VINEYARD'S ATTORNEY FEES CLAIM TURNS INTO SOUR GRAPES

 

In Belle Terre Ranch Inc. v. Wilson, 2015 DJDAR 506, the California Court of Appeal for the First Appellate District decided an agricultural trespass action involving an attorney fees claim.

The defendant purchased the Soda Rock Winery. He intended to repair a winery building on the property. A portion of the winery building was adjacent to the Belle Terre Ranch Inc. (Belle Terre) vineyard. In between the winery building and the vineyard was a path.

A dispute arose when the defendant’s use of the path allegedly damaged the plaintiff’s grape vines. The plaintiff filed a lawsuit to quite title and for trespass, contending that the path was actually on its property. Ultimately, the trial court found in favor of the plaintiff, awarding nominal damages of $1. The court did award the plaintiff, however, $116,920.00 in attorney fees pursuant to Code of Civil Procedure Section 1021.9.

The defendant appealed, arguing that the plaintiff was not entitled to attorney fees, and the court of appeal agreed. The court noted that in an action to recover “damages to personal or real property” resulting from trespass onto agricultural land or a ranch, the prevailing plaintiff is entitled to attorney fees, under Section 1021.9. However, the statute requires some “actual injury” to the property. Because the plaintiff prevailed on the trespass claim, but was only awarded nominal damages, the court concluded that the plaintiff was not entitled to attorney fees under Section 1021.9.

LAW FIRM LOSES FEE CLAIM: TOTAL VICTORY TURNS INTO CRASHING LOSS

                 In David S. Karton, A Law Corporation, v. Dougherty, 2014 DJDAR 15340, the California Court of Appeal for the Second Appellate District decided a case with a long, convoluted complex fact pattern under California Code of Civil Procedure Section 1717, the prevailing party statute, and Section 1032, which governs cost awards.

The defendant retained David S. Karton, A Law Corporation, to represent him in a marital dissolution case. The attorney expended significant time and resources on the matter but the client did not pay for the services rendered. Three years later, the attorney sued the client to recover $65,247.00 in unpaid fees, costs and interest. The defendant failed to appear and the trial court entered a default judgment against the former client. The attorney then sought to enforce the judgment as well as attorney fees incurred in the divorce case. After further complex proceedings, the attorney was granted relief which actually increased the principal judgment. The former client then appealed the judgment rendered by the trial court.

The appellate court reversed the attorney fees award on the basis that the original default judgment was void because the judgment exceeded the attorney’s original demand. On remand, the trial court granted the former client’s motion to vacate the default. The matter then proceeded to arbitration under Business and Professions Code Section 6201, the mandatory attorney fees arbitration statute. The arbitration panel concluded that the former client had already paid his debt to the law firm and, on that basis, no relief was appropriate for the attorney.

The attorney then moved the case back to state court where the trial judge ruled that the law firm was the “prevailing party” under the definition of Civil Code Section 1717 and awarded it more than $1 million in attorney fees. The former client appealed yet again.

The court of appeal reversed, noting that under Section 1717, in the event of litigation on a contract, the party prevailing on the contract has a right to recover attorney fees. The prevailing party is the person who received a “greater level of relief” in the action on the contract. The court noted that under Section 1717(b)(2), if a defendant fully tenders a contractual debt, deposits it with the court and proves that this was the full debt, the defendant is the prevailing party for attorney fee purposes. Because the law firm recovered no relief in the action on the contract, the defendant was the  prevailing party.

Is a tenant is entitled to attorney fees when landlord's anti-SLAPP motion is denied?

In Ben‑Shahar v. Pickart, 2014 DJDAR 15712, the California Court of Appeal for the Second District decided a complex landlord/tenant case involving the interplay of unlawful detainer proceedings and California’s Special Motion to Strike under Code of Civil Procedure Section 426.16.

The defendant (“Pickart”) purchased a rent‑controlled apartment building. He then served the tenant with a 60‑day notice to vacate the premises. Pickart initiated unlawful detainer proceedings after the tenant refused to vacate the premises. The trial court granted the unlawful detainer petition and ordered the tenant to vacate. The parties then entered into an agreement to settle the unlawful detainment action.

The tenant agreed to vacate the unit and the landlord agreed to move in the unit within the time period specified under the local rent control ordinance. After the landlord failed to move in by the deadline, the tenant sued the landlord for breach of the settlement agreement.

The landlord filed an anti‑SLAPP motion, asserting that his conduct was protected as it was related to the unlawful detainer action. The trial court denied the landlord’s anti‑SLAPP motion and the tenant’s motion for attorney fees.

The court of appeal reversed, stating that the anti‑SLAPP statute allows the trial court to strike any cause of action that arises from the defendant’s exercise of the “right of petition” or “free speech.” However, the court of appeal noted that the record was clear that the tenant’s lawsuit was directed at the landlord’s purported breach of the settlement agreement and did not arise from the unlawful detainer action. 

The court of appeal remanded the matter to the trial court to make the required determination whether the tenant was entitled to fees and, if so, the amount of the recovery.

Court rules percentage based award is reasonable under California law - ignores federal precedent

In Laffitte v. Robert Half International Inc.,  2014 DJDAR 15575, the California Court of Appeal for the Second Appellate District decided an interesting attorney fee case arising from class action wage and hour litigation.

In 2001, a class plaintiff filed a wage and hour class action against Robert Half International Inc. (“Robert Half”) and related entities. After a number of years of intense litigation, all parties agreed to settle the case. Pursuant to the terms of the settlement, Robert Half agreed to pay a gross settlement amount of $19,000,000. The agreement further provided that class counsel would seek approval of not more than $6,333,333.33, or 33.33 percent of the $19,000,000 settlement.

Thereafter, the class representatives filed a motion for attorney fees, requesting $6,333,333.33 in fees for class counsel. One class member filed an objection to the application. The objector argued that the notice to the class members denied due process because the nature and timing of the settlement approval was unfair.

The objector also argued that, in reviewing the class counsel’s request for attorney fees, the trial court erred by using the “percentage of fund method” and that there were irregularities and mistakes in the court’s lodestar calculation.

The objector cited federal authorities in support of the objection. The objector argued that requiring class members to file objections to the proposed settlement and request for attorney fees before class counsel filed their motion for attorney fees was a violation of due process. In support of this argument, the objector relied on FRCP 23 (rule 23) and 54 (rule 54) (28 U.S.C.), and the Ninth Circuit’s opinion in In re Mercury Interactive Corp. Securities Litigation (9th Cir. 2010) 618 F.3d 988, 993‑995.

In deciding the issue, the second appellate district stated that FRCP 23 and related federal case law does not control in California. The court stated that:

As a general rule, California courts are not bound by the federal rules of procedure but may look to them and to the federal cases interpreting them for guidance or where California precedent is lacking.”

The court of appeal stated that under the “common fund” doctrine, the goal is to compensate counsel for their efforts, regardless of the method of calculation. Thus, the “percentage‑of‑the‑benefit” analysis or the lodestar method for determining attorney fees is appropriate so long as the chosen method is applied consistently and accurately reflects the type of legal work performed in the relevant community.

When automatic stay violations require fee awards

In America’s Servicing Co. v. Schwartz‑Tallard, 2014 DJDAR 12063, the United States Court of Appeal for the Ninth Circuit decided an interesting case arising from allegations that a debt servicing entity violated the Bankruptcy Code’s automatic stay provisions.

A debt servicing entity entered into a contract to service a debtor’s home mortgage. The debtor subsequently filed for bankruptcy, but continued to make mortgage payments to the entity. However, the servicing entity contended that there was a default, and moved to lift the automatic stay, allowing it to foreclose on the debtor’s home. The court granted the motion to lift the stay.

The Bankruptcy Court subsequently reinstated the stay orally at a hearing at which the debt servicer did not make an appearance. The court did not render a written order reinstating the stay until after the debtor’s home was sold at a trustee’s sale at the behest of the debt servicing entity. In response, the debtor filed a motion for violation of the automatic stay, seeking sanctions and other relief. Subsequently, the bankruptcy court found in favor of the debtor and awarded damages against the debt servicer. The court also ordered a return of the home back to the debtor.

The debt servicer appealed the lower court’s order. The district court upheld the Bankruptcy Court’s decision. The debtor then moved to recover the attorney fees incurred in the appeal by the debt servicer to the district court. The Bankruptcy Court denied the request for fees, concluding that the fees were not incurred in “enforcing” the automatic stay provisions of the Bankruptcy Code. The Bankruptcy Appellate Panel (BAP) overturned that decision.

The Ninth Circuit affirmed the ruling of the BAP, noting that under Bankruptcy Code Section 362, a party injured by any willful violation of a stay is entitled to recover actual damages, including costs and attorney fees.  The Ninth Circuit reasoned that because the debtor was not pursuing a damage award, but was defending against the debt servicer’s appeal of the Bankruptcy Court’s ruling, the fees should have been awarded.

Post award correction of attorney fees award by arbitrator is reversed

In Cooper v. Lavely Singer Professional Corp., 2014 DJDAR 13272, the California Court of Appeal for the Second Appellate District ruled that a post‑hearing substantive “correction” of a “Final Award” of attorney fees awarded by an arbitrator was inappropriate.

Jeffrey Cooper (“Cooper”) hired a law firm (“law firm”) to represent him in a fraud case. The case was submitted to arbitration and the arbitrator ruled against Cooper. Cooper then commenced an arbitration with JAMS against the law firm, alleging attorney negligence and malpractice. The law firm represented itself in the arbitration. Following a hearing, the arbitrator found that the law firm was the prevailing party and permitted the law firm to submit a motion for attorney fees. The arbitrator then issued a “Final Award” but denied the request for attorney fees in total. Thereafter, the law firm moved for “correction” of the award, arguing that the arbitrator had the discretion to “correct the award” in the “interest of justice.” Based on new paperwork and evidence that was submitted by the law firm, the arbitrator made a revised award granting an award of attorney fees.

The court of appeal reversed the decision and actions of the arbitrator. The court of appeal noted that under CCP§ 1284, an arbitrator has the power to “correct” a final arbitration award only if the correction is for “miscalculation of figures” or “nonsubstantive matters of form” that have no impact on the substantive merits of the arbitration. The court of appeal specifically concluded that an arbitrator is prohibited from substantively amending the final award to include new awards of damages or attorney fees. The court of appeal concluded that the arbitrator’s award of attorney fees in the revised final award was not a “correction” as defined by CCP§ 1284. The court of appeal concluded that the trial court erred in denying Cooper’s petition to vacate the attorney fee award on that basis.

Attorney fees claim becomes the tail that wags the litigation dog

In Ellis Law Group LLP v. Nevada City Sugar Loaf Properties LLC, 2014 DJDAR 13541, the California Court of Appeal for the Third Appellate District decided a case implicating the doctrine that self‑represented law firms may not be awarded attorney fees for work conducted to pursue an anti‑SLAPP motion.

The Ellis Law Group LLP (Ellis) sued Nevada City Sugar Loaf Properties LLC (Nevada) to collect unpaid legal fees and costs. Sugar Loaf filed a cross‑complaint, which listed three attorneys in the caption, including Joseph Major, as counsel of record for Ellis. Major’s name was also included as an Ellis attorney in the caption of numerous other documents relating to the anti‑SLAPP motion. The trial court subsequently granted the anti‑SLAPP motion.

Ellis then filed a motion for attorney fees as the prevailing party. In support of the fee motion, Major contended that attorney fees should be awarded because he was an “independent contractor” for the Ellis law firm and was not an attorney employed by the firm. The trial court granted the fee motion and awarded Ellis $14,553.50 in attorney fees.

The court of appeal reversed the fee award rendered by the trial court. The court noted that while normally a prevailing defendant on a special motion to strike should be awarded attorney fees, a successful “self‑represented attorney” on such a motion is not entitled to a fee award. The court held that “of counsel” should be considered a member of the law firm, if the relationship between the two is “close, personal and regular.” The court noted that the analysis for “of counsel” attorneys applies to attorneys who are “independent contractors.”  The court reasoned that during his work on the anti‑SLAPP motion, Major was a member of the law firm because he was included on the caption of numerous anti‑SLAPP pleadings.

A Cautionary Tale: Members of a Defunct LLC May Have Liability For Attorney Fees

In CB Richard Ellis Inc. v. Terra Nostra Consultants the California Court of Appeal for the Fourth Appellate District decided an interesting issue concerning the liability of an LLC member for a fee award imposed against the defunct entity, a Limited Liability Company (“LLC”).

CB Richard Ellis Inc. (CBRE) entered into a real property listing agreement with Jefferson 38 LLC (“Jefferson”).  Jefferson agreed to pay CBRE a 6 percent sales commission upon successful closing on a piece of land.

Jefferson began negotiating with a potential buyer, who eventually purchased the property for a multi‑million dollar sum. Jefferson failed to pay CBRE any commission on the sale. Subsequently, CBRE initiated arbitration against Jefferson to seek payment of its contractual commission. After successfully obtaining an award against Jefferson, CBRE filed a complaint against the individual members of Jefferson to enforce the award as the LLC had been dissolved. CBRE asserted claims for breach of contract and sought other forms of relief as well.

The jury found that Jefferson breached the contract with CBRE by failing to pay the promised commission. The jury also found that the LLC had been purposely dissolved and that a financial distribution had been made to the LLC members upon the dissolution. The jury awarded CBRE $354,000 and the court subsequently concluded that each LLC member was liable up to the amount distributed upon dissolution of the LLC. However, the trial court denied CBRE’s motion for attorney fees.

CBRE appealed the decision denying attorney fees and the court of appeal reversed. The court noted that pursuant to former Corporations Code § 17355(a)(1)(B), causes of action against a dissolved limited liability company may be enforced against its members, if any of the assets of the dissolved company have been distributed to members upon dissolution. 

Based on the jury’s finding that Jefferson was dissolved and that the assets were distributed to its members, the court of appeal reasoned that the LLC members became parties to the contract with CBRE as a matter of law. On this basis, the court of appeal concluded that attorney fees were recoverable pursuant to former Corporations Code § 17355.

 

Creditor's Willful Violation of Automatic Stay Results in Fee Award

In Snowden v. Check Into Cash of Washington Inc. (In re Snowden), 2014 DJDAR 12677, the United States Court of Appeals for the Ninth Circuit decided a bankruptcy case involving the award of attorney fees.

The debtor obtained a loan from Check Into Cash (“CIC”). The debtor filed for Chapter 7 bankruptcy and listed CIC as an unsecured creditor. After the bankruptcy petition was filed, CIC cashed a check the debtor had written to secure the loan. CIC’s actions resulted in the bank account to be overdrawn.

The debtor filed a motion for sanctions, alleging that CIC willfully violated the automatic stay provisions of the U.S. Bankruptcy Code. CIC denied it violated the automatic stay. In response to the debtor’s request to settle, CIC sent an email offering to resolve the entire matter for approximately $1,000. The debtor did not agree to those terms.

Subsequently, the bankruptcy court concluded that CIC violated the automatic stay and awarded damages totaling $27,484, including attorney fees. The debtor was not satisfied with the fee award and pursued an appeal. On appeal, the debtor argued she was entitled to additional attorney fees for the entire time period before the court determined that CIC had violated the automatic stay.

The Ninth Circuit partially reversed the decision of the lower court. The Ninth Circuit noted that attorney fees are recoverable when the automatic stay is willfully violated. The Ninth Circuit concluded that the lower court improperly calculated the fee award and should have awarded fees incurred to end a violation of the automatic stay.

 

A Judgment Cannot Not Lie Against Attorney Who is a Non Party

In Suarez v. City of Corona, 2014 DJDAR 12101, the California Court of Appeal for the Fourth Appellate District decided an interesting case concerning the interpretation of California Code of Civil Procedure Section 1038. That statute provides a statutory ground for a public entity to recover attorney fees for “frivolous” litigation brought against a municipality.

The plaintiff was a passenger in a motor vehicle. The vehicle exploded while filling up at a fueling station operated by the City of Corona (the City). The plaintiff sued the City, contending that the filling station and its equipment was defective. However, discovery revealed that the vehicle being “filled up” at the station had defective tanks which caused the explosion. The evidence supported the conclusion that there were no gas leaks at the filling station. The City repeatedly demanded to be dismissed but the plaintiff refused.

Significant defense costs were incurred after the dismissal demands were made by the City. The City moved for summary judgment, arguing that the lawsuit was “frivolous” within the meaning of Code of Civil Procedure Section 1038. That statute provides a remedy for a city to obtain a fee award for unmeritorious (i.e. frivolous) litigation.

The trial court awarded the City $135,905.00 in fees which were assessed jointly against the plaintiff and his attorneys. The plaintiff appealed, arguing that Section 1038 did not authorize an award of fees against a “non‑party attorney.”

The court of appeal agreed and reversed the award. The court noted that in proceedings that are not brought in good faith and with reasonable cause, it “shall render judgment” in favor of the prevailing party. Although Section 1038 was silent as to whom the award of defense costs may run against, the court concluded that a “judgment” cannot lie against an attorney who is not a “party” to the action.