Opinion
B222313 Los Angeles County Super. Ct. No. BC174047
10-31-2011
CECILIA ENCARNACION et al., Plaintiffs and Appellants, v. 20TH CENTURY INSURANCE COMPANY, Defendant and Appellant.
Greines, Martin, Stein & Richland, Robert A. Olson and Feris M. Greenberger for Defendant and Appellant. Law Offices of Ian Herzog, Ian Herzog and Evan D. Marshall for Plaintiffs and Appellants.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
APPEAL from a judgment of the Superior Court of Los Angeles County. Amy D. Hogue, Judge. Affirmed.
Greines, Martin, Stein & Richland, Robert A. Olson and Feris M. Greenberger for Defendant and Appellant.
Law Offices of Ian Herzog, Ian Herzog and Evan D. Marshall for Plaintiffs and Appellants.
Cecilia Encarnacion and her children (collectively the Encarnacion plaintiffs), were judgment creditors under a $5.6 million wrongful death judgment against Ramon Aguilera, and assignees of Aguilera's assignable rights against his insurer, 20th Century Insurance Company (20th Century). They sued 20th Century for breach of contract and breach of the implied covenant of good faith and fair dealing, seeking to recover their unpaid wrongful death judgment and postjudgment interest. Aguilera joined in the bad faith claim, asserting his unassigned tort claims for emotional distress and punitive damages for 20th Century's refusal to accept the Encarnacion plaintiffs' policy-limits settlement offer. In three previous appeals and five writ proceedings this court has dealt with numerous disputed legal issues arising from these events.
Following the parties' lead, we refer to the insurer as 20th Century notwithstanding that its name is now 21st Century Insurance Company.
In this appeal (perhaps the last in this case) 20th Century challenges a $2.7 million judgment for attorney fee damages awarded under Brandt v. Superior Court (1985) 37 Cal.3d 813 (Brandt), on three bases: that it rests upon improper legal grounds, that it is excessive, and that it lacks evidentiary support. Encarnacion appeals from the same Brandt fee judgment, contending that the trial court improperly limited the jury's award and erroneously denied their recovery of certain costs.
We find no prejudicial error, and affirm the judgment.
BACKGROUND
We draw upon the court's extensive factual recitals in earlier appeals, Encarnacion v. 20th Century Insurance Co. (Sept. 27, 2007, B179825, consol. with B182737 [nonpub. opn.] (Encarnacion II)), and Aguilera v. 20th Century Insurance Co. (Dec. 30, 2008, B190775 [nonpub. opn.]).
Ramon Aguilera rented property to Marco Gonzalez and Cecilia Encarnacion, who lived there with their three children. The Encarnacion plaintiffs sued Aguilera for wrongful death after Aguilera shot and killed Gonzalez in March 1994, following a dispute over unpaid rent. Aguilera was insured by 20th Century under a $100,000 homeowner's policy.
2. Previous lawsuits and appeals
a. The wrongful death suit - Encarnacion v. Aguilera
In the wrongful death suit against Aguilera, 20th Century initially agreed to defend Aguilera under a reservation of rights, but declined to accept the Encarnacion plaintiffs' policy-limits settlement offer and later denied coverage, based primarily on its policy's exclusion of coverage for intentional criminal acts. The Encarnacion plaintiffs obtained a $5.6 million judgment in the wrongful death action, and Aguilera assigned them his assignable rights against 20th Century.
b. The bad faith suit - Encarnacion v. 20th Century (Encarnacion I)
The Encarnacion plaintiffs and Aguilar together sued 20th Century, alleging causes of action on behalf of the Encarnacion plaintiffs for breach of contract as assignees of Aguilera's rights, and for breach of the implied covenant of good faith and fair dealing on behalf of both the Encarnacion plaintiffs and Aguilera. In a cross-action, 20th Century sought a declaration that its policy provided no coverage to Aguilera, and it thus had no liability to either Aguilera or the Encarnacion plaintiffs.
The trial court granted summary judgment to 20th Century, holding that the policy's criminal-acts exclusion precluded coverage in the wrongful death action. But on appeal this court reversed and remanded the case for trial, finding triable issues of fact as to whether 20th Century should be precluded upon equitable grounds from relying on its criminal-acts coverage exclusion. (Encarnacion v. 20th Century Insurance Co. (May 8, 2000, B127594 [nonpub. opn.] (Encarnacion I.)
The equitable issues on which coverage rested were whether 20th Century had misled Aguilera to plead guilty to manslaughter and to forego independent counsel in the wrongful death action, and whether it had misled the Encarnacion plaintiffs to join in a global settlement of that action, triggering the equitable doctrines of forfeiture, equitable estoppel, and promissory estoppel.
c. Rulings following remand in Encarnacion I
After remand, the trial court bifurcated the coverage case issues into a phase 1 trial of the equitable issues underlying 20th Century's coverage defense, to be followed by a trial of the parties' respective damage claims if coverage were established. On June 2, 2002, this court granted the Encarnacion plaintiffs' petition for writ of mandate, holding that the equitable issues that underlie the question of coverage must be determined by the court, not a jury. (Encarnacion v. Superior Court (June 19, 2002, B157545) [nonpub. opn.].)
The trial court (Hon. J. Stephen Czuleger) found in the phase 1 trial that equitable defenses overcame 20th Century's coverage exclusion. It found that 20th Century had induced Aguilera to waive his right to independent counsel without advising him of the potential for conflicts of interest; and it found that 20th Century had induced Aguilera to plead guilty to involuntary manslaughter by representing that its criminal-acts coverage exclusion would apply only to intentional criminal acts, without disclosing that it would deny coverage if Aguilera admitted any crime related to Gonzalez's death. The court held that the doctrines of forfeiture, equitable estoppel, and promissory estoppel precluded 20th Century from relying on the policy's criminal-acts exclusion to deny coverage.
Following these rulings the trial court denied the Encarnacion plaintiffs' request to amend their complaint to add a claim under Insurance Code section 11580, in order to "clarify" their right "to recover damages in their own right and not simply as assignees for defendant [20th Century's] breach of the duty of good faith and fair dealing." On December 19, 2003, this court declined to hear the Encarnacion plaintiffs' writ petition challenging that ruling.
Following the phase 1 trial the court held that the tort claims pled by both Aguilera and the Encarnacion plaintiffs for non-economic damages (emotional distress, punitive damages, and attorney fee damages under Brandt) were personal to Aguilera and not assignable to the Encarnacion plaintiffs. That order limited the Encarnacion plaintiffs to the assignable claims for economic damages resulting from 20th Century's breaches.
The trial court rejected 20th Century's argument that the Encarnacion plaintiffs' contract damages could not exceed the policy's $100,000 policy limits. On October 5, 2004, it entered judgment for the Encarnacion plaintiffs and against 20th Century for contract damages in the amount of the $5.6 million wrongful death judgment, which with postjudgment interest then totaled $10,519,602.58.
On August 19, 2004, the Encarnacion plaintiffs had filed a second action against 20th Century under Insurance Code section 11580, subdivision (b)(2), seeking payment of the wrongful death judgment as judgment creditors and beneficiaries of Aguilera's policy. The suit was dismissed on March 18, 2005, after the trial court (Hon. John Shepard Wiley) sustained 20th Century's demurrer on the ground the action was barred by res judicata.
d. The Encarnacion II appeal
In Encarnacion II, this court affirmed the Encarnacion plaintiffs' $10.5 million contract damage judgment against 20th Century. (Encarnacion II, supra, B179825 at pp. 40-44.) But we reversed the trial court's ruling that Aguilera's claim for Brandt fees was not assignable, holding that under our Supreme Court's recent decision in Essex Ins. Co. v. Five Star Dye House, Inc. (2006) 38 Cal.4th 1252 (Essex), assignees may recover Brandt fee damages for the fees incurred in a suit against the insurance company to recover policy benefits. (Id. at p. 1265.) We therefore remanded the Encarnacion plaintiffs' Brandt fee claim for trial. (Encarnacion II, supra, B179825 at pp. 46-48.)
In a separate trial of Aguilera's bad-faith tort action for emotional distress and Brandt fee damages, the trial court (Judge Wiley) held that because Aguilera had assigned his rights to Encarnacion, he could not recover Brandt fee damages from 20th Century. The jury in that trial found by special verdict that 20th Century had breached its implied covenant of good faith and fair dealing, but the breach had caused Aguilera no damages. This court affirmed the resulting judgment against Aguilar and in favor of 20th Century. (Aguilera v. 20th Century Insurance Co., supra, B190775.)
Because the Encarnacion plaintiffs were precluded by Judge Czuleger's rulings from obtaining noneconomic tort damages, they had no formal role in the trial of Aguilera's tort claim against 20th Century. But their lawyers—the Herzog firm—nevertheless associated to assist Aguilera's counsel in the trial of Aguilera's tort claim.
We also held in Encarnacion II that the verdict that 20th Century's tortious bad faith had caused Aguilera no damages did not preclude the Encarnacion plaintiffs from recovering Brandt fees: "The Supreme Court explained in Essex that the assignee's right to recover Brandt fees is 'the right to recover Brandt fees that the assignee incurs to recover the policy benefits in the lawsuit against the insurance company.'" (Encarnacion II, supra, B179825, at p. 48.)
On December 24, 2007, 20th Century satisfied the underlying contract judgment by paying the full amount—by then about $13.9 million—to the Encarnacion plaintiffs. From that total, the Encarnacion plaintiffs' counsel, the Herzog firm, was paid a 40 percent contingent fee of $5,515,000. 3. Trial of the remanded Brandt fee claim
Ruling in the Encarnacion plaintiffs' remanded Brandt fee action—the action at issue in this appeal—the trial court (Hon. Amy D. Hogue) held that 20th Century was bound by the jury's determination in Aguilera's bad faith action that 20th Century had tortiously breached its implied covenant of good faith and fair dealing. It ruled, and instructed the jury, that the Encarnacion plaintiffs had acted reasonably in engaging attorneys to recover the payment owed under Aguilera's policy. And it rejected the parties' cross-motions for summary judgment (in which 20th Century had contended that the Encarnacion plaintiffs could recover no Brandt fees as a matter of law, and the Encarnacion plaintiffs had contended that they should be entitled to recover all of the fees their attorneys received under their 40 percent contingent fee agreement).
The trial court instructed the jury at the trial's outset that the Encarnacion plaintiffs could recover only the portion of the fees that were attributable to their attorneys' efforts to recover contract damages—benefits owed under Aguilera's policy. To accomplish that result, the court instructed, it must allocate the attorneys' work between that attributable to obtaining contract benefits, for which the Encarnacion plaintiffs were entitled to recover Brandt fees, and the work attributable to other issues, such as bad faith damages, for which they were not. The sole issue for jury determination therefore was the portion of the $5.5 million total fee that should be allocated to counsel's efforts to obtain policy benefits on the Encarnacion plaintiffs' behalf.
The Herzog firm kept no records of the time spent by its attorneys. But after reviewing relevant documents (some 52 boxes of them), Evan Marshall, an attorney with the firm, estimated that the Herzog firm's attorneys had devoted at least 2,000 hours on Encarnacion's behalf. His estimate was that about 85 percent of the firm's efforts had been devoted to issues of coverage, and about 15 percent to the tort issues and "other things." Documents reflecting his estimates were admitted into evidence. 20th Century's witness on the Brandt fee issue, attorney Andre Jardini, estimated from the documentation that the Herzog firm had devoted almost 3,000 hours to the case, of which 329 hours should be allocated to the contract issues, 1,192 hours to the tort issues, and 1,460.5 hours to mixed issues of contract and tort, about half of which should be credited to the contract issues.
The trial court instructed the jury that the Encarnacion plaintiffs "are not entitled to recover all of the fees that they paid to their attorneys," and that they had the burden of proving the appropriate amount of Brandt fee damages. It instructed the jury how to allocate the attorney fees: The jury must determine the number of hours attributable to the attorneys' work on the contract issues, including the portion of any mixed hours that should be attributed to the contract claim; it should divide that sum by the total hours devoted by the attorneys; and it should then multiply that fraction by the $5,515,000 fee paid under the contingent fee agreement. The result is the appropriate amount of Brandt fee damages. The same formula was set forth in the jury's special verdict form. The court also instructed the jury to "use your judgment to decide a reasonable amount based in the evidence and your common sense," and that its award "must be based on your reasoned judgment applied to the testimony of the witnesses and the other evidence that has been admitted during trial."
The jury determined that the Encarnacion plaintiffs' attorneys had devoted a total of 2,981.5 hours, half of which (1,489.5 hours) it allocated to their effort to obtain the insurance contract benefits. It specifically found that 1,052.5 hours were devoted to contract issues alone, and that 874 hours were jointly devoted to contract and tort issues of which it attributed half (437 hours) to the contract claims. Applying the formula required by the instructions and the special verdict form to the $5,515,000 fees the Encarnacion plaintiffs had paid under their contingent fee agreement, it awarded Brandt fees totaling $2,755,294.
The trial court entered judgment against 20th Century in that amount on November 30, 2009. Notice of entry of judgment was served December 17, 2009. The Encarnacion plaintiffs filed their notice of intention to move for new trial on December 21, 2009; 20th Century filed its notice of intention to move for new trial on December 30, 2009.
The Encarnacion plaintiffs and 20th Century each moved also to vacate the judgment, and for judgment notwithstanding the verdict.
On February 8, 2010, the trial court denied both parties' challenges to the judgment, but granted 20th Century's motion to tax the Encarnacion plaintiffs' costs. The parties timely filed their notices of appeal on February 16, and February 18, 2010, both well within the 30-day limit following service of the February 8 order denying their postjudgment motions. (Cal. Rules of Court, rule 8.108(b), (c), (d).)
The judgment, which resolves the last remaining issues in this protracted dispute, is appealable. (Code Civ. Proc. § 904.1, subds. (a)(1), (a)(2), (a)(4).) Central to the appeals of both parties is the jury's $2,755,294 Brandt fee award and the trial court's orders leading to it. The Encarnacion plaintiffs appeal also from the order taxing their cost bill. (Code Civ. Proc., § 904.1, subd. (a)(2).)
DISCUSSION
A. The Jury Properly Determined The Appropriate Brandt Fee Award.
In California, the rule codified in Code of Civil Procedure section 1021 is that "each party to a lawsuit must ordinarily pay his own attorney fees." (Trope v. Katz (1995) 11 Cal.4th 274, 278.) But there are exceptions. (Essex v. Five Star Dye House, Inc., supra, 38 Cal.4th at p. 1257; Code Civ. Proc., §§ 1021 [measure and mode of compensation of attorneys is left to parties' agreement, except as provided by statute], 1033.5, subd. (a)(10) [attorney fees are allowable costs when authorized by contract, statute, or law].)
Our Supreme Court held in Brandt, supra, 37 Cal.3d 813 that an exception to the general rule arises when an insurer's tortious breach of its covenant of good faith and fair dealing "reasonably compels the insured to retain an attorney to obtain the benefits due under a policy." Then, the fees the insured pays to engage an attorney to recover the contract benefits under his or her policy are recoverable as elements of the insured's economic loss—damages—proximately caused by the insurer's breach, rather than being classified as ordinary attorney fees. (Brandt, supra, 37 Cal.3d at p. 817.) But "[f]ees attributable to obtaining any portion of the plaintiff's award which exceeds the amount due under the policy are not recoverable" as Brandt fee damages. (Id. at p. 819.)
In Cassim v. Allstate Ins. Company (2004) 33 Cal.4th 780 (Cassim), the court affirmed that these well-settled rules apply when the fees paid to the plaintiffs' counsel are computed under a contingent fee agreement as a percentage of the insured's recovery, as well as when they are paid at an hourly rate. Either way, the appropriate Brandt fee is "'the amount attributable to the attorney's efforts to obtain the rejected payment due on the insurance contract.'" (Id. at p. 809, quoting Brandt, supra, 37 Cal.3d at p. 819, italics omitted.)
This case tests the limits of these principles. In this appeal the Encarnacion plaintiffs argue that because there was no tort recovery against 20th Century, none of the fees paid to their contingent-fee attorneys is attributable to the tort case, and the entire $5.5 million contingent fee—40 percent of their contract-action award—is necessarily attributable solely to their attorneys' efforts to obtain the policy benefits owed them. Therefore no allocation of the attorneys' efforts was required, and the trial court should not have permitted the jury to award any lesser amount as Brandt fee damages.
20th Century's appeal argues that the trial court erred in a different respect, by permitting the jury to award Brandt fee damages attributable to attorneys' efforts to obtain amounts that exceed the $100,000 policy limit of Aguilar's insurance coverage. The $100,000 policy limit, it contends, constitutes the maximum "policy benefits" that the Encarnacion plaintiffs could recover in their contract action; the portion of their recovery above that amount constituted consequential damages, not policy benefits. Thus, they argue, in determining the plaintiffs' Brandt fee award the jury should not have been permitted to consider the portion of the attorneys' efforts to obtain a recovery of $100,000, and the award of Brandt fees exceeding 40 percent of the fees attributable to those efforts was error.
Both of these contentions are inconsistent with the principles on which Brandt and Cassim rest.
1. The trial court properly instructed the jury to determine the portion of the Encarnacion plaintiffs' fees attributable to their counsel's efforts to obtain the policy benefits owed to Aguilera.
The trial court instructed the jury that the only issue to be determined was the amount of the plaintiffs' damages resulting from 20th Century's bad faith, and that the only such damages claimed by the plaintiffs is the fees they paid to their attorneys—an amount it was the plaintiffs' burden to prove by a preponderance of the evidence. It instructed the jury that the plaintiffs were entitled to be reimbursed for the portion of the fees attributable to their attorneys' efforts to obtain benefits owed under the insurance contract, but not for fees attributable to any other purpose. And it was given the formula it must use to accomplish that result.
The Encarnacion plaintiffs contend that in this case the entire $5.5 million contingent fee they paid their attorneys is necessarily attributable to their contract action. Their theory is straightforward:
(a) They sought and recovered judgment compensating them for the policy benefits 20th Century owed under Aguilera's homeowner's policy, consisting of the consequential damages resulting from the insurer's failure to accept the Encarnacion plaintiffs' policy-limits settlement offer. Because 20th Century had failed to accept the Encarnacion plaintiffs' policy-limits settlement offer, those policy benefits consisted of the $5.6 million judgment entered against Aguilera in the Encarnacion plaintiffs' wrongful death action against him, plus interest, rather than merely the $100,000 limit under Aguilera's policy with 20th Century. (Johansen v. California State Auto. Assn. Inter-Ins. Bureau (1975) 15 Cal.3d 9, 12, 14-15 ["The implied covenant of good faith and fair dealing imposes a duty on the insurer to settle a claim against its insured within policy limits whenever there is a substantial likelihood of a recovery in excess of those limits"]; Hamilton v. Maryland Casualty Co. (2002) 27 Cal.4th 718, 724-725 ["An unreasonable refusal to settle may subject the insurer to liability for the entire amount of the judgment rendered against the insured, including any portion in excess of the policy limits"].)
(b) Their contingent fee agreement provided that they would pay the Herzog firm 40 percent of any recovery it obtained on their behalf.
(c) Their ultimate recovery in the contract action turned out to be $13.9 million, of which 40 percent, roughly $5.5 million, was paid as fees to their attorneys.
(d) Because there was no tort recovery, all of the $5.5 million in fees are necessarily attributable to the contract award. The trial court therefore erred by refusing to enter summary judgment for Brandt fees of the entire $5,515,000, plus interest, and by instead instructing the jury to find that a portion of the underlying fee was not attributable to the contract claim.
The plaintiffs' theory is inconsistent with the principles on which the Brandt and Cassim decisions rest. It is true that all of the plaintiffs' attorneys' fees resulted from their recovery of contract damages; there was no tort recovery. Their recovery in the contract action constituted compensation for 20th Century's contract breach (failure to settle within policy limits), not tort damages (such as for emotional distress, punitive damages, or Brandt fees). And the fees they paid were measured solely by reference to their recovery as assignees of the rights owed under Aguilera's policy.
But the Encarnacion plaintiffs' theory reflects a misconception. Under the Brandt and Cassim cases, the plaintiffs are entitled to recover the portion of the total fees attributable to their counsel's work to recover the policy benefits, not the portion attributable to their recovery of those benefits. (Cassim, supra, 33 Cal.4th at pp. 808-809 [Brandt fees cannot be calculated by computing contingent-fee percentage of contract recovery; appropriate Brandt fees may be more or less than that amount].) As Cassim explicitly holds, their contingent fee agreement cannot be viewed as two independent fee agreements, one providing for a fee of 40 percent of any contract recovery, and another providing for 40 percent of any tort recovery: "More accurate . . . is to say that plaintiffs agreed, as is generally the case, to pay their attorney an unallocated and undifferentiated 40 percent of their total recovery, whatever that might be." To conclude otherwise "is therefore a fiction." (Cassim, supra, 33 Cal.4th at p. 808.)
Here, the entire $5.5 million fee was triggered by the contract recovery; but the evidence showed that only a portion of the Herzog firm's work was attributable to obtaining that recovery. The plaintiffs' burden was to establish the portion of the total fee that was attributable to work on the contract issues. As the court held in Cassim: "If plaintiffs can prove that some portion of that fee"—some portion of the contingent fee recovered as "an unallocated and undifferentiated 40 percent of their total recovery"—is attributable to the contract work and not the tort work, they are entitled to recover that portion of the total contingent fee as Brandt fees. (Cassim, supra, 33 Cal.4th at p. 808.) But under the theory enunciated in Cassim, the converse is equally true: If some portion of the total fee is found to have been for legal work that is solely or partially attributable to issues other than the contract recovery, reimbursement of the plaintiffs for that portion of their total fee would exceed the benefits they are entitled to recover under Brandt.
The evidence was that the Herzog firm devoted substantial efforts on the plaintiffs' behalf to both the contract and tort issues, and that it received a total fee of $5.5 million for its work. According to the plaintiffs' evidence, the firm devoted about 2,000 hours on their behalf, about 85 percent of which were attributable to the contract issues; the remaining 15 percent of the firm's efforts were directed to the bad faith tort and "other things." 20th Century's evidence estimated that the attorneys devoted almost 3,000 hours on the plaintiffs' behalf, but only about 22 percent of that time was attributable to the contract issues. The firm's fee agreement entitled it to be compensated as a percentage of any recovery by the plaintiffs, no matter which action or issue might be the recovery's source. No one contends that any of its work was intended to be pro bono.
This evidence justified the trial court in instructing the jury, as it did, to allocate the attorneys' efforts—and therefore the contingent fee resulting from those efforts— between the contract and tort actions, and to award the plaintiffs only the portion of the total fees that the plaintiffs proved should be attributed to work on the contract issues. Neither the evidence nor the law could support the ruling sought by the Encarnacion plaintiffs, that all of the Herzog firm's efforts—and therefore that all of its fees—must be attributed to the contract action, and none to the tort action. The evidence that some disputed portion of the work was devoted to noncontract issues precludes the allocation of 100 percent of the fees to the Brandt fee award.
2. The Encarnacion plaintiffs were not prejudiced by the trial court's refusal to give the special jury instructions they proffered with respect to the verdicts in the phase 1 trial.
The reasoning set forth above also explains why the trial court's refusal to instruct the jury according to the extensive special instructions requested by the Encarnacion plaintiffs caused them no prejudice. The proposed instructions would have told the jury that in the phase 1 trial no tort issues had been tried, and that the plaintiffs had recovered only contract damages and not tort damages; would have instructed the jury that the Encarnacion plaintiffs had not been parties in the phase 1 trial; and would have informed the jury about some of the distinctions between tort and contract damages. The Encarnacion plaintiffs contend that these proposed instructions included statements of black-letter law, statements taken from the opinions in Encarnacion I and Encarnacion II that are law of the case, and statements essential to neutralize the prejudicial impact of certain testimony given by 20th Century's expert.
"'Tort damages' are awarded for breach of duties which are imposed by law over and above the terms of a party's agreement. Breach of the implied covenant of good faith and fair dealing (sometimes called bad faith) is a tort. Tort damages are more extensive than contract damages and include all detriment proximately caused by breach of the legal duty, whether it could have been anticipated or not. Damages for breach of the implied covenant of good faith and fair dealing include out-of-pocket losses including expenses such as attorneys' fees which resulted from breach of 20th Century's duties under the contract."
The Encarnacion plaintiffs' purpose in urging these instructions is clear: to indicate to the jury that it should attribute the attorney fees based on the phase 1 verdict entirely to the contract issues, and not to the tort issues. However the trial of contract issues was the culmination of years of litigation and effort by the Herzog firm, which had been devoted to more than just the contract issues. The determination of appropriate Brandt fees required allocations segregating the proportion of the total effort devoted over a period of years that was attributable to recovery of the policy benefits. The phase 1 trial was just one piece of that much more lengthy effort by the Herzog firm on the Encarnacion plaintiffs' behalf.
As the evidence shows, the Herzog firm devoted substantial efforts to both the contract issues, and to the tort issues (such as claims for emotional distress and, potentially, punitive damages) which were unassignable and to which the Encarnacion plaintiffs therefore were not parties. The plaintiffs' own expert witness testified that approximately 15 percent of the Herzog firms' work was directed to obtaining bad faith tort remedies rather than benefits flowing from the insurance coverage. The evidence was that before (and perhaps after) 2003 the Herzog firm had devoted efforts to issues other than the contract issues; that some of the Herzog firm's discovery would have been used for both the contract and tort issues; that the attorneys' unsuccessful efforts to obtain an amendment of their complaint under Insurance Code section 11580, and their attendance at certain depositions, could be attributed to work on the bad faith tort claim; that the Herzog firm had devoted some time to Aguilar's later-dismissed claim of attorney malpractice against the attorneys provided for his defense by 20th Century, and to Aguilera's punitive damage claim against 20th Century; and that the Herzog firm had prepared and filed some motions for the benefit of both Aguilera and the Encarnacion plaintiffs, and had prepared jury instructions on Aguilera's behalf for the bad faith case. As the plaintiffs' expert put it, the Herzog firm was "joined in interest in pursuing the [bad faith tort] action" on Aguilera's behalf, and a victory by Aguilera would have benefitted the Encarnacion plaintiffs. Aguilera and the Encarnacion plaintiffs had a "symbiotic relationship," in which "each benefitted from the work of the other."
The special instructions proposed by the Encarnacion plaintiffs would have suggested to the jury that the phase 1 trial itself was of greater importance than the time and effort that had been devoted to the various issues throughout the litigation. The Encarnacion plaintiffs were not prejudiced by the trial court's refusal to give the jury this inappropriate message.
3. The trial court properly refused to limit the Brandt fee recovery to 40 percent of the fees attributable to recovery of the $100,000 policy limit.
The trial court refused to instruct the jury that the Brandt fees the Encarnacion plaintiffs were entitled to recover could not include fees incurred to obtain any portion of the contract damage award in excess of the $100,000 coverage limit of Aguilera's policy. 20th Century asks this court to find error in that ruling, arguing that consequential contract damages, such as the portion of the contract recovery that exceeded the $100,000 policy limit, do not qualify as "policy benefits" for which a Brandt fee recovery may be obtained.
The proposed instruction was: "Any award of attorneys' fees must be based solely on the efforts to obtain the $100,000 policy benefits. The attorney[s'] efforts to obtain amounts more than the $100,000 policy benefits are not recoverable and must not be included in any award"
The authority supporting 20th Century's interpretation is sparse. 20th Century notes the court's holding in Brandt phrased in terms of plaintiffs' right to recover attorney fees incurred to obtain "policy benefits." It argues that in Essex v. Five Star Dye House, Inc., supra, 38 Cal.4th at p. 1258, the court equates "policy benefits" with "policy limits" where it says that "attorney fees expended to obtain damages exceeding the policy limit . . . are not recoverable as Brandt fees." And allowing recovery of fees incurred to recover amounts above the policy's $100,000 limit as Brandt fees permits the plaintiffs to treat the excess-of-policy-limits recovery inconsistently, both as contract damages for which Brandt fees may be recovered, and as tort damages flowing from the breach of the implied covenant of good faith and fair dealing. We find none of these points persuasive, for each appears to be inconsistent with the bedrock principles underlying key decisions.
In Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, the court held that an insured may recover contract damages for the insurer's bad faith failure to settle a claim against the insured within policy limits in the full amount of the resulting judgment against the insured. And it explained that such a recovery does not obtain more than the insured "could have gained by full performance" of the insurance contract—even when the judgment far exceeds the insurance contract's policy limit. (Id. at p. 661.) That is because the policy benefits owed to the insured include more than just the obligation to pay money. "The policy limits restrict only the amount the insurer may have to pay in the performance of the contract as compensation to a third person for personal injuries caused by the insured; they do not restrict the damages recoverable by the insured for a breach of contract by the insurer." (Id. at p. 659.) The monetary amount required to compensate the insured for breach of the insurer's nonmonetary obligations may exceed the maximum that would have been payable in the absence of a breach. "If [the insurer] had performed its contract, it would have settled the action against [the insured], thereby protecting him from all liability. The allowance of a recovery in excess of the policy limits will not give the insured any additional advantage but merely place[s] him in the same position as if the contract had been performed." (Id. at p. 661.)
Thus the contract damages awarded in excess of the policy limit are imposed "not for a bad faith breach of contract but for failure to meet the duty to accept reasonable settlements, a duty included within the implied covenant of good faith and fair dealing"— a benefit owed to the insured under the policy. (Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 430.) The contract judgment in excess of the policy limits is merely the monetary equivalent of the policy benefit that the insured was denied by the insurer's breach. (Comunale v. Traders & General Ins. Co., supra, 50 Cal.2d at p. 661 [allowing insured recovery in excess of policy limit where insurer has failed to settle within policy limits "will not give the insured any additional advantage but merely places him in the same position as if the contract had been performed"]; Archdale v. American Internat. Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449, 469 [purpose of excess judgment is to provide insured "as nearly as possible the equivalent of the benefits of the contract"].)
In Essex v. Five Star Dye House, Inc., supra, 38 Cal.4th 1252 (Essex), as in this case, the insured had assigned its rights under its policy to the third-party judgment creditor. The assignee then sought payment from the insurer for the damages arising from the insured's claims, consisting of monetary damages resulting from the insurer's denial of the benefits due the insured under the policy (in that case the $1.6 million judgment the insured had suffered following the insurer's denial of a defense), as well as Brandt fee damages to reimburse the amounts the assignee had spent to obtain those benefits. The trial court had held that the Brandt fee claim was not assignable; the Supreme Court reversed, holding that both the claims for the policy benefits and for the right to recover Brandt fees were assignable. (Id. at p. 1255.)
It is true that in describing the insured's rights under Brandt, the court in Essex said that "attorney fees expended to obtain damages exceeding the policy limit . . . are not recoverable as Brandt fees." (38 Cal.4th at p. 1258.) But that language appears only in connection with the court's explanation that Brandt fee damages cannot include compensation for attorney fees incurred to obtain tort damages in excess of the policy limit, such as for emotional distress, punitive damages, or anything other than to obtain the benefits the insured is owed under the policy: "'Rather, Brandt merely entitles the insured to all of the benefits due under the policy, undiminished by the expenses incurred in retaining an attorney to recover under the policy.'" (Id. at p. 1258, quoting Cassim, supra, 33 Cal.4th at p. 815, italics added.) Nothing in the case indicates that the court intended that phraseology to apply to contract damages constituting the monetary equivalent of the benefit that the insured was denied. Similarly, in Cassim the court held that in determining Brandt fees there must be an allocation between fees attributable to work on the contract and tort issues; it did not suggest (much less hold) that the Brandt fee determination requires allocation also between fees attributable to below-policy-limit and above-policy-limit recoveries. (Cassim, supra, 33 Cal.4th at pp. 808-809.)
20th Century does not explain how such an allocation would be possible under the framework of Brandt, Cassim, and Essex. Where the underlying fee is attributable to work on both contract and tort issues the Brandt fee determination requires allocation based on the portion of the attorneys' efforts devoted to the contract issue, not the portion of the efforts compensated by the contract judgment. It is unclear how allocation of the contract recovery into under- and over- policy limits portions would affect the Brandt fee formula, which looks to the attorney's efforts, not the recovery. To determine the appropriate Brandt fee by reference to an artificial division of the recovery into the first $100,000 and the remaining millions seems the antithesis of the framework on which Brandt, Cassim, and Essex rest.
20th Century identifies no sound policy reason for such an allocation. The purpose of Brandt fees is to afford the insured (or the insured's assignee) the right "'to recover the policy benefits in full, undiminished by the attorney fees incurred in bringing the action to recover those benefits.'" (Essex, supra, 38 Cal.4th at p. 1264.) The $5.6 million contract judgment against 20th Century was awarded as the monetary equivalent of the benefit owed under Aguilera's policy—the benefit of protection from the excess verdict that a policy-limits settlement would have prevented. The Encarnacion plaintiffs were reasonably required to incur substantial fees in order to recover that policy benefit. There is no obvious reason that their recovery should be limited to the portion of those fees that are attributable to seeking the $100,000 that might have been enough to satisfy the insurer's contractual obligations, had the insurer provided the protection it owed its insured.
If the Essex decision's language were read literally to cap the Brandt fees at no more than the fees attributable to seeking the $100,000 policy limit, that dictum is wholly unexplained. It constitutes a single sentence; the decision does not otherwise address the point, which is not an issue in that case. For that reason, we do not read the Essex decision as imposing a policy-limits cap on the value of the work for which Brandt fee damages may be recovered. (Christensen v. Superior Court (1991) 54 Cal.3d 868, 917 [case is not authority for proposition not considered]; Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 734-735 [same].) We see no reason why any portion of the attorney's reasonable efforts to recover the benefits due the insured under the policy should be excluded from consideration in the calculation of recoverable Brandt fees.
20th Century affirms that "the Encarnacions could recover excess-of-liability consequential damages under either a contract or a tort theory." (Archdale v. American International Specialty Lines, supra, 154 Cal.App.4th at pp. 467-468 [portion of judgment that exceeds policy limit, constituting consequential damages resulting from the insurer's failure to settle, may be attributable to the contract recovery, and not just a tort recovery].) But it nevertheless argues that "they could not treat the cause of those damages—the implied covenant breach—simultaneously as both a contract and a tort breach." Their point seems to be that because the Encarnacion plaintiffs elected to seek contract damages for the insurer's breach of the covenant of good faith and fair dealing, they are precluded from obtaining Brandt fee damages. "[t]hey cannot inconsistently claim both uniquely tort damages (Brandt fees) and contract damages out of the same breach."
We see no inconsistency. Missing from 20th Century's argument is any explanation why the Encarnacion plaintiffs cannot be permitted to obtain Brandt fee tort remedies in addition to their compensatory contract recovery, and any authority to support that proposition.
We decline to address the point further, however. In Encarnacion II, this court affirmed the Encarnacion plaintiffs' award of contract damages against 20th Century and remanded the case for determination of the Brandt fees they were entitled to recover. That determination is law of the case, binding on the parties, the trial court, and this court, that the contract judgment does not preclude the Encarnacion plaintiffs from recovering Brandt fees.
4. The trial court did not err in instructing the jury to make a "reasonable" allocation of the fees to which the plaintiffs were entitled, and to base their decision on "common sense."
Both parties argue that the jury's Brandt fee determination is defective. 20th Century contends that the trial court improperly instructed the jury that it could reject all of the evidence in order to "come up with its own, pseudo-expert 'reasonable' and 'common sense' formula" for the appropriate amount of Brandt fee damages, leading it to award "an amount not tethered to any admitted expert evidence." The Encarnacion plaintiffs join the contention that the "'reasonable allocation'" instruction was error requiring a new trial. We find no error.
The Encarnacion plaintiffs' argument is contingent on our rejection of their contention that the Brandt fees are as a matter of law the full $5.5 million the plaintiffs paid their attorneys. They expressly preserve their contention that the court should have permitted no allocation at all.
Consistent with the court's instruction to the jury that "the order of the instructions does not make any difference," and because the parties make no mention of it, we disregard differences in the order the instructions were read to the jury from the copies compiled in Appellant's Appendix.
The trial court provided the jury with the formula it would use to determine the appropriate amount of recoverable Brandt fees (by finding the portion of the attorneys' total work attributable to work on the contract issues, and applying that ratio to the $5.5 million total fees). It then instructed the jury that it had already determined 20th Century's liability for bad faith, and that the only remaining question was the plaintiffs' reasonable damages, consisting of "certain attorneys' fees," the amount of which the plaintiffs must prove. The plaintiffs "are not entitled to recover all of the fees that they paid to their attorneys," the court instructed, and "I have already instructed you on the standard for deciding the amount of attorneys' fees award."
In the instruction that 20th Century contends was error, the court then instructed the jury: "You must use your judgment to decide a reasonable amount based in the evidence and your common sense, . . . but the amount you award may not exceed the amount that plaintiffs proved by a preponderance of the evidence based on the law as I've explained it to you."
20th Century contends that this last instruction superseded all others, and "free[ing] the jury to reject all of the expert allocation evidence and to come up with its own, pseudo-expert 'reasonable' and 'common sense' formula."
The argument fails for two reasons. First, the record indicates that 20th Century requested this instruction, justifying rejection of 20th Century's challenge to it as invited error. (Gherman v. Colburn (1977) 72 Cal.App.3d 544, 567.)
The Encarnacion plaintiffs' joinder in 20th Century's contention that the instruction misled the jury is a single sentence, amounting to "me too."
Second, the contention is not sustained by the record. Arguing that "[t]he jury should have been limited to the evidence," 20th Century ignores that the instructions, read as a whole, provided that limitation.
The jury was instructed—repeatedly—to base its decision only on the evidence and the court's instructions. "You must decide the case based only on the evidence presented in this trial and the instructions of law that I provide." "You must decide what the facts are, and I repeat, your verdict must be based only on the evidence that you see or hear in the courtroom." "You must decide what the facts are in the case from the evidence that you see or hear during the trial." "You must decide what the facts are. . . . You must decide the facts based on the evidence admitted in this trial." "You must decide what the facts are in the case from the evidence you saw or heard during trial."
The jury was instructed to "give every piece of evidence whatever weight you think it deserves." It was instructed that [y]ou must not speculate or guess in awarding these damages." It was instructed that in exercising its judgment to determine a reasonable amount of damages "based in the evidence and your common sense," the amount awarded "may not exceed the amount that plaintiffs prove by a preponderance of the evidence based on the law as I've explained it to you." And it was again instructed that "[y]our award must be based on your reasoned judgment applied to the testimony of the witnesses and the other evidence that has been admitted during trial."
The court's reference to "a reasonable amount based in the evidence and your common sense" did not free the jury to reach an improper compromise rather than finding (as 20th Century argued it should have done) that the plaintiffs had failed to carry their burden of proof of the proper amount of their Brandt fee damages. As it was properly and repeatedly told (in instructions that 20th Century does not challenge), the jury was entitled to believe all, part, or none of each witness's testimony, and that it should accept the part of a witness's testimony that it believes is true and ignore the rest. It was told to weigh the testimony of the experts and other witnesses, to determine the extent to which all the witnesses' testimony was "true and accurate," and "to disregard all or any part of an opinion" it found to be "unbelievable, unreasonable, or unsupported by the evidence."
20th Century's and the Encarnacion plaintiffs' experts were examined about their respective methodologies and the facts and documents on which they had based their estimates. 20th Century's expert estimated that about 22 percent of the total time the attorneys had devoted on the plaintiffs' behalf should be allocated to the contract issues; the Encarnacion plaintiffs' expert estimated that the attorneys had devoted fewer total hours, but that about 85 percent of those hours should be allocated to their efforts on behalf of the contract issues. The jury was not bound to accept either of these estimates—either as to the attorneys' total hours, the reasonableness of those hours. or the time attributable to the contract issues—without change. Its apparent allocation of about 50 percent of the attorneys' total time to the contract issues may reflect differences that jurors may have had with respect to any number of possible elements of the experts' respective opinions. But nothing in this result, or elsewhere in the record, reflects a wholesale departure by the jury from the evidence, nor a disregard of the law it was instructed to apply.
We reject, as wholly without basis in the record, the parties' claim that the court's reference to "a reasonable amount based in the evidence and your common sense" constituted error, or that it caused the jury to disregard all of the other instructions.
5. The jury's Brandt fee allocation is supported by substantial evidence.
Closely related is 20th Century's contention that because no expert testified to the precise allocation reflected in the jury's verdict, the jury's Brandt fee determination was unsupported by substantial evidence. The testimony of the parties' respective experts as to the appropriate allocation of the attorneys' work between the contract and tort issues was, 20th Century notes, "starkly at odds," without "middle ground," requiring that the jury accept or reject these witnesses' testimony in total.
As we note above, the jury was repeatedly and properly told (in instructions 20th Century does not challenge) that the facts were the jury's to determine, based on the evidence and the courts' instructions. The jurors were each entitled to evaluate the evidence—including the experts' differing estimates of the time devoted to each issue, the reasonableness of that expenditure, and the appropriate allocation of that time to the contract and other issues—and to accept and reject portions of that evidence as they saw fit. And in reaching a common verdict the jurors were then entitled to consider one another's differing analyses and conclusions. The fact that the ultimate verdict rests somewhere between the estimates of the experts indicates only that the jury did what it was instructed to do, rather than that its verdict is either unsupported or unreasonable.
B. The Trial Court Did Not Prejudicially Err By Declining To Instruct The Jury That The Amount Of Attorney Fees Paid—And To Be Paid—On Behalf Of The Minor Plaintiffs Required Court Approval.
The court told the jury panel at the outset of the case, without objection by the parties, that the Herzog firm had been paid fees of about $5.5 million resulting from the $13.9 million the Encarnacion plaintiffs had recovered in the contract action. It was told that in this trial the jury's job would be "to determine the extent to which 20th Century has to reimburse the Encarnacions" for those fees.
After testifying about the Herzog firm's work on the case, an attorney-witness was cross-examined by 20th Century about the firm's fees. He was asked, without objection, whether the firm planned to take a fee for recovering Brandt fee damages "in this part of the case"; he responded that it did. When he was asked, also without objection, how that fee would be calculated, he responded that "[i]t would be . . . under the same contingency agreement under which we did the initial contract trial which would be the 40 percent . . . ." That, he testified, would be a $1,870,000 fee if the jury were to adopt his estimate of the hours the attorneys had devoted to the contract issues. The combined fee resulting from both the contract and Brandt fee awards, he testified, would total $7,370,000.
On redirect examination, the plaintiffs' counsel asked whether the fee that the minor plaintiffs would pay would be 40 percent of the Brandt fee award. The witness responded that it "[d]epends on whether the court allows you to get 40 percent or not." But when counsel attempted to inquire about the reason that is so, the trial court sustained 20th Century's objection. The trial court later refused either to strike the evidence that the minors would pay a 40 percent fee on the Brandt fee damage award, or to instruct the jury that the further fees the minors would pay would be subject to court approval.
The Encarnacion plaintiffs contend that these rulings misled the jury as to "a material fact," and "left the jury under the misleading impression that plaintiffs' counsel were guaranteed another 40% from Brandt damages." We discern no prejudice, and thus no error.
1. The trial court did not err in refusing to instruct the jury that the fees to be paid by the minor plaintiffs would require court approval.
The jury was not called upon to determine the amount of fees the plaintiffs would pay to the Herzog firm as a result of its decision on the Brandt fee issue. The Brandt fee issue in this case was the amount the plaintiffs should be reimbursed for the fees they had already paid. The fact that the law requires the court's approval of any future fees to be paid on behalf of the minor plaintiffs (Prob. Code, § 3601) therefore cannot be characterized as a material fact in the trial.
A trial court should give requested instructions on material questions that are to be considered by the jury. (Conservatorship of Walker (1987) 196 Cal.App.3d 1082, 1100.) But because the amount of the additional fees the Encarnacion plaintiffs (or the minor plaintiffs) would pay to their attorneys as a result of its decision in this trial was not an issue material to the jury's determination, the court's refusal to instruct the jury of that circumstance was not error.
The trial court had ruled in limine at the trial's outset to preclude evidence that after 20th Century's payment of the contract-damage award the court had approved the minors' 40 percent fee to the Herzog firm. The Encarnacion plaintiffs apparently wanted to present that evidence in order to show the jury that a 40 percent contingent fee is reasonable. But the trial court ruled that the approval of the 40 percent fee was irrelevant to the question in this trial: whether it was reasonable for the plaintiffs to hire the Herzog firm on that basis, not whether the fee was reasonable when the contingency occurred years later.
2. The trial court's exclusion of evidence that the fees to be paid by the minor plaintiffs would be subject to court approval, and its refusal to strike earlier testimony that the plaintiffs' fee would be 40 percent of the award, did not constitute a miscarriage of justice.
The Encarnacion plaintiffs imply—but do not directly argue—that they should have been permitted either to tell the jury that any future fees the minors would pay would be subject to court approval, or the court should have stricken the earlier testimony that the fees previously paid (and presumably the minor's portion of those fees) had been 40 percent of the plaintiffs' $13.9 million contract recovery. To address the first of these points directly the plaintiffs would have been compelled to explain what they did not explain in the trial court: what the jury should have been told about the factors on which the trial court would rely in determining whether to approve the minors' share of the fees; how evidence of these factors should be presented to the jury; and—most importantly— how these subjects could be addressed without an undue expenditure of time, and without misleading the jury to believe that these factors were relevant to its decision (when they were not).
Nor do the Encarnacion plaintiffs make any attempt to explain (either here or in the trial court) how striking the earlier unopposed and undisputed testimony that a fee of 40 percent of the contract recovery had been paid to the Herzog firm would have alleviated the prejudice they believe flowed from the jury's knowledge of that fact. The trial court could reasonably have concluded that calling the jury's attention to that irrelevant information might instead result in a greater, rather than lesser, likelihood that the stricken fact might improperly influence the jury's decision. If the jury were inclined to rely on the size of the previous fee as a justification for disregarding the remainder of the court's instructions that called upon it to determine the plaintiffs' award by reference only to other facts, it would seem unlikely that the jury would heed the instruction to disregard the stricken evidence.
"A verdict or finding shall not be set aside, nor shall a judgment or decision based thereon be reversed, by reason of the erroneous exclusion of evidence unless the court which passes upon the effect of the error or errors is of the opinion that the error or errors complained of resulted in a miscarriage of justice . . . ." (Evid. Code, § 354; see also Cal. Const., art. VI, § 13 [no reversal for error unless it has resulted in miscarriage of justice]; Code Civ. Proc., § 475 [court must disregard error unless it is shown that different result was likely in absence of the error]; Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 570 [error is harmless unless it is reasonably probable that without the error the result would have been more favorable to the appellant].) Apart from the conclusion that the jury was misled, the Encarnacion plaintiffs make no showing that the claimed error had any likely impact at all on the jury. On this record we therefore find no reasonable probability that the jury disregarded the trial court's detailed instructions as to the factual questions on which its award must be based, and the formula it must apply in order to reach its verdict.
Evidence Code section 354, subdivision (a) requires also that before reversal may be required for the exclusion of evidence, the record must show that "[t]he substance, purpose, and relevance of the excluded evidence was made known to the court by the questions asked, an offer of proof, or by any other means." Here, while plaintiffs' counsel made no explicit offer of proof, we find that the parties and the court reasonably understood that the plaintiffs were seeking to present evidence that the amount of any fee to be paid by the minor plaintiffs would be subject to court approval.
C. The Trial Court Did Not Err By Refusing To Instruct The Jury That The Encarnacion Plaintiffs May Recover Prejudgment Interest.
1. The Encarnacion plaintiffs were not entitled to their requested instruction regarding prejudgment interest under Civil Code section 3288.
The trial court refused the Encarnacion plaintiffs' request for an instruction in the language of Civil Code section 3288, that "[i]n an action for the breach of an obligation not arising from contract, and in every case of oppression, fraud or malice, interest may be awarded in your discretion." We reject their challenge to that ruling for reasons having nothing to do with whether prejudgment interest under Civil Code section 3288 is available for an award of Brandt fee damages.
The record does not disclose whether the trial court did or did not consider the merits of that issue. The Encarnacion plaintiffs accurately contend that "[i]f anything is firmly established in the law of Brandt damages, it is that they are tort damages, not recoverable simply for breach of the contractual obligation, but only upon a showing of a tortious breach of the implied covenant of good faith and fair dealing," citing Cassim, supra, 33 Cal.4th at page 806 for that proposition. 20th Century agrees that Brandt fees are tort damages, but with equal accuracy it contends that a breach of the insurer's obligations under its insurance contract is an essential element of a Brandt fee claim, thus supporting its conclusion that a Brandt fee claim is not "an obligation not arising from contract" for which prejudgment interest may be recoverable under Civil Code section 3288. (See Interstate Fire & Casualty Ins. Co. v. California Ins. Guarantee Assn. (1981) 125 Cal.App.3d 904, 910 [insurer's tortious failure to settle a claim "has been said to arise out of the insurance contract"].) We are aware of no decisions that have directly addressed this question.
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Even if the Encarnacion plaintiffs were entitled to have the jury consider whether to award prejudgment interest on its Brandt fee award under Civil Code section 3288— an issue we do not decide—they were not entitled to the instruction they requested. The requested instruction would have informed the jury that it had discretion to award interest if it believed this was a "case of oppression, fraud or malice," despite the fact that the jury would have had no basis in the evidence or the court's instructions on which to determine whether this is or is not such a case. And the requested instruction would also have left the jury to determine for itself whether this case does or does not involve "an action for the breach of an obligation not arising from contract," which is an unsettled question of law (that the parties' briefs address only in passing), not a question of fact for jury determination.
For each of these reasons, the trial court was within its discretion to refuse the proffered instruction in the form proposed, even if it had determined that the prejudgment-interest issue was proper for jury consideration. (Joyce v. Simi Valley Unified School Dist. (2003) 110 Cal.App.4th 292, 302 [irrelevant, incomplete, or misleading instructions need not be given]; DeGeorge v. Crimmins (1967) 254 Cal.App.2d 544, 547 [improper for instructions to quote law regarding factual issues not raised by the evidence].)
2. The Encarnacion plaintiffs were not entitled to prejudgment interest under Civil Code section 3287, subdivision (a).
Civil Code section 3287, subdivision (a), provides that a party who is "entitled to recover damages certain, or capable of being made certain by calculation" is entitled also to recover interest on those damages from the date the right to recover the damages arises. The Encarnacion plaintiffs argue that their Brandt fee damages became certain in the amount of 40 percent of their contract recovery when the court affirmed their contract judgment, or perhaps earlier.
The Encarnacion plaintiffs' argument that their Brandt fee claim was unliquidated rests wholly on the contention that we have already considered and rejected in this appeal: that because they recovered only on their contract claim they were entitled to recover Brandt fees consisting of an unallocated 40 percent of their entire contract-damage recovery. As they concede, "the court's insistence that the Brandt damages were subject to allocation and thus unliquidated precluded plaintiff from seeking prejudgment interest under Civil Code § 3287(a) . . . ."
Civil Code section 3287 "does not authorize prejudgment interest where the amount of damage[s], as opposed to the determination of liability, 'depends upon a judicial determination based upon conflicting evidence and is not ascertainable from truthful data supplied by the claimant to his debtor.'" (Fireman's Fund Ins. Co. v. Allstate Ins. Co. (1991) 234 Cal.App.3d 1154, 1173.) Because the determination of the Brandt fees that the plaintiffs were entitled to recover was subject to proof upon conflicting evidence and they were not entitled to recover any liquidated amount, they were not entitled to prejudgment interest under Civil Code section 3287, subdivision (a).
D. The Encarnacion Plaintiffs' Appeal From The Order Striking Discovery Referee And Defense Expert Fees Is Meritless.
20th Century moved successfully in the trial court to tax costs claimed by the Encarnacion plaintiffs for the fees of the discovery referee appointed by the trial court, and the fees they had paid 20th Century's expert witness under Code of Civil Procedure section 2034.260. The Encarnacion plaintiffs' challenge to the order taxing costs lacks merit.
The plaintiffs' core contentions regarding these fees are that the issues handled by the discovery referee and testified to by the expert turned out to be unnecessary. The expert witness deposition was unnecessary because 20th Century ultimately did not try to show that the fees paid by the plaintiffs were unreasonable; the discovery referee fees were unnecessary because the contested discovery related to the apportionment issue, which, the Encarnacion plaintiffs contend yet again, should not have been an issue in the case.
Code of Civil Procedure section 1033.5, subdivision (b)(1) identifies the "[f]ees of experts not ordered by the court" as items for which costs are not recoverable unless expressly authorized by law. (Olson v. Automobile Club of Southern California (2008) 42 Cal.4th 1142, 1149-1150 [no costs recoverable for fees of expert not ordered by court].)
The Encarnacion plaintiffs do not identify any such authorization. Moreover, the trial court unquestionably had discretion to determine that the fees the Encarnacion plaintiffs incurred to depose 20th Century's expert were neither unnecessary nor oppressive, and in concluding that the plaintiffs should bear their own costs for that deposition.
The trial court's justification for striking the plaintiffs' claimed cost for the discovery referee's fees is clearer still. The issues before the discovery referee involved what the plaintiffs again argue is a "non-issue": 20th Century's efforts to obtain the documentation required to allocate the fees the plaintiffs had paid between amounts attributable to the contract issues and amounts attributable to other issues. It was not a non-issue at all; it was in fact the trial's central issue. The trial court had discretion to determine, as it did, that the plaintiffs should bear their own costs for the discovery referee's fees.
Code of Civil Procedure section 1033.5, subdivision (c)(4) expressly gives the trial court discretion to grant or deny recovery of costs for items not listed. We find no abuse of that discretion. (Gibson v. Bobroff (1996) 49 Cal.App.4th 1202, 1209 [whether cost is reasonably necessary to the case is within trial court's discretion].)
DISPOSITION
The judgment is affirmed in full. The parties are to bear their own costs on appeal.
NOT TO BE PUBLISHED.
CHANEY, J.
We concur:
MALLANO, P. J.
ROTHSCHILD, J.