Attorney Fee Award Overturned in Tobacco Litigation

Posted on May 16, 2011 by David J. McMahon

In a significant case captioned In re Tobacco Cases I, 2011 DJDAR 4896 (2011), the California Fourth District Court of Appeal overturned an award of attorney fees.

The case arose from a consent decree which was entered into between most states, including California and several tobacco manufacturers. The consent decree was finalized in 1998.

A key section of the consent decree permanently enjoined R.J. Reynolds Tobacco Company (“Reynolds”) from using cartoons in tobacco advertising. The plaintiffs alleged that the use of the cartoons was inappropriate as it made the product appealing to children.

In 2007, Reynolds placed tobacco ads in Rolling Stone Magazine. The ads were placed by the editor of Rolling Stone, next to editorial content which contained cartoon images.

A plaintiff in the case, the State of California, brought proceedings to enforce the decree prohibiting the use of cartoons in advertising. After a hearing, the court concluded that only a part of the advertisement violated the cartoon prohibition, and that Reynolds was not responsible for the placement of its ad in the magazine. On those grounds, the court refused to issue further relief.

Despite the court’s ruling, the State of California submitted a petition for attorney fees under the provisions contained in the consent decree. Part of those provisions allowed for attorney fees in any proceedings resulting in a finding that the defendant was in violation of the injunction.

The court awarded attorney fees to the State pursuant to Civil Code Section 1717. Reynolds asserted that Section 1717 was inapplicable, that the State was not a successful litigant and filed an appeal.

The court of appeal reversed and remanded the award of fees. The court noted that Section 1717 set forth the grounds for a fee award in a contract action. It provides for attorney fees to the prevailing party. A prevailing party is one who recovers “greater relief” in the litigation. The trial court has discretion to find that no prevailing party exists when the results of the litigation are mixed.

The court of appeal concluded that Section 1717 applied as the injunction was in the nature of a contract. It was entered into with mutual agreement between the State and Reynolds. Thus, Section 1717 applied.

However, the fee award was improper as the State did not recover the “greater relief” it had sought. The People were not a “prevailing party” and the fee award was reversed.

Court Ruling Taxing Appellate Costs is Subject to an Immediate Appeal

Posted on May 13, 2011 by David J. McMahon

In Krikorian Premiere Theatres LLC v. Westminster Central LLC, 2011 DJDAR 4363 (2011), the California Fourth District Court of Appeal reversed a $22 million judgment against Westminster Central LLC and in favor of Krikorian Premiere Theaters LLC.

The appellate court found that under the parties’ lease agreement, and the “sole remedy” clause contained in that agreement, plaintiff’s recovery was limited to the reimbursement of its architectural fees, a tiny fraction of the gross sum of the judgment. The court also awarded Westminster costs on appeal.

On remand, Westminster claimed costs on appeal totaling almost $2.6 million. The trial court awarded the bulk of the claimed costs to Westminster but granted a motion to tax costs filed by the plaintiff as to several of significant items claimed.

Thereafter, the defendant appealed, challenging the ruling on the motion taxing costs, before the new judgment was entered on remand. The court of appeal affirmed the ruling of the trial court. The court of appeal stated that to be appealable as an order after judgment under Code of Civil Procedure Section 904.1(a)(2), a postjudgment order must be one that is “not preliminary.”

The appellate court noted that when making an award of costs on appeal, the relevant final judgment was the judgment of the court of appeal. Thus, the court of appeal viewed any subsequent proceedings at the lower court level as essentially postjudgment proceedings.

Moreover, because the award of costs was immediately enforceable, it cannot be affected by further action at the trial court level. The court therefore held that the order denying a motion to tax costs on appeal is immediately appealable.

Who is on the Hook for Costs in Paying Subpoenaed Peace Officers?

Posted on May 12, 2011 by David J. McMahon

In Maddox v. City of Costa Mesa, 2011 DJDAR 4373 (2011), the California Fourth District Court of Appeal decided a unique issue arising under the California Government Code section 68097.2. That provision provides that when a peace officer is subpoenaed to testify that the party issuing the subpoena is required to reimburse the public entity for the full cost to pay the peace officer.

An attorney represented a client in a DMV proceeding. The attorney signed subpoenas for the appearance of police officers at the DMV administrative hearing. The attorney posted the required deposit of $150 for each subpoena. The actual expenses incurred by the City of Costa Mesa exceeded the amount of the deposits.

The City sent the attorney invoices for the difference and he refused to pay the invoices and told the City to seek payment from his client. The attorney then filed a verified complaint for declaratory relief against the City, claiming that the fees were owed by the litigant in the action, not the litigant’s attorney. The City moved for judgment on the pleadings, arguing that under Government Code Section 68097.2, both the litigant and the litigant’s attorney are responsible for reimbursing the City’s expenses. The trial court granted the motion and the court of appeal affirmed the lower court’s ruling.

As referenced above, section 68097.2 provides that when a peace officer is subpoenaed to testify, “the party at whose request the subpoena is issued” must reimburse the public entity for costs incurred in paying the officer. If the actual expenses incurred exceed the amount deposited, that party must also pay the difference. 

This court determined that the term “the party at whose request the subpoena is issued” means the litigant and the litigant’s counsel, either of whom is responsible for paying costs to the public entity. 

As such, the litigant and the litigant’s counsel were both responsible for paying the City.