Lodestar, Not Contingency Fee Agreement Amount, Governed Work On Section 496(c) Work, Requiring A Remand On That Sole Issue.
Siry Investments, L.P. v. Farkhondehpour, Case No. B340681 (2d Dist., Div. 2 Sept. 23, 2026) (unpublished) involved a long-ranging dispute between the parties with respect to the scope of relief and attorney’s fees allowed under Penal Code section 496(c). Plaintiff ultimately obtained a substantial default judgment against defendants, including a reversal of an appellate court decision that rejected awarding treble damages and attorney’s fees under subdivision (c)—reinstating substantial treble damages and fee awards. [Penal Code section 496 is a theft-related provision used in business tort cases where there is embezzlement, diversion of funds, or conversion in the right circumstances.] Plaintiff also obtained terminating sanctions which were sustained on appeal; although some reductions were made from the original $12 million default judgment, plaintiff still obtained a substantial multi-million-dollar judgment based on appellate efforts resulting in a restoration of treble damages and fees—meaning that plaintiff only lost $376,437 through an amended judgment. Plaintiff moved for further section 496 fees, a large portion relating to appellate work, for about $4.275 million, inclusive of a 1.6 positive multiplier and about $1 million in lodestar fees representing services provided under a contingency fee agreement . The lower court awarded plaintiff $4,268,597.97 in fees under section 496(c), determining the multiplier was warranted and the contingency fee component was justified. This triggered an appeal by defendants.
With one exception, the fee award was affirmed. The primary issue on appeal was whether plaintiff was the section 496(c) prevailing party, with the appellate court finding that plaintiff’s efforts in preserving a substantial default judgment with a minor reduction established that plaintiff did prevail. There was an initial scholarly discussion where the appellate court found that the prevailing party standard governed section 496(c) fee awards, with plaintiff obtaining its main litigation objective through a substantial judgment and with minor reductions/setbacks for unsuccessful efforts not detracting from that reality. (City of Los Angeles v. Metropolitan Water Dist. of Southern California, 42 Cal.App.5th 290, 307 (2019).) Other issues respecting related activities were decided in plaintiff’s favor on appeal, as well as the award of the positive multiplier because exceptional skill was demonstrated on novel, complex issues which ultimately were adjudicated to the benefit of plaintiff.
The one issue resulting in a remand was the lower court’s award of the contingency fees to plaintiff based on the contingency formula. The appellate court found that was a flawed approach, since the lodestar approach applied because nothing in section 496(c) established that an alternative fee methodology was allowable. Because there was no record about hourly rates and hours worked, the matter had to be remanded to have those issues looked at on a re-do basis.