Limitations on Attorney Fees Under Probate Code Section 17211

Posted on June 24, 2010 by David J. McMahon

In Soria v. Soria, 2010 DJDAR 8945 (2010), the Fourth Appellate District decided a case which demonstrates the limitations of Probate Code Section 17211(b). Probate Code Section 17211(b) permits a probate court to award attorney fees to the beneficiary of a trust who contests the trustees’ accounting, if the trustee opposes the contest without reasonable cause and in bad faith.

In 1993, Richard Soria Sr. (Father) and Irene Sarinana (Mother) entered into a contract with Father’s parents, Richard and Lynda Soria (Grandparents). The contract required the Grandparents to convey a deed to a parcel of real property to Richard and Irene Soria. However, the agreement contained a provision that if Richard and Irene Soria were to ever divorce; the property would immediately revert to Father and the couple’s children (Grandchildren).

The Grandparents allegedly did not comply with the terms of the agreement. In 2005, the Grandchildren filed suit against Grandparents in an effort to compel conveyance of the deed. The lawsuit alleged that the conditional contract to convey the deed to the property, constituted a trust agreement. The suit further alleged that the Grandparents were the trustees, and Mother, Father and Grandchildren were the beneficiaries of the contract. The proceedings at the trial level were complex. After vigorous motion practices a judgment was entered against the Grandparents finding that the agreement was an express trust, with Grandparents in breach of its terms for failing to turn over the property deed.

The judgment required the Grandparents to convey the property to the Grandchildren on certain payment terms. Subsequently, the trial court granted Grandchildren’s motion for attorney fees pursuant to Probate Code Section 17211(b), and Grandparents appealed that ruling.

The court of appeal reversed the judgment below.

The court stated that Section 17211(b) provides that if a beneficiary contests an accounting performed by the trustee, and the court determines that the trustee’s opposition to the proceeding was without reasonable cause and in bad faith, the court has authority to award costs, including reasonable attorney fees.

The court ruled that Section 17211(b) deals with the situation where a beneficiary’s contests a trustee’s accounting. Where that happens, the claim is governed by the probate court. Here, the Grandchildren did not contest a trustee’s accounting in probate court. The Grandchildren filed a civil complaint requesting injunctive relief and declaration that the agreement was in fact a trust. Therefore, the court concluded, Grandchildren were not entitled to attorney fees under Section 17211(b).

Attorney Fees Awards Subject to Offset Litigants' Preexisting Debts to the U.S. Government

Posted on June 21, 2010 by David J. McMahon

 

In Astrue v. Ratliff, 2010 DJDAR 8875 (2010), the United States Supreme Court held that attorney fees awards are properly payable to the litigant, not to her attorney. For this reason, a fee award is subject to an offset where the litigant owed the government a preexisting debt.

Ruby Ree (“Ree”) successfully sued the Social Security Administration (“SSA”) for benefits. Her attorney was Catherine Ratliff (“Ratliff”). Ree filed a successful motion for attorney fees which was not opposed by the government. Before the government reimbursed Plaintiff for the fee award, it discovered Ree owed the United States a debt that predated the award. The government sought an administrative offset against the award. Counsel for the prevailing party, Ms. Ratliff, intervened challenging the offset on the grounds that the fee award belonged to her, as a litigant’s attorney, and thus could not satisfy the litigant’s debts. The district court disagreed, but the appeals court agreed with Ratliff. The issue was then appealed to the United States Supreme Court.

The high court reversed and remanded the decision of the court of appeal. 

The court specifically stated its longstanding view of the term “prevailing party.”  The court noted that in attorney fees statutes that term refers to the “prevailing litigant.” Statutes that mean to distinguish the attorney from the litigant in fees cases do so explicitly. The court also stated that the word “award” in the litigation context means giving or assigning by judicial decree. Here, the Equal Access to Justice Act provides for the court to “award” the “prevailing party” attorney fees. As such, an attorney fees award is payable to the litigant rather than to the attorney. Because the award is properly payable to the litigant it is subject to an offset for the preexisting debt.

 

Improper Involuntary Bankruptcy Petition Gives Rise to Award of Counsel Fees

Posted on June 16, 2010 by David J. McMahon

In Orange Blossom Limited Partnership v. Southern California Sunbelt Developers Inc. 2010 DJDAR 8623, Ninth Circuit (2010), the Ninth Circuit concluded that a bankruptcy court properly awarded costs, attorney’s fees and punitive damages against thirteen creditors that initiated an improper involuntary bankruptcy petition under 11 U.S.C. § 303 (i).

The creditors filed involuntary bankruptcy petitions against IBT International Inc. (“IBT”) and Southern California Sunbelt Developers Inc. (“SCSD”) under Chapter 11 of the Bankruptcy Code. Two individuals, Donald Grammer and David Tedder, controlled the entities that filed the petitions. 

The bankruptcy court dismissed the petitions against SCSD after finding that the petitioners’ claims were the subject of a bona fide dispute. 11 U.S.C. §303(b). The court subsequently dismissed the involuntary petition against IBT on a motion by the petitioning creditors. 

SCSD and IBT filed motions for costs, attorneys’ fees and punitive damages against the petitioning creditors under § 303 (i). They also sought sanctions against the individuals who controlled the creditors under Bankruptcy Rule 9011 and the court’s inherent power.

The court awarded IBT and SCSD costs, attorney fees and punitive damages under §303(i) of the Bankruptcy Code, and issued sanctions against Grammer and Tedder who then appealed.

The Ninth Circuit affirmed in part noting that §303(i) is a fee-shifting provision.

The court stated that the bankruptcy court may grant a debtor reasonable attorney fees when an involuntary bankruptcy petition is dismissed. The bankruptcy court awarded SCSD and IBT costs and fees incurred during the involuntary bankruptcy petition as well as those incurred while litigating claims for damages under §303(i). The Ninth Circuit concluded the award was appropriate, since a fee award can encompass all aspects of a §303 action, including claims for damages. 

The Ninth Circuit reversed on one issue noting that the bankruptcy court did not have authority to award costs against Grammer and Tedder for fees incurred by SCSD and IBT’s motions for sanctions. 

Creditors who are considering initiating an involuntary petition under Chapter 11 of the Bankruptcy Code should study this decision carefully.

 

Fees Incurred for Monitoring Settlement Agreement Compliance are Recoverable Under 42 U.S.C. § 1988

Posted on June 16, 2010 by David J. McMahon

In Prison Legal News v. Schwarzenegger, 2010 DJDAR 8612 (9th Circuit 2010) the court decided whether, and to what extent the publisher of, a monthly prison news magazine may recover attorneys’ fees from the State of California for monitoring the State’s compliance with a prior settlement agreement.

The publisher Prison Legal News (“Legal News”) settled claims against the California Department of Corrections and Rehabilitation (“CDCR”) relating to First and Fourth Amendment claims relating to dissemination of the magazine and other literature in correctional facilities. After entering into negotiations, the parties resolved the dispute and CDCR agreed to pay Legal News’ attorney fees for the period up until the agreement was executed by the parties. Legal News also reserved the right to pursue claims for attorney fees for work performed after signing the agreement. 

Subsequent to execution of the settlement agreement, Legal News filed a complaint against CDCR under 42 U.S.C. § 1983 pursuant to the procedures set out in the settlement agreement. The parties notified the district court of the settlement, sought dismissal without prejudice, and stipulated that Legal News was entitled to $320,000 in attorney fees for work done through December 11, 2006. The court granted dismissal and confirmed the attorney fee award. In October of 2007, Legal News moved for a further fee award in the sum of $137,672.79. The district court substantially granted that motion. The court awarded Legal News $137,502 in attorney fees for the period between September 1, 2007, and October 15, 2008. 

Subsequently, Legal News brought a second motion for fees in the sum of $143,322.96. The CDCR argued that Legal News was not entitled to additional fees for work performed in simply monitoring compliance with the settlement agreement.

The Ninth Circuit affirmed in part noting that § 1988 provides that in actions brought under § 1983, courts may award the prevailing party reasonable attorney fees. A plaintiff who obtains a legally enforceable settlement agreement qualifies as a prevailing party. The court stated that § 1988 authorizes attorney fees awards for monitoring compliance with the parties’ settlement agreement. This is true even where that monitoring does not lead to a judgment or order.

The Ninth Circuit concluded that Legal News was entitled to recover attorney fees for monitoring the CDCR’s compliance.

Unsatisfied Judgment Allows Prevailing Party to Recover Attorney Fees

Posted on June 16, 2010 by David J. McMahon

In Lucky United Properties Investment Inc. v. Lee, 2010 DJDAR 8085 (2010), the First District Court of Appeal decided a unique issue dealing with the recovery of attorney fees incurred in enforcing a judgment.

The procedural history of the case is convoluted. In 2006, the Plaintiff sued Lucky United Properties Investments Inc. (“Lucky”) for malicious prosecution. Lucky cross‑complained for malicious prosecution against the Plaintiff and his attorney, Albert Lee (hereinafter “Lee”). The trial court granted anti‑SLAPP motions in connection with both of the lawsuits.

Thereafter, the court awarded the attorney, Lee, $26,407.50 in fees and costs as the prevailing party on his anti‑SLAPP motion. Lucky failed to pay the attorney in a timely manner, and Lee filed a cost memorandum for $424 in enforcement costs. Lucky then sent the attorney $26,820, which the attorney claimed was insufficient. Lee then sought attorney fees and costs in relation to Lucky’s appeal from the order granting Lee’s anti‑SLAPP motion. Lee claimed $587 in costs from the appeal. The trial court awarded the attorney $33,830 for attorney fees and costs. The attorney then requested attorney fees incurred to enforce the earlier order awarding attorney fees and costs. The trial court denied the request on the ground that Lucky had fully paid the amounts due before the motion was brought.

The Court of Appeal reversed and remanded the decision of the lower court, noting that a motion for attorney fees incurred in enforcing a judgment must be filed before a judgment is satisfied. Here, Lucky did not move to tax the $424 in costs claimed by the attorney. Thus, those costs were incorporated into the judgment and the $26,820 mailed to the attorney. The court noted that the amount did not satisfy the judgment. The court also noted that Lucky did not pay the original judgment in full despite the payment of $33,830. Thus, when the attorney filed the motion for attorney fees, Lucky had not fully satisfied the judgment. On that basis, the court of appeal concluded that the trial court erred in denying the attorney’s request for attorney fees.

Federal Courts Have Jurisdiction to Review Title VII Administrative Attorney Fee Awards

Posted on June 10, 2010 by Gary A. Bresee

The Ninth Circuit has clarified that a Title VII claimant can file a civil suit in district court strictly concerning the amount of attorneys' fees awarded in the Title VII administrative proceeding.  In other words, the claim need not involve the substantive liability ruling in order to grant the districct court jurisdiction to review the fees awarded to the prevailing party.  

In Porter v. Winter, 10 C.D.O.S. 5541 (June 5, 2010), a former civilian employee of the Navy complained to the Equal Employment Opportunity Commission (EEOC) of the Navy's gender discrimination against him.  The EEOC found the Navy liable to Porter for retailiation but not for gender discrimination.

However, when the EEOC granted only a small portion of Porter's fees, he sued the Navy in district court challenging the amount of the attorneys' fees awarded.  The district court dismissed the case for lack of subject matter jurisdiction, but the Ninth Circuit reversed. 

The Ninth Circuit was asked to reconcile the seemingly contradictory U.S. Supreme Court decisions of North Carolina Dept. of Trans. v. Crest Street Community Council, Inc., 479 U.S. 6 (1986) and New York Gaslight Club, Inc. v. Carey, 447 U.S. 54 (1980).  In Crest Street the Supreme Court held that 42 U.S.C. section 1988 did not allow such claims "solely to recover attorneys' fees."  In contrast, in Carey the Supreme Court decided that Title VII allows such a civil suit, "solely to obtain an award of attorneys' fees for legal work done in state and local proceeedings." 

The Ninth Circuit, citing slightly different statutory language and legislative history between section 1988 and Title VII, relied upon Carey and reversed the District Court's dismissal.  The court also reasoned that imposing such a limitation would be inconsistent with the responsibility of federal courts to ensure that TItle VII claimants received complete relief for their injuries.