15% Reduction Justified Because Monthly Receiver Reports Might Have Resulted in Possible Fee Savings, Says Second District, Division 7
Here is an interesting one for all of you attorneys representing receivers. The lesson to be learned is direct and simple: make sure they discharge basic fiduciary responsibilities of filing monthly reports, or face possible reductions in your fees.
Jeffers, Mangel, Butler & Marmaro v. Southland Land Corp., Case No. B214255 (2d Dist., Div. 7 Mar. 15, 2010) (unpublished) involved a receiver appointed to liquidate Southland Land Corporation, which had 53 lawsuits pending against it and was enmeshed in political corruption scandals surrounding the City of South Gate. Quite a mess. However, the main part of this unpublished decision that should be of interest is that the trial court trimmed (or, to use the proper vernacular, “surcharged”) receiver’s counsel’s fees 15% because receiver failed to submit monthly reports to the court as required by the California Rules of Court. In fact, receiver did not make court applications to pay his counsel’s fees, although most of them were paid out of the receivership estate. Although other reductions of a more minor nature were in controversy, the 15% surcharge of $219,916 (on fees of $1,466,106) obviously inspired an appeal by receiver’s counsel.
The appellate court affirmed. Although finding no reported decision using the term “surcharge” to describe a discretionary reduction in attorney’s fees, it believed that some courts used the term to describe excessively high fees awarded in relation to the amount recovered in the litigation. By analogy, counsel’s failure to ensure that receiver made his monthly reports (in this case, missing about 24 reports) could have cost the receivership estate a lot of potential savings of fee and other categories, justifying affirmance under the abuse of discretion standard.