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

In Nevis Homes LLC v. CW Roofing Inc., 2013 DJDAR 6187(2013) the California Court of Appeal for the Second Appellate District decided a procedural issue pertaining filing a memorandum of costs. The court clarified the rules and stated that no statute or rule of court specifically exempts cost memoranda from the five-day extension rule for pleadings served by mail under California Code of Civil Procedure section 1013(a).

An association filed a lawsuit against a builder alleging defects in construction. The builder filed a cross action against a roofing company, one of the subcontractors on the project. The homeowners’ association later settled with the builder, and the builder soon thereafter settled with the roofer. 

After dismissal of the cross-complaint against the roofer, the builder mailed a notice of dismissal. However, counsel for the roofer did not file the cost bill until 19 days after the notice of dismissal was entered. 

The builder moved to strike the cost bill as untimely, arguing that the cost bill should have been filed within 15 days after the dismissal with no extension for mailing. The trial court granted the motion to tax costs in its entirety.

The Court of Appeal noted that California Rules of Court Rule 3.1700(a)(1) provides that a party who claims costs, must serve and file a memorandum of costs within 15 days after the date of service of written notice of entry of judgment.

The court also noted that Code of Civil Procedure Section 1013 provides an extension of five days for cases of service by mail. 

The builder argued that costs memoranda were exempt from the five-day mailing extension pointing out that any reference to CCP§1013 was “conspicuously absent” from Rule 3.1700.  

However, the court of appeal could find no statute or rule of court which specified that the normal five-day extension for service by mail did not apply to a memorandum of costs. 

On that basis the court of appeal clarified the rule and stated that the five-day extension under CCP§1013(a) was fully applicable.

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Tags: Appeals, California Rules of Court Rule 3.1700(a)(1), Code of Civil Procedure section 1013(a), Nevis Homes LLC v. CW Roofing Inc., five-day extension rule for pleadings, memorandum of costs

By David J. McMahon & Jeevan Subbiah

Introduction

Many of our litigation management audits involve complex environmental cleanup cases. In these cases, it is important to first evaluate the underlying matter, including the fact patterns of the various lawsuits, in relation to the contested coverage provisions. Then we examine the manner in which the tendered fees and expenses were incurred, including the legal and consultant work performed. Many of our audits involve excess liability indemnity policies with large self insured retentions often in excess of $30 million. Subject to the terms and conditions of the policies, the insurer typically has no payment obligation until and unless the self insured retention is appropriately exhausted by the appropriate payment of covered claims. The insurers obligation arises for expenses in excess of the policy’s self insured retention.

Evaluation of the Policy

It is important to thoroughly evaluate the definition of "Defense Costs" when reviewing the applicable policy language. In addition, the policies may also contain exclusions for property damage which is owned, occupied by or rented to the insured. These claims need to be carefully evaluated.

An insurer may find it beneficial to hire an independent consultant or expert to assist in the review of the insured’s fee and cost claim. We can analyze the back-up submitted by the insured, including information contained in databases which may have been submitted in support of insured’s claim. In addition, we can review any independent investigation of the facts and circumstances concerning the underlying incident.

Burden of Proof is on the Insured

Generally, the burden is on the insured to demonstrate that a loss falls under the coverage provisions of the insurance contract. (“The burden is on the insured to prove that a loss falls within the policy’s coverage”; “An insured seeking to recover for a loss under an insurance policy has the burden of proving that a loss occurred and also that the loss was a covered event within the terms of the policy.”). 

When part of the loss is covered under a policy and part is not, the insured typically has the burden of proving the proper allocation.

Reviewing Costs

In our audits, we often find that many questionable costs require further investigation. For example:

1. Inefficient and Unreasonable Cleanups – The environmental cleanup conducted by the insured and the insured’s contractors may have been conducted in an inefficient manner, resulting in potentially unreasonable costs. We can review the total dollar amount expended in comparison to the work performed in other similar environmental cases to see if inefficiencies exist.
2. Work Conducted by Specific Contractors - Specific contractors (vendors) may need particular scrutiny. For example, environmental remediation work performed by a particular vendor may need to be validated in detail and distinguished from other work. Also, specific work may be excluded by the policy (such as work conducted on a right of way) or may be covered under the primary coverage obtained by the insured.
3. Community Information – Our review of underlying documents related to the matter may result in finding a document, such as a letter from a neighbor or community member, that highlights the inefficient nature of the environmental cleanup. In addition, the insured may cleanup property that was not impacted by the event or was not in the immediate vicinity. Such “aggressive” cleanup work may have been done for “public relations purposes” to ward off potential lawsuits. If so, this work may not be covered by the policy since it may not be a covered defense cost. In addition, contractors sometimes overcharge for inefficient work.
4. Vendor Documentation - The documentation submitted by the insured in support of the charges for environmental remediation contractors may be deficient and the insured may fail to meet its burden of establishing that these particular charges are covered by the policy. Often a review of one contractor will result in findings that are equally applicable to the other contractors.
5. Charges Previously Submitted to First Party Insurers – A review of the invoices may also show that the charges were previously submitted to the insured's first party insurers before submission to the liability carrier. This may be an attempt to “double dip” on recoverable costs or fees.

The examples set forth above are just a few illustrations of the potential unreasonable costs and activities that may be identified from a careful analysis of the bills and supporting documentation. 

Conclusion

After reviewing all the foregoing, including the applicable correspondence relating to the claim, we often are able to reach conclusions on whether the expenses are reasonable and were necessarily incurred as required by the applicable policy provisions. We can also determine whether a portion of the expenses were also incurred for activities which are excluded from coverage. We can quantify this amount in both our charts and report. These documents may provide support for negotiation, settlement or the insured to submit additional information for review. 

Please feel free to contact us if you have questions about the protocol referenced above.

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Tags: Attorney Fees, Complex Environmental Fee Claims, Litigation Management, environmental cleanup

In Duchrow v. Forrest, 2013 DJAR 5534 (2013) the California Court of Appeal for the Second Appellate District decided a unique fee claim arising in a procedural context.

An attorney, the Plaintiff, retained counsel to sue her employer for employment‑related claims. Under the retainer agreement, the Plaintiff and the lawyer agreed that the lawyer would be compensated on an alternative fee arrangement involving both hourly rates and on a contingency fee basis.

At the beginning of the trial, Plaintiff’s counsel moved to withdraw from the case. The Plaintiff did not oppose that request and the court granted the motion to withdraw. The Plaintiff apparently could not find another attorney to represent her. The case was subsequently dismissed. 

After the dismissal was entered, counsel sued the Plaintiff for breach of the retainer agreement, alleging he was entitled to approximately $40,000 in fees. Near the end of a week long trial, the lawyer then filed a motion to amend the complaint, increasing the amount of fees at issue to over $300,000. Counsel claimed the new sum was valid as it represented compensation for additional work on the file. The trial court granted the motion to amend and the jury awarded the lawyer $140,057 in fees.

The Plaintiff filed an appeal and the Court of Appeal reversed the trial court’s decision under Code of Civil Procedure Section 473(a)(1).

The court noted that a trial Judge has discretion to determine whether to grant an amended complaint. Despite the discretion, the court of appeal also noted that a trial court must still consider mitigating factors, such as untimely presentation of the amendment. The court of appeal noted that unexplained lengthy delay in seeking the amendment is a valid reason for denying a motion for leave to amend. 

The court of appeal concluded that the lawyer should have included the true amount sought in the original complaint or should have sought leave to amend at an earlier date, not during trial. The panel stated that the delay in seeking the amendment deprived the Defendant of the ability to prepare for trial and the motion should have been denied on that basis alone.

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Tags: Appeals, Attorney Fees, Code of Civil Procedure Section 473(a)(1), Contingency Fees, Duchrow v. Forrest

In Kleveland v. Siegel & Wolensky LLP, 2013 DAR 4961(2013) the California Courts of Appeal for the Fourth Appellate District affirmed the denial of a special motion to strike and the award of costs and attorney fees as sanctions arising out of family trust litigation.

The Plaintiff filed a malicious prosecution suit against a law firm. The case was hotly contested and resulted in years of litigation and multiple appeals.  

After the contentious litigation, one party (the “Plaintiff”) filed a malicious prosecution complaint. The “Defendant,” a law firm, filed a special motion to strike under California Code of Civil Procedure §425.16 in response to the complaint. CCP §425.16 is commonly referred to as the anti‑SLAPP statute. 

The trial court concluded that the Plaintiff’s complaint had merit and that the Plaintiff would likely prevail. Thus, it denied the law firm’s special motion to strike under CCP §425.16. The trial court also awarded the Plaintiff attorney fees and costs as sanctions concluding that the special motion to strike had been filed for improper purposes.

The court of appeal affirmed the lower court decision. The court of appeal concluded that the law firm’s anti-SLAPP petition did arise from valid first amendment activity.  However, the court of appeal also concluded that the Plaintiff was likely to prevail on the merits and that the petition was filed with the purpose of forcing a settlement, which the court of appeal found to be an improper tactic.  On that basis, the court of appeal concluded that the appeal was not meritorious and that sanctions were properly granted.

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Tags: Appeals, Attorney Fees, Code of Civil Procedure Section 425.16, Kleveland v. Siegel & Wolensky LLP, anti-SLAPP statute

By David McMahon and Brendan Mullan

The California Supreme Court recently held that work product protection applies to recordings of witness interviews conducted by attorneys or their agents and information concerning the identity of those witnesses in Coito v. Superior Court.

The Coito decision changed the landscape in California regarding the application of the work production doctrine to witness statements and witness identities. 

Work product is codified in California under Civil Code §§ 2018.010 et. seq. Absolute work product is afforded to writings and recordings that reflect an “attorney’s impressions, conclusions, opinions or legal research or theories.” Civ. Code § 2018.030(a). 

Qualified work product protection is afforded to all other work product. Qualified work product is “not discoverable unless the court determines that denial of discovery will unfairly prejudice the party seeking discovery in preparing that party’s claim or defense or will result in prejudice.” Civ. Code § 2018.030(b). 

Now in California, witness statements obtained as a result of interviews conducted by an attorney, or by an attorney’s agent at the attorney’s behest, constitutes work product under Civ. Code § 2018.030. Coito, 54 Cal. 4th at 494. Whether the statements are entitled to absolute or qualified work product is determined on a case by case basis. Id. at 496. 

The witness statements may be entitled to absolute protection if the attorney resisting discovery can show that disclosure would reveal the attorney’s “impressions, conclusions, opinions, or legal research or theories.” Even if the attorney cannot make that preliminary showing, the statements are entitled to qualified work product protection as a matter or law. Id. The statements may be subject to discovery only if the party seeking discovery can show that “denial of discovery will unfairly prejudice him in preparing his claim or will result in an injustice.” Id. 

To that extent, the Coito decision disapproved prior decisional law set forth in Fellows v. Superior Court, 108 Cal. App. 3d 55 (1980); People v. Williams, 93 Cal. App. 3d 40 (1979); Rodriguez v. McDonald Douglas Corp., 87 Cal. App. 3d 626 (1978); Kadlebach v. Amaral, 31 Cal. App. 3d 814 (1973); Greyhound Corp. v. Superior Court, 56 Cal. 2d 355 (1961); and Nacht & Lewis Architects, Inc. v. Superior Court, 47 Cal. App. 4th 214 (1996).

The Coito decision is also notable for its holding regarding the identity of witness statements and its effect on Form Interrogatory 12.3. 

Form Interrogatory 12.3 seeks the contact information for any individual the defense counsel has obtained a written or recorded statement. The Coito court held that 12.3 generally must still be answered but the identity of witnesses from whom counsel has obtained statements may be entitled to work product protection upon a preliminary showing by the attorney resisting discovery that the information sought is entitled to work product protection. However, statements independently prepared by witness are not subject to protection. 

The decision is important from a litigation management standpoint. Now, it is clear that witness interviews can be delegated to lower billing-rate investigators and that work product protections will still apply.

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Tags: Appeals, California Civil Code sections 2018.010, Civil Code section 2018.030(a), Civil Code section 2018.030(b), Coito v. Superior Court, Fellows v. Superior Court, Form Interrogatory 12.3, Greyhound Corp. v. Superior Court, Kadlebach v. Amaral, Litigation Management, Nacht & Lewis Architects, Inc. v. Superior Court, People v. Williams, Rodriguez v. McDonald Douglas Corp., absolute work product , qualified work product

By David McMahon & Jeevan Subbiah

In our “Startup Blog” series, How to Select New Counsel and Manage Legal Fees, we have been discussing the early stages of how to hire a lawyer for your startup. You should be aware that there are different payment methods available for legal fees. In this post we are going to focus deeper on deferred payment models.

One startup executive told us his story of shopping for legal counsel. He was so surprised and startled when a law firm offered him deferred billing that he decided to look for a different firm. He questioned the law firm’s motives since his startup was very capable of paying for its legal work. He wondered if the law firm was taking advantage of him and trying to make more money off of his company. Deferred payment models, including deferred billing, are not a deceptive practice and some startups should consider this alternative fee arrangement.

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Tags: ABA Model Rule 1.7, ABA Model Rule 1.8, Conflict Of Interest: Current Clients, How to Select New Counsel and Manage Legal Fees, Litigation Management, alternative billing, alternative fee arrangement, deferred payment models

By David McMahon & Jeevan Subbiah

This is a follow up in our series, How to Select New Counsel and Manage Legal Fees, related to litigation management for startup companies to help ease the frustration and confusion of hiring and managing legal counsel for the first time. As you may recall, previously we have discussed typical legal needs for a startup, tips for selecting an attorney, big and small firm size, and crowdfunding and The Jobs Act.

The initial stages of litigation management become important as you close in on hiring counsel. Early litigation management can include negotiating a billing rate appropriate for your legal needs, determining whether your work can be billed at an hourly or project rate, considering deferred billing and regularly reviewing your legal billing for inconsistencies and excessive charges. As we have noted earlier in this series, legal billing is changing drastically due to the challenging economy. Many common billing practices, such as billing clients for routine overhead costs, such as utilities, copy services, library maintenance and rent, are considered excessive. You may want to discuss these types of costs in advance with your lawyer. In addition, you should consider having your legal counsel managed either by a dedicated person internally or by a third party law firm. 

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Tags: Alternative Fee Arrangements, Attorney Fees, Client Alerts, How to Select New Counsel and Manage Legal Fees, Litigation Management

My partner, Gary Bresee, recently blogged on the recent Ninth Circuit decision in Padgett v. Loventhal, 2013 DAR 1933 (2013). 

As Gary noted, in that case, the US Court of Appeals for the Ninth Circuit overruled the decision of trial judge James Ware, and remanded the case for further consideration. Judge Ware made significant reductions in the fees requested by the plaintiffs in a civil rights case without detailed explanation or computation of the reasons for reducing the attorney fee claim. The panel was critical of the reduction as the district judge slashed the fees and costs without any detailed description or supporting calculations for the reductions ordered.

The Ninth Circuit reversed the decision of the trial judge, noting that district courts must give reasons for declining to award costs and for reducing costs based on a partial victory. 

Another key take away issue from the Ninth Circuit’s decision relates to public policy considerations relating to judicial economy. Judge Ware recently retired. Now a new judge will have to be assigned to the case to clarify the award and the basis therefore. A properly documented decision would have alleviated these additional burdens and costs.

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Tags: Appeals, Attorney Fees, Padgett v. Loventhal

In Lucky United Properties Investments Inc. v. Lee, 2013 DAR 1614 (2013), the California Court of Appeal for the First Appellate District decided when interest begins to accrue on an award of prejudgment interest in the attorney fee context. The ultimate holding in the case is that interest on a prejudgment award of attorney fees accrues upon the entry of judgment. A different rule is applicable for postjudgment interest.

The case arose from complex and lengthy litigation. Initially, the plaintiff filed a malicious prosecution complaint against the defendant arising from a lawsuit over real property. The defendant responded by filing a cross‑complaint for malicious prosecution against the plaintiff.

Both parties subsequently filed special motions to strike under the anti‑SLAPP statute. The trial court granted specific relief and also awarded the plaintiff’s attorney costs and attorney fees in connection with the anti‑SLAPP motion. The plaintiff and the defendant continued to litigate the proper fees which were the subject of the award. The litigation continued on for several years. (See prior discussion of the case here.)

The trial court issued an order containing a computation of the interest the defendant owed to the plaintiff based on outstanding judgments. The plaintiff’s attorney challenged the trial court’s calculation, arguing that the trial court had miscalculated the appropriate amount of interest owed on the attorney fee award.

The court of appeal reversed the trial court’s decision. The court reiterated that if costs are established by a judgment, but the full amount of the award is later ascertained, the court clerk enters the costs on the judgment after the amount is determined.

Based on the foregoing, interest will typically accrue on the prejudgment costs and attorney fees portion of the judgment upon the entry of the judgment.

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Tags: Appeals, Attorney Fees, Lucky United Properties Investment Inc. v. Lee, Postjudgment Interest, anti-slapp motions, prejudgment costs

In Grossman v. Park Fort Washington Association, 2013 DAR 747 (2013), the California Court of Appeal for the Fifth Appellate District decided an interesting fee case arising out of a dispute between property owners and a homeowners association.

The property owners built improvements on their property without obtaining the approval from their homeowners association (“the Association”). The Association contended that the applicable bylaws prohibited the improvements that were constructed by the property owners without obtaining required permits and paying fees. The Association imposed a daily fine until the improvements were completely removed from the premises.

The trial court reviewed the bylaws and concluded that the rules allowed the constructed improvements. The judge vacated the fine that was imposed by the Association. The property owners then filed a petition for attorney fees. They sought the recovery of the significant time spent by their lawyers on a mediation and related alternative dispute resolution activities. The trial court awarded the property owners more than $100,000 in fees.

The Association appealed the fee award. The Association focused on the portion of the award rendered for the fees incurred for the mediation. The court of appeal reviewed the Association’s arguments but did not find them to be persuasive. The court noted that the applicable statute (the Davis‑Stirling Act) contains a mandatory attorney fees provision. The statute states that in an action to enforce bylaws and related documents, the prevailing party shall be awarded reasonable attorney fees and costs.

The court noted that the Association failed to provide any persuasive legal authority that the Legislature intended to exclude from any applicable fee award for work incurred in ADR‑type of activities. The court of appeal affirmed the award of fees on that basis.

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Tags: ADR, Appeals, Attorney Fees, Civil Code sections 1351-1378, Davis‑Stirling Act, Grossman v. Park Fort Washington Association, Prevailing Party Suits, alternative dispute resolution, homeowners association