Opinion
G060730
01-09-2023
LADERA RANCH MAINTENANCE CORPORATION, Plaintiff, Cross-defendant and Respondent, v. GRANT A. TINSLEY et al., Defendants, Cross-complainants and Appellants.
The Appellate Law Firm, Aaron Myers; and Mark Kuntze for Defendants, Cross-complainants, and Appellants. Whitney Petchul, Frederick T. Whitney, Jane A. Gaba, Jacky P. Wang; Gordon Rees Scully Mansukhani, Craig J. Mariam and John P. Cogger for Plaintiff, Cross-defendant, and Respondent.
NOT TO BE PUBLISHED
Appeal from a postjudgment order of the Superior Court of Orange County, No. 30-2016-00864515, John C. Gastelum, Judge. Reversed and remanded.
The Appellate Law Firm, Aaron Myers; and Mark Kuntze for Defendants, Cross-complainants, and Appellants.
Whitney Petchul, Frederick T. Whitney, Jane A. Gaba, Jacky P. Wang; Gordon Rees Scully Mansukhani, Craig J. Mariam and John P. Cogger for Plaintiff, Cross-defendant, and Respondent.
OPINION
GOETHALS, J.
Grant A. Tinsley and Karen D. Jennings, co-owners of a home and members of a homeowners' association known as the Ladera Ranch Maintenance Corporation (LARMAC), appeal from the trial court's attorney fee order in favor of LARMAC after a bench trial. As we discussed in our recent opinion following the homeowners' unsuccessful appeal of the decision on the merits, the court found in favor of LARMAC on its complaint against the homeowners which alleged violations of community standards involving a large tarp they erected adjacent to their home, and failure to replace two trees they removed from their yard. (Ladera Ranch Maintenance Corporation v. Tinsley (Aug. 23, 2022, G060079) [nonpub. opn.] (Tinsley I).) The trial court similarly found in LARMAC's favor against the homeowners' cross-complaint for their neighborhood grievances. Their claims included selective enforcement or nonenforcement of rules related to placing trash cans out for collection, noise and parking violations, failure to address children playing pranks and actions otherwise allegedly breaching community standards. (Ibid.)
In Tinsley I, we observed in a footnote that the record indicated the trial court awarded LARMAC attorney fees in the "staggering" sum of "nearly $600,00.00- composed of more than $298,000 to LARMAC as plaintiff and in excess of $286,000 to LARMAC as cross-defendant," which we inferred "may suggest there was a battle to the death in the courtroom below." (Tinsley I, supra, G060079) We noted at that time, however, that "no issue regarding attorney fees [was] currently before us." (Ibid.) We did not know the fee request was even higher, a breathtaking number approaching $700,000 ($699,598.72).
The homeowners have now appealed the fee order. While the trial exceeded the homeowners' initial estimate of three days to eight days, and LARMAC prevailed in requiring the homeowners to remove a small chain and sign across their entryway, the tarp, and an order for payment for the trees, we find no adequate justification in the record or the trial court's order for such fees. Nothing suggests that more than 2,700 attorney hours were necessary-by 11 lawyers no less-to address a tarp, two trees, and a chain, nor to defend against equivalent complaints lodged by the homeowners in a cross-complaint. A fee award eclipsing a half million dollars for such matters stands out as manifestly excessive. We therefore reverse and remand for the trial court to reconsider its order in line with the governing principles, which we explain. There may yet be justification for a sum approaching the fees awarded, or half, a quarter, or none; or, alternatively, the parties may resolve this issue themselves. But at this time, nothing in the briefing, the appellate record, or the trial court's order explains it.
FACTUAL AND PROCEDURAL BACKGROUND
Our earlier opinion set out the background related to the tarp, trees, and other grievances litigated by the parties. (Tinsley I, supra, G060079.) For our purposes here, it is enough to note that LARMAC filed its complaint in July 2016, the homeowners responded with their cross-complaint in January 2017, and, after several continuances, the matter proceeded to trial in September 2019. LARMAC does not suggest the continuances added appreciably to its attorneys' billed time, or that the homeowners were responsible for any delay caused by the continuances. To the contrary, LARMAC says simply that the matter came on "regularly" for trial.
After the trial court entered judgment in its favor, LARMAC submitted its fee request; the court issued the fee award in June 2021. As reflected in its minute order, the trial concluded, "[t]he parties agree LARMAC is entitled to fees and costs pursuant to the authority cited in the moving papers. They also agree upon the use of the lodestar method, and the hourly rates charged by LARMAC's counsel."
"[T]he fee setting inquiry in California ordinarily begins with the 'lodestar,' i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate." (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 (PLCM Group).) The trial court appears to have used for its convenience a "'blended' rate of $253" an hour for the many attorneys who brought the complaint and "a blended rate of $225 an hour" for the many more who defended against the cross-complaint.
Beyond using the lodestar method and the attorneys' basic billing rates, the parties did not agree on much. LARMAC requested $354,8844.25 in attorney and paralegal fees to prosecute the complaint. This figure was based on 1,331.20 hours in attorney time by, as the trial court noted in its order, "six different attorneys . . . over the course of five (5) years." (Original italics.)
LARMAC also sought $331,221 in attorney fees for the work of five lawyers and a paralegal on the cross-complaint. The lawyers in making their fee request did not "tall[y] the total number of hours" expended, but the trial court calculated based on subtotals for each that "1,398.90 hours were spent in defense of the Cross-Complaint." (Bolding omitted.) Of these hours, only 5.4 related to work done by a paralegal.
In response, the homeowners challenged the reasonableness of the requested hours, specifically identifying dozens they characterized as "excessive," or for "clerical" functions, "duplicative," unwarranted "to amend pleadings . . . erroneously drafted," and the like. The homeowners also objected to the fee requests for the hours 2 incurred in defending the cross-complaint, as they were largely block billed.
"Block billing occurs when 'a block of time [is assigned] to multiple tasks rather than itemizing the time spent on each task.'" (Mountjoy v. Bank of America, N.A. (2016) 245 Cal.App.4th 266, 279.)
More specifically, the homeowners objected to the fee requests as follows: "LARMAC was represented by two separate law firms for a lawsuit that involved straightforward and non-complex issues involving breach of CC&R['s], declaratory relie[f] and nuisance. LARMAC's two law firms have collectively billed over $699,598.72. The pretrial discovery was not complex. It involved interrogatories generated and responded to by all litigants, request for admissions generated and responded to by all litigants and requests for production of documents that were generated and responded to by all litigants. There were four depositions taken[:] LARMAC deposed the two Defendants/Cross-Complainants and the Defendants/Cross-Complainants deposed two witnesses from LARMAC. No expert witnesses were called by either party, because the issues litigated did not require expert testimony.
"LARMAC's general counsel, Whitney Petchul is a law firm that specialize[s] i[n] the representation of homeowners associations. LARMAC 's insurance defense counsel, Gordon Rees Scully Mansukhani, LLP. is a well-regarded and highly recognizable multi state civil defense law firm. As argued in this opposition, the billing entries submitted by Whitney Petchul in support of its request for attorney's fees in the amount of $354,844.25 are excessive, unreasonable and duplicative and must be significantly reduced in the court's discretion."
As to the cross-complaint in particular, the homeowners objected that "[t]he billing exhibits submitted by Gordon Rees Scully Mansukhani, LLP are block billing entries which are not descriptive of the tasks performed, the amount of time spent on those tasks and the amount of duplication and overlap with co-counsel. Absent clear evidence which dispels these omissions, the request[ed] award of attorney's fees by Gordon Rees Scully Mansukhani, LLP [for] $344.754.47 must be denied in their entire[t]y, or substantially reduced."
The trial court disallowed about 160 hours of the 1,331 hours spent in bringing LARMAC's complaint, with the main reduction consisting of eliminating more than 120 hours spent in overconferencing with attorneys defending the cross-complaint. In all, the court allowed "1171.6 total hours at $253 an hour to Plaintiff" in pursuing the complaint. Thus, the fees awarded therefore were "$296,414.80 + $2,440.00 for preparation of this motion = $298,854.80."
In making these deductions the trial court indicated it had "gone through," as to prosecution of the complaint, "the 67 pages of billing statements, line by line, and entry by entry and made reductions for pre-litigation fees (28.5 hours)" incurred before the complaint was filed, while also disallowing "fees incurred in association with matters not connected to the Complaint (for example, other possible nuisances)," which the court itemized at "8.4 hours." The court also eliminated "the significant amount of fees incurred in communicating, calling, emailing, conferencing, etc. with 'insurance appointed counsel,' often related to the Cross-Complaint, and seemingly duplicative, unnecessary or improper (122.7 hours)." The court did not address the overall reasonableness of the fees claimed or hours expended.
As to defense against the cross-complaint, the court allowed "1249.5 total attorney hours at a blended rate of $225 an hour," which caused the court to make an additional fee award of $286,212.50 in favor of LARMAC. This was in addition to the $298,854.80 already awarded.
The court noted as to the cross-complaint that the homeowners did not "make any specific objections" to particular entries, apparently in contrast to their more tailored attack on the attorney hours expended on the complaint, which was not block billed. Nevertheless, the court agreed the fees requested on the cross-complaint "do appear too high." (Original italics.) The court "agree[d] with Cross-Complainant's overall argument that the bills suggest duplication and unnecessary work that cannot legitimately be attributed to . . . LARMAC's defense of the cross-complaint which only had three causes of action: (1) breach of CC&R's; (2) declaratory relief and (3) nuisance." (Original bolding.)
The court also expressly commented on the manner in which the 274 pages of billing statements related to the cross-complaint were "presented," including that they were not paginated and the entries "skip[ped]" around nonchronologically. The court indicated it found the billing statements "very frustrating."
Additionally, in reviewing the billing statements, the court was "struck by two matters." "First, a lot of work performed by attorneys here could have been performed by a paralegal. The [c]ourt notes six people worked on the defense, and yet just 5.4 hours were incurred by the paralegal." The court increased this number to 25.5 hours.
The court did so by adjusting attorney-billed time that it believed should have been performed by paralegals, which the court found was "a lot," by cutting the attorney time by 2 percent. Thus, the court "deem[ed] 2 percent of the 1398.90 hours of total time" as "hav[ing] been incurred by a paralegal ...."
"Second," the court was struck in reviewing the billing entries by the "tremendous amount of 'communications with corporate counsel,'" which the court found to be "duplicative, unnecessary, or improper." This overconferencing exemplified the court's "main concern here" as to the cross-complaint, which was "duplication of efforts and billing between counsel representing LARMAC as Plaintiff and counsel representing LARMAC as Cross-Defendant." To redress this duplication, the court reduced the 1,398.90 in requested hours by "deem[ing] 8.8 percent [to be] unnecessary."
These reductions of 8.8 percent of the 1,398.90 hours and then 2 percent of that figure resulted in the court awarding the $286,212 figure for 1,249.5 hours of attorney work at $225 an hour and 25.5 paralegal hours at $150 an hour.
The homeowners now challenge the fee award totaling $585,067.30.
DISCUSSION
"We review an award of attorney fees generally for abuse of discretion." (Riskin v. Downtown Los Angeles Property Owners Assn. (2022) 76 Cal.App.5th 438, 445 (Riskin).) Under this ordinarily deferential standard, a fee award "'will not be disturbed unless the appellate court is convinced that it is clearly wrong. '" (Serrano v. Priest (1977) 20 Cal.3d 25, 49.) Put another way, an award will not be set aside "absent a showing that it is manifestly excessive in the circumstances." (Children's Hospital & Medical Center v. Bonta (2002) 97 Cal.App.4th 740, 782.) Implicit in these negative statements is the converse rule that we must reverse a fee award where it is "manifestly excessive" or "clearly wrong." Short of that standard, remand may still be required for the trial court to clarify its ruling.
In Serrano v. Unruh (1982) 32 Cal.3d 621, our Supreme Court warned that parties who lodge unreasonably inflated fee requests may be subjected to "'a severer reaction'" (id. at p. 635) than a mere "'reduction of their fee to what they should have asked in the first place'" (id. at p. 624, fn. 2). While the reduction is committed to the court's discretion and no statement of decision is required (see Ketchum v. Moses (2001) 24 Cal.4th 1122, 1137, 1140 (Ketchum)), the court's fee decision must not reflect a mistaken view about the scope of its discretion, and the court must apply the correct legal standard (Riskin, supra, 76 Cal.App.5th at p. 446). As we explain, the homeowners' "assertions of error have sufficient merit to require remand of this matter for recalculation of attorney fees under an appropriate exercise of discretion pursuant to the [governing] standard." (Ketchum, at p. 1141.)
Here, the hardworking trial judge tried to scrutinize "line by line" the 67 pages of billing statements submitted by six attorneys to prosecute LARMAC's complaint. It appears the court also attempted, despite the "very frustrating" unpaginated nature of the documents, to wade through 274 pages of billings submitted by five additional attorneys related to the cross-complaint. "When confronted with hundreds of pages of legal bills," however, "trial courts are not required to identify each charge they find to be reasonable or unreasonable, necessary or unnecessary." (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 101.)
In fact, as our late colleague Justice Sills was known to observe, there can be a "positive danger" in a line-by-line approach. We agree. We recall that he understood in this context that "[t]hings [can] seem more reasonable" when viewed in tiny digestible snippets that obscure their cumulative effect. In taking such an approach, the trial judge may miss the "reverse synergy inherent in chopped up bits" of task padding, attorney stacking, and overconferencing. (See Magana v. Charlie's Foods (Apr. 8, 2010, G041153) [nonpub. opn.].) In other words, the forest can be lost for the trees.
While the trial court admirably tried to pare "the significant amount of fees incurred" (italics added) for attorney overconferencing on the complaint, the critical finding in our view is that this excess billing was "significant." The six lawyers spent well over a thousand hours in attorney time-billing at hundreds of dollars an hour-on the tarp, two trees, and the removal of the entryway chain. In racking up 1,331 billable hours, it's as if an attorney at the firm did nothing else but bill on this straightforward matter for well over one-half of a billable year.
Similarly, the trial court found "a tremendous amount" of overconferencing by five other attorneys in defending against the cross-complaint. (Italics added.) The court found the attorneys' excessive "'communications with corporate counsel' . . . duplicative, unnecessary, or improper." The court did not slice away itemized entries for overconferencing as it had on the complaint, but it cut the 1,398.90 hours billed on the cross-complaint by a similar percentage-8.8 percent (compared to about 9 percent on the complaint).
Mathematical calculations alone cannot always determine whether a fee is reasonable. Indeed, simple arithmetic can provide a false sense of precision that does not necessarily align with the trial court's duty to deter inflated fees. Here, the trial court did reduce the number of allowable hours claimed by the attorneys who defended the cross-complaint, and reallocated those hours at the rate for a paralegal because "a lot of work performed by attorneys here could have been performed by a paralegal." (Italics added.) Yet the percentage reduction the court imposed for attorney hours it "deems . . . could have been incurred by a paralegal at $150 instead of [by] an attorney" was just 2 percent. That 2 percent figure resulted in increasing the 5.4 paralegal hours originally billed to 25.5 paralegal hours-a relatively insignificant increase when considering the 1,398.90 attorney hours billed.
Many attorneys who chose law school over other more mathematically inclined professions can perhaps relate to the answer given by Chevy Chase on Saturday Night Live, when he played Gerald Ford in a mock presidential debate: "It was my understanding that there would be no math."
As this court has observed, "An attorney's chief asset in submitting a fee request is his or her credibility ...." (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1325-1326 (Christian Research).) The party moving for fees "'"bear[s] the burden of establishing entitlement to an award."'" (Id. at p. 1320.) When "counsel leaven[s] the fee request with noncompensable hours and vague, indecipherable billing statements, destroying the credibility of the submission . . . a severe reduction" is justified. (Id. at pp. 1318-1319.) In such circumstances, counsel should not "expect particularized, individual deletions as the only consequence." (Id. at p. 1329.)
Our concern here is heightened by the number of attorneys involved. In a complex trust administration case requiring a 14-day trial (Donahue v. Donahue (2010) 182 Cal.App.4th 259, 264 (Donahue))-said by the attorneys seeking fees there to involve a "bet the farm" defense, this court reversed a large attorney fee award based on the work of eight attorneys from three major law firms (id. at p. 273). We observed that, "'just as there can be too many cooks in the kitchen, there can be too many lawyers on a case.'" (Id. at p. 272.) We noted that signs of too many lawyers in the kitchen included "task padding, over-conferencing, [and] attorney stacking (multiple attendance by attorneys at the same court functions)." (Ibid.)
We also explained in Donahue that a "spare-no-expense strategy" employing so many lawyers "calls for close scrutiny" in the trust context, where trustees have duties to be cost-conscious and to only "incur costs proportional to the trust's objectives." (Donahue, supra, 182 Cal.App.4th at p. 273.) A similar principle applies here, where, while an adversary in court on their landscaping and other disputes, the homeowners were members of LARMAC, and the association owed fiduciary duties to them as much as to their fellow members to incur only reasonable expenses.
As in Donahue, "[a]lthough the veteran jurist here may have had these principles in mind, we find nothing in the fee order[] . . . to assure us the trial court analyzed these factors." (Donahue, supra, 182 Cal.App.4th at p. 274.) While the trial court expressly found "significant" and "tremendous" overconferencing, nothing indicates that the court looked for task padding, attorney stacking, or inflated billing in other areas.
Judicial concern about overstaffing is not new, nor is recognition of a correlation between overconferencing and overstaffing. (Donahue, supra, 182 Cal.App.4th at p. 272, see, e.g., Christian Research, supra, 165 Cal.App.4th at p. 1326 ["Indeed, the five attorneys [defendant] deployed on the motion appear to have expended [undue] time telephoning, conferencing, and e-mailing each other . . . supporting the trial court's conclusion the matter was overstaffed"].) Nothing indicates the trial court considered whether the matter was staffed commensurate with the issues litigated, nor whether the high level of overconferencing impacted the credibility of the attorneys' billing demands in other areas.
We conclude remand is required because, in addition to eliminating or reducing particular billing entries that stand out as excessive, the trial court in exercising its discretion must step back and view the fee request against the case as a whole. As our former colleague Justice Aronson explained in Guillory v. Hill, the trial court's "foremost task" in considering an attorney fee award "is to evaluate the reasonableness of the fee requested." (Guillory v. Hill (2019) 36 Cal.App.5th 802, 811 (Guillory).)
In doing so, a party's success is not the only benchmark to obtain fees. (Guillory, supra, 36 Cal.App.5th at p. 811.) While the fee-setting inquiry "'begins with the "lodestar"'" figure, which itself requires a determination of '"the number of hours reasonably expended"' (Gunther v. Alaska Airlines, Inc. (2021) 72 Cal.App.5th 334, 357 (Gunther)), "'[t]he lodestar figure may then be adjusted, based on consideration of factors specific to the case'" (ibid., italics added).
Overall, the fee awarded must be "'reasonable in relation to the results obtained.'" (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 989 (Chavez) [observing, in upholding denial of fee altogether, that judgment could have been rendered in a limited civil case].) As the Supreme Court counseled in Chavez, consideration must be given to the "amount of time an attorney might reasonably expect to spend in litigating such a claim." (Id. at p. 991, italics added.) Fee awards '"were never intended to '"produce windfalls to attorneys."'"' (Guillory, supra, 36 Cal.App.5th at p. 811.)
While it is "'"well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court"'" (Gunther, supra, 72 Cal.App.5th at p. 357), the court must "'"make[] its determination after consideration of a number of factors"'" (id. at p. 358; see Donahue, supra, 182 Cal.App.4th at p. 269 ["There are limits to the scope of our deference"]). The requisite factors include "'the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case.'" (PLCM Group, supra, 22 Cal.4th at p. 1096.) Other '"major factors"' include ""'the intricacies and importance of the litigation, the labor and the necessity for skilled legal training and ability in trying the cause, and the time consumed."'" (In re Marriage of Keech (1999) 75 Cal.App.4th 860, 870; id. at p. 871 [trial court abused its discretion in awarding $25,000 in fees in "a relatively simple dissolution action"].)
The trial court's fee calculations, while painstaking, do not appear to reflect consideration of these factors in awarding fees in an amount that seems to us "manifestly excessive." The trial court, however, should have the opportunity to consider those factors in the first instance. "'When the record is unclear whether the trial court's award of attorney fees is consistent with the applicable legal principles, we may reverse the award and remand the case to the trial court for further consideration and amplification of its reasoning.'" (Donahue, supra, 182 Cal.App.4th at p. 269, quoting In re Vitamin Cases (2003) 110 Cal.App.4th 1041, 1052 [reversing attorney fee award to putative class members].) That is the case here.
DISPOSITION
The attorney fee award is reversed, and the matter is remanded for proceedings consistent with this opinion. Appellants are entitled to their appellate costs.
WE CONCUR: O'LEARY, P. J., SANCHEZ, J.