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Category: Prevailing Party Issues

Article: Pay Attention to Prevailing Party Fee Provisions

November 3, 2021

A recent article by James Walson, “Pay Attention to Prevailing Party Fee Provisions,” reports on the recent Levy v. Levy decision means for Florida landlords and whether they should consider revisiting their lease fee provisions.  This article was posted with permission.  The article reads:

It is routine in Florida leases to consider any prevailing party fee provision as automatically reciprocal due to Section 57.105(7), Florida Statutes. That Statute provides for reciprocity of attorneys’ fees even where a contract provision is written only in favor of one party. On October 7, 2021, the Supreme Court of Florida in Levy v. Levy (Fla. 2021), found that the following provision did not automatically trigger a fee award to the prevailing party, where the prevailing party did not establish that the non-prevailing party was in violation of the agreement:

“13. ENFORCEMENT. In the event that either party should take legal action against the other by reason of the other’s failure to abide by this Agreement, the party who is found to be in violation of this Agreement shall pay to the other party who prevails in said action, the prevailing party’s reasonable expenses incurred in the enforcement of this Agreement, said expenses to include, but not be limited to, reasonable attorney’s fees ….”

The Court held that a finding that the non-prevailing party was in violation of the agreement was a condition precedent to the award of attorneys’ fees. Therefore, in a case where the plaintiff alleges that defendant was in default under the agreement, but defendant successfully defends the case by establishing that defendant was not in violation, defendant is not entitled to its attorneys’ fees because the condition precedent to enforcement was not met, i.e. no one was found to be in violation of the agreement.

The opinion remains subject to further rehearing and is therefore not final; however, if it remains in place, it presents an interesting drafting issue for Florida landlords. The overwhelming majority of landlord / tenant litigation is initiated by a landlord as a result of an alleged tenant default under the lease. As a result, Florida landlords could include a similar provision to Levy in their leases on the theory that they are likely to be the only party alleging a breach. If the landlord prevails on its theory of breach, it would be entitled to attorneys’ fees. If the landlord does not prevail and tenant does not establish that landlord was in default, only that tenant was not in default, no attorneys’ fees would be awarded. The practical effect shifts the attorney fee risk away from the landlord and onto the tenant in most cases.

In light of the Levy decision, Florida landlords should consider revisiting their lease attorneys’ fee provisions and tenants should carefully read the provisions they are agreeing to as there is a very real risk that a tenant would prevail in defensive litigation, but not be entitled to reimbursement of attorneys’ fees.

Article: Recovering Attorney Fees in Arbitration

November 1, 2021

A recent article by Charles H. Dick, Jr., “Recovering Attorney Fees in Arbitration,” reports on recovering attorney fees in arbitration.  This article was posted with permission.  The article reads:

An accurate assessment of damages is crit­ical for case evaluation, and the cost of dispute resolution plays an important role in deciding to pursue claims.  Even strong liability cases can fail to make economic sense.  That is why a thorough case appraisal should thoughtfully consider the attorney fees to be incurred.  And equally important, an objective case valuation should assess the likelihood of recovering attor­ney fees.

The “American Rule,” which specifies that each party must bear its own attorney fees, is a lesson for law school’s first year, and though the rule has been slightly modified to encour­age certain litigation in the public interest, fee-shifting remains the exception rather than the rule.  Against this background, professional responsibility obliges counsel to keep clients informed about litigation economics (Cal. Rules Prof. Conduct, rule 1.4)—something critically important as a case approaches the in­evitable mediation.  Unfortunately, experience teaches that an exacting analysis of litigation cost and exposure to fee-shifting often is an afterthought, and that the development of case strategies, discovery plans, and tactical maneu­vers occurs without thoughtfully weighing the implications of the American Rule and its ex­ceptions.  This is a recurring issue in arbitration.

Perhaps litigators approach attorney fee recovery casually, thinking there will be ample time to deal with the question before a final judgment is entered.  Arbitration, however, is different.  The binding nature of arbitration makes appellate relief unlikely.  An arbitrator’s award of attorney fees is unlikely to be sec­ond-guessed by a court, even if there is no stat­utory or contractual basis for the award. (See Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1, 33; id. at p. 11 [“it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.  In reaffirming this general rule, we recognize there is a risk that the arbitrator will make a mistake.”].)  When it comes to recovering attor­ney fees in arbitration, counsel needs to get the issue correct from the beginning.

California has codified the American Rule in Code of Civil Procedure section 1021.  Con­tractual arrangements can modify the rule and provide for fee-shifting, but a careful study of the parties’ language is critical. (See Valley Hard­ware, LLC v. Souza (Nov. 20, 2015, D067076) 2015 Cal.App.Unpub. Lexis 8347 [affirming arbitrator fee award in face of inconsistent contract provisions].)  Contractual language inevitably varies: Some agreements provide for recovery of fees “when permitted by law”; some say fees “actually incurred” are recoverable; some limit attorney fees to a percentage of the damages awarded; some say the prevailing party “shall” recover fees, while others use the uncertain “may.” Civil Code section 1717 de­fers to the contracting parties, subject to minor tweaks that limit fees to a “reasonable” amount and require that fee recovery be reciprocal.

In addition to carefully scrutinizing con­tract language, one also needs to know the procedural rules that will be applied in arbi­tration.  For example, in a Financial Industry Regulatory Authority (FINRA) arbitration regarding the investment brokerage industry, the arbitral panel is directed to determine the “costs and expenses,” yet absent some statutory exception to the American Rule, fee-shifting still depends on the parties’ underlying agree­ment (see FINRA rule 12902(c)).  Unless the parties’ agreement forbids fee-shifting, the rules of the International Institute for Conflict Prevention and Resolution (CPR) authorize the arbitration tribunal to apportion costs for “legal representation and assistance … incurred by a party to such extent as the Tribunal may deem appropriate” (see CPR 2019 Adminis­tered Arbitration Rules, rule 19.1(d) & 19.2). Rule 24(g) of the JAMS Comprehensive Arbi­tration Rules & Procedures is the mirror image: “[T]he Arbitrator may allocate attorneys’ fees and expenses … if provided by the Parties’ Agreement or allowed by applicable law” (ac­cord, Uniform Arbitration Act, § 21).

If all parties request an award of attorney fees, rule 47(d)(ii) of the American Arbitra­tion Association’s Commercial Arbitration Rules and Mediation Procedures authorize an award of attorney fees even if the underlying agreement is silent on the issue.  Throwing in a boilerplate prayer for attorney fees and costs without considering the consequences can result in fee-shifting.  And during arbitration, even casual discourse about attorney fees can be a basis for fee-shifting, absent an express agreement to the contrary.  (Marik v. Univ. Vill. LLC (Oct. 3, 2013, B247171) 2013 Cal.App. Unpub. Lexis 7143 [brief asserting entitlement to recover fees provided basis for arbitrator’s fee award]; see Prudential-Bache Securities, Inc. v. Tanner (1st Cir. 1995) 72 F.3d 234, 242-243 [“costs and expenses” under New York Stock Exchange Rules interpreted to permit award of attorney fees when both sides to dispute requested attorney fee award].)

Counsel should be mindful of an arbitra­tor’s predisposition to produce an award that is “fair to all concerned,” and this may include fee-shifting as an exercise in equity. (See Co­hen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 877 [absent parties’ agreement limiting arbitrator power, award of attorney fees on basis of equity and conscience affirmed].)  Further, misconduct of counsel may be a reason to “sanction” a party by reducing an attorney fee award. (E.g., Karton v. Art Design & Const., Inc. (2021) 61 Cal.App.5th 734 [fees reduced for incivility of counsel].)  And consider JAMS Comprehensive Arbitration rule 24(g), which authorizes an arbitrator to consider noncompliance with discovery orders when awarding attorney fees.

Attorney fees incurred prosecuting or defending a complaint to compel arbitration may be recoverable, but the procedural posture of the civil court action will determine when fee-shifting may occur. (E.g., Otay River Const. v. San Diego Expressway (2008) 158 Cal.App.4th 796.)  Though there is authority to the contrary (Benjamin, Weill & Mazer v. Kors (2011) 195 Cal.App.4th 40 [allowing recovery of fees even though liability on claim awaited arbitration]), the better-reasoned view is expressed in Roberts v. Packard, Packard & Johnson (2013) 217 Cal. App.4th 822.  In that case, clients filed suit against their former lawyers, alleging breaches of fiduciary duty and conversion in connection with settlement of qui tam litigation.  The law firm’s motion to compel arbitration was grant­ed, and the trial court awarded the firm its fees as the prevailing party.  On appeal, the court was persuaded the phrase “an action” means an entire judicial proceeding; procedural steps in the course of a lawsuit, such as a motion to compel arbitration, are steps in the prosecution or defense of an action, but they are not the entirety of an action on a contract.  The Roberts case stands for the proposition only one side can “prevail” in a lawsuit, and fee-shifting had to await the arbitrator’s final determination of the clients’ professional liability claims. (Id. at p. 843.)

Civil Code section 1717 defines the “pre­vailing party” as the person who recovers the greater amount on a contract.  Yet, Hsu v. Ab­bara (1995) 9 Cal.4th 863, makes it clear this involves more than a mathematical calculation.  The “court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their liti­gation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.” (Id. at p. 876.)  Thus, it is possible for a party to prevail by achieving litigation objectives, even though an opponent may have obtained a favorable verdict on liability theories.  Generally, however, when a verdict on contract claims is good news for one party and bad news for another, a court is obligated to treat the happy litigant as the prevailing party.

The identity of a prevailing party becomes more complicated when results of an arbitra­tion are mixed. In this regard, Marina Pacific Homeowners Association v. Southern California Financial Corp. (2018) 20 Cal.App.5th 191, is instructive.  This case between a homeowners’ association and a finance institution exempli­fies litigation that produces some wins and some losses for both sides.  The case involved a claim by the homeowners that they did not owe monthly fees the financial institution contended amounted to $97 million over the life of a lease.  The trial court found against the homeowners and declared there was an obligation to make monthly payments.  But the court also found the monthly payment rate was only 40% of the financial institution’s demand.  On appeal, the court declined to consider settlement communications as being a reliable expression of a party’s litigation objectives and concluded the “substance” of the result was a $58 million loss for the defendant.  Invoking the decision in the Hsu case, the court con­cluded there was no simple, unqualified result pointing to either side as a prevailing party, and the trial court had acted within its discretion in denying recovery of attorney fees.

One lesson regarding “prevailing parties” is the need for caution in over-pleading one’s case. Some counsel cannot resist converting a straight-forward breach of contract action into a fraud case with overtones of unfair business practices and assorted tort claims.  Pleading multiple claims that eventually are discarded for want of proof can be dangerous, especially unsubstantiated allegations of fraud.  In De La Questa v. Benham (2011) 193 Cal.App.4th 1287, 1295, an appellate court acknowledged the practice of overstating one’s claims, which makes it more difficult to determine the victor.  In a case producing mixed results, unsupported claims may lead to an opponent’s recovery of fees.

Counsel in arbitration need to address fee-shifting with a laser focus, beginning with the preliminary hearing, which is the first op­portunity to meet the arbitrator and learn his or her preferences.  Arbitrators can be expected to employ the lodestar method recognized as acceptable by a long line of California cases (e.g., PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1094).  Several issues can be dis­cussed at the hearing: What procedures will the arbitrator use to deal with attorney fee and cost issues?  Will these matters be bifurcated until an interim or tentative award on the merits is de­livered? Does the arbitrator have requirements for form, style, and specificity of time records? Will “block billing” be accepted? If more than one law firm will be appearing for a party, the conference also is an opportunity to explain why and set the stage to defuse a later argument about duplicated efforts.

In a case with both contract and tort claims, counsel should consider keeping a separate re­cord of time spent on matters that may not be entitled to recovery of attorney fees.  Counsel should be prepared to demonstrate that time records were prepared contemporaneously with the work reported, since there often is a lack of daily time recordation, let alone contem­poraneous reporting.  The fee application also should explain how the litigation team was de­ployed and why individual tasks were assigned to team members.

Proving the reasonableness of time and rates ordinarily can be accomplished by declarations of counsel regarding the usual, customary, and regular timekeeping and billing practices of the law firm.  Resumes of the personnel involved and a summary of the work may be useful.  (See, e.g., Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 702.)  And this informa­tion can be supplemented by the opinions of other lawyers objectively knowledgeable about actual practices within the community.  Survey data often is available for firms in metropolitan areas, and those reports also carry credibility.  But counsel should be alert to differences between posted or rack rates and hourly rates actually realized, because there often is a ma­terial difference.  As with hotels and rental cars, there may be a significant disparity between the advertised rate and what people actually pay.

Nemecek & Cole v. Horn (2012) 208 Cal. App.4th 641 makes it clear that a calculation of “reasonable fees” does not hinge on what fees actually were paid.  In that case, defense counsel had been compensated on the basis of negotiat­ed insurance panel rates.  The arbitrator refused to be controlled by such rate structures and declined to use the Laffey Matrix employed by the United States Department of Justice in de­termining rates the federal government believes are reasonable.  Instead, the award of attorney fees was based on an independent assessment of what would be reasonable, and the appellate court affirmed confirmation of that award. (See Chacon v. Litke (2010) 181 Cal.App.4th 1234, 1260 [awarding reasonable rate $50 greater than counsel’s regular rate].)

There are three important things to remember about recovering attorney fees in arbitration.  First, carefully study the parties’ agreement to understand the rights it extends and the limitations it imposes.  Second, avoid pleading unnecessary claims that make it seem the end result tips in favor of one’s opponent.  Third, vacating an erroneous fee award is unlikely, so make your best case regarding fee-shifting before the entry of a final award.

Charles H. Dick, Jr. is a neutral with JAMS, and he serves as a mediator and an individual arbitrator or member of multi-arbitrator panels in complex commercial matters, securities and investment disputes, professional liability cases, products liability issues, and other business-related controversies.

Can Texas Force Lawyers to Pay Prevailing Party’s Fees in Federal Litigation?

October 31, 2021

A recent article by John Connolly, “Can Texas Force Lawyers to Pay the Prevailing Party’s Legal Fees in Federal Litigation?,” reports on the new Texas legislation, SB 8 and its attorney fees provision.  This article was posted with permission.  The article reads:

The new Texas abortion law known as S.B. 8 has been the subject of extensive commentary for its “bounty” cause of action against abortion providers and “aiders and abettors.”  But the law creates a second cause of action that may infringe the right to counsel in federal courts and, as a result, may face its own judicial scrutiny.

The second modification to the Texas Code creates a cause of action against litigants and their lawyers who challenge the enforceability of any Texas law that regulates or restricts abortion, including but not limited to S.B. 8. See SB 8 § 4 (amending Texas Civ. Prac. & Remedies Code § 30.022).  The provision applies to cases filed in state or federal court.  If the party defending the Texas law prevails, that party can seek fees and costs in a new action filed in Texas state court within three years of final judgment in the underlying action. Id. § 30.022(c).  The lawyer is jointly and severally liable with the client for the fees and costs.  The fee-shifting provision, although somewhat ambiguous, appears to be entirely one-way; i.e., if the party challenging the law prevails, that party is not entitled (through § 30.022) to recover fees and costs from the opposing party or counsel.

Many other statutes and rules expose lawyers to attorney’s fees for misconduct during litigation, but as a few commentators have explained, S.B. 8 appears to be the first law that makes lawyers liable based solely on the issue they are litigating.  In view of other provisions in S.B. 8 that intentionally frustrate judicial challenges of the statute, it seems beyond doubt that one purpose of § 30.022(c) is to impede a litigant’s attempt to obtain counsel to challenge a Texas abortion law.

For cases litigated in federal court, § 30.022 violates at least the spirit of 28 U.S.C. § 1654, which provides that “In all courts of the United States the parties may plead and conduct their own cases personally or by counsel as, by the rules of such courts, respectively, are permitted to manage and conduct causes therein.” Section 1654 traces back to the Judiciary Act of 1789. See 1 Stat. 73, § 35 (Sep. 24, 1789). Thus, the right to private (or retained) counsel in federal judicial proceedings is older than the Sixth Amendment and the rest of the Bill of Rights, and the right to retained counsel is so accepted that case law defining its limits in federal civil cases is sparse. Most case law under § 1654 relates to the right to proceed pro se, but the statute also codifies a right to proceed with private counsel of one’s choice. See Texas Catastrophe Property Ins. Ass’n v. Morales, 975 F.2d 1178, 1181 (5th Cir. 1992); McCuin v. Texas Power & Light Co., 714 F.2d 1255, 1262 & n.24 (5th Cir. 1983); Bottaro v. Hatton Assocs., 680 F.2d 895, 897 (2d Cir. 1982). As the text of the statute provides, the right is subject to reasonable rules “of such [i.e., United States] courts.” A body of precedent makes clear that the right to counsel does not override, for instance, the requirement that an attorney hold a valid license, which typically is conferred and regulated in the first instance by state law. E.g., Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305, 1308 (2d Cir. 1991). But ethics and licensing requirements are laws of general applicability, and federal courts usually adopt them through their own local rules. As far as I can tell, no state law seeks to impede access to counsel in federal courts more clearly and directly than S.B. 8.

Nevertheless, it is hard to predict whether a federal (or state) court would strike down § 30.022 under § 1654 or some other doctrine protecting the right to counsel in federal courts. In the criminal context, where the Sixth Amendment protects a right to appointed counsel for indigent defendant and to retained counsel of one’s choice for others, see Powell v. Alabama, 287 U.S. 45, 53 (1932), the Supreme Court has upheld a federal statute prohibiting the use of forfeitable funds to retain defense counsel. Caplin & Drysdale, Chartered v. United States, 491 U.S. 617 (1989). The four dissenting justices observed that “the reluctance of any attorney to represent the defendant in the face of the forfeiture threat effectively strips the defendant of the right to retain counsel.” Id. at 654 (Blackmun, J., dissenting). The majority nevertheless concluded that the government had a substantial property interest in the forfeitable funds. Id. at 627-28. That rationale would not apply to § 30.022, of course, as the federal government has no competing interest in the Texas fee-shifting scheme.

Because the right to counsel at issue here is primarily statutory rather than constitutional, the argument would be pre-emption rather than unconstitutionality under the Sixth Amendment. The most pertinent pre-emption doctrine is “obstacle pre-emption,” which applies when a state law imposes obstacles to the purposes and objectives of Congress. E.g., Hines v. Davidowitz, 312 U.S. 52, 67 (1941). In Felder v. Casey, 487 U.S. 131 (1988), for instance, the Court held that state-law requirements that prospective plaintiffs notify government officials before filing suit were pre-empted when applied to federal civil rights claims under 42 U.S.C. § 1983. See also El-Tabech v. Clarke, 616 F.3d 834, 840 (8th Cir. 2010) (although state law establishing procedure for payment of federally awarded attorney’s fees was not completely pre-empted, if state claims board rejected an attorney’s fee award “that specific executive or legislative action would almost surely be conflict preempted”). Although these cases are not directly on point, it seems intuitive that a state law requiring lawyers to pay attorney’s fees for unsuccessful federal claims filed in federal courts is a serious obstacle to the federal right to counsel. By all appearances, that is exactly what the Texas legislature intended it to be.

Whether the “obstacle” to retained counsel imposed by S.B. 8 would lead a federal (or state) court to strike it down is a novel question that may itself evade judicial resolution3.  But the question deserves its day in court. Like the bounty cause of action that S.B. 8 creates against abortion providers or aiders and abettors, the fee-shifting cause of action against federal litigants and their lawyers is transportable to other states and other rights. The right to counsel in civil proceedings is not as prominent as the right to abortion, but it is an important right nonetheless, and federal courts should have the last word on whether states can impede the right through legislation like S.B. 8.

1A second basis for pre-emption might be the Texas law’s incompatibility with 42 U.S.C. § 1988, which allows reasonable attorney’s fees to the prevailing party in actions to enforce provisions of the federal civil rights statutes, including 42 U.S.C. § 1983. But § 1988 does not allow recovery of fees from opposing counsel. Roadway Express, Inc. v. Piper, 447 U.S. 752, 761 (1980). 

2Some courts hold that the right to retained counsel in civil cases is implicit in the due process clause. See, e.g., Morales, 975 F.2d at 1180; contra Kentucky W. Va. Gas Co. v. Pennsylvania Public Util. Comm’n, 837 F.2d 600, 618 (3d Cir. 1988). Like most rights, it is not absolute, and may be overridden for compelling reasons. See 975 F.2d at 1181.

The bounty statute may fall before the fee-shifting provision is tested; the United States’ complaint against Texas, for instance, does not clearly challenge the fee-shifting provision. In addition, because the prevailing party can file the attorney’s fee claim in a new case in state court, that claim might evade judicial review by federal courts. See Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983) (party had First Amendment right to file nonfrivolous claim in state court and NLRB could not order party do dismiss the claim before determination of its merits in state court); 28 U.S.C. § 2283 (anti-injunction act). Nevertheless, state courts would have authority to consider the pre-emption argument, and the Supreme Court ultimately could decide the issue on discretionary review.

Defense ‘Prevailing Party’ in DVPA Case Dropped by Plaintiff

October 9, 2021

A recent Metropolitan News story, “Defendant Was ‘Prevailing Party’ in Action Under DVPA Where Plaintiff Dropped Case,” reports that a judge erred in finding that a defendant was not the “prevailing party” in a civil action brought to impose a domestic violence restraining order on him, the Court of Appeal for this district has held, proclaiming that he did prevail even though the circumstances were that the plaintiff dismissed her petition after gaining such an order in a separate criminal proceeding.

But, Justice Anne H. Egerton of Div. Three said in an unpublished opinion, that does not mean that the order by Los Angeles Superior Court Judge Jonathan L. Rosenbloom denying an award of attorney fees to the defendant in the civil case need be reversed.  Such an award is discretionary, she noted, and, under Art, VI, §13 of the state Constitution, reversal is called for only where an error has resulted “in a miscarriage of justice” which, she declared, did not occur.

Burbank attorney David D. Diamond—a two-time unsuccessful candidate for the Los Angeles Superior Court who has announced his candidacy in the 2022 election—represented defendant Joshua Nathaniel Rivers in the trial court and on appeal. In seeking an award of $6,300 in attorney fees in favor of his client, sued by Marcia Bennett under the Domestic Violence Prevention Act (“DVPA”), Diamond said in an April 2, 2019 notice of motion that his client was “was compelled to respond to and defend a frivolous action,” and set forth in his memorandum of points and authorities: “Petitioners case was adjudicated in favor of Respondent. On November 20, 2018 the Petitioner asked for an additional hearing date to retain an attorney.  On December 10, 2018, the new hearing date, she failed to appear.”

He added in a declaration: “It is my belief that Petitioner should pay for the Respondent’s attorney’s fees because she [sic] is the prevailing party.”  In an opposing declaration dated May 29, 2019, Northridge attorney Bernal P. Ojeda (who also represented Bennett in the appeal) protested:

“The Respondent’s claim as a prevailing party is misleading.  Respondent at the present time has a four year criminal restraining order against him, not mentioned in the current motion….[T]his was the reason Petitioner did not appear for the hearing in the instant case. The criminal case is a related case and the criminal protective order should have been mentioned to this court but was not.  Given the fact that there is an existing restraining order against Respondent and protecting Petitioner, Respondent cannot claim he is a prevailing party nor can he have that status.”  (Los Angeles Superior Court Judge Peter Mirich granted the restraining order on Nov. 30, 2018, 10 days before the hearing at which Bennett did not appear.)

Ojeda said in his memorandum of points and authorities: “The criminal action now pending is a related case, involving the same parties, same incident and set of facts.”  The minute order of the June 4 hearing before Rosenbloom on the motion for attorney fees simply recites: “The Court finds Respondent is not the prevailing party.  “Motion Hearing re attorney fees is denied with prejudice.”

In her opinion upholding the outcome, Egerton said: “Rivers has not demonstrated the trial court’s erroneous prevailing party determination resulted in a miscarriage of justice….[B]ecause Rivers was the respondent on Bennett’s petition for a domestic violence restraining order, the trial court had discretion to deny his request for prevailing party attorney fees under [Family Code] section 6344, subdivision (a).”

She continued: “On the record before us, it is not reasonably probable that the court would have awarded Rivers the attorney fees he requested, even if the court had properly deemed him the prevailing party on the petition. And, based on this record, we cannot say the court’s denial of prevailing party attorney fees would have been an abuse of discretion.”  The judge went on to say: “And, given that Bennett dismissed her petition only after already obtaining the protection she sought under the DVPA, we cannot say the trial court’s denial of attorney fees on this ground would have been an abuse of discretion.”

Article: What is a Legal Fee Audit?

October 7, 2021

A recent article by Jacqueline Vinaccia of Vanst Law LLP in San Diego “What is a Legal Fee Audit?,” reports on legal fee audits.  This article was posted with permission.  The article reads:

Attorneys usually bill clients by the hour, in six minute increments (because those six minutes equal one tenth of an hour: 0.1).  Those hours are multiplied by the attorney’s hourly rate to determine the attorney’s fee.  There is another aspect of attorney billing that is not as well known, but equally important — legal fee auditing.  During an audit, a legal fee auditor reviews billing records to determine if hourly billing errors or inefficiencies occurred, and deducts unreasonable or unnecessary fees and costs.

Both the law and legal ethics restrict attorneys from billing clients fees that are unreasonable or unnecessary to the advancement of the client’s legal objectives.  This can include analysis of the reasonableness of the billing rate charged by attorneys.  Legal fee audits are used by consumers of legal services, including businesses, large insurance companies, cities, public and governmental agencies, and individual clients.  Legal fee audits can be necessary when there is a dispute between an attorney and client; when the losing party in a lawsuit is required to pay all or part of the prevailing party’s legal fees in litigation; when an insurance company is required to pay a portion of legal fees, or when some issues in a lawsuit allow recovery of  attorneys’ fees and when other issues do not (an allocation of fees). 

In an audit, the auditor interviews the client, and reviews invoices sent to the client in conjunction with legal case materials to identify all fees and costs reasonable and necessary to the advancement of the client’s legal objectives, and potentially deduct those that are not.  The auditor also reviews all invoices to identify any potential accounting errors and assure that time and expenses are billed accurately.  The auditor may also be asked to determine if the rate charged by the attorney is appropriate.

The legal fee auditor can be an invaluable asset to parties in deciding whether to file or settle a lawsuit, and to the courts charged with issuing attorneys’ fee awards.  The court is unlikely to take the time to review individual invoice entries to perform a proper allocation of recoverable and non-recoverable fees leaving the parties with the court’s “best approximation” of what the allocation should be.  The fee audit provides the court and the parties with the basis for which to allocate and appropriately award reasonable and necessary fees. 

Audits are considered a litigation best practice and a risk management tool and can save clients substantial amounts of money in unnecessary fees.  It has been my experience, over the past two decades of fee auditing, that early fee auditing can identify and correct areas of concern in billing practices and avoid larger disputes in litigation later.  In many cases, I have assisted clients and counsel in reaching agreement on proper billing practices and setting litigation cost expectations. 

In other cases, I have been asked by both plaintiffs and defendants to review attorneys’ fees and costs incurred and provide the parties and the court with my expert opinion regarding the total attorneys’ fees and costs were reasonably and necessarily incurred to pursue the client's legal objectives.  While the court does not always agree with my analysis of fees and costs incurred, it is usually assisted in its decision by the presentation of the audit report and presentation of expert testimony on the issues.

Jacqueline Vinaccia is a San Diego trial attorney, litigator, and national fee auditor expert, and a partner at Vanst Law LLP.  Her practice focuses on business and real estate litigation, general tort liability, insurance litigation and coverage, construction disputes, toxic torts, and municipal litigation.  Her attorney fee analyses have been cited by the U.S. District Court for Northern California and Western Washington, several California Superior Courts, as well as various other state courts and arbitrators throughout the United States.  She has published and presented extensively on the topic of attorney fee invoicing, including presentations to the National Association of Legal Fee Association (NALFA), and is considered one of the nation’s top fee experts by NALFA.