Fifth District Affirms Trial Court’s Fee Enhancement Award Upon Remand.
In Robertson v. Fleetwood Travel Trailers of California, Inc., 144 Cal.App.4th 785 (2006) (Robertson I), the Fifth District Court of Appeal affirmed a jury verdict in favor of plaintiffs (a couple) for Fleetwood’s failure to repair their defective travel trailer and subsequent failure to replace the trailer/reimburse trailer costs to the couple. The jury verdict awarded $38,000 in repurchasing costs and civil penalties under the Song-Beverly Act (Civil Code section 1790 et seq.). However, it remanded the attorney’s fees award to plaintiffs of $231,187.45 for recalculation of fees because the trial court erroneously “double dipped”—impermissibly used the same factors in determining both the lodestar amount and the multiplier. Robertson I did hold that the lodestar adjustment method, including the use of fee multipliers under Ketchum v. Moses, 24 Cal.4th 1122, 1135-1136 (2001)(one of our “Leading Cases”), was justified by the fee-shifting language in Civil Code section 1794(d), the Song-Beverly Act’s mandatory, pro-buyer fee provision. (In essence, class action lodestar enhancement principles were engrafted as part of the Song-Beverly Act fee-shifting considerations.) The $231,187 in fees subject to remand from Robertson I broke down this way: $145,080 in trial fees, increased by a .50 multiplier (subtotal of $217,620) plus an additional $13,566 in fees spent on the fee petition.
As identified by Robertson I, the trial court’s error was in using the contingency risk and payment delay risk factors to establish the lodestar (reasonable hours spent multiplied by the hourly prevailing rate for private attorneys in the community conducting noncontingent litigation of the same type) and the lodestar fee enhancement, violating the “double counting” prohibition set forth in Ketchum, supra, 24 Cal.4th at 1138-1139. On remand, however, the fee claimants and the trial court “cleaned up” the record so as to demonstrate no “double counting.” For example, the postremand fee motion included an expert declaration from Mr. Pearl (the CEB attorney’s fees treatise writer) on contingent and contingent hourly rates charged by other law firms throughout the state.
Fleetwood opposed on these grounds: (1) the trial court should eliminate the .50 multiplier (eliminating $72,540 in requested fees); (2) no further multipliers should be applied to trial or appellate fees; and (3) any payment delay was covered by the appeal bond.
In the postremand fee proceeding, the trial court found the $340 hourly rate reasonable and actually increased the prior multipliers applied to sought-after fees. The specific determinations looked like this: (1) trial services–$152,460 lodestar with a multiplier of 1.35 (versus prior .50 multiplier) plus $18,530 in fee petition expenses (for a subtotal of $376,812); and (2) Robertson I appellate services–$72,454 lodestar with a .95 multiplier plus $5,440 in fee petition expenses (for a subtotal of $146,725). The grand total of the fee award came to $523,537 which, when coupled with the costs award, swelled the final tally to $545,723.
Fleetwood appealed the postremand fee determination, advancing four arguments: (1) the trial court still “double counted” on factors at the lodestar and multiplier determination phases; (2) the lodestar amount was improperly calculated; (3) the lodestar was unreasonable as a “noncontingent” rate because Song-Beverly Act cases are only taken on a contingency basis; and (4) the multipliers were duplicative. Fleetwood’s abuse of discretion challenges—with it acknowledging the deferential review standard—did not prevail in light of the trial court’s faithful obedience to the remand directives set forth in Robertson I.
In Robertson v. Fleetwood Travel Trailers of California, Inc., Case No. F053028 (5th Dist. July 18, 2008) (unpublished) (Robertson II), the Fifth District began by setting forth the parameters of the abuse of discretion review standard and lodestar adjustment method, a discussion that is useful for practitioners on either side of a fee dispute. (Slip Opn., at pp. 9-11.) It then determined that the lower court did not rubberstamp its prior order, but undertook a comprehensive redetermination of fee issues from “scratch.”
The appellate panel found no “double counting” of factors the second time around. Fleetwood mainly challenged the declaration of plaintiffs’ lead attorney when he testified that the contingency and nonpayment risks are factors used internally by his firm when setting hourly attorney rates. The Court of Appeal determined that this was relevant to the trial court’s lodestar decision: “In determining whether a relevant market compensates for contingency or risk and thereby encompasses such factors within the prevailing rates, evidence of an express statement from the attorney involved in the case would obviously be a significant factor. Indeed, such evidence may lead a trial court to conclude that the relevant market has already incorporated factors such as contingency and risk into the fee rate, since a reasonable inference may be drawn that a law firm’s use of internal factors is a reflection of market practices and conditions.” (Slip Opn., at p. 13.)
The lodestar was properly calculated. Fleetwood argued it was not based on comparable legal services in the local community. Two problems plagued this argument: (1) Fleetwood waived this argument by not objecting to evidence on the $340 hourly rate; and (2) plaintiffs did include evidence on the rate of at least one local attorney practicing in the Song-Beverly Act area.
Fleetwood’s lodestar unreasonableness argument—noncontingent hourly rates are inapposite because Song-Beverly Act cases are only taken on a contingency basis—failed as well. Both plaintiffs’ lead counsel and Mr. Pearl provided evidence about the hourly rates charged by numerous contingent and noncontingent lawyers with similar experience as plaintiffs’ counsel. This was sufficient, coupled with Fleetwood’s waiver in failing to object to the evidence.
The Robertson II panel also found that circumstances had changed so as to justify increased multipliers of a nonduplicative nature. Plaintiffs won almost all the substantive issues in Robertson I except for the fee remand issue, the delay had doubled, and attorney hourly rates had risen.
The Court of Appeal also discounted the notions that the appeal bond and accrual of postjudgment statutory interest eliminated the need to consider the “payment delay” factor in the multiplier calculus. It answered the argument this way: “Although a multiplier based on delay is in many respects tantamount to an interest rate [citation omitted], other considerations are often involved beyond the mere time differential of awaiting payment of accrued fees. For example, a delay multiplier may be appropriate in light of such considerations as inflation, unusually long delay, preclusion of other work, advancement by the law firm of its own funds to cover litigation costs, and to account for the fact that the lodestar was based on rates in effect at the time services were rendered but the attorney’s hourly rates have increased over time,” citing Graham v. DaimlerChrysler Corp., 34 Cal.4th 553, 583-584 (2004); Horsford v. Bd. of Trustees of Cal. State Univ., 132 Cal.App.4th 359, 399-400 (2005); Sternwest Corp. v, Ash, 183 Cal.App.3d 74, 76-77 (1986). Because lots of attorney hours had been carried for 3 ½ years by plaintiffs’ attorneys and hourly rates had risen in the interim, there was no abuse when the trial court utilized increased multipliers.
Several pointers emerge from Robertson II. First, litigants opposing fee motions need to object to crucial evidence and offer contesting evidence on lodestar or multiplier issues. Otherwise, their contentions are likely subject to being disregarded based on waiver principles. Second, contesting litigants need to carefully consider appealing a fee award a second time where the other party and trial court significantly “cured” the remand issues. This second appeal likely will be judged under a substantial evidence test, a very, very tough review standard for appellants to overcome successfully on appeal (especially on the second go-around). Third, the respondent which does indeed appeal and lose will find itself likely having to bear more appellate fees when the appellant wins the second appeal.