March 2019 Update
STATUTES AND RULES
FEHA. Effective January 1, 2019, Govt C §12965(b) of the Fair Employment and Housing Act was amended to provide that, notwithstanding CCP §998, a prevailing defendant cannot be awarded fees and costs unless the court finds the action was frivolous, unreasonable, or groundless when brought, or the plaintiff continued to litigate after it clearly became so. See Huerta v Kava Holdings, Inc. (2018) 2018 Cal App Lexis 1025; Arave v Merrill Lynch, Pierce, Fenner & Smith, Inc. (2018) 19 CA5th 525. Note that statutes that add or amend provisions for attorney fees are generally applied to pending cases (see §2.6). See §§2.48, 2.80, 3.82.
California Public Records Act. Government Code §6259(d), which previously entitled a prevailing “plaintiff” to fees, was amended effective January 1, 2019, to clarify that the award is made to a prevailing “requester.” See National Conf. of Black Mayors v Chico Community Publ’g, Inc. (2018) 25 CA5th 570, in which the court of appeal held that attorney fees may not be awarded under the CPRA for “reverse-PRA” suits, i.e., actions seeking to prevent the disclosure of public records. See §3.87.
California Rules of Professional Conduct. The Rules of Professional Conduct were extensively revised effective November 1, 2018, and changes were incorporated throughout this update. For example, Rule 1.5.1 now clarifies that the rules governing division of fees among counsel do not apply to court-ordered fees. See §1.19.
Tax Treatment of Attorney Fees. The general rule of Commissioner v Banks (2005) 543 US 426, 125 S Ct 826, makes contingent attorney fees taxable to both the attorney and client, and creates a double taxation that is mitigated by statute only in certain unlawful discrimination and whistleblower cases. Noncorporate individual clients who pay contingent fees out of a recovery can no longer deduct those fees as miscellaneous itemized deductions since the Tax Cuts and Jobs Act (Pub L 115–97, 131 Stat 2054) eliminated miscellaneous deductions for tax years 2018 through 2025. See §§1.21–1.24.
Federal Local Rules. The Northern District of California revised its Procedural Guidance for Class Action Settlements (effective November 1, 2018), which discusses in detail the type of documentation required to obtain attorney fees under a class action settlement. See §3.87.
Eligibility and Entitlement to Fees
In Rimini St., Inc. v Oracle USA, Inc. (2019) ___ US ___, 139 S Ct 873, the United States Supreme Court decided that the term "full costs" in the Copyright Act (17 USC §505) does not permit recovery of any costs other than those specified in the general federal costs. However, the Rimini decision did not address a line of Ninth Circuit cases holding that nonstatutory litigation costs incurred by attorneys and billed to clients may be recovered as attorney fees rather than costs. See §9.130.
In Heller Ehrman LLP v Davis Wright Tremaine LLP (2018) 4 C5th 467, the California Supreme Court held that a dissolved law firm does not have a property interest in the hourly fees paid to departed attorneys on cases that were previously handled by the firm, nor to the profits generated on those cases. See §1.19.
In Olive v General Nutrition Ctrs., Inc. (2018) 2018 Cal App Lexis 1210, the court of appeal held that a trial court was authorized to find that there was no prevailing party under CC §3344 (unauthorized use of likeness) because both sides obtained limited success. The appellate court adopted the prevailing party analysis employed in Hsu v Abarra (1995) 9 C4th 863 for CC §1717 cases. See §§2.45, 10.53.
Although attorney fees are not recoverable under the California Public Records Act (Gov C §6259(d)) for “reverse-PRA” suits, they may be awarded under CCP §1021.5 if all the elements of that statute are met. See, e.g., Pasadena Police Officers Ass’n v City of Pasadena (2018) 22 CA5th 147 in §3.87.
In People v Investco Mgmt. & Dev. Co. (2018) 22 CA5th 443, the court of appeal held that specially appearing investors were entitled to fees under CCP §1021.5 against a state agency and defendants for successfully opposing a proposed settlement when the agency had opposed the investors’ objections to the settlement. See §3.61.
In AMN Healthcare, Inc. v Aya Healthcare Servs., Inc. (2018) 28 CA5th 923, the court of appeal affirmed a fee award under CCP §1021.5 in favor of former employees/defendants who obtained declaratory relief that invalidated nonrecruiting clauses in their contracts and vindicated their right to practice their professions under Bus & P C §16600. See §3.46.
In Heron Bay Homeowners Ass’n v City of San Leandro (2018) 19 CA5th 376, the court of appeal held that the personal interests of a plaintiff homeowners association in a CCP §1021.5 lawsuit were too speculative to preclude attorney fees when its members’ desire to avoid property value losses “was at least once removed” from the success of the environmental litigation. See §3.68.
The court of appeal in Department of Forestry & Fire Protection v Howell (2017) 18 CA5th 154 denied attorney fees to prevailing defendants under CCP §1021.5 because damages and fees that defendant avoided by defeating the case were disproportionate to plaintiff’s financial burden. See §3.68.
In LAOSD Asbestos Cases (2018) 25 CA5th 1116, 1123, the court of appeal held that, although the trial court lacked discretion to deny CCP §1032 costs to a prevailing defendant based on the losing plaintiff’s inability to pay, a different rule applies to expert witness fees under CCP §998, which requires consideration of several factors, including ability to pay. See §3.69.
Fee Awards Based on Contractual Fee Clauses
In California-American Water Co. v Marina Coast Water Dist. (2017) 18 CA5th 571, the court of appeal held that an action to avoid contract enforcement is “an action on a contract.” See §4.50.
A prevailing defendant may be awarded contractual fees even if the plaintiff’s action against other defendants remains to be decided. See Burkhalter Kessler Clement & George LLP v Hamilton (2018) 19 CA5th 38 in §4.74.
In Shapira v Lifetech Resources, LLC (2018) 22 CA5th 429, the court of appeal held that plaintiff’s request for voluntary dismissal under CC §1717(b)(2) should have been granted, even though it was made just before written closing arguments were due and cut off defendant’s potential recovery of attorney fees. See §4.83.
Attorney Fees Awarded as Sanctions
In Ponce v Wells Fargo Bank (2018) 21 CA5th 253, the court of appeal reversed CCP §128.7 sanctions against plaintiffs and their attorneys, holding that pleadings cannot be presented to the court for an “improper purpose” if they are not frivolous. See §6.16.
Methods of Fee Calculation
In Vogel v Harbor Plaza Ctr. (9th Cir 2018) 893 F3d 1152, the Ninth Circuit held that the lodestar method was required following a default judgment in a statutory fee-shifting case and the court’s local rule’s schedule for fees in default judgment cases was not presumptively reasonable. See §8.10.
In Glaviano v Sacramento City Unified Sch. Dist. (2018) 22 CA5th 744, the court of appeal held that the trial court abused its discretion in failing to use the lodestar method to calculate fees under Ed C §44944, noting that the lodestar is the “primary method” for calculating fees in statutory fee cases (citing this text). See §16.24.
Determining the Lodestar
In Nishiki v Danko Meredith, P.C. (2018) 25 CA5th 883, the court of appeal held that rates claimed by an opponent’s attorney in a prior case supported the trial court’s award of fees under Lab C §98.2. See §9.121.
In Rodriguez v County of Los Angeles (9th Cir 2018) 891 F3d 776, the Ninth Circuit held that the Prison Litigation Reform Act of 1995 (PLRA) (42 USC §1997e) cap on attorney fees applies only to fees “solely attributable” to federal claims, and does not limit fees for work performed on state civil rights claims, including fees “as readily available” to state claims as to federal claims. See §9.79.
Whether contract attorneys hired do a specific task like e-discovery should be billed at “cost” or market rates was addressed in In re Anthem, Inc. Data Breach Litig. (ND Cal, Aug. 17, 2018, No. 15–MD-02617–LHK) 2018 US Dist Lexis 140137. See §9.110. The district court in that large common fund case also found there was a duplication of effort by counsel (too many law firms and billers on the case, leading to excessive “start up” time, too many attorneys billing for attending depositions, too much settlement time, and too much partner time), but ruled it was impermissible to use a 10 percent “haircut” as a deterrent to future overbilling. See §§9.4, 9.76.
Adjustments to the Lodestar
In Rodriguez v County of Los Angeles (9th Cir 2018) 891 F3d 776, the Ninth Circuit affirmed a 2.0 multiplier based on factors that included the high quality of representation, contingent risk, and opportunity costs during the long litigation. See §10.36, 10.47.
In Dunlap v Liberty Natural Prods. (9th Cir 2017) 878 F3d 794, the Ninth Circuit upheld a 50 percent fee reduction based on partial success when the plaintiff succeeded on one federal disability discrimination claim but lost on four unrelated state employment claims. See §10.66.
In Nishiki v Danko Meredith, P.C. (2018) 25 CA5th 883, the court of appeal held that, given the unique language of Lab C §98.2, the usual “partial success” rules do not apply to fees claimed for defeating the employer’s appeal of a wage order under Lab C §98. See §10.53.
In In re NCAA Athletic Grant-In-Aid Cap Antitrust Litig. (ND Cal, Dec. 17, 2017, No. 4:14-md-2541-CW, 4:14-cv-02758-CW) 2017 US Dist Lexis 201108, the district court approved a requested fee of 20 percent of a settlement fund based on considerations including exceptional results, risk, costs, and complexity. See §10.56.
Fees for Work in Arbitration
In Findleton v Coyote Valley Band of Pomo Indians (2018) 27 CA5th 565, the court of appeal affirmed a fee award for appellate work that was required to sustain an order compelling arbitration. See §14.20.
The arbitrator may award incremental costs after the initial award has been confirmed. See EHM Prods., Inc. v Starline Tours of Hollywood, Inc. (2018) 21 CA5th 1058 in §14.12.
Appellate Review of Fee Orders
In Hernandez v Restoration Hardware, Inc. (2018) 4 C5th 260, the California Supreme Court held that an unnamed class member must intervene in the litigation in order to have standing to appeal the court’s approval order. See §16.12.