 998 allows a defendant to recover reasonable expert fees where the plaintiff fails to timely accept a 998 award, and then loses at trial. 

The court noted that for a Section 998 offer to be valid, it must be in writing and include a statement containing the terms and conditions of an award as well as a simple statement of acceptance.

The court of appeal noted that Pacific’s offers directed the plaintiffs to file an “Offer and Notice of Acceptance.”  The court noted that the offer was in substantial compliance with the statute. For this reason the court ruled that the trial court erred in not awarding the carrier the expert costs. 

This case is a cautionary one for counsel and a reminder that a technical variance in a 998 offer can preclude an award of costs.

Attorney Fees Are Properly Granted Where School District Improperly Withholds Documents

In Garcia v. Bellflower Unified School District the California Court of Appeal for the Second Appellate District decided an interesting attorney fee claim arising under the California Public Records Act (“the Act”).

A former teacher was employed at the Bellflower School District (the “District”). She sued the District, alleging she was exposed to mold and was injured, during her teaching tenure. Her attorney issued a document request under the Act to the District.

The District refused to comply with the document request. The teacher moved to compel the District to produce the requested documents. Although the court found that certain requests were not relevant or probative, the court concluded that the District was obligated to produce other, numerous categories of documents. After substantially prevailing in the document battle, the teacher moved for $9,788 in attorney fees. The trial court granted that request and the District appealed.

The court of appeal noted that the Act allows members of the public to inspect a local public agency’s records by filing a petition. If the trial court finds the agency is not justified in withholding a record, the court must order its disclosure. If the person who filed the petition prevails, an attorney fees award may be proper. Because the trial court ordered the District to produce certain documents related to mold, the teacher was the prevailing party and was entitled to an award of reasonable attorney fees.