Finding That an Anti-SLAPP Motion is Frivolous Justifies Fee Award

In Baharian-Mehr v. Glenn Smith, et. al. 2010 DJDAR 15946 (2010) the Fourth District of the California Court of Appeal, held that the special motion to strike procedure set forth in CCP § 425.16 was not applicable to a business dispute. The court also affirmed the grant of an attorney fee award rendered against the Defendant. The court granted fees after finding the Defendants’ motion was frivolous.

Baharian-Mehr (Mehr) formed a business entity with the Glenn Defendants. Mehr thereafter discovered alleged accounting irregularities in the business and he sued his partners for an accounting, fraud and related business torts. In response to the complaint, the Defendants filed a special motion to strike pursuant to Code of Civil Procedure Section 425.16, the anti-SLAPP statute. The court denied the motion, finding that the subject matter of the litigation of the case was a business dispute, which was not a proper subject for an anti-SLAPP motion. 

In addition to denying the motion to strike, the lower court ordered the Defendants to pay Plaintiff $1,500 in attorney fees because the motion was frivolous. The Defendants filed an appeal of the decision. In addition, on appeal, Mehr also argued that the court of appeal should not review the fee award except on review from a final judgment.

The Fourth District affirmed the court rulings below. The court of appeal stated that under Section 425.16, if a court finds that an anti-SLAPP motion is frivolous, it shall award reasonable attorney fees to a party who prevails on such a motion. The court also ruled that an order denying a special motion to strike is appealable and that the appeal of the attorney fees issue was the proper subject of an appeal. 

The court also confirmed that Glenn’s motion was frivolous, stating that any reasonable attorney would be aware that a business dispute of this kind is not subject to the anti-SLAPP statute. 

On this basis, the court held that the award of attorney fees to Plaintiff was appropriate.

Technical Construction of 'Actual Controversy' Requirement Under CCP § 1060 is Overturned in Dispute Over Fees

In Leonard Carder, LLP v. Patten, Faith & Sandford 2010 DJDAR 15776 (2010) the Second Appellate District interpreted the “actual controversy” requirement contained in CCP § 1060 in a fee dispute context.

Two law firms Leonard Carder LLP (“Carder”) and Patten, Faith & Sandford (“Patten”) were appointed to represent a class in a class action lawsuit. The litigation effort was successful and the class was awarded approximately $14.4 million in compensation. Carder moved for an award of attorney fees, presenting a lodestar calculation stating that Carder worked 11,414 hours and Patten worked 673 hours. Under the lodestar presented by Carder, fees were due in the sum of $10,879,272 for Carder and $373,040 for Patten. 

At the hearing on the motion, the trial court signed a stipulation by the parties concerning the fees owed. The court authorized payment of attorney fees totaling $12,475,000 to be paid to Carder “as trustees for distribution to all counsel.” 

Thereafter, Carder filed a declaratory relief action against Patten, alleging that Patten had received $373,040, but was also claiming the right to 40 percent of the award based on an alleged agreement between the firms. Patten failed to respond to the action in a timely manner and Carder applied for a default judgment. The court denied relief to Carder, ruling that “no controversy” existed under CCP § 1060.

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

The court stated that CCP § 1060 states that a person desiring a declaration of rights may file an action in cases of actual controversy.

“Actual controversy” refers to a probable future controversy relating to the parties’ rights and duties. The court concluded that the record on appeal contained evidence that Carder had written a letter to Patten agreeing to give 40 percent of fees to Patten but then later Carder repudiated the agreement. The court concluded that based on this record, there was an ongoing controversy over the distribution of attorney fees.

The court of appeal therefore reversed the trial court’s decision and remanded the case for further proceedings.

 

Award of Attorney Fees is Improper Where Litigation Sought Renewal of Grazing Permits Rather than the Grant or Renewal of a License

In Western Watersheds v. Interior Board of Land Appeals, 2010 DJDAR 15784 (9th Cir. 2010), the Ninth Circuit decided a case involving the interplay between the renewal of Bureau of Land Management (BLM) grazing permits and the fee shifting provisions of the Equal Access to Justice Act (“EAJA”).

After the BLM issued decisions renewing grazing permits in Idaho, the Western Watersheds Project, (“Western”) a conservation group, filed administrative appeals of those decisions. In essence, Western alleged that the permits were improperly granted in violation of federal regulations and the National Environmental Policy Act (“NEPA”). 

An administrative law judge consolidated the appeals and issued a partial stay. This was a substantial victory for Western and, subsequently, the parties entered into a settlement agreement. Western moved for fees and costs under the Equal Access to Justice Act (EAJA). The EAJA partially waives the sovereign immunity of the United States allowing an award of attorneys’ fees in limited circumstances

The administrative law judge denied the motion for fees in its entirety, and Western appealed to the Interior Board of Land Appeals (Board). The Board affirmed, as did the district court, finding that the “adjudication was for the purpose of granting or renewing a license,” and was not within the purview of the EAJA. Western appealed the decision to the Ninth Circuit.

The Ninth Circuit affirmed the decision of the district court noting that Western’s administrative appeal was to challenge BLM’s renewal of grazing permits. For this reason the EAJA was inapplicable to the proceedings.

Disclosure of the Nature of Legal Practice and Representation is Required by Arbitrator in Fee Dispute Matter

In Benjamin, Weill and Mazer v. Kors, 2010 DJDAR 15842 (2010) the First Appellate District decided a novel case involving the disclosure requirements under the California Arbitration Act.

Plaintiffs, the Temples, sued Nancy Kors for her activities as a professional adoption facilitator. Kors retained the law firm of Benjamin, Weill & Mazer (BWM) to represent her in the litigation. The Temples voluntarily dismissed their complaint without prejudice, after expensive litigation ensued. Kors moved for attorney fees and her motion was denied. Thereafter, BWM requested that Kors pay the fees which had been billed to her. Kors failed to pay the bills, and BWM sued Kors seeking the balance owed to the firm of $68,986.38.

The trial court granted Kors’ motion to compel fee arbitration and Sean SeLegue was designated chief arbitrator. The arbitration panel concluded that Kors was required to pay BWM $102,287.39 in unpaid fees, costs and interest. BWM then moved to confirm the award in the Superior Court. Kors responded by alleging that SeLegue failed to disclose the nature of his law practice, which could cause a person to doubt his impartiality. 

Kors claimed that at the time of arbitration, SeLegue was representing a prominent law firm in an attorney-client fee dispute. Kors also contended that SeLegue’s practice involved the representation of law firms in client disputes. The court granted BWM’s petition to confirm the award and denied Kors’ disqualification request.

The Court of Appeal reversed the trial court’s decision, noting that the California Arbitration Act requires arbitrators to disclose:

all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.” (CCP § 1281.9(a)).

The Court of Appeal stated that the arbitrator’s failure to disclose the facts relating to the nature of his law practice justified vacation of the arbitration award.

The court specifically noted that SeLegue’s extensive practice involving attorneys and their professional responsibilities to clients, was an important factor that, if not disclosed, could create an impression of bias. 

On these grounds, the court ruled that SeLegue had a duty to disclose the nature of his practice and his representation of clients in fee disputes. Because there was a failure to disclosure important facts, the court of appeal remanded the case, with directions to grant Kors’ motion to vacate the arbitration award.