Party Who Pursues Litigation to Enforce CC&Rs Needs to "Get Ducks in a Row" Prior to Suing

Posted on January 18, 2012 by David J. McMahon

In Salehi v. Surfside III Condominium Owners’ Association, 2011 DJDAR 16552 (2011), the California Court of Appeal for the Second Appellate District decided a case illustrating the pitfalls of a plaintiff pursuing litigation without a strategic game plan. The end result was a fee award against the plaintiff for more than $252,767 in attorney fees.

The plaintiff purchased a condominium. The condominium community was governed by a set of covenants, conditions, and restrictions (“CC&Rs”). The CC&Rs were enforced by a condominium owners association (“the Association”).

In May 2008, the plaintiff filed suit against the Association, alleging numerous causes of actions for violation of the CC&Rs. Approximately one week before trial, the plaintiff informed the Association’s counsel that she was dismissing all but two of the causes of action.

The Association subsequently moved to recover $252,767 in attorney fees incurred in defending against the voluntarily dismissed causes of action pursuant to Civil Code Section 1354. The plaintiff responded to the motion for fees by contending that she only requested dismissal of the causes of action that required testimony from an expert. The expert allegedly was unavailable to testify at trial due to illness. The trial court denied the motion for attorney fees. The court found that under Civil Code Section 1354, the defendants were not a “prevailing party” within the meaning of the statute.

The court of appeal reversed the decision of the lower court. 

The court noted that pursuant to Civil Code Section 1354, in an action to enforce the governing documents of a common interest development, the “prevailing party” shall be awarded reasonable attorney fees and costs. The court of appeal specifically noted that the underlying record demonstrated that plaintiff’s case against the Association was tenuous. The court also stated that the record failed to establish that the plaintiff was prepared to prove the case substantively. The court of appeal concluded the trial court incorrectly denied the Association attorney fees and remanded the case for further proceedings.

"Of Counsel" Title Does Not Automatically Bar Claim for Attorney Fees

Posted on January 17, 2012 by David J. McMahon

In Dzwonkowski v. Spinella, 2011 DJDAR 16427 (2011), the California Court of Appeal for the Fourth Appellate District decided an appeal relating to an award of attorney fees arising out of fee arbitration.

A client retained a law firm for representation in a probate matter. Another attorney who had the designation as “of counsel” at the law firm took over the matter when it proceeded into litigation.

The lawyer with the “of counsel” designation occasionally handled litigation matters on behalf of the firm. However, the “of counel” did not maintain a regular presence at the office. A dispute over the payment of attorney fees arose between the client and the law firm. An arbitration panel found in favor of the law firm. The fee award amounted to more than $33,000. The trial court confirmed the arbitration award. The law firm then filed a motion for $16,344 in attorney fees incurred in the arbitration proceeding and in related proceeding at the trial court level.

In the client’s opposition to the fee motion, he argued that the firm had not “incurred” attorney fees in connection with the representation, in part because the fees were incurred by the attorney with the “of counsel” title. The trial court rejected that argument and granted the motion for fees in its entirety.

The court of appeal affirmed that decision. The court of appeal noted that Civil Code Section 1717(a) states that in an action on a contract, if a contract provides for attorney fees incurred in enforcing the contract, the prevailing party is entitled to reasonable attorney fees. The court stated that:

Whether fees are incurred is evidenced by an obligation to pay attorney fees, the existence of an attorney‑client relationship, and distinct interests between the attorney and client.

The court of appeal noted that the record established that the firm was contractually obligated to pay the “of counsel” attorney fees incurred for his work on the case. The court of appeal also noted that the record established that the law firm actually retained the “of counsel” to provide services related to the fee dispute. Based in part on those conclusions, the court concluded the trial court’s award was proper.

Finding of Implied Waiver of Fees Contained in Marital Settlement Agreement Trumps Fee Claims

Posted on January 12, 2012 by David J. McMahon

In Marriage of Guilardi, 2011 DJDAR 16245 (2011), the California Court of Appeal for the Sixth Appellate District decided a fee petition related to so‑called pendente lite attorney fees. The fees were generated from the efforts of a party to set aside a marital settlement agreement (hereinafter the “MSA”).

A couple made the decision to separate and executed a MSA. The MSA addressed the division of money, property and custody of the husband and wife’s daughter.

After the MSA was negotiated, it was incorporated into a final judgment which was approved by the court. Subsequently, the wife moved to set aside the judgment and the MSA on numerous grounds, including the alleged non‑disclosure of key facts by the husband. The family court denied the motion, even though it concluded that the MSA was inequitable as applied to the wife’s financial situation. However, the court concluded that the mere fact that the MSA was not equitable was insufficient to invalidate the agreement in its entirety. The court was influenced by the fact that the wife had allegedly willingly entered into the MSA.

In subsequent proceedings, the wife sought attorney fees for the prosecution of her claims under the Family Code and for the fees attributable to the work concerning attacking the judgment of dissolution and the MSA. The trial court granted the husband’s motion to dismiss the claim for fees. The court found that there was an “implicit waiver” of the fee claim for statutory fees in the MSA.

The wife appealed the decision of the trial court and the court of appeal affirmed the decision of the trial court. The court of appeal noted that Family Code Section 2030 authorizes an award of pendente lite attorney fees to one party in a dissolution proceeding to the extent the award is “reasonably necessary” to compensate the party for maintaining the proceeding.

However, the court of appeal agreed with the trial court’s conclusion that the MSA contained an implicit waiver of any claims that either party might bring against the other arising out of the agreement. Accordingly, the court of appeal concluded that the family court properly granted the husband’s motion to dismiss the petition for attorney fees.

 

Legally Separate Cause of Action Supports a Fee Award Under Civil Code Section 1717

Posted on December 13, 2011 by David J. McMahon

In CDF Firefighters v. Maldonado, 2011 DJDAR 15709 (2011), the California Court of Appeal for the Fifth District decided a complex case involving a claim for fee recovery arising under California Civil Code Section 1717. That statute is designed to ensure mutuality of a remedy for attorney fee claims under contractual attorney fee provisions. The case arose out of a labor union dispute.

CDF Firefighters is a labor union for California wild‑land firefighters. One of the members of the CDF labor union filed charges against two other members. He alleged that the two members conspired to violate his right to attend a conference and to vote during the proceedings.

The aggrieved member filed formal charges and a CDF Committee sustained the charges against one of the members. The CDF Committee levied a $743 fine against that member. At that point, the case and the related proceedings get complex, factually and procedurally.

Subsequently, another former CDF labor union member filed charges against the same two CDF members involved in the first case. The member alleged that the two other members refused to comply with their trustee obligations. As a result, both members were expelled from CDF membership and fined more than $22,000 each. Those members refused to pay the fines. CDF then sued them for breach of contract. Ultimately, the fines were found to be invalid by the court. In an effort to avoid a fee award, CDF then dismissed its remaining claims.

The defendant then moved for an award of attorney fees under Civil Code Section 1717 contending he was the prevailing party. The trial court denied the motion, concluding that CDF’s dismissal of the remaining claims essentially ended the action. The defendant appealed and the appellate court reversed.

The court of appeal stated that in contractual litigation, the party prevailing on the claim is entitled to attorney fees under Section 1717. However, there is no prevailing party for purposes of Section 1717 if an action has been voluntarily dismissed. The court then drew a highly technical distinction and concluded that CDF’s dismissal of the remaining claims was not sufficient to bar the claim for reasonable attorney fees.

 

A Sanctions Attorney Fee Motion Requires a Finding of Frivolous Conduct for Justification

Posted on November 29, 2011 by David J. McMahon

In August of 2011 in Musaelian v. Adams, 197 Cal. App. 4th 1251 (2011), the California Court of Appeal for the First Appellate District decided a case which further established the necessary prerequisites required for a sanctions attorney fee award under Code of Civil Procedure Section 128.7. 

That statute allows the court to award sanctions to a party for the “frivolous” conduct of counsel for an adversary in litigation. The statute also authorizes the award of sanctions where the conduct was designed to harass the opponent or to cause unnecessary delay in the proceedings. The action arose from a business dispute.

The Plaintiff sued the Defendant and his business (the “first lawsuit”). After the Defendant failed to respond to the complaint, the Plaintiff obtained default judgments against both Defendants and then attempted to obtain partial satisfaction of the judgments through a foreclosure sale on a home that the individual Defendant owned jointly with a third party (the “Homeowners”). The Homeowners sought to protect the house by filing a protective petition for Chapter 13 bankruptcy. The Plaintiff pursued the claim in bankruptcy court, but it was dismissed.

The Homeowners/Defendants in the first lawsuit then brought a new action (the “second lawsuit”) based on the Plaintiff’s allegedly improper attempts to force the sale of the home through foreclosure. The trial court sustained demurrers to the complaint and awarded sanctions, finding the complaint in the second lawsuit was improperly filed. Thereafter, significant procedural maneuvering took place in the matters and the issue of the propriety of the fee award eventually ended up before the First Appellate District.

The Appellate Court stated that under CCP § 128.7, if an attorney presents a pleading or other similar paper to the court for an improper purpose, the court may impose sanctions, including attorney fees. However, where the underlying conduct is not for an “improper purpose” or is otherwise “frivolous,” there is an insufficient basis for an award of attorney fees as sanctions. The Court of Appeal concluded that under the record presented on appeal, the attorney fee award was improper.

 

Sanction Award is Improper Even if Defense Counsel Admitted to Violation of the Court Order

Posted on November 28, 2011 by David J. McMahon

In Miller v. City of Los Angeles, 2011 DJDAR 15764 (9th Cir. 2011), a divided panel of the United States Court of Appeals for the Ninth Circuit decided an unusual case involving the imposition of sanctions, including attorneys’ fees, for a lawyer’s alleged violation of an in limine order at trial. The trial judge imposed sanctions in the sum of $63,678.50 as compensation to the opponent for the alleged violation of the in limine order.

A man was killed when he was shot by a police officer. His survivors sued the police officer and the police department for wrongful death.

During pre‑trial proceedings, the district court issued an in limine order precluding the defendants from arguing or mentioning that the decedent was carrying a gun when he was shot by the policeman. Defense counsel, in closing argument, stated that the police officer thought that the decedent refused to surrender because he may have shot another individual. The lawyer for the plaintiffs objected, arguing that the comment violated the Court’s pre‑trial in limine order. As a result, the court instructed the jury to ignore the statement.

The jury was unable to reach a verdict and the district court declared a mistrial. Later, the family of the decedent moved for sanctions. Counsel for the defense apparently conceded violating the order and apologized. However, defense counsel did not concede that his conduct was tantamount to bad faith, the prerequisite for sanctions. He argued that the transgression was “inadvertent, fleeting and harmless.” The district court granted the sanctions motion and imposed a fee award totaling more than $60,000.

The Ninth Circuit reversed the sanctions award. The Ninth Circuit stated that it was required to review the trial court’s determination that sanctions were proper on the basis of substantial evidence. 

The Ninth Circuit concluded that the in limine order did not provide adequate notice that defense counsel was prohibited from arguing how the police officer perceived the situation. Thus, defense counsel was entitled to argue that the officer was acting reasonably in believing that the decedent posed a threat as having just shot another person. 

The Ninth Circuit therefore concluded that because the defense lawyer did not violate the order, there was no basis for a sanctions award. The Ninth Circuit reversed on that basis.

Cost Shifting is Proper Where Defendant's Section 998 Offer Was Reasonable as a Matter of Law

Posted on November 21, 2011 by David J. McMahon

In Adams v. Ford Motor Co., 2011 Cal. App. Unpub. LEXIS 7411 (Cal. App. 2d Dist. Sept. 29, 2011), the California Court of Appeal for the Second Appellate District decided an important case arising under the cost shifting provisions of California Code of Civil Procedure § 998. This is the so called “offer of judgment” statute. The case arose out of a wrongful death claim against Ford Motor Co. (“Ford”).

The decedent allegedly performed regular maintenance on his vehicles. Five of the cars were manufactured by Ford. He contracted mesothelioma and passed away. His wife and their three children sued Ford. The plaintiffs argued that Ford’s products caused the decedent’s exposure to asbestos.

Ford served the plaintiffs with a settlement offer under CCP § 998 in the amount of $2,500 per plaintiff, amounting to $10,000. The offer also included a mutual waiver of costs. The plaintiffs did not respond to the offer, allowed it to expire and the case went to trial. 

The jury found in favor of Ford, and Ford filed a memorandum of costs, claiming $185,741 in costs, including expert witness fees of $167, 570 pursuant to the cost shifting provisions of CCP § 998.

The plaintiffs moved to tax costs. 

Plaintiffs alleged that Ford’s 998 offer was made in bad faith and that Ford had no reasonable expectation that the offer would be accepted. Thus, it was made only to recover expert witness fees in the event that Ford prevailed at trial. The trial court denied plaintiffs’ motion as the lower court concluded that the offer was reasonable.

The Court of Appeal affirmed the lower court’s ruling. The Court noted that if a plaintiff does not accept a defendant’s Section 998 offer and the plaintiff fails to obtain a more favorable judgment, the plaintiff may not recover post‑offer costs. Moreover, the plaintiff must pay the defendant’s costs from the time of the offer as well as for the services of expert witnesses.

However, to be enforceable, the settlement offer must be “realistically reasonable under the circumstances of the particular case.” The Court concluded that the plaintiffs should have known that their chances of prevailing were slim because they had entered into several other settlements with other defendants for amounts much lower than they sought from Ford.

An Employer is Eligible to Recover Costs Under Labor Code Section 1194

Posted on November 21, 2011 by David J. McMahon

In Plancich v. United Parcel Service Inc., 198 Cal. App. 4th 308 (2011), the California Court of Appeal for the Fourth Appellate District decided a unique issue relating to the recovery of costs under the California Labor Code. The case arose out of the plaintiff’s claim that United Parcel Service (“UPS”) failed to pay the plaintiff proper overtime wages and related compensation.

Larry Plancich (“Plancich” or “Plaintiff”) was a supervisor for UPS. He sued UPS, alleging failure to pay proper wages for overtime compensation as well as unfair competition. He alleged that he worked more than 40 hours per week, and UPS had misclassified him as an exempt employee. The judge ruled in favor of UPS on the unfair competition cause of action. Subsequently, a jury found in favor of UPS on the remaining claims.

The trial court awarded costs to UPS. The amount of the cost award was not decided. 

UPS filed a memorandum of costs amounting to $38,387.20. The Plaintiff moved to strike costs, arguing that an employer may not recover costs, even where it arises from an employee’s claim for overtime compensation under Labor Code Section 1194 which is not successful. In response, UPS argued that Code of Civil Procedure Section 1032(b) required that costs be awarded to the prevailing party, whether it be the employee or employer. The trial court struck the costs request.

The Court of Appeal reversed under Section 1032(b). 

The Court noted that a prevailing party is entitled as a matter of right to recover costs in any action, unless the applicable statute provides an express exemption from cost recovery. Section 1194 gives a prevailing employee in an action for overtime compensation an avenue to recover attorneys’ fees and costs. Because the Court concluded that the statute does not contain express language excluding a prevailing employer from recovering costs, a cost award was appropriate.

 

Untimely SLAPP Motion Does Not Support a Fee Award

Posted on November 4, 2011 by David J. McMahon

In Chitsazzadeh v. Kramer & Kaslow, 2011 DJDAR 14689 (2011), the California Court of Appeal for the Second Appellate District decided an interesting case under Code of Civil Procedure Section 425.16, a special motion to strike under the California anti‑SLAPP statute.

The defendant in the case was a law firm, Kramer & Kaslow (“the Kramer firm”), who represented Brake Land Inc. and Abolfalz Sharjari as plaintiffs in a prior action. That case resulted in summary judgment being granted to the defendants, Mohammed Chitsazzadeh and Mansoureh Shajari, in the original action.

In July 2009, the defendants in the original action sued the Kramer firm, alleging malicious prosecution. After submitting a demurrer to the complaint, Kramer also filed a special motion to strike the complaint under Code of Civil Procedure Section 425.16. The firm alleged that the complaint arose from Kramer’s constitutionally protected activity. The Kramer firm also argued that the Plaintiffs could not show a likelihood of prevailing on the merits.

In opposition, the Plaintiffs argued that Kramer failed to file the special motion to strike within 60 days after service, as required by Code of Civil Procedure Section 425.16. The Plaintiffs further asserted that the motion was frivolous. The trial court denied Kramer’s special motion to strike as untimely. The Court also awarded the Plaintiffs attorney fees.

The Court of Appeal reversed in part. The Court of Appeal noted that under Section 425.16, a special motion to strike must be filed within 60 days after service of the complaint on the defendant.  A plaintiff prevailing on the motion is entitled to an award of attorney fees and costs only if the trial court finds that the special motion to strike was “frivolous” or “solely intended” to cause unnecessary delay.

Here, the Court of Appeal concluded that the Kramer firm failed to file the special motion to strike within the 60 days following service of complaint and that it was not timely. However, the court ruled that the fact that a special motion to strike was untimely, alone, did not support a finding that the motion was frivolous or solely intended to cause unnecessary delay.

 

Court Properly Awards Contingency Attorney Fees as Restitution

Posted on November 2, 2011 by David J. McMahon

In People v. Taylor, the California Court of Appeal for the Third Appellate District decided a unique case involving a claim for victim restitution under Penal Code Section 1202.4(f)(3)(H). The case was unique in that the restitution claim also included a contingent attorney fee component. The trial court approved the restitution claim, including the fee component.

On July 29, 2007, the defendant improperly crossed a double yellow line while driving his vehicle. He caused a head‑on collision with another vehicle and immediately fled the scene.  The victim suffered serious personal injuries and property damage. After he was apprehended, the defendant pled nolo contendere to hit and run driving causing injury. The trial court sentenced him to six years in prison.

The court then ordered $44,554.83 in victim restitution, including $8,333.33 in attorney fees under the Penal Code section noted above. In response, the defendant argued that the award of victim restitution for attorney fees was improper because it was for a contingency fee paid by the victim without a prior determination as to whether the fee was “reasonable.”

The Court of Appeal affirmed the decision, noting that under Penal Code Section 1202.4(f)(3)(H), restitution is authorized for “actual and reasonable attorney’s fees” which the victim incurred due to the defendant’s criminal conduct. 

The Court of Appeal noted that the traditional lodestar method is a fee shifting mechanism applied in many civil litigation contexts. The court noted that the policy reasons underlying victim restitution presents different interests. This court determined that when uncontradicted evidence exists that a victim incurred attorney fees due to the defendant’s actions, it did not constitute an abuse of discretion to award restitution for the fee without application of the traditional lodestar approach.