Litigation Management & Attorney Fee Analysis Blog : Attorney Fee Analysis & Litigation Management Lawyer : Barger & Wolen Law Firm : Litigation Management, Legal Fees, Billing Guidelines

by David J. McMahon and Tino X. Do

In Nelson v. Pearson Ford Co., D054369 (July 15, 2010), the Fourth Appellate District upheld the trial court’s judgment awarding attorney fees to plaintiff class representative under the Automobile Sale Finance Act (“ASFA”), and denied costs to defendant in its claim under California Code of Civil Procedure Section 998.

Nelson involved a class action against the Pearson Ford car dealership for alleged violations of the ASFA, Consumers Legal Remedies Act (“CLRA”) and California Unfair Competition Law (“UCL”) arising from a backdated car sale contract that resulted in a car buyer paying interest for a time period when no contract existed, and for erroneously adding insurance premium to the sales price of the car which resulted in additional sales tax and financing charges. 

Two separate classes were certified by the trial court: the backdating class and the insurance class. 

Following a bench trial, the trial court found Pearson Ford liable under the ASFA to only the insurance class, liable to both classes under the UCL, and not liable to either class under the CLRA. The trial court granted certain remedies under the ASFA and the UCL, and awarded Nelson his attorney fees and costs under the ASFA. Both parties appealed. 

The appellate court reversed the trial court as to the portion of the judgment finding Pearson Ford not liable to the backdating class under the ASFA and the CLRA. The court also found that the trial court erred in the remedies it awarded under the ASFA and the UCL. The court upheld the trial court’s ruling on the award of attorney fees and costs.

Attorney fees in this matter were not awarded under the UCL, which does not permit this type of remedy, but under the AFSA, a statute that specifically grants the recovery of attorney fees to the prevailing party. 

The appellate court noted that Pearson Ford did not challenge the trial court’s conclusion that Nelson was the prevailing party for both classes under the ASFA (Civ. Code section 2983.4), or dispute the awarded amount. Instead, Pearson Ford argued that the trial court should have taken into consideration the fact that it had made a Section 998 offer of $500,000 before trial, and that Nelson failed to obtain a more favorable judgment at trial. 

The appellate court, while noting that a valid settlement offer can be made under Section 998 in a certified class action, agreed with the trial court that the Section 998 offer at issue was invalid because it was a lump-sum offer to two classes. The court stated that it would be impossible to determine whether either class received a less favorable result at trial than it would have received under the offer.

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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.

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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.

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In Prison Legal News v. Schwarzenegger, 2010 DJDAR 8612 (9^th 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.

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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.

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by Scott E. Calvert

Hardt v. Reliance Standard Life Insurance Co., __ U.S.__ (2010)

In a decision authored by Justice Clarence Thomas, the United States Supreme Court has declared that an ERISA claimant need not be a “prevailing party” to be eligible for an attorneys’ fees award. In Hardt v. Reliance Standard Life Insurance Co., __ U.S.__ (2010), the Court ruled that under 29 U.S.C. §1132(g)(1), a party may be awarded attorneys’ fees if “some degree of success on the merits” is achieved, as opposed to the more stringent requirement imposed by some circuit courts that they be a “prevailing party.”

Bridget Hardt initiated the litigation seeking long-term disability benefits under an ERISA plan. Faced with cross motions for summary judgment, the United States District Court for the Eastern District of Virginia denied Reliance’s motion finding that “Reliance’s decision to deny benefits was based on incomplete information.” The District Court also denied Hardt’s motion for summary judgment, but in doing so, found “compelling evidence” that Hardt was totally disabled. The District Court accordingly remanded the claim to Reliance with instructions that all of the evidence in the file be adequately considered within 30 days, otherwise “judgment will be issued in favor of Ms. Hardt.” 

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In Grove v. Wells Fargo Financial California Inc., 2010 DJDAR 7351 (2010), the Ninth Circuit Court of Appeals decided an interesting case involving the types of costs which are recoverable under the provisions of the Fair Credit Reporting Act (“FCRA”) 15 U.S.C. § 1681 et seq. Under FCRA § 16810(a)(2), the statute permits a prevailing plaintiff to recover the “costs of the action together with reasonable attorney’s fees as determined by the court.”

The facts of the case are summarized as follows. Wells Fargo Financial California Inc. (“Wells Fargo”) notified several credit agencies that the plaintiff was delinquent on an automobile loan. The plaintiff disputed the information and requested that Wells Fargo correct the record. Wells Fargo refused to do so. Plaintiff then sued Wells Fargo under the FCRA.

In the complaint, plaintiff alleged that Wells Fargo provided false information to the credit reporting agencies. The parties subsequently reached a settlement, and the district court approved the parties’ stipulated judgment. The agreement provided that Wells Fargo would pay plaintiff $20,000 plus costs and reasonable attorney fees. In plaintiff’s motion to recover on the judgment, plaintiff also requested $6,770.60 in non‑taxable costs, in addition to other expenses. The district court denied plaintiff’s request for costs that were not listed as “taxable” under 28 U.S.C. section 1929, concluding it did not have any authority to award non‑taxable costs. Plaintiff appealed that decision of the lower court to the Ninth Circuit.

The Ninth Circuit reversed in part, noting that 28 USC section 1920 outlines the federal court’s power to shift litigation costs. The court noted, however, that Section 1920 does not speak to the authority of the district court to award taxable costs. For that reason, the Ninth Circuit considered whether the FCRA’s expense shifting provision authorized the award of non-taxable costs. The court concluded that the statute does contemplate such an award.

The Court noted that the FCRA allows a prevailing plaintiff to recover the costs of the action together with reasonable attorney fees. The court determined that since the FCRA provides for the recovery of “reasonable attorney’s fees,” district courts have discretion to award non‑taxable costs to prevailing parties under the FCRA. The Ninth Circuit concluded that the district court erred in ruling that it had no authority to do so.

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In a much anticipated legal fee decision, the U.S. Supreme Court ruled on April 21, 2010, that trial courts may award fee enhancements above the “lodestar” amount to lawyers for superior performance, but only in rare and well-documented circumstances. 

The case of Perdue v. Kenny A. was one which had been carefully watched by civil rights and public interest groups, many of which rely on fee-shifting statutes when they prevail in litigation. 

The Supreme Court’s 5-4 majority rejected the fee enhancement request of $6 million by plaintiffs’ lawyers in a successful class-action suit on behalf of 3,000 children in Georgia, which the court recognized had helped reform the Georgia foster care system.

The trial judge awarded the lawyers $6 million using the lodestar method of calculating legal fees — hours worked multiplied by the local hourly market rate for lawyers of comparable experience and skill. The judge then added an “enhancement” of $4.5 million for what he said was work of exceptionally high quality.

Justice Alito, writing for the majority, said fee enhancements for superior attorney performance are permissible, but only in exceptional cases. In this case, however, he believed that the trial judge did not provide “proper justification” for the enhancement under a series of factors listed in the opinion. 

Justice Alito made it clear that the purpose of fee enhancements was not to enrich the lawyers.  He said that federal fee-shifting law,

... serves an important public purpose by making it possible for persons without means to bring suit to vindicate their rights.  But unjustified enhancements that serve only to enrich attorneys are not consistent with the statute’s aim. 

In a footnote, Alito added that if the $4.5 million fee enhancement that was awarded by the trial judge had remained in place, the attorneys representing the foster care plaintiffs “…would earn as much as the attorneys at some of the richest law firms in the country.” 

In conclusion, the 5-4 majority opinion overturned the trial court’s award of a $4.5 million lodestar enhancement to plaintiffs’ attorneys and remanded the case back to the district court.

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In a recent California Supreme Court decision, the court determined that trial courts have the discretion to deny costs and attorney fees to a plaintiff alleging violations of the FEHA who recovers damages that could have been recovered in a limited civil case

By: David J. McMahon and Brendan V. Mullan

 In Chavez v. City of Los Angeles, 47 Cal. 4th 970 (2010), the California Supreme Court was presented with yet another claim brought under the Fair Employment and Housing Act (FEHA) in which the plaintiff’s attorney requested fees far in excess of the minimal damages recovered by the plaintiff. The issue before the court was whether C.C.P. section 1033(a) gives courts the discretion to award attorney fees to a prevailing party under the FEHA when the judgment is less than the jurisdictional amount of limited civil cases ($25,000 or less).

In Chavez, the plaintiff was a police officer who sued the city of Los Angeles alleging claims of employment discrimination, harassment and unlawful retaliation in violation of the FEHA; defamation; intentional infliction of emotional distress; invasion of privacy; civil rights violations; trespass, inverse condemnation; nuisance and intentional infliction of emotional distress. 

After seven years of convoluted litigation in state and federal court, the plaintiff prevailed on one claim, retaliation, and received a judgment in the amount of $11,500. Plaintiff’s other causes of action were all dismissed or found without merit. 

After the jury returned its verdict, the plaintiff’s attorney filed a motion for attorney fees under Government Code section 12965(b) for $436,602.75. Two months later, the attorney filed an amended motion for attorney fees, adding a “2x” multiplier to the lodestar calculation, increasing the amount of fees requested to a total of $870,935.50. 

Defendants opposed the motion asserting that the plaintiff’s attorney had overreached and outrageously inflated the fee request.

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In Jankey v. Song Koo Lee, 2010 DJDAR 2024 (2010), the California First Appellate District decided an unsettled question relating to the scope of preemption of the Americans with Disabilities Act of 1990, 42 U.S.C. §12101 (ADA). The court reviewed the preemption question vis-à-vis California Civil Code §54, known as the California Disabled Persons Act (CDPA).

The plaintiff was a disabled person who used a wheelchair. The plaintiff sued the owner of a food market, seeking injunctive relief under the ADA and the CDPA. The plaintiff claimed that a step at the entry of the market was a barrier, that effectively prevented him from entering the store. The trial court granted the defendant summary judgment.

As a prevailing party, the defendant moved for attorney fees under Civil Code Section 55 contained in the CDPA. Based on the case authority of Hubbard v. SoBreck LLC, 531 F3d. 983 (9th Cir. 2008), the plaintiff argued that the ADA preempted fee awards to prevailing defendants under Section 55 unless there is affirmative proof that the plaintiff’s action was “groundless.” The court disagreed and granted the defendant fees amounting to $118,458.

The court of appeal affirmed the trial court’s decision. The court noted that the federal law preempts state law when state law is an actual conflict with federal law. The court concluded that Section 55 of the CDPA mandated that a prevailing party in an action to enjoin a violation of disability access requirements is entitled to recover attorney fees.

The court noted that the ADA’s preemption provision’s purpose is to maximize the plaintiff’s options in pursuing state law remedies. Further, it found that a conflict does not exist between the discretionary fee provision of the ADA and mandatory nature of fees under Section 55. Accordingly, the ADA did not preempt Section 55 and the trial court properly awarded the defendant reasonable attorney fees.

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Where a Settlement Offset Exceeds the Amount Awarded at Trial

In Goodman v. Lozano, 2010 DJMAR 1925, (2010), the California Supreme Court decided an important case under CCP § 1032, the prevailing party statute. 

Background

The plaintiffs entered into a contract to purchase a house from the Lozano defendants. AMPM Construction built the house. Shortly thereafter the plaintiffs sued the Lozanos, Albert Mobrici, a principal with AMPM, AMPM, the architect, and the real estate brokers for construction defects. After protracted litigation, the builder and its principal settled with the plaintiffs for $200,000. Other defendants, except for the Lozanos, settled with the plaintiffs for approximately $30,000. The plaintiffs rejected the Lozanos’ $35,000 settlement offer under Code of Civil Procedure Section 998. The case went to trial and the court awarded the plaintiffs $146,000 against the Lozanos. However, the prior settlements totaled $230,000. 

The trial court concluded that the Lozanos should receive credit for the prior settlement and that the plaintiffs should receive nothing. Because the Lozanos paid nothing towards any judgment, the court found that they were prevailing parties. The court awarded the Lozanos $132,000 in attorney fees and $12,000 in costs. The appeals court affirmed that result.

The California Supreme Court affirmed the appellate court’s decision. The Court noted that where a plaintiff settles with defendants for an amount that is greater than a subsequent damage award against a nonsettling defendant, the damage award is essentially nullified and results in a zero judgment.  

The Court stated that prevailing party is entitled to recover costs in any action and is defined as “the party with a net monetary recovery.” The Court held that a plaintiff who obtains a verdict against a defendant, which is offset to zero due to prior settlements, has not gained a “net monetary recovery.” Accordingly, the Court held that the plaintiffs were not the prevailing parties. The Lozanos prevailed because they avoided payment to the plaintiffs by proving damages in an amount less than the settlement proceeds.

For these reasons the Court concluded that the Lozanos were entitled to their reasonable attorney fees and costs awarded at trial.

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Court finds that the government did not act frivolously in conducting a factual investigation

In U.S.. v. Capener, 2010 DJDAR 392 (2010) the U.S. Court of Appeals for the Ninth Circuit, overturned a fee award, rendered against the government under the so called “Hyde Amendment.” 

The Hyde Amendment, 18 U.S.C. § 3006A note, permits the court to award attorneys fees to a defendant in a criminal prosecution where the government has acted in a manner that was “vexatious, frivolous, or in bad faith . . .”  

After conducting an investigation initiated by a health insurance carrier, the federal government prosecuted physician Mark Capener for alleged health care fraud. The government claimed that its investigation found indications that the doctor had billed patients for unnecessary and unperformed surgeries.

As a result of the investigation, the doctor was charged with numerous counts of fraud. The government relied on statements made by its retained expert. The expert concluded that certain pathology samples did not contain bone fragments, which would be present if certain surgeries were in fact performed. Further investigation revealed that the samples actually did contain bone fragments. At trial, the government presented the bone fragment theory to support the prosecution. 

After further proceedings, the charges against Capener were dismissed by the government and Capener moved to recover his fees under the Hyde Amendment. The district court found that portions of the government’s claims were frivolous, and awarded partial fees. Both the government and the defendant appealed.

The Ninth Circuit reversed in part. 

The court noted that under the Hyde Amendment, the court may award a prevailing party reasonable attorney fees where it finds that the government’s position violated the standards set forth in the Hyde Amendment. The Ninth Circuit stated that a failure to sufficiently investigate can rise to the level of frivolousness only when the government had some reason to know further investigation was needed. The court concluded that there were no facts in the record to support a conclusion that the government knew the “bone fragment theory” was wrong. 

On this basis the court concluded that the government’s reliance on its expert’s opinion did not rise to the level of misconduct necessary to recover fees under the Hyde Amendment.

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Although this sounds obvious, the Ninth Circuit recently illustrated, in Klamath v. Bureau of Land Management, No. 08-35463 (9th Cir., Dec. 15, 2009), that a plaintiff must have actually received some kind of relief on the merits of her claim before she can be said to have prevailed, and thereby be entitled to her attorneys' fees.  There must be a "material alteration" of the status quo, and the court's order must consist of relief, not merely a determination of legal merit.  There must be some kind of "judicial imprimatur," which first means, typically, a court order of some kind.  

The judicial imprimatur must also be an enforceable entitlement to relief: 

"To receive what one sought is not enough to prevail: the court must require one's opponent to give it."

Consequently, a lawsuit which brings about a voluntary change in defendant's conduct would "lack a judicial sanction or imprimatur."  In Klamath, Plaintiffs Klamath Siskiyou Wildlands Center, et al. ("Klamath") sued the Bureau of Land Mangement ("BLM") alleging that a timber sale in the Willy Slide area was illegal.  Klamath sought an injunction against the sale taking place.  During the pendency of the suit, however, the BLM vacated its earlier rulings and granted Klamath's protest of the Willy Slide timber sale.  

The BLM then moved to dismiss the case, and the District Court agreed, dismissing the action as unripe or moot due to BLM's voluntary actions.  Since this order did not conclude that Klamath was entitled to relief, it did not confer prevailing party status upon Klamath.  Because it did not "require one party to do something it otherwise would not be required to do," the District Court's grant of attorneys fees was reversed.

This seems to be a valid strategy.  If you find yourself a defendant in a suit where plaintiff would be entitled to her fees, consider a voluntary change to the status quo -- even if it occurs after the action has been commenced -- so long as it is prior to the plaintiff's ability to obtain a court order granting any kind of relief.  This would, if successful, avoid any claim for attorneys' fees from the plaintiff in the future.   

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In the litigation captioned In Re the Marriage of Natalija and Nikolai Solomon Lyustiger, 2009 DJDAR 14245 (2009) the Third District Court of Appeal decided an action based on the Uniform Foreign Money-Judgments Recognition Act (Act). 

Natalija Lyustiger (Wife) sought to enforce two orders of a British domestic relations court requiring Nikolai Solomon Lyustiger (Husband) to pay a total of 50,000 pounds for Wife’s attorney fees arising from dissolution proceedings. After trial, the California trial court (Yolo County) determined that enforcement of the British orders was proper under the Act and entered judgment accordingly.

On appeal the Third District reversed the lower court’s ruling noting that the Act specifically excludes from its scope the enforcement of “support in matrimonial or family matters.” Moreover the Act contains a broad definition of “support.” The court stated that the award of fees was for purposes of the Act, in the nature of “support;” therefore, the trial court erred by enforcing the award of attorney fees.

Natalija and Nikolai Lyustiger met in London in April 2001 and were married in the U.S. in 2002. They lived in Russia, until Natalija moved back to London alone. The Lyustigers apparently divorced in 2004 and entered into a settlement agreement whereby Nikolai agreed to pay spousal support to Natalija. In 2005, the parties sought and received a Russian decree of divorce. 

Later, Natalija filed for divorce in the High Court of Justice in London. Husband argued that the court did not have jurisdiction because the marriage had already been dissolved. The British court ordered Nikolai to pay 50,000 pounds for Natalija’s attorney fees and Husband ignored that order. In 2006, after moving to California, Wife sued Husband to enforce the British fee award. The trial court held that the British order was enforceable and required Nikolai to pay the attorney fees.

On appeal the court specifically noted that the Act allows a judgment of a foreign state to be enforceable in the same manner as the judgment of a sister state. The court of appeal stated however, that the Act excludes the enforcement of foreign-county judgments for “support in matrimonial or family matters” and that term “support” is defined broadly.

Because the British order awarded attorney fees as part of Natalija’s maintenance, which is basically the same as “support” for purposes of California law, the Act did not apply and the court of appeal reversal.

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In Vons Companies Inc. v. Lyle Parks Jr. Inc., 2009 DJDAR 13828, the California Court of Appeal, 2nd District, decided a complex case involving both the “prevailing party” doctrine (CCP§ 1032) and CC § 1717, the reciprocal remedy statute.

Vons Companies Inc. (Vons) hired Lyle Parks Jr. Inc. (Parks) to construct a shopping center in 2002. The construction contract contained a prevailing party attorney fee clause. When the work was completed, Parks issued a warranty for the work for a one year time period. There was no attorney fee clause in the warranty agreement.

In 2004, Vons sold the shopping center to a third party, Mock Ranch Inc. (Mock). In 2006, Mock sued Parks for breach of warranty and negligence, claiming that Parks engaged in poor workmanship. Mock also sued Vons for failing to disclose material information about the suitability of the purchase.

Prior to trial, Mock and Vons settled their case. As part of the settlement, Mock assigned its claims for negligence and breach of warranty against Parks to Vons. Thus, Vons sought damages from Parks and the jury found in favor of Vons on the claims for breach of express warranty and negligence. Vons sought costs, asserting that it was entitled to recover Mock’s costs as its assignee. Parks moved to strike or tax costs, pointing out that Vons was the prevailing party only as to Mock’s two claims against Parks.

The trial court granted Parks’ motion to strike and tax costs, finding no factual support for the claim that Vons was Mock’s assignee and that due to the cursory cost memorandum submitted, that Vons had not met its burden of proof on the issue. In addition to the cost memorandum, Vons also submitted a request for more than $1 million in attorneys’ fees based on the provisions in the construction contract. The trial court denied that motion for fees, observing that Vons did not assign the construction contract to Mock, only the warranty agreement.

The Court of Appeal disagreed with the trial court, in part. 

The court noted that a prevailing party is entitled to recover costs. Courts do not have the discretion to deny costs to a prevailing party absent contrary statutory authority. The court noted that Vons was the prevailing party on the negligence and breach of warranty claims that Mock assigned to it. The Court noted, however, that in the cost memorandum, Vons sought all of its own pretrial litigation costs without regard to whether those costs were necessary to the claims on which it prevailed. Thus, the court stated that the trial court should have determined a proper cost award based on arguments presented in relation to Lyle’s motion to tax costs. Further, the entire trial was based on the assignment of Mock’s claims to Vons. Thus, Vons was entitled to costs as the prevailing party on the claims that Mock assigned to it.

As to the fee claim, the Court of Appeal affirmed the trial court’s decision, noting that there was no fee clause in the warranty agreement.

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In 21st Century Insurance Co. v. Superior Court, 2009 DJDAR 12587 (August 24, 2009), the California Supreme Court ruled on an undecided question pertaining to the proper application of the “Made-Whole” rule versus application of the “Common Fund” doctrine in the context of an automobile liability insurance policy.

Silvia Quintana (Quintana) was insured by 21st Century Insurance Co. (21st Century). She was injured in an automobile accident with a third party. 21st Century paid $1,000 under the no‑fault medical payment (med‑pay) insurance provision contained in the policy. Quintana then sought damages against the third party. She eventually settled the third party claim for $6,000. 

In the course of the suit, she incurred more than $2,000 in attorney fees and costs. Quintana’s insurance policy required her to reimburse 21st Century for the med‑pay amount, so to avoid double recovery by her. She paid $600 representing full reimbursement of $1,000 less the pro rata attorneys' fees of $400 but argued that 21st Century was required to reimburse all the litigation expenses incurred in order to satisfy the "made-whole" rule. 21st Century contended that California law did not require an insurer to pay such expense to meet this rule. Rather, litigation expenses should be determined separately per “the common fund doctrine” on a pro rata basis.

Quintana subsequently filed a class action lawsuit against 21st Century. The insurer demurred to the complaint, asserting that Quintana did not state a cause of action because California law does not include attorneys’ fees in the made-whole doctrine. The trial court overruled the demurrer and 21st Century filed a petition for writ of mandate. The Fourth Division of the California Court of Appeal agreed with 21st Century’s view of the law and Quintana petitioned for review before the Supreme Court.

The Court of Appeal ruling was affirmed by the Supreme Court.  The court stated that the made‑whole rule “limits the insurer’s reimbursement right . . . where the insured has not recovered [her entire debt.].” Thus, an insurer may not accept any money from a third party until the insured “has been fully compensated for [her] injuries.” 

The common fund doctrine holds that where “a number of parties are entitled in common to a specific fund, such action brought . . .in [their] benefit . . . results in the creation or preservation of the fund such that . . . attorney’s fee [may be awarded] out of the fund.” 

Here, Quintana argued that reimbursement of her litigation costs would better reflect compensation of her entire debt. However, the court found no law requiring or supporting her contention. Rather the policies underlying these two legal theories supported the conclusion that 21st Century should be responsible only for the pro rata share of the litigation expenses incurred.

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In Wood v. Santa Monica Escrow Co., 2009 DJDAR 12082 (Aug. 13, 2009), the Second Appellate District decided a novel prevailing party attorney fee case. The plaintiff, Craig Wood, was the personal representative of the Estate of Merle A. Peterson. Plaintiff brought an action against Patrick McComb and Santa Monica Escrow Co. alleging causes of action for alleged elder abuse. The complaint asserted that the defendants improperly induced an elderly individual to obtain a loan secured by her residence, and to distribute the proceeds to Patrick McComb. Merle Peterson obtained the loan with Santa Monica Escrow acting as escrow agent.

Two years after filing the complaint, the Plaintiff voluntarily dismissed the action. After dismissal, Santa Monica Escrow moved for attorney fees based on the contractual provisions in the escrow agreement which stated that a prevailing party would receive attorney fees in an action between the escrow holder and parties to the escrow. Santa Monica asserted that it was not required to allocate the fees between the contractual and non-contractual causes of action because all claims arose from the same transaction. The trial court denied the motion in its entirety which was affirmed on appeal. The appellate court ruled that a prevailing defendant is not entitled to receive attorney fees in elder abuse cases.

Thereafter, Wood moved for attorney fees against Santa Monica Escrow. The motion for fees was based on the attorney fee provisions in the escrow instructions. The trial court denied the motion, finding that the escrow agent was the prevailing party in the action. The ruling was appealed by the Plaintiff.

The appellate court affirmed the decision of the lower court noting that a party who prevails on appeal is not entitled to attorney fees, despite the existence of a contractual fee provision, where the appellate court does not decide who prevailed in the lawsuit. Instead, the prevailing party is defined as the party who has prevailed overall in the case. Plaintiff argued that he was the prevailing party because he won on Santa Monica Escrow’s appeal of the denial of its motion for attorney fees. However, the court found that the purported success on the appeal did not decide who won the lawsuit. Instead, Santa Monica Escrow won overall because Plaintiff voluntarily dismissed the case. For this reason he was not the prevailing party entitled to attorney fees.

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In Choi v. Orange County Great Park Corp., California Courts of Appeal 2009 DJDAR 9790, (June 30, 2009) the Fourth Appellate District reversed the decision of the trial court, denying a fee application submitted pursuant to Code of Civil Procedure § 1021.5, California’s “Private Attorney General” statute.

The defendant in the case was a public benefit nonprofit corporation called Orange County Great Park Corp. (OCGPC). The entity was created to develop a former U.S. Marine Air Station property in Orange County, California. Over $400 million in public money was committed to the project. OCGPC had a nine‑member board that consisted of the Irvine City Council (ICC) and four outside directors. Steven Choi and Christina Shea (collectively, Choi) were two of the outside directors. After the CEO of OCGPC resigned, a search committee consisting of four directors was formed to find a replacement.

The plaintiff, one of the outside directors, was not included on the search committee and her request to see the resumes of the applicants was refused. Choi petitioned for a writ of mandate to compel defendant to produce the requested documents. Prior to the hearing, the parties entered into a stipulation whereby OCGPC agreed to let Choi view the documents. Choi filed a motion to recover attorney fees as the “prevailing party” under Code of Civil Procedure § 1021.5. The petition was summarily denied by the trial court.

The trial court’s decision was reversed by the Court of Appeal. The court noted that Section 1021.5 permits recovery of attorney fees for a “prevailing party…when its action has resulted in the enforcement of an important right affecting the public interest [and] a significant benefit has been conferred on the general public.” It is not necessary for a party to have received a “final favorable judgment” but rather, the “critical fact is the impact of the action, not the manner of its resolution.” 

The court concluded that Choi was the prevailing party as she received the desired end result. Her lawsuit resulted in the enforcement of an important public right to review candidates who would ultimately control a significant amount of public money.

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In Cadkin v. Loose, 2009 DJDAR 9552, US Court of Appeals - Ninth Circuit, No. 08-55311 (June 26, 2009), the Ninth Circuit reviewed and reversed a decision rendered by the district court holding that the defendant was the “prevailing party” entitled to an award of fees where the plaintiff voluntarily dismissed the action without prejudice.

In Cadkin, the plaintiff initiated a lawsuit alleging copyright infringement, as well as other claims. Ultimately, plaintiff voluntarily dismissed the action without prejudice and the defendant sought to recover its reasonable attorney’s fees expended in defense of the litigation. The district court granted the fee application based on “controlling circuit precedent” holding that a defendant is entitled to an award even where the plaintiff has voluntarily dismissed the action without prejudice. See Corcoran v. Columbia Broadcasting System, Inc., 121 F.2d 575, 576 (9^th Cir. 1941).

The Ninth Circuit reviewed the lower court’s decision in light of the Supreme Court’s holding in Buckhannon Bd. & Care Home, Inc., v. W. Va. Dep’t of Health and Human Res., 532 U.S. 598, 604 (2001). In that case, in the context of the Fair Housing Amendments Act (FHAA) the United States Supreme Court stated that the determination of prevailing party status should be determined on whether “a material alteration of the legal relationship of the parties” has occurred. In applying Buckhannon to the Cadkin case the court also explicitly cited to recent Ninth Circuit case law holding that dismissals without prejudice do not “alter the legal relationship of parties” for attorney’s fee award purposes. See Oscar v. Alaska Dep’t Of Educ. & Early Dev. 541 F.3d 978, 981 (9th Cir. 2008)

The court noted that Copyright Act Section 505 authorizes a court to award “reasonable attorney’s fees to the prevailing party.” However, the panel concluded that the Corcoran opinion holding that a defendant is the prevailing party upon voluntary dismissal without prejudice was “clearly irreconcilable” with the controlling Supreme Court authority set forth in Buckhannon. Thus, this court reversed the attorney’s fee award, finding that plaintiff’s voluntary dismissal without prejudice still afforded the plaintiff the ability to refile its copyright claims against defendant. Accordingly, defendant was not a prevailing party and was not entitled to an award of attorney’s fees.

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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.

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In Silver Creek LLC v. Blackrock Realty Advisors, 2009 DJDAR 7165 (pdf), the California Court of Appeal – 4^th 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.

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In Smith v. Workers’ Compensation Appeals Board, 2009 DJDAR 6715, May 11, 2009, the California Supreme Court decided a case concerning the contours of Labor Code §4607. That statute provides:

“Where a party to a proceeding institutes proceedings to terminate an award made by the appeals board to an applicant for continuing medical treatment and is unsuccessful in such proceedings, the appeals board may determine the amount of attorney’s fees reasonably incurred by the applicant in resisting the proceeding to terminate the medical treatment, and may assess such reasonable attorney’s fees as a cost upon the party instituting the proceedings to terminate the award of the appeals board.”

The Plaintiffs in the case sustained injuries while working for their respective employers. The Plaintiffs were awarded partial permanent disability and future medical treatment. After some passage of time, the Plaintiffs requested additional treatment. The State Compensation Insurance Fund (SCIF), the Plaintiffs’ employers’ insurance carrier, declined the demand for further treatment. The Plaintiffs instituted proceedings to obtain the treatment. The workers’ compensation judge found that treatment remained medically necessary and authorized the requested medical procedures. The Plaintiffs then moved for attorney fees under Labor Code Section 4607. The workers’ compensation judge denied the requests, asserting that SCIF did not institute proceedings to terminate the Plaintiffs’ awards for medical treatment. The Court of Appeal reversed the determination below.

The California Supreme Court reversed the appellate court. The Court stated that Section 4607 authorizes an award of attorney fees to an employee who has successfully defended against his employer’s attempt to terminate an award for medical treatment. The employee is entitled to attorney fees only if the employer challenged the continuing necessity for the original award. Attorney fee awards are not proper where the employer or insurer has denied a request for specific treatment. Here, each plaintiff made specific requests for treatment. SCIF disputed the specific requests and did not attack the plaintiffs’ initial awards of future treatment. The Court concluded that Section 4607 did not authorize an award of attorney fees to the Plaintiffs.

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The Pigford litigation involved a group of African American farmers who alleged the U.S. Department of Agriculture denied them farm loans and otherwise discriminated against them based upon their race.  One of those farmers, Robert Homes, was awarded $300,000 against the USDA.  However, Mr. Homes' was not as successsful in his fee request filed under the Equal Credit Opportunity and Equal Access to Justice Acts.  His $192,000 fee claim was recently rejected by Judge Paul Friedman of the U.S. District Court for the District of Columbia. 

The court reasoned that Mr. Homes alleged eleven distinct claims, but only succeeded on five.  And since each claim was based on a separate set of facts, they were unrelated.  Homes' lawyers were allegedly seeking time expended on some of the unsuccessful claims, so the court rejected the request.  Judge Friedman further explained:

[S]imply reducing Covington’s fee by a fraction corresponding to the number of unsuccessful claims is not likely to result in a fair and reasonable fee for Covington’s service.

Comment:  This is another good example of how fees could and should be allocated between claims.  Whether you are the party requesting fees, or opposing the fee application, depending upon the statutory scheme, one should not rely on simple ratios based upon successful vs. unsuccessful claims (in this case, 5/11).  Consider retaining an expert to analyze the specific billing entries, and allocate the time entries to work performed on only those claims upon which the party succeeded. 

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We reported on the Ninth Circuit's opinion in McCowan v. City of Fontana here, holding that the District Court failed to consider the level of success obtained by the plaintiff in a civil rights action.  See Ian McCowan v. City of Fontana 550 F3d 918 (2008).  McCowan had been arrested and tased by officers of the Fontana police department who had mistakenly believed that he was in possession of illegal drugs.  In his subsequent excessive force case, McCowan prevailed on only one of his nine claims and recovered only $20,000 in damages via settlement, despite alleging damages in excess of $75,000.  The District Court's award of $200,000 in legal fees and costs was overturned by the 9th Circuit.

On April 24, 2009, the Ninth Circuit recently denied McCowan's petition for panel rehearing and rehearing en banc.  See Ian McCowan v. City of Fontana, 08 C.D.O.S. 4957 (April 24, 2009).  However, the court also took the oportunity to amend its original opinion, issued December 24, 2008, by clearly explaining the tasks required by the District Court after remand.  The following instructions can be found in the conclusion of the amended opinion, but were not included in the original decision:

"When awarding attorney fees on remand, the district court should adequately explain the reasonable number of hours and hourly rate it uses in calculating the fee, and appropriately adjust the award to account for McCowan's limited success on claims and damages, and for any public benefit derived form his suit."

The original Ninth Circuit opinion had merely "reversed and remanded for reconsideration of the issue of attorneys' fees and costs consistent with" the opinion.  This quote is an excellent amendment to the opinion, because it provides the court (and the rest of us) with a clear step-by-step approach to analyzing these fee applications in the context of prevailing party suits.  If the December 2008 McCowan opinion was considered an important decision, then this amended opinion is now a "must read" for all prevailing parties.    

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In Fries v. Rite Aid Corp., 2009 DJDAR 5721 (April 24, 2009), the California Court of Appeal, First Appellate District clarified an issue concerning the procedure for properly filing a memorandum of costs where a plaintiff voluntarily dismisses an action. The court analyzed whether a party who seeks costs after a voluntary dismissal, is required to file a proposed judgment in addition to the memorandum of costs. The court concluded that there was no legal requirement that the party file a proposed judgment in addition to the cost memorandum.  The court clarified a procedural issue that has been pending for some time. The importance of this question from an attorney fee standpoint is that when any California statute refers to the award of “costs and attorneys fees,” the fees may be recoverable as a component of the costs to be awarded. Attorneys’ fees allowable as costs may be fixed upon noticed motion, at the time a statement of decision is rendered and/or, as in this case, on a cost memorandum supported by affidavit, made concurrently with a claim for other costs.

In Fries plaintiff filed a complaint against Rite Aid but soon thereafter filed a request for voluntary dismissal of the action. On the day that the plaintiff dismissed the case, Rite Aid filed a memorandum of costs. The plaintiff moved to strike or tax the costs arguing that the memorandum contained procedural defects because the defendant failed to file a proposed judgment or an order of dismissal simultaneously with the cost memorandum. The trial court disagreed with the plaintiff noting that the defendant complied with California rule of court 3.1700.

Under California rule of court 3.1700 a prevailing party who claims costs must serve and file a memorandum of costs within 15 days after the date of the mailing of the notice of entry of judgment or dismissal by the clerk under CCP § 664.5 or the date of service of written notice of entry of judgment or dismissal, or within 180 days after entry of judgment, whichever is first. A memorandum of costs must be verified by a statement of the party, attorney or agent that to the best of his or her knowledge the item of costs are correct and were necessarily incurred in the case.

The question framed by the Court of Appeal was whether as the plaintiff maintained, that the defendant was also required to file a proposed judgment along with their memorandum of costs. The court concluded that California Rules of Court 3.1700 does not require a party to do so. The plaintiff relied on a passage in a frequently relied on California practice guide for the proposition that “a prevailing party who claims costs shall serve and file a memorandum of costs after service of written notice of entry of judgment or dismissal.” The appellate court disagreed noting that the language in the practice guide referred to involuntary rather than voluntary dismissal because of the reference to CCP § 664.5.

Counsel should be guided by the clarification when filing a memorandum of costs seeking to recover either costs, attorneys’ fees or both in a voluntary dismissal scenario.

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Several issues should be considered by counsel prior to beginning the task of drafting a petition seeking an award of attorneys’ fees. Obviously, the applicant must be entitled to a fee award. Most frequently, entitlement to an award arises under a contract, a statute or case law granting the right to attorneys’ fees. Regardless of the authority for an award, it is critical for the applicant to understand that the burden of proof will lie with the petitioner in establishing the amount, necessity and reasonableness of the fees incurred. Under the Supreme Court authority of Hensley v. Eckerhart, 461 U.S. 424 (1983) the fee claimant has the burden of proving that the fees requested were both reasonable and necessarily incurred.

The fee petition is typically set up via a written motion. The motion should set forth the legal and factual basis for the award, including declarations establishing the foundational facts supporting the claim.

A successful fee petition is based on in part on a determination that the fees sought are reasonable. This is frequently referred to as the lodestar. The lodestar is described as the number of hours reasonably expended in the litigation multiplied by a reasonable hourly rate. This calculation provides the foundation for establishing the reasonableness of the lawyer’s services. The applicant must be aware that various factors will justify moving the award up or down depending on the success achieved and the capability of counsel handling the case. Particular attention should also be paid to the rates sought and whether they are in compliance for the type of case in the relevant community. 

The declarations submitted in support of the fee award will be scrutinized by the court and opposing counsel, particularly where numerous lawyers and paralegals participated in the case. In some cases it may also be prudent to retain an expert to provide testimony via declaration supporting the application. Where a fee request is not significant, retaining an expert may be hard to justify from an economic standpoint. However, where the fees are substantial an expert is particularly necessary to justify the award, particularly if the underlying record is not well developed.

Counsel should also expect that opposing counsel will retain their own expert to scrutinize the fee petition and the supporting declarations. Extra care should be made to establish, in the first instance, that the fees were necessary and reasonable. 

As a starting point to the entire process, it is fundamental that all of the billers keep accurate and contemporaneous time records of the fees incurred. In our experience, courts will either disallow or substantially reduce the fees sought where adequate and contemporaneous time records have not been maintained. The bills should demonstrate that time was recorded in specific detail, describing the work performed and tasks accomplished usually in one tenth of an hour increments.

The fee applicant should also keep in mind that a significant application for fees can often lead to a totally new round of litigation including writing discovery and depositions. The cost and potential recovery associated with the petition must be considered at the outset. 

A successful fee application begins at the outset of the representation. The manner in which time is recorded and the format and style of the bills will play a significant role in the outcome of the petition. It is extremely important that accurate and meaningful time entries be entered on a contemporaneous basis from the beginning to end of the litigation. This greatly enhances the possibility of obtaining a successful result.

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Under California Law numerous exceptions exist to the traditional “American Rule” wherein each party is required to pay their own attorneys’ fees in litigation. The exceptions exist in three general categories.

• Provisions provided by contract authorizing the award of fees
• State statutes which authorize fee awards in particular actions including but not limited to CCP § 1021.5. The statute is known as the Private Attorney General Rule
• Theories rooted in equity and fee awards for wrongful conduct

The potential for a fee award is a critical consideration for a party to consider when initiating or defending litigation. Obviously, the cost of litigation including a fee award, can become a substantial factor in developing litigation strategy. Therefore, in the initial planning for litigation, it is important to determine whether a statute, a common law theory, or a contractual provision might provide for some form of fee shifting. 

There are literally hundreds of California statues which provide for fee shifting in numerous areas including but not limited to the Government Code, civil rights, consumer protection, employment, general civil procedure, immigration and real property.

An important consideration on the topic of fee shifting is that such awards are constrained by ethical considerations. For example, California Rule of Professional Conduct 4-200 provides as follows:

A.     A member should not enter into an agreement for, charge, or collect an illegal or unconscionable fee.

B.      Unconscionability of a fee shall be determined on the basis of all the facts and circumstances existing at the time the agreement is entered into . . . The following factors are considered:

1.        The amount of the fee in proportion to the value of the services performed.

2.        The relevant sophistication of the member and the client.

3.        The novelty and difficulty of the question involved and the skill required to perform the legal services properly.

4.        The likelihood, if apparent to the client, that the acceptance of a particular employment will preclude other employment by the member.

5.        The amount involved and the results obtained.

6.        The time limitations imposed by the client or by the circumstances.

7.        The nature and length of the professional relationship with the client

8.        The experience, reputation, and the ability of the attorneys performing the services.

9.        Whether the fee is fixed or contingent.

10.     The time and labor required.

11.     The informed consent of the client to the fee.

All of the factors noted here are important in calculating the amount of fee award. Counsel should also use care to avoid conflicts of interest when an attorney is settling the merits of a case and the fee award simultaneously. That scenario can create a situation creating adversity between the lawyer and the client.

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Very often the final judgment is issued by the trial court, which triggers the deadline for appealing the decision.  In the interim, the trial court has yet to decide the fee application filed by the prevailing party.  The fee award can then be issued after expiration of the deadline to appeal the final judgment.  As a practitioner, if you wish to claim error in the fee award, what do you do?  The answer is either appeal, separately, the fees decision, or appeal both rulings in the same Notice of Appeal.  Failing to do so may result in your inability to claim error in the fee application ruling.  

In Colachis v. Salazar, a recent unpublished opinion by the California Court of Appeal, Second District, a pro per plaintiff received an unfavorable judgment in September 2007.  His subsequent motion to vacate the judgment was also denied.  Plaintiff then received a $58,104 attorney fee award issued against him in November 2007.  However, Plaintiff's Notice of Appeal only mentioned the "judgment and order denying motion to vacate judgment.”  When Plaintiff attempted to challenge the fee order, the court concluded Plaintiff’s failure to expressly appeal the postjudgment fees order was fatal.  Although the Colachis decision is unpublished, the court relied upon Colony Hill v. Chamaty, 143 Cal.App.4^th 1156 (2006) -- which is a published opinion -- to conclude that appellant’s failure to appeal from the postjudgment attorney fees award had deprived the court of jurisdiction to consider the issue. 

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Last fall I served as an expert in a case which analyzed the loadstar claimed by the prevailing parties in City of Los Angeles v. County of Kern, Case No. CV 06-5094 GAF (VBKx) (September 3, 2008).  The written opinion by U.S. District Judge Gary Allen Feess has been cited as "must reading" on the methodology that can be used by a federal district judge to reduce the lodestar in civil rights cases.  See California Attorneys' Fees website.  The decision illustrates more than a few pitfalls which should be avoided by litigation counsel, particularly when there are multiple lawfirms billing to the file and the duplication of efforts that can result therefrom.  The decision also outlines an approach which can be utilized by anyone interested in how best to evaluate the reasonableness of attorney invoices before paying.  To read the full decision, click here, or click on the column to the left under "Links."  

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