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Category: Fees as Damages

CA Court: Attorney Fees Might Have Been Awardable as Damages

October 23, 2018

A recent Metropolitan News story, “Attorney Fees Might Have Been Awardable as Damages” reports that the Fourth District Court of Appeal declared that a trust that had to continue defending against an action in an unlawful detainer when the plaintiff refused to file a request for dismissal after a settlement had been reached was probably entitled to recover its post-settlement attorney fees as damages, in a new action, rather than securing them through a post-judgment motion for costs in the UD case.

While indicating a preference for that view—and suggesting that two cases to the contrary were incorrectly decided—Justice Richard D. Fybel of Div.  Three said in an unpublished opinion that the issue need not be determined because the amount of the fees awarded—$118,000—was not supported by the evidence, consisting solely of inadmissible hearsay.  The opinion directs the trial court to enter judgment in favor of the defendant, Morris Cerullo World Evangelism, Inc. (“MCWE”), and against plaintiff Lloyd Copenbarger, as trustee of the Hazel I. Maag Trust.

“It appears to us the Maag Trust could recover, as damages for breach of the settlement agreement, its attorney fees incurred in the unlawful detainer action,” Fybel wrote.  “One purpose for the Maag Trust entering into the settlement agreement was to avoid continuing to run up attorney fees in the unlawful detainer action; had MCWE performed its obligations under the settlement agreement by dismissing the action, the Maag Trust would not have incurred those fees.”

This was not a case where a written agreement called for the award of attorney fees to the prevailing party.  MCWE pointed to Code of Civil Procedure §1021 which codifies the American Rule that party normally bears its own costs of attorney fees, “[e]xcept as attorney’s fees are specifically provided for by statute.”  Citing the 1985 California Supreme Court decision in Brandt v. Superior Court, Fybel said: “There is a difference, however, between attorney fees sought qua damages and attorney fees sought qua costs of suit.  ”In Brandt, recovery of attorney fees was permitted as tort damages in a case where an insurer wrongfully denied coverage.

Fybel wrote: “Although Brandt dealt with a tort cause of action, the principle that attorney fees qua damages are recoverable as damages, and not as costs of suit, applies equally to breach of contract.  In this case, for example, the Maag Trust’s attorney fees incurred in defending the UD Action are damages caused by MCWE’s breach of the Settlement Agreement.  Those attorney fees were not costs of suit because they were not costs incurred in the action to enforce the Settlement Agreement.  In contrast, the Maag Trust’s attorney fees incurred in the lawsuit for breach of the Settlement Agreement would be, if recoverable, costs of suit because they were incurred in the litigation in which they were sought.”

The jurist noted that there are two contrary Court of Appeal opinions: Olson v. Arnett, decided in 1980 by this district’s Div. Five, and Navellier v. Sletten, a 2003 decision from the First District’s Div. Four.  “We question whether Olson and Navellier were correctly decided because both opinions fail to recognize the difference between attorney fees sought as damages and attorney fees sought as costs of suit,” Fybel said.  “We are not bound by those opinions.”

Noting that comments on the recoverability of attorney fees as damages were dicta, he declared: Although it appears to us attorney fees may be recovered as damages for breach of contract, we do not need to decide the issue.  Nor do we need to decide whether, as MCWE contends, the Maag Trust had to plead attorney fees as special damages in its complaint, whether the Maag Trust failed to disclose those damages in discovery, or whether the Maag Trust had to plead and prove excuse of its own failure to perform its obligations under the Settlement Agreement.  Nor do we need to decide the offset issue.  If attorney fees were recoverable as damages for breach of the Settlement Agreement, the Maag Trust failed to prove them.”

The case is Copenbarger v. Morris Cerullo World Evangelism, Inc., G054731.  Fybel noted that the present appeal was the fifth one stemming from a lease of property in Newport Beach.  Neither Olson or Navellier discussed Brandt. Brandt damages are generally awarded in insurance cases.  Div. One of the First District Court of Appeal said in the 1994 case of Ramirez v. Sturdevant: “Plaintiffs’ attorneys were hopeful that the Brandt rationale could be extended beyond bad-faith insurance cases to other situations involving a breach of the covenant of good faith and fair dealing—such as wrongful termination cases.  There is no evidence that such an extension ever had been sanctioned judicially, however, and in 1990…Division Four of this court expressly found such an extension to be unwarranted.”

The holding in Brandt was criticized in a majority opinion by then-Justice Miriam Vogel (now returned to law practice) in the 1995 case of Burnaby v. Standard Fire Ins. Co., with Presiding Justice Vaino Spencer (now deceased) dissenting from that portion of the discussion.  Vogel wrote: “Whatever merit there may be to the criticisms regularly heaped upon the American rule…, the decision to change that rule is the Legislature’s, not the courts’. For that reason, we agree with Chief Justice Lucas’s dissent in Brandt…that courts ought to move cautiously in extending the nonstatutory bases on which awards of attorneys’ fees may be predicated.  For the same reasons, we suggest it is time for the Supreme Court to reconsider and reject the exception it adopted in Brandt.” The high court has not acceded to that suggestion.

Ninth Circuit Upholds Fees for Fees Under Statute

April 24, 2017

A recent Metropolitan News story by Kenneth Ofgang, “Panel Upholds Award of ‘Fees-on-Fees’ Under Statute” reports that a statute that permits federal judges to sanction attorneys for vexatious litigation permits an award of fees to opposing counsel for litigating the right to fees, the Ninth U.S. Circuit Court of Appeals ruled.

In a published order, the panel—Judges Alex Kozinski, Richard A. Paez, and Marsha S. Berzon—denied reconsideration of the appellate commissioner’s ruling calculating sanctions against Boston attorney Michael J. Flynn and his client, Timothy Blixseth.  The two were ordered to pay nearly $192,000 in fees and costs incurred by several creditors of Blixseth, a co-founder of the bankrupt Yellowstone Mountain Club.  Blixseth was found jointly liable for all but around $34,000 of the award, for which Flynn was found separately liable by statute.

Blixseth and one of his ex-wives developed the Yellow Mountain Club as an exclusive resort for “ultra-wealthy” golfers and skiers.  He has blamed the 2008 mortgage crisis for the collapse of his finances.  His wealth was estimated by Forbes magazine at $1.3 billion when it named him one of the 400 wealthiest Americans in 2006.  Creditors have claimed Blixseth has hidden assets.

Blixseth, represented by Flynn, appealed the denial of a motion to recuse the District of Montana bankruptcy judge assigned to his case.  The Ninth Circuit affirmed, agreeing with the district judge that Blixseth’s accusations were “a transparent attempt to wriggle out of an unfavorable decision by smearing the reputation of the judge who made it.”

In August 2015, the Ninth Circuit panel said Blixseth and Flynn were subject to attorney fees incurred by creditors on that appeal, citing Rule 38 of the Federal Rules of Appellate Procedure and 28 U.S.C. §1927.  “If a court of appeals determines that an appeal is frivolous, it may, after a separately filed motion or notice from the court and reasonable opportunity to respond, award just damages and single or double costs to the appellee.”

Section 1927 provides: “Any attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”

In the order, the panel agreed with the appellate commissioner that fees incurred in litigating the right to fees, or “fees on fees,” cannot be awarded under Rule 38, but may be awarded under §1927.  The panel also denied, without comment, Flynn’s motion that the judges recuse themselves.

Because Rule 38 refers to “damages,” the judges said, it is not a fee-shifting statute, and the only attorney fees that may be awarded under the rule are those “incurred in defending against the frivolous issues or frivolous portions of an appeal.”

Section 1927, by contrast, “may be characterized as a fee-shifting provision, despite its sanctions trigger,” the panel said.  The legislation’s purpose, the judges said, it to shift the burden of the vexatious litigation onto the vexatious lawyer, noting that fee-shifting statutes generally are interpreted as permitting the award of “fees on fees.”

The case is Blixseth v. Yellowstone Mountain Club, LLC, 12-35986.

Indiana Bill Would Allow Recovery of Attorney Fees in Wrongful Death Actions

January 12, 2016

A recent the IndianaLawyer.com story, “Bill Would Allow Recovery of Attorney Fees in All Wrongful Death Actions” reports that a northern Indiana senator has introduced legislation to amend Indiana’s wrongful death statute to allow for surviving families to collect attorney fees.

Sen. Lonnie Randolph, D-East Chicago, has proposed in Senate Bill 124 that language be added to Indiana Code 34-23-1 that would enable a widow or widower, dependent children or dependent next of kin to receive reasonable attorney fees in wrongful death actions.

The measure comes after the Indiana Supreme Court ruled in August that under current law attorney fees do not qualify as damages when the deceased is survived by family.  In SCI Propace LLC; South Central Indiana Rural Electric Membership Corp.; Rush Shelby Energy Rural Electric Cooperative, Inc. v. Courtney Fredrick, as Personal Representative of the Estate of Stephan Fredrick, Deceased, 55S04-1508-PL-501, the unanimous court found the state’s General Wrongful Death Statute allows for attorney fees only when the decedent has no survivors.

Randolph’s bill specifies that in an adult wrongful death lawsuit, damages include “reasonable attorney’s fees” incurred by the estate or any person for bringing and maintaining the action.

The fiscal impact of the new language would depend on whether a state agency is found liable for an individual’s death, according to the Indiana Legislative Services Agency.  The maximum payment for a wrongful death from the state government is $700,000 but the average cost of attorney fees in such actions is unknown.

Government to Pay Attorney Fees in FLSA Suit

September 21, 2015

A recent Texas Lawyer story, “Government to Pay $1.5M in Attorney Fees in FLSA Suit,” reports that the U.S. Department of Labor has agreed to pay $1.5 million in attorney fees to Corpus Christi company and its owner after the U.S. Court of Appeals for the Fifth Circuit sanctioned the federal government for bad faith ruled that it owed fees to the company.

The wage and hour division of the U.S. Department of Labor will pay the money to Gate Guard Services and owner Bert Steindorf, according to the settlement agreement.  The money is for attorney fees and expenses.

The Department of Labor alleged in a 2010 complaint that Gate Guard violated overtime laws.  But according to a ruling in July issued by a three-judge Fifth Circuit panel, when the DOL investigated Gate Guard for alleged Fair Labor Standards Act (FLSA) violations, the federal agency violated its own internal procedures and ethical litigation practices.

The Fifth Circuit sanctioned the federal government for bad faith and found that it owed attorney fees and travel expenses to Gate Guard.  But instead of having U.S. District Senior Judge John Rainey of the Southern District of Texas determined that exact amount of fees and expenses, the DOL negotiated a settlement with Pipitone.

Earlier, in April 2014, Rainey had ruled that the DOL owed $565,227 in attorney and paralegal fees and travel expenses to Gate Guard.  In 2013, Rainey granted Gate Guard’s motion for summary judgment and dismissed all claims that the DOL brought against it in the FLSA enforcement action.

Pipitone said the $1.5 million the government is paying covers the $1.3 million in attorney fees Steindorf has paid over the years plus “$200,000 in what I’m going to call essentially an enhancement.”

Great Reviews for NALFA Webinars

June 3, 2015

NALFA is hosting a series of webinars on attorney fee and legal billing issues throughout 2015.  All our webinars are free for NALFA members and NALFA clients.  So far this year, NALFA has hosted 2 webinars: “Winning Attorney Fees in Court: Use of Experts, Case Strategies & Hot Issues” and “Bankruptcy Fee Examiners in Large Chapter 11 Cases.”  Dozens have registered for each of these CLE webinars.  Some of the comments from the registered guests include:

“The panel discussion [on bankruptcy fees] was very educational”

“Very impressed with the panel presentation and materials”

“Gained a great deal of insight and information. So many complex issues on these [fee] issues.”

“Learned valuable information”

"Great program...hope this becomes an annual thing"

For information on upcoming NALFA programs, visit http://www.thenalfa.org/CLE-Programs/