By Matthew Ross
Parties in civil cases often ask trial courts to award attorney fees. With thousands of dollars usually at stake, it is necessary for both bench officers and practitioners to be familiar with the basic concepts of law in this field.
The objective of this article and self-study test is to discuss the fundamentals of court-awarded attorney fees. Readers will learn about the different bases justifying such awards, including statutes, contracts, and public policy; how courts compute the proper amount to be awarded; and methods parties use to recover attorney fees.
The general rule is that a court should not award attorney fees: "Under the American rule, as a general proposition each party must pay his [or her] own attorney fees. This concept is embodied in Section 1021 of the Code of Civil Procedure, which provides that each party is to bear his own attorney fees unless a statute or the agreement of the parties provides otherwise." (Gray v. Don Miller & Assoc. Inc., 35 Cal.3d 498 (1984).)
A court may award attorney fees to a litigant as costs to an action only if something specifically authorizes the award. Statutes, contracts, or nonstatutory case law are the potential sources for this authorization. See Code of Civil Procedure Section 1033.5(a)(10).
There are dozens of statutes that allow a court to award fees, and this does not even include statutes that authorize fees as sanctions. Some of the most common ones include:
* Business and Professions Code Section 16750(a): prevailing plaintiff in an antitrust action under the Cartwright Act is entitled to fees.
* Civil Code Section 55: prevailing party entitled to fee awards under California's Disabled Persons Act.
* Civil Code Section 789.3(d): prevailing party entitled to reasonable attorney fees in an action alleging an unlawful utility shutoff or lockout.
* Civil Code Section 1695.7: the equity seller under the Home Equity Sales Contract Act can recover reasonable attorney fees.
* Civil Code Section 1942.4(b): prevailing party in an action arising out of the landlord's breach of warranty of habitability entitled to fees.
* Civil Code Section 3496: court may award prevailing party costs in certain nuisance cases.
* Civil Code Section 1942.5(g): prevailing party in action for retaliatory eviction entitled to fees.
* Code of Civil Procedure Section 425.16(c): fee awards mandatory to defendants who prevail under anti-SLAPP statute and Section 425.18(f): plaintiffs who defeat motions are entitled to fee awards if the motion to strike is frivolous or solely intended to cause unnecessary delay.
Civil Code Section 1717 governs attorney fee awards for enforcing contracts that include fee-shifting clauses. The section awards attorney fees to the "party prevailing on the contract, whether he or she is the party specified in the contract, or not." Civil Code Section 1717(b) authorizes award of fees to "the party who recovered the greater relief in the action on the contract." Civil Code Section 1717(b) gives the trial court discretion to determine that there is no party prevailing on the contract; however, when one party "obtains a simple, unqualified victory, the court has no discretion to deny attorney fees. (Hsu v. Abarra, 9 Cal.4th 863 (1995).) Code of Civil Procedure Section 1021 authorizes contractual agreements for fee-shifting awards. A choice-of-law provision may also authorize fee awards.
For example, in Applera Corp. v. MP Biomedicals LLC, 173 Cal.App.4th 769 (2009), a choice-of-law provision in the contract required application of Swiss law, and under Swiss law, the prevailing party is entitled to recover attorney fees. Thus, attorney fees were recoverable in the California lawsuit under Civil Code Section 1717.
The California Supreme Court has explained that appellate decisions have created two nonstatutory exceptions to the general rule that a court should not award attorney fees, "each of which is based upon inherent equitable powers of the court. The first of these is the well-established 'common fund' principle: when a number of persons are entitled in common to a specific fund, and an action brought by a plaintiff or plaintiffs for the benefit of all results in the creation or preservation of that fund, such plaintiff or plaintiffs may be awarded attorney's fees out of the fund ....
The second principle, of more recent development, is the so-called 'substantial benefit' rule: when a class action or corporate derivative action results in the conferral of substantial benefits, whether of a pecuniary or nonpecuniary nature, upon the defendant in such an action, that defendant may, in the exercise of the court's equitable discretion, be required to yield some of those benefits in the form of an award of attorney's fees." (Serrano v. Priest, 20 Cal.3d 25 (1977).)
A commonly used method to compute attorney fees to be awarded is the Lodestar Analysis. Lodestar refers to the "number of hours reasonably expended multiplied by the reasonable hourly rate" of an attorney. (PLCM Group Inc. v. Drexler, 22 Ca1.4th 1084 (2000).) Under the PLCM Group case, the lodestar figure may then be adjusted based on a consideration of various factors "to fix the fee at the fair market value for the legal services provided." "[T]he lodestar is the basic fee for comparable legal services in the community." (Ketchum v. Moses, 24 Ca1.4th 1122 (2001).)
Lodestar is the usual method used under fee-shifting statutes unless a contrary intention appears. For example, Ketchum held that lodestar, including enhancements, applies to awards under the anti-SLAPP statute. But the Supreme Court in Ketchum v. Moses also stated, "we are not mandating a blanket 'lodestar only' approach; every fee-shifting statute must be construed on its own merits ...." PLCM Group concluded that the Lodestar analysis also applies to fee recovery for in-house counsel.
Enhancements and negative adjustments are applied to the lodestar figure. Under Serrano v. Priest, the figure may be adjusted up or down based on factors including the novelty and difficulty of the litigation and questions involved, the skill displayed in presenting them, the extent to which the nature of the litigation precluded other employment by the attorneys, and the contingent nature of the fee award. PLCM Group further found that the court also may consider the attorney's success or failure and the fee agreement with the client.
Achieving only limited success may be used as a basis for reducing lodestar. Hensley v. Eckerhart, 461 U.S. 424 (1983) stated, if "a plaintiff has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount." Although California courts acknowledge that trial courts must consider the degree of success obtained, they recognize that trial courts have discretion, at least in civil rights and private attorney general cases, in deciding whether to reduce the lodestar on this basis. Harman v. City and County of San Francisco, 158 Cal.App.4th 407 (2007). The appellate court in Harman noted that "a slight monetary recovery will not control assessment of the appropriate amount of attorney fees where a constitutional right is vindicated or a significant public benefit conferred."
In exercising its discretion in deciding whether to enhance the lodestar, the trial court "must not intertwine considerations relevant to the determination of the lodestar amount with factors relevant to whether the lodestar should be adjusted upward." (Northwest Energetic Servs. LLC v. California Franchise Tax Bd., 159 Cal.App.4th 841 (2008).)
The party seeking fees must present evidence substantiating the time spent and the hourly rate of each attorney. The party seeking fees has the "burden of showing that the fees incurred were allowable[,] reasonably necessary to the conduct of the litigation[,] and were reasonable in amount." (Levy v. Toyota Motor Sales, U.S.A. Inc., 4 Ca1.App.4th 807 (1992).) Although the hours spent must be substantiated, an award of attorney fees may be based on declarations of counsel without production of detailed time records. (Raining Data Corp. v. Barrenechea, 175 Cal.App.4th 1363 (2009).)
A court must also apportion fees and reduce the lodestar figure when causes of action for which fees are recoverable are combined with causes of action for which attorney fees may not be recoverable. (Reynolds Metals Co. v. Alperson, 25 Ca1.3d 124 (1979).) However, "[a]ttorney's fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed. Attorneys fees need not be apportioned between distinct causes of action where plaintiff's various claims involve a common core of facts or are based on related legal theories. Apportionment is not required when the issues in the fee and nonfee claims are so inextricably intertwined that it would be impractical or impossible to separate the attorney's time into compensable and noncompensable units." (Graciano v. Robinson Ford Sales Inc., 144 Cal.App.4th 140 (2006).) Under the Harman case, a court must also apportion fees between successful and unsuccessful claims in which attorney fees are recoverable.
When the amount of attorney fees requested is inflated, the trial court has discretion to reduce the amount of fees (Serrano v. Unruh, 32 Cal.3d 621 (1982)) or deny recovery of attorney fees altogether (Chavez v. City of Los Angeles, 47 Cal.4th 970 (2010); Meister v. Regents of the Univ. of Cal., 67 Cal.App.4th 437 (1998).)
Attorney fees recoverable by statute or contract are costs of the suit. "It is now well settled that attorney fees, whether authorized by contract or statute, are recoverable under [Code of Civil Procedure Section] 1033.5, subdivision (a)(10) as an element of costs, and rather than claim attorney fees as an element of damages, the proper method to recover attorney fees is as an item of costs awarded upon noticed motion. [Citation.] Attorney fees based on a contract provision do not need to be demanded in the complaint." (Chinn v. KMR Prop. Mgmt., 166 Cal.App.4th 175 (2008); see also Civil Code Section 1717(a) [reasonable attorney fees based on contract are deemed costs of suit].)
Under Code of Civil Procedure Section 1033.5(c)(5), attorney fees based on statute may be recovered on noticed motion, at the time a statement of decision is rendered, on application supported by affidavit made concurrently with a claim for other costs, or on entry of a default judgment. Attorney fees based on "law," as opposed to a statute or a contract, must be claimed by noticed motion unless the parties stipulate otherwise.
The usual practice is to seek attorney fees by noticed motion. (See Civil Code Section 1717(b).) As provided by California Rule of Court 3.1702, "[e]xcept as otherwise provided by statute, this rule applies in civil cases to claims for statutory attorney's fees and claims for attorney's fees provided for in a contract."
If attorney fees are sought as an element of damages, they must be pleaded and proved and are awarded as part of the judgment, not by a separate posttrial motion. (Brandt v. Superior Court, 37 Cal.3d 813 (1985).)
Reasonable attorney fees incurred in preparing the motion for attorney fees ("fees on fees") also are recoverable. (Estate of Trynin, 49 Cal.3d 868 (1989).) However, enhancements applied to the lodestar on fees incurred in underlying litigation do not automatically or necessarily apply to fees on fees. (Pellegrino v. Robert Half Int'l Inc., 182 Cal.App.4th 278 (2010).)
The trial court is not required to prepare a statement of decision in ruling on an attorney fees motion. (Maria P. v. Riles, 43 Cal.3d 1281 (1987).) A party may request the trial court to prepare a statement of decision, and a statement of decision might be desirable to assist any appellate review of the award. (See California Common Cause v. Duffy, 200 Cal.App.3d 730 (1987).) Finally, with or without a statement of decision, the trial court should, and sometimes must, articulate reasons for its ruling on an attorney fees motion. (Graham v. DaimlerChrysler Corp., 34 Ca1.4th 553 (2004).)