Court Properly Awards Contingency Attorney Fees as Restitution

Posted on November 2, 2011 by David J. McMahon

In People v. Taylor, the California Court of Appeal for the Third Appellate District decided a unique case involving a claim for victim restitution under Penal Code Section 1202.4(f)(3)(H). The case was unique in that the restitution claim also included a contingent attorney fee component. The trial court approved the restitution claim, including the fee component.

On July 29, 2007, the defendant improperly crossed a double yellow line while driving his vehicle. He caused a head‑on collision with another vehicle and immediately fled the scene.  The victim suffered serious personal injuries and property damage. After he was apprehended, the defendant pled nolo contendere to hit and run driving causing injury. The trial court sentenced him to six years in prison.

The court then ordered $44,554.83 in victim restitution, including $8,333.33 in attorney fees under the Penal Code section noted above. In response, the defendant argued that the award of victim restitution for attorney fees was improper because it was for a contingency fee paid by the victim without a prior determination as to whether the fee was “reasonable.”

The Court of Appeal affirmed the decision, noting that under Penal Code Section 1202.4(f)(3)(H), restitution is authorized for “actual and reasonable attorney’s fees” which the victim incurred due to the defendant’s criminal conduct. 

The Court of Appeal noted that the traditional lodestar method is a fee shifting mechanism applied in many civil litigation contexts. The court noted that the policy reasons underlying victim restitution presents different interests. This court determined that when uncontradicted evidence exists that a victim incurred attorney fees due to the defendant’s actions, it did not constitute an abuse of discretion to award restitution for the fee without application of the traditional lodestar approach.

Ninth Circuit Finds Insufficient Basis for Large Attorney Fee Award

Posted on September 26, 2011 by David J. McMahon

In Jones v. GN Netcom Inc., 2011 DJDAR 12668 (2011), the U.S. Court of Appeal for the Ninth Circuit decided an issue that frequently arises in class action litigation. That issue relates to the often minimal benefits paid to class members while plaintiffs’ class counsel fees are often very high.

The case arose when numerous products liability class actions were fled against defendant Motorola Inc. The lawsuits alleged that Motorola purposefully failed to disclose the risk of hearing impairments caused by the use of Bluetooth headsets. The parties participated in mediation which resulted in a settlement. Motorola agreed to pay $100,000 in cy pres awards. The agreement also carved out up to $800,000 for fees to class counsel, and $12,000 for the class representative.

Certain class members objected to the fee award. Despite the objections, the district court approved the settlement and awarded $850,000 to class counsel for fees and costs based on the lodestar method. The trial court made the award despite the fact that the fees awarded were eight times more than the class recovery. The class objectors argued that the settlement was not fair and reasonable. They claimed the fee award advanced the interests of class counsel over the class itself.

The Ninth Circuit reversed the attorney fee award, noting that the trial court had an independent obligation to ensure that an award is reasonable. Because the record in the trial court did not contain an explicit calculation of the method utilized to calculate the lodestar amount, the Ninth Circuit found the award deficient. The Ninth Circuit found the record was not sufficient to support the award. Specifically, the Appellate Court found no comparison between the settlement’s attorney fee award and the benefit to the class, or degree of success in litigation. As such, there was an insufficient basis for determining the reasonableness of the award.

 

US Supreme Court Limits Fee Enhancements to "Exceptional Cases"

Posted on April 30, 2010 by Gary A. Bresee

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.

Level of Success a Key Factor in Civil Rights Fee Award Cases.

Posted on February 6, 2009 by John "Jack" S. Pierce

The 9th Circuit has recently overturned an attorneys' fee award of $200,000 by the District Court in a civil rights case, holding that the District Court failed to consider the level of success obtained by the plaintiff in that matter.  See Ian McCowan v. City of Fontana 550 F3d 918 (2008)

In that case 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.  After his release, he sued the officers and the City of Fontana for civil rights violations in the U.S. District Court for the Central District of California alleging the use of excessive force, the making of an arrest without probable cause and deliberate indifference on the part of the city of Fontana.

McCowan prevailed on only one of his nine claims and recovered only $20,000 in damages after seeking damages in excess of $75,000.  The District Court's award of $200,000 in legal fees and costs was appealed to the 9th Circuit and was overturned.

The 9th Circuit, applying the LODESTAR method of analysis, held that the reasonableness of a civil rights attorney fee award in a 42 USCA 1988 case is determined primarily by reference to the "level of success" achieved by the plaintiff.  It further held that civil rights attorney fees must be "adjusted downward" where the plaintiff has obtained limited success on his pleaded claims and the redult does not confer a meaningful public benefit.  The 9th circuit reversed after finding that McCowan's lawsuit did not confer a benefit to the public since the claims were brought against two officers and not the entire police department and settlement did not result in a change in any policy of the police department.

The 9th Circuit remanded the case to the District Court for reconsideration of the fee issue consistent with the 9th Circuit's opinion.