Court of Appeal Also Decides Prejudgment Interest Not Allowable on Fee Awards.
Okay, so who says we don’t try to give you readers a synopsis of decisions (even though some might be a little wordy)? The next decision—Woosley v. State of California, Case No. B209890 (2d Dist., Div. 5 Apr. 16, 2010) (unpublished)—involves some interesting class action fee award issues. We have, in this post, summarized a 51-page decision, unless you desire to read it yourself. What a deal!
The case involved a marathon class action/consolidated cases of almost 30 years of litigation against the DMV/State Board of Equalization about the assessment of vehicle license fees and use taxes collected on out-of-state vehicles. The 1978-1992 phase of litigation resulted in a 1985 judgment resulting in a refund common fund of about $800 million and a $13.7 million fee award to class counsel, directed to be paid from the common fund. However, the 1985 common fund judgment, based on a state supreme court decision, was reduced down to $2 million when DMV appealed—which effectively meant that the use tax challenges were largely unsuccessful. No real common fund was actually created on some aspects of the case. Eventually, a subsequent judgment still found DMV’s violations, and a 2008 judgment awarded over $23 million in attorney’s fees and costs under the private attorney general statute (Code Civ. Proc., § 1021.5.) DMV appealed.
On review, the Second District, Division 5—in a very comprehensive opinion—reversed and remanded the calculation of the fee awards, among other things, on these grounds:
- The trial court was not precluded from awarding attorney’s fees under section 1021.5 notwithstanding the common fund portion of the 1985 judgment (Beasley v. Wells Fargo Bank, 235 Cal.App.3d 1407, 1415-1417 (1991), disapproved on a different point in Olson v. Auto. Club of So. Calif., 42 Cal.4th 1142, 1151 (2008);
- The trial court could not base its determination to use section 1021.5 solely on the fact that the common fund which had been generated was insufficient to pay the refunds and attorney’s fees (Bank of America v. Cory, 164 Cal.App.3d 66, 90-91 (1985));
- Because no common fund was set aside to benefit the reclassification class members, it was fair for the trial court to not require the refund class members to pay the attorney’s fees under the circumstances;
- One attorney’s reconstructed time records were adequate substantiation for a fee award;
- The trial court’s failure to address the lack of success—reduction of the 1985 judgment by about $800 million down to $2 million—required a lodestar recalculation;
- The trial court erred in utilizing duplication and padding as factors for adjusting the multipliers, when it should have been used to determine the proper lodestar; and
- Prejudgment interest is not allowable on an attorney’s fees award under section 1021.5 (cf. Bear Creek Planning Com. v. Title Ins. & Trust Co., 164 Cal.App.3d 1227, 1248-1249 (1985), disapproved on a different ground in Bay Development, Ltd. v. Superior Court, 50 Cal.3d 1012, 1032 n. 12 (1990) [fees allowable by statute and vesting discretion within the trial court to determine entitlement and/or reasonableness means no award fixed until fee determination late in the litigation]).