Attorney's Fees Recoverable Under Victim's Bill of Rights, but Only If Reasonably Incurred

Posted on June 26, 2009 by Gary A. Bresee

Attorneys fees incurred by the victim of a crime in California can be claimed under the Victims' Bill of Rights, which established the right of crime victims to receive restitution directly from the criminal.  In People v. Millard, 09 CC.D.O.S. 7856 (June 23, 2009), the trial court ordered Millard to pay the victim's attorney's fees, based on a contingency fee agreement, of $366,666 incurred in pursuing a civil judgment against Millard.  Initially, the trial court found the contingency fees to be "unconscionable," but nevertheless believed it was obligated to enforce the contingency fee agreement and award the entire amount in restitution.

The appellate court reversed, citing Penal Code section 1202.4's requirement that restitution may include "actual and reasonable attorneys' fees and other costs of collection."  Accordingly, the victim was certainly entitled to restitution of his attorneys' fees, but only to the extent those fees were reasonable.  The appellate court felt this was an abuse of discretion and remanded the issue back to the trial court for further proceedings regarding the amount of reasonable attorney fees incurred.     

The interesting question, of course, is this:  "Who should pay that portion of the fees which are deemed unreasonable?"  If the trial court is unable to transfer the entire contingency fee to Millard, the victim, presumably, would bear the burden of paying the unreasonable portion of the fees. 

"Citizens for Better Forestry" Denied Fees Where Ninth Circuit Concludes Environmental Organization Was Not The "Prevailing Party"

Posted on June 24, 2009 by David J. McMahon

The Ninth Circuit decided a “prevailing party” issue in the environmental context in Citizens for Better Forestry, et al. v. U.S. Department of Agriculture, 2009 DJDAR 8323 (2009). Citizens for Better Forestry and other environmental groups sued the USDA alleging violations of the National Environmental Policy Act (NEPA) and other environmental statutes. The Plaintiffs alleged that the USDA committed procedural violations of NEPA and other statutes when promulgating a new national forest management rule and sought declaratory and injunctive relief.

The district court dismissed the suit on standing and ripeness grounds. On appeal the Ninth Circuit court reversed and remanded, holding that the USDA had violated NEPA and directed the district court to determine whether injunctive relief was proper. That matter was decided at Citizens for Better Forestry v. U.S. Department of Agriculture 341 F.3d 961, 965 (9th Cir. 2003).

After Ninth Circuit reversed the decision of the district court, the USDA withdrew the challenged rule and issued a new one in its place. The Plaintiff then dismissed its case and moved for attorney fees under the Equal Access to Justice Act (EAJA). The district court awarded attorney fees, holding that the environmental groups were the “prevailing party” on the NEPA claims. The USDA appealed the district court’s ruling and the Ninth Circuit reversed once again.

The Ninth Circuit court held that the EAJA permits an award of attorney fees to a “prevailing party” in civil actions against the United States. To be considered “prevailing,” a party must have been awarded a judgment or similar relief in its favor. Further, an award “must be preceded by a material alteration” of the parties’ legal relationship. The Plaintiffs argued that they should be considered a prevailing party due to the ruling that the USDA violated NEPA. The Ninth Circuit noted however, that Plaintiffs did not receive a formal declaratory judgment or other relief from any court. This court found that a favorable determination on an issue did not suffice to consider them to be a prevailing party. Further, the legal relationship of the parties did not materially alter. The Ninth Circuit concluded that the district court erred in awarding attorney fees.

Citizens for Better Forestry should be studied by potential fee claimants’ prior to moving for a fee award under the EAJA. The court here seemed inclined to deny the award for fees where the plaintiff simply dismissed the case after the USDA issued a new set of rules. In retrospect the plaintiff should have obtained a finding that it was their litigation which caused the USDA to amend the rule. The court would likely have granted the award under that scenario.

Attorney's Fees Award Against Counsel is Reversed for Lack of Statutory Authorization

Posted on June 17, 2009 by David J. McMahon

In Hyde v. Del Nero, 2009 DJDAR 8329 (2009), the Ninth Circuit clarified whether a lawyer for a party may be liable for fees under 15 U.S.C. Section 1692k(a)(3) of the Federal Debt Collection Practices Act (“FDCPA”) (pdf). In 2004, the plaintiffs filed suit against Midland Credit Management, Inc. (“MCM”) alleging violations of the FDCPA. Three months before trial, the law firm of Hyde & Swigart was retained to represent one of the plaintiffs after MCM settled with the other plaintiff.

The case was heard as a bench trial. The judge dismissed a number of the remaining plaintiff’s claims during trial and eventually rendered an award in favor of MCM. Plaintiff presented only one supporting witness at trial. The district court awarded MCM attorney’s fees and costs against the plaintiff and his lawyers, Hyde & Swigart, jointly and severally.

In support of the award, the district court wrote that plaintiff’s sole witness was “wholly without credibility” and the case was brought “in bad faith for the purpose of harassment” as defined in Section 1692k(a)(3) of the FDCPA. The law firm appealed the award of fees rendered against it. 

On appeal, the lawyers argued that attorney’s fees may not be awarded against a plaintiff’s attorney under Section 1692k(a)(3). The Ninth Circuit agreed and reversed. The court stated that under Section 1692k(a)(3), a court may award reasonable attorney’s fees for an action “brought in bad faith and for the purpose of harassment.” The court noted however, there is a general presumption that an attorney is not liable for fees unless a statute explicitly provides for such a liability. The court noted that Section 1692k(a)(3) is silent as to who is responsible for the actual payment of the award. On this basis, the court determined that an award under Section 1692k(a)(3) cannot be against the plaintiff’s attorneys as there was no authorization within the statute for such a result. The Ninth Circuit emphasized that although the trial court has discretion to determine reasonable attorney’s fees, it had no authority to shift the burden of payment on parties other than the plaintiff, without specific statutory authorization.

Trial Court's Expansive Ruling on Recovery of Counsel Fees is Upheld on Appeal

Posted on June 11, 2009 by David J. McMahon

In County of Sacramento vs. Sandison, 2009 DJDAR 7843 (2009), the Third Appellate District dealt with the interplay between Government Code § 25845 and C.C. § 1717 in a novel fee dispute. Under Government Code § 25845(b) the statute states:

In any action to abate a nuisance, whether by administrative proceedings, judicial proceedings, or summary abatement, the owner of the parcel upon which the nuisance is found to exist shall be liable for all costs of abatement incurred by the county, including, but not limited to, administrative costs, and any and all costs incurred in the physical abatement of the nuisance. Recovery of costs pursuant to this section shall be in addition to and shall not limit any prevailing party’s right to recover costs [under] . . . any other provision of law.

Section (c) of that statute states:

A county may, by ordinance, provide for the recovery of attorneys’ fees in any action, administrative proceedings, or special proceedings to abate a nuisance. If the ordinance provides for the recovery of attorney’s fees, it shall provide for recovery of attorneys fees by the prevailing party, rather than limiting recovery of attorneys’ fees to the county if it prevails . . . In no action, administrative proceedings or special proceedings shall an award of attorneys’ fees to a prevailing party exceed the amount of reasonable attorneys’ fees incurred by the county in the action or proceeding.

California Civil Code § 1717 (a) provides:

In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.

The county of Sacramento sued James and Julianne Sandison for maintaining a non-permitted dwelling on their property. The parties entered into a settlement agreement and stipulated to an injunction against the Sandison’s. The injunction enjoined the Sandisons from maintaining a second dwelling without the required permits. The settlement agreement stated that the prevailing party in an action brought to enforce the injunction would be entitled to attorney fees. Thereafter, the county attempted to enforce the injunction, and initiated a contempt proceeding against the Sandisons. The trial court found in favor of the Sandisons, who moved for their reasonable attorney fees, based on the provisions contained in the settlement agreement. The trial court awarded the Sandisons the $44,089 in fees requested which exceeded the limitations contained in Government Code Section 25845(c). The county appealed contending that the trial court issued a fee award which did not comply with the Government Code limitations.

On appeal the court noted that Government Code Section 25845(c) states that an award of attorney fees to a prevailing party shall not exceed the reasonable amount incurred by the county in an action. However, the court reasoned that the recovery of attorney fees authorized by contract is considered to be in addition to the prevailing party’s right to recover fees under Section 25845. Although the county argued that the amount of attorney fees should have been limited to the amount incurred by the county under Section 25845, the court found that the settlement agreement authorized the award of attorney fees in addition to any reasonable fees awarded under Section 25845. The court concluded that the trial court did not err in refusing to limit the attorney fee award and the Sandisons’ award was proper. 

The case illustrates a rather novel interplay between two statues which authorize an award of fees under California law.

 

Judge Makes Decision on the Necessity and Reasonableness of Fees And Costs In Lead Paint Toy Claims

Posted on June 8, 2009 by David J. McMahon

Federal Judge William Hart ruled that a liability insurer owed a defense to a seller of toys that were manufactured in China in ACE American Insurance Co. v. RC2 Corp. Inc. et al., 568 F. Supp. 2d 946 (N.D. Ill. 2008). The allegedly harmful toys involved, contained lead paint which gave rise to claims for bodily injury. In a subsequent ruling involving components of the claim for reimbursable defense costs, the court made reductions for voluntary payments and work it characterized as “non-legal.” ACE American Insurance Co. v. RC2 Corp. Inc. et al., 2009 WL 1137904 (N.D. Ill., April 23, 2009).

ACE insured RC2 under four consecutive liability policies in effect from 2004 to 2007. ACE argued there was no defense obligation based on the policy “coverage territory clause” and the fact that the lawsuits against RC2 and Learning Curve alleged harm to people or property in the United States. The argument raised the question of the construction of the occurrence language, with regard to the policies coverage territory provisions.

Ruling on cross motions for summary judgment, Judge Hart interpreted the relevant policy language. He construed the policy term “occurrence” as referring to the cause of the harm, reasoning that the resulting harm was not included in the definition of occurrence. He further concluded that the policies required only that the occurrence take place in the coverage territory, not that the harm also occur outside of the United States to trigger coverage.

In the subsequent ruling, Judge Hart examined the related question of reimbursable defense costs.   The judge held that certain costs incurred in defending two retailers that were named in underlying lawsuits were not owed because the insured did not obtain the prior consent of the carrier prior to assuming the obligations of the retailers. The court noted that the retailers were not insureds under the policies and the insured was obligated to tender to ACE documentation relating to defending the retailers prior to assuming their defense. The judge stated that: “Even if the insurer had denied a duty to defend and is not providing representation while pursuing a declaratory action, the insured still must comply with any additional notice requirements or other obligations under the policy.”

The court also held that certain work appearing to relate to press releases was not compensable defense costs and should not be reimbursed.  The judge also reduced numerous block-billing time entries by 10 percent on the basis that entries were unreliable. Other work related to reviewing press releases for inclusion of privileged communications did not constitute defense costs. Finally, the court ruled that an attorney’s time spend reading newspaper articles and Consumer Product Safety Commission (CPSC) publications was legal work, not public relations in nature and should be reimbursed.

The court’s ruling on compensable defense costs is generally in line with other case law construing the scope of an insurance carriers’ obligation to reimburse certain categories of legal work. An important lesson from this case is that an insured shall always promptly tender a claim for the carrier, prior to assuming the defense of a third party.

Court Abuses Discretion by Denying Award of Counsel Fees

Posted on June 2, 2009 by David J. McMahon

In Silver Creek LLC v. Blackrock Realty Advisors, 2009 DJDAR 7165 (pdf), the California Court of Appeal – 4th District decided an important issue concerning California’s prevailing party statute, CC § 1717.

BlackRock Realty Advisors, Inc. (BlackRock) agreed to purchase commercial property from Silver Creek, LLC (Silver Creek). The agreement was to buy the property for $29.75 million with a deposit of $1.13 million in escrow. BlackRock agreed to assume the existing property loans and the transaction was to close on July 1, 2005. The agreement included a provision for attorney fees to be awarded to the “prevailing party.” 

Subsequently, the parties got into a dispute about certain loan assumption terms and the contract was not consummated by the contractual deadline. Silver Creek advised BlackRock that escrow was terminated as the deadline was not met. BlackRock refused to acknowledge the termination. Silver Creek offered to relinquish the deposit in exchange for termination and sought declaratory relief when BlackRock failed to respond. The trial court found in favor of Silver Creek, but concluded that BlackRock was entitled to a set off in the amount paid for the deposit. Silver Creek filed a motion for attorney’s fees under Civil Code § 1717. The trial court found that there was no “prevailing party” as Silver Creek was not completely victorious.

The court of appeal reserved and concluded that Section 1717 requires on award of attorney’s fees to the “prevailing party.” The “prevailing party” is the party who recovers “a greater relief in the action on the contract.” While the trial court has discretion in determining the “prevailing party,” the discretion is limited.  The court held that the record clearly showed that Silver Creek obtained the greater relief as the “main litigation objective” was the “disposition of the properties” rather than the return of the deposit. Since the “property issue” was decided in Silver Creek’s favor, Silver Creek was the “prevailing party” for the purposes of §1717.