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Poon v. Poon

California Court of Appeals, First District, First Division
Dec 19, 2007
No. A114652 (Cal. Ct. App. Dec. 19, 2007)

Opinion


GARY P. POON, Plaintiff and Respondent, v. GORDON M. POON, Defendant and Appellant. A114652 California Court of Appeal, First District, First Division December 19, 2007

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

San Francisco County Super. Ct. No. CGC-01-323369

Margulies, J.

Gary P. Poon prevailed in litigation to recover from his brother, Gordon M. Poon, approximately $6.4 million in misappropriated funds and interest on behalf of his mother’s estate and a family-owned corporation. Based on the common fund and substantial benefit doctrines, the trial court awarded Gary attorney fees of $591,267 to be paid out of the funds recovered. In this appeal, Gordon challenges the legal basis for the fee award as well as its amount. We reject Gordon’s challenges and affirm the order awarding fees.

I. BACKGROUND

Gary sued his brother, Gordon, to invalidate a series of monetary gifts their mother, Vivien, had made to Gordon before her death in 2000. Gary alleged that certain of the gifts were the product of Gordon’s undue influence over Vivien. Gary also sued Gordon on a breach of fiduciary duty theory, alleging that Gordon improperly orchestrated the withdrawal of funds from a family-owned corporation, Speedgain Limited (Speedgain). Gary asserted the undue influence causes of action as an heir of Vivien’s intestate estate, and he asserted the breach of fiduciary duty causes of action both as shareholder derivative claims on behalf of the corporation and in his own right as a minority shareholder.

A jury found that a November 1999 gift of $1.74 million to Gordon was the result of Gordon’s undue influence. Following the jury trial, the trial court issued a statement of decision invalidating two gifts to Gordon totaling $2.65 million made by his mother from an account held in the name of Speedgain. The court ruled that Gordon breached his fiduciary duty to the corporation and its shareholders and directors by arranging for these transfers without shareholder or director approval, and by concealing the transactions from Gary. The ensuing judgment for $6,413,939.72 against Gordon included the following monetary awards: (1) a judgment in favor of Vivien’s estate for $1.74 million, plus prejudgment interest of $730,800; (2) a judgment in Gary’s favor for $662,500, plus prejudgment interest of $323,284.93, based on Gary’s one-quarter share of the $2.65 million wrongfully withdrawn from Speedgain; and (3) a judgment in Speedgain’s favor for $1,987,500 ($2.65 million less $662,500), plus prejudgment interest of $969,854.79.

In a nonpublished opinion, we modified the judgment to eliminate Gary’s individual award of $662,500 plus interest, and to add that amount to the award in favor of Speedgain. (Poon v. Poon (Nov. 14, 2007, A113528) (Poon I).)

After the court denied postjudgment motions brought by Gordon, Gary filed a motion seeking $618,807.75 in attorney fees to be paid out of the judgment recovered from Gordon. The motion asserted that Gary was entitled to fees under two legal theories: the “common fund” doctrine and the “substantial benefit” rule. In support of his claim, Gary argued that his efforts had resulted in the creation of a $6.4 million fund and had achieved a substantial pecuniary benefit for several passive beneficiaries, including Vivien’s estate, the estate of Gordon and Gary’s father, Patrick, administrators and creditors of both estates, the taxing authorities of Singapore and the United States, and Speedgain.

The trial court granted Gary’s fee motion, finding that fees were recoverable under both the common fund and substantial benefit theories. The court found that Gary had submitted sufficient proof of his reasonable fees incurred to support an award of $591,267. Gordon timely appealed from the postjudgment award.

II. DISCUSSION

Gordon contends that the trial court erred in finding that the common fund and substantial benefit doctrines applied and then abused its discretion by awarding an excessive amount of fees.

A. Legality of the Fee Award

As Gordon emphasizes, “California follows what is commonly referred to as the American rule, which provides that each party to a lawsuit must ordinarily pay his own attorney fees.” (Trope v. Katz (1995) 11 Cal.4th 274, 278.) California also recognizes statutory and common law exceptions to the American rule, including the common fund and substantial benefit doctrines. Under the common fund theory, a party who expends attorney fees in winning a suit that creates a fund from which others derive benefits may require those passive beneficiaries to bear a fair share of the litigation costs. (Abouab v. City and County of San Francisco (2006) 141 Cal.App.4th 643, 662.) The substantial benefit theory, which developed out of the common fund doctrine, “ ‘ “permits the award of fees when the litigant, proceeding in a representative capacity, obtains a decision resulting in the conferral of a ‘substantial benefit’ of a pecuniary or nonpecuniary nature.” ’ ” (Ibid.) In such cases, a court may require in the exercise of its equitable powers that all those receiving the benefit should contribute to the costs of obtaining it. (Ibid.)

The essence of Gordon’s position is that neither exception applies because “this is a dispute between two brothers, not a larger class of persons, over what their parents did with their assets.” We focus on Gordon’s contentions with respect to the common fund theory because these are dispositive of his legal argument.

First, according to Gordon, the fact that creditors of the parents’ estates—specifically, St. Mary’s Hospital which has a claim against Vivien’s estate for unpaid hospital bills, and the United States and Singapore taxing authorities, which have potential claims for unpaid estates taxes—might benefit from Gary’s litigation success does not support application of the common fund doctrine. Second, since Gary and Gordon are the only material beneficiaries of Vivien’s and Patrick’s estates, Gary is the sole person who actually benefited from the litigation over Vivien’s November 1999 gift to Gordon and it therefore makes no sense to foist Gary’s attorney fees on Gordon. Third, as with the November 1999 gift, the only person with an interest at the end of the day in the fund created by Gary’s success in his shareholder derivative claims is Gary himself, making it inappropriate for Gordon to bear Gary’s attorney fees.

1. Litigation over the November 1999 Gift

On November 30, 1999, Gordon signed Vivien out of her board and care facility for an unannounced trip out of town with his family, even though Gary was on his way across country to see her that day. On the way out of town, Gordon stopped at a notary’s office and had Vivien sign a letter prepared by him instructing her Canadian bank to immediately close her accounts and wire the proceeds, $1.74 million, to Gordon’s personal account in San Francisco. Notwithstanding Gordon’s testimony that the trip and funds transfer were Vivien’s ideas, the jury determined that the November 1999 gift was in fact a result of Gordon’s undue influence.

Gary argued in the trial court that among the passive beneficiaries of his successful litigation to recover the $1.74 million gift for Vivien’s estate was St. Mary’s Hospital, an estate creditor. In August 2004, St. Mary’s Hospital filed a creditor’s claim against Vivien’s estate for unpaid medical bills of approximately $425,000, incurred in the last few months before Vivien’s death in March 2000. Ultimately, St. Mary’s entered into an agreement with the administrator of Vivien’s estate to settle its claim for a maximum amount of $92,500, or any lesser amount available, to be paid from estate funds after payment of estate taxes and administration expenses, but prior to any distribution to the beneficiaries. St. Mary’s also gave its express consent to the administrator to enter into a stipulation to be bound by the outcome of Gary’s claims against Gordon in this lawsuit, and it did not oppose or ask to be heard on Gary’s fee motion.

Other estate creditors cited by Gary as passive beneficiaries of the undue influence litigation are the taxing authorities of the United States and Singapore. These authorities have potential claims against Vivien’s estate arising from unreported inter vivos transfers made by Vivien to Gordon, and claims against Patrick’s estate due to Patrick’s failure to file United States income tax returns between 1993, when he came to live in California after suffering a stroke in Singapore, and his death in 2001.

According to Gary, neither Vivien’s nor Patrick’s estates would likely be in a position to pay their creditors but for the financial windfall they will receive from his litigation against Gordon. Vivien’s estate is due to receive a total of $2,470,800 as a result of the portion of the judgment pertaining to the November 1999 gift. As of July 2005, the administrator of Vivien’s estate expressed concern that the estate might be insolvent as a result of its tax liabilities. According to Gary, Patrick’s estate would be insolvent but for the share of the judgment in this action that it will ultimately receive.

To show that the creditors’ claims cannot support application of the common fund doctrine, Gordon principally relies on City and County of San Francisco v. Sweet (1995) 12 Cal.4th 105 (Sweet). Sweet was injured when struck by an automobile. (Id. at p. 109.) He was unable to pay for the medical treatment he received at a county hospital so the county asserted a lien for the amount due in a personal injury suit he brought against the automobile driver. (Ibid.) After prevailing in the personal injury suit, Sweet paid the county the amount due less a deduction for the county’s proportionate share of the attorney fees he incurred in the suit, claiming that the deduction was justified under the common fund doctrine because his litigation against the driver had led to the creation of a “fund” from which the county could recover the greater portion of its expenses. (Ibid.)

The lower courts agreed with Sweet’s position, but the Supreme Court reversed, finding that the common fund theory was not available to offset a lienholder’s recovery when the relationship of the litigation plaintiff and the lien claimant is that of debtor and creditor. (Sweet, supra, 12 Cal.4th at p. 118.) The court reasoned that accepting such a theory would unfairly disadvantage creditors who assert judgment liens against a plaintiff debtor by compelling them to accept a reduced recovery on their liens. (Id. at pp. 116–117.) Rather than compensate the plaintiff for shouldering a burden that in fairness should be shared with others, making a judgment lienor pay the plaintiff’s fees out its recovery would give the plaintiff an undeserved benefit denied to other debtors whose debt was collected by other means. The court distinguished judgment creditors from other common fund claimants as follows: “Unlike the interest of other claimants to a common fund, the creditor’s right to payment is not contingent on litigation which creates a fund. Thus, no equitable principles justify departure from the statutory command of Code of Civil Procedure section 1021 that each party to litigation bear the expense of its own attorney fees.” (Id. at p. 117.) In our view, the underlying rationale of Sweet is that it would not advance any equitable purpose to treat a plaintiff’s creditors as common fund beneficiaries merely because they exercise their statutory right to assert a judgment lien in the plaintiff’s third party lawsuit.

Sweet is distinguishable from the case before us. Unlike the personal injury plaintiff in Sweet, Gary brought the subject claim to recover assets on behalf of Vivien’s estate, not solely on his own behalf. By definition, such a claim inures to the benefit of all persons interested in the estate, which includes the estate’s creditors as well as its beneficiaries. Under Probate Code section 48, subdivision (a), an “interested person” includes “[a]n heir, devisee, child, spouse, creditor, beneficiary, and any other person having a property right in or claim against a trust estate or the estate of a decedent which may be affected by the proceeding.” Further, unlike the creditor in Sweet, St Mary’s Hospital and the various tax claimants asserted to be common fund beneficiaries in this case are neither judgment creditors in the present action nor are they creditors of the plaintiff. The fundamental concern that underpins Sweet—the misuse of an equitable doctrine to impair the use of judgment liens as a creditor remedy—is simply not implicated here.

Gordon emphasizes the following language in Sweet: “In common fund cases the litigation has been undertaken in contemplation that a fund will be created that will confer a benefit on a class of beneficiaries with a common interest in the benefit obtained, but a personal injury tort action is undertaken for the benefit of the injured plaintiff. The plaintiff’s creditors do not have an interest in the recovery in common with the plaintiff. That the creditors may benefit from any recovery is an incidental, not an intended, benefit of the litigation.” (Sweet, supra, 12 Cal.4th at p. 117.) Gordon argues that Gary’s interest as a beneficiary of Vivien’s estate is adverse to the interests of the estate’s creditors and therefore cannot be the sort of “common interest” claim that Sweet held would justify the application of the common fund doctrine. However, we do not construe Sweet as stating a general rule that creditors may not as a matter of law be considered passive beneficiaries for purposes of the common fund doctrine even if they are not creditors of the active litigant.

According to Gordon, Gary’s claim also fails under Sweet because his actual motivation for bringing the lawsuit was to benefit himself, and that other creditors, claimants, or beneficiaries of Vivien’s or Patrick’s estates are merely incidental and unintended beneficiaries. In effect, Gordon is arguing that Sweet establishes a subjective requirement in common fund cases—that the active litigant must be motivated to bring the litigation by a desire to confer benefits on the passive beneficiaries. We do not read any such requirement into Sweet or other common fund cases. The common fund doctrine is rooted in the prevention of unjust enrichment. (Serrano v. Unruh (1982) 32 Cal.3d 621, 627.) Its purpose is to ensure that those who are entitled to share in a fund created by the active litigant’s efforts bear their share of the burden of its recovery. (Ibid.) Its applicability does not depend on the active litigant’s altruistic motives, but on whether his actions have in fact conferred a benefit on others. Here, Gary’s complaint expressly sought recovery of the subject assets on behalf of “plaintiff and any other persons entitled to distribution of the estate of decedent other than [Gordon]” and the result of the judgment will in fact accrue to the benefit of all such persons. Whether Gary cared as much about the results of the litigation for other claimants as he did about his own recovery is legally immaterial.

Gary relies on a number of probate cases that have deemed creditors as well as beneficiaries of the estate to be among the persons who benefit from actions brought on behalf of the estate. In Estate of Reade (1948) 31 Cal.2d 669, expressly extending the common fund doctrine to probate proceedings, the California Supreme Court upheld an award of fees to an estate beneficiary for recovering insurance proceeds wrongfully retained by the administratrix of the estate. (Id. at pp. 671–672.) After discussing common fund principles, their applicability in a probate context, and the particular facts in issue, the court concluded: “We therefore conclude that the allowance of a fee for the legal services which thus redounded to the benefit of the estate and all persons interested therein was within the lawful exercise of power by the trial court . . . .” (Id. at p. 672, italics added.)

In Estate of Lundell (1951) 107 Cal.App.2d 463, in express reliance on the common fund theory as applied in Estate of Reade, the Court of Appeal upheld an award of attorney fees to the principal beneficiary of a will for successfully challenging certain charges imposed by the executors: “Such allowance is predicated upon the equitable rule that fees for legal services rendered in preserving a common fund for the benefit of all heirs or persons interested in an estate are proper charges against such fund.” (Estate of Lundell, at p. 464; see also Estate of Swanson (1959) 171 Cal.App.2d 437, 440–441, to the same effect.)

Gary also cites the following language from Winslow v. Harold G. Ferguson Corp. (1944) 25 Cal.2d 274, a case involving an insolvent trust in which the Supreme Court, in reliance on common fund principles, held that the fee claim of the attorneys for certain trust beneficiaries who had acted to bring the trust assets under court supervision should take precedence over the creditors’ claims against the trust: “Having rendered valuable service over a period of ten years and having thereby brought into the protective custody of the court the trust assets, which avoided total loss to the creditors, appellant and his associates established their right to preference as against the creditors of the fund. . . . The pleadings plainly demonstrate that counsel acted for the benefit of all persons interested in recovery of the fund—including creditors and beneficiaries alike—and that legal fees for such service would be a proper charge upon the share due the creditors as well as upon the excess which might be distributable to the beneficiaries.” (Id. at pp. 285–286.)

In our view, Gary has the better of this argument. When a recovery is made by one beneficiary on behalf of an estate, as in this case, the persons or entities who benefit from the common fund recovery include not only the estate’s other beneficiaries, but also its creditors. The special limitation that applies when the litigant seeks to use the common fund doctrine at the expense of his own creditors, as recognized in Sweet, is not a barrier to an award of fees out of the common fund in such cases.

Moreover, besides Gordon and Gary, Vivien’s heirs include Patrick’s estate, which will receive one-half of any distributions from Vivien’s estate under Singapore’s law of intestate succession. Patrick left a “pour-over will,” under which the assets remaining after payment of administrative expenses and taxes, will go into Patrick’s trust. As noted earlier, the Internal Revenue Service (IRS) has claims against Patrick’s estate due to Patrick’s failure to file United States income tax returns for several years before his death. Patrick’s trust provided that each of Patrick’s five grandchildren was to receive $5,000, provided that the trust assets total at least $100,000. All other assets of the trust are to be distributed to Gordon. Gary maintains that Patrick’s trust, the IRS, and Patrick’s grandchildren may all be considered passive beneficiaries of his judgment against Gordon, along with Vivien’s estate and its creditors and beneficiaries, notwithstanding that Gordon is the major beneficiary of the trust.

The five grandchildren are Gordon’s daughter and Gary’s four children. Gordon claims that Gary’s children cannot be considered beneficiaries because, under the express terms of a no contest clause of the trust, other litigation that Gary has initiated concerning the trust would bar any distribution under it to Gary’s children. Based on the record before us, this court is not position to determine, and will not assume that the no contest clause would be enforceable against Gary’s children. (See Prob. Code, § 21305 et seq. defining numerous situations in which no contest clauses are deemed unenforceable in California.)

We agree with Gary’s position. All of the persons and entities in question—the trust, the IRS, and Patrick’s grandchildren—are in line to receive tangible financial benefits as a result of Gary’s litigation efforts, either in the trust’s case by receiving additional assets or, in the case of the parties with claims on trust assets, by obtaining a greater likelihood of full payment. None of these parties were themselves active participants in the litigation resulting in the benefit.

The existence of these passive beneficiaries, as well as the benefit to Vivien’s estate and its creditors, is more than sufficient to support an award under the common fund theory. (See Estate of Kann (1967) 253 Cal.App.2d 212, 214–215, 223 [upholding a common fund award where the services of the objectors’ attorney increased the assets passing under the will to the benefit of a single legatee other than the objectors].) As noted in Sweet, the common fund cases have “three common elements . . .: (1) there would have been no recovery without the litigation; (2) the beneficiaries of the litigation would be paid out of the fund made available by the litigation; and (3) the attorney fees were sought by the sole ‘active litigant’ whose recovery created the fund.” (Sweet, supra, 12 Cal.4th at p. 114.) Those elements are all present here. The estates would be virtually insolvent but for the recovery obtained in this litigation, the beneficiaries will ultimately be paid out of the fund created, and Gary is the sole active litigant who pursued recovery of the assets comprising the fund.

The common fund doctrine is rooted in a broad concept of equity and fairness—that all persons and entities who benefit from a fund created by litigation should share in the cost of creating it. Whether the doctrine applies must necessarily be decided on a case-by-case basis. Certainly, no bright line rule or standard is controlling on the particular facts before us. Although this case is primarily a dispute between two brothers, other persons and entities have tangibly benefited from it—the estates of Vivien and Patrick and the estates’ creditors, claimants, and other beneficiaries—and Gordon has not shown why these parties may not also be counted as beneficiaries for purposes of the common fund doctrine. Had the administrator of Vivien’s estate brought the present lawsuit there is little doubt that the attorney fees incurred in its successful prosecution would properly be chargeable against the estate. We cannot say as a matter of law, on this factual record, that the trial court lacked discretion to award fees to Gary for accomplishing the same result on the estate’s behalf.

We need not reach Gary’s further contention that even if he and Gordon were the only two persons affected by the litigation over the November 1999 gift, he would still be entitled to his fees. (See Estate of McDonald (1954) 128 Cal.App.2d 719.)

2. Litigation Over the Speedgain Transactions

The facts and proceedings concerning the Speedgain transactions are described in detail in our nonpublished opinion in Poon I, supra, A113528. The relevant facts established at trial are as follows: (1) Speedgain was a valid Liberian corporation until its annulment in June 2001; (2) Speedgain was a passive investment company formed by Patrick as a vehicle for passing family assets on to Gordon and Gary equally when Patrick and Vivien passed away; (3) Patrick wanted the corporate process to be used so that family members, acting as shareholders and directors, would have to approve any transactions of assets out of the corporation; (4) Gordon, Gary, Vivien, and Patrick were shareholders of Speedgain, with each owning 25 percent of its shares; (5) Gary and Gordon were Speedgain directors; (6) in 1998, without notice to or approval by Gary, Gordon orchestrated $2.65 million of withdrawals by Vivien from Speedgain’s corporate bank accounts that wound up in Gordon’s personal accounts; (7) Speedgain was not engaged in any ongoing business after June 2001, but existed solely for the purpose of winding up its affairs and distributing its assets; and (8) Gary had standing to sue Gordon derivatively on behalf of Speedgain.

While acknowledging that the common fund doctrine has frequently been applied in shareholder derivative suits, Gordon argues that the courts deny fees in such cases when the litigation is nothing more than a fight between two shareholders of a close corporation over their personal interests. He points out that Gordon succeeds to 100 percent of Patrick’s estate, including Patrick’s one-fourth interest in Speedgain, and that Vivien’s one-fourth interest in Speedgain will go one-fourth to Gordon, one-fourth to Gary, and a further one-half to Gordon as sole beneficiary of Patrick’s estate. Thus, in the end, Speedgain’s recovery, net of any taxes or debt, will be divided between Gordon and Gary.

Gordon relies principally on Baker v. Pratt (1986) 176 Cal.App.3d 370 (Baker), a Second Appellate District case reversing an award of attorney fees under the common fund and substantial benefit doctrines made to a shareholder of two close corporations after he prevailed in litigation against the corporations’ only other shareholder. The Court of Appeal explained its reasons for rejecting the common fund and substantial benefit theories as follows: “The action[] resulted in findings that appellant had misappropriated corporate funds and property, but this was to no one’s detriment other than respondent’s. Respondent and appellant were the only shareholders in each of the corporate entities. It is clear that respondent’s ‘ultimate objective [was] not to secure or preserve a common fund but to establish personal adverse interests therein. In such a case fees may not be awarded.’ [Citations.] It cannot be claimed that there were parties other than respondent from whom fees could be sought and who were similarly situated with mutual interests in and mutual rights to proceed and recover the sums representing the fund. [Citation.] There are no ‘passive beneficiaries’ of respondent’s action which he can claim should be made to bear their fair share of the litigation costs. [Citation.] [¶] . . . [¶] Both the common fund doctrine and the substantial benefit doctrine exist in equity so that the active litigator who extends a benefit to a class of passive beneficiaries is not made to bear the cost of litigation on his or her own. [This] action[] involved the disputes of two persons in their individual capacities or of corporate entities that were owned by one or both of the parties to this action. Neither of the doctrines supports an award of attorneys fees in these disputes.” (Id. at pp. 378–380.)

Gary argues that Baker is factually distinguishable because it involved only two shareholders whereas, in this case, two entities besides Gary and Gordon had shareholders’ interests—Patrick’s estate and Vivien’s estate—and these entities had creditors and beneficiaries with an interest in the Speedgain judgment. In addition, Gary points to the more recent case of Cziraki v. Thunder Cats, Inc. (2003) 111 Cal.App.4th 552 (Cziraki), in which a different Second Appellate District panel, faced with a dispute among the three shareholders of a close corporation, sought to sharply limit Baker to its own unique facts. After discussing a series of out-of-state shareholder derivative cases that applied the common fund doctrine to disputes among two or three shareholders of a close corporation, the Cziraki court concluded that Baker’s approach was analytically flawed: “In applying the common fund and substantial benefit doctrines, the courts in the matters discussed above did not focus on the size or type of corporation or the number of shareholders participating in the litigation. The courts directed their attention to whether or not the derivative litigation had conferred a discernable benefit on the corporation and whether or not equity demanded the corporation reimburse the party whose action brought about the benefit. We find the rationale of these cases persuasive. When a corporation is the sole beneficiary of a derivative shareholder suit, we conclude it should bear the costs associated with obtaining that benefit. [¶] . . . [¶] Strict adherence to the criteria suggested in Baker for when the common fund and substantial benefit doctrines apply would make it virtually impossible for a minority shareholder in a close corporation with few shareholders to recover attorney fees in a successful derivative suit in which another shareholder has injured the corporation.” (Cziraki, at p. 563, italics added.)

In our view, the trial court had discretion under Baker and Cziraki to award Gary attorney fees on a common fund theory based on his successful Speedgain claims. Under Cziraki, the action conferred a discernible benefit on the corporation, the recovery of $2.65 million wrongfully appropriated by Gordon. Under Baker, he achieved a benefit for two passive shareholders of Speedgain, Patrick’s estate and Vivien’s estate, neither of which can be considered mere alter egos of Gary and Gordon.

Because the fee award was lawful under the common fund doctrine, we do not reach the issue of whether the substantial benefit doctrine also supported the award.

B. Reasonableness of Fees Awarded

Gordon points out that the law firm billing statements Gary submitted as part of his supporting evidence were in “block” or daily billing format. If multiple tasks were performed on Gary’s cases by a given attorney on a single day, the billing statement would list the tasks performed and the total time spent by the attorney on all legal services performed for Gary on that date, but did not specify the time spent on each task or on each legal case. Although Gary deducted a substantial amount of the billings to account for fees he incurred on other legal matters, Gordon claims that the amount deducted was insufficient, and that the trial court abused its discretion by accepting Gary’s allocation of fees rather than requiring Gary’s attorneys to allocate the fees they billed to him, or performing its own independent allocation.

Our review of the trial court’s award of attorney fees is deferential. (Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 832.) The trial court has its own expertise in the value of legal services performed in a case. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096.) Unless convinced that the trial court’s award is clearly wrong, a reviewing court will not disturb its award of attorney fees. (Id. at p. 1095.) In Nightingale v. Hyundai Motor America (1994) 31 Cal.App.4th 99 at pages 102–103, the court upheld the reasonableness of a fee award supported in part by block-billed entries. Another block-billing case, Bell v. Vista Unified School Dist. (2000) 82 Cal.App.4th 672, held that the court was required to apportion fees between causes of action eligible for a statutory fee award and those that were not where the prevailing plaintiff submitted block-billing statements without attempting to perform such an apportionment. (Id. at pp. 686–689.)

Gary was initially represented in this action by Evans, Latham & Campisi (ELC), and later by Reed Smith and Janssen Doyle. ELC billed him $712,267.25 in fees for several related cases, including this one. In a declaration accompanying his fee motion, Gary explained and itemized a series of deductions that he applied to the ELC billings. These included deductions of: (1) $250,000 for fees incurred in an earlier proceeding to establish a conservatorship for Patrick; (2) $80,000 for fees that were duplicative of work that Reed Smith and Janssen Doyle had to perform to get up to speed on the litigation; (3) approximately $59,000 reflecting the deduction of all billing entries showing work on matters other than this case, including deductions of the full amounts of any billing entries that combined services rendered for this case and related cases; and (4) $49,500 for courtesy fee discounts given by ELC. The $59,000 deduction was supported by an itemized spread sheet listing all of the billing entries subtracted. Gary deducted an additional $10,000 from his Reed Smith bills and $2,000 from Janssen Doyle’s billings to reflect work these firms performed on related matters.

This amount was based on an estimate provided by Reed Smith attorney, Bette Epstein, after reviewing the billings.

The trial court did not abuse its discretion in accepting Gary’s allocation. Contrary to Gordon’s suggestion, there is no rule requiring that the allocation must be performed by the billing attorneys or the court. Gary is an attorney and was in as good a position as the attorneys who represented him in the related cases to make an appropriate allocation. The deductions he made were substantial—about one-half of his total fees incurred in the various litigation matters—and are supported by a detailed explanation and rationale. Gary’s allocation of his ELC fees was reviewed and accepted by the arbitrator in a fee arbitration between Gary and ELC held before a retired judge.

The total fees allocated to this case are not out of line with the extent and intensity of effort required to litigate it to a conclusion, or with the monetary judgment obtained. This was a complex case involving $9.2 million in assets located in several different countries. There was extensive pretrial motion and discovery practice. The parties participated in multiple settlement conferences and negotiations. A seven-day jury trial was followed by voluminous briefing on bifurcated court issues. After the trial court’s tentative decision on the bifurcated issues, there was extensive litigation both preceding and following the entry of a final statement of decision and judgment. The total fees Gary sought amounted to approximately 9 percent of the judgment recovered, far less than the 25 percent figure that courts often use as a benchmark to determine the reasonableness of a fee award in common fund and similar cases. (See Glendale City Employees’ Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 341, fn. 19; Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 24, fn. 1, and federal cases cited therein.) Based on the record before us, the trial court did not abuse its discretion in determining that an award of $591,267 was reasonable.

Gordon further contends that Gary should be estopped from claiming his ELC fees were reasonable because, in the fee arbitration with ELC, he had taken the position that ELC’s fees were unreasonable. We are not persuaded. The arbitrator in fact rejected Gary’s position and found that ELC’s fees were reasonable and necessary. Generally, the estoppel doctrine only applies if another tribunal has accepted a litigant’s inconsistent position. (Levin v. Ligon (2006) 140 Cal.App.4th 1456, 1476.) In the circumstances of this case, Gary was entitled to adhere to the arbitrator’s finding that ELC’s fees were reasonable. Asserting that position here cannot be considered in any manner an attempt to “ ‘play[] “fast and loose” with the court[s].’ ” (See Thomas v. Gordon (2000) 85 Cal.App.4th 113, 119.)

Finally, Gordon claims that the trial court erred in not limiting Gary’s fees solely to those incurred for the claims he asserted derivatively on behalf of Speedgain since only those derivative claims could conceivably come under an exception to the American rule that each side bears its own fees. Alternatively, Gordon argues that a minimum of one-third of the reasonable fees should be deducted to reflect the Speedgain claims Gary pursued to obtain direct or individual damages as opposed to those he prosecuted derivatively on behalf of the corporation.

In our view, the facts and evidence pertaining to Gary’s Speedgain causes of action were so closely interrelated that it would make no sense to try to apportion fees in this manner between individual and derivative claims. (See Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129–130 [“Attorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed”].) In addition, for the reasons discussed earlier, the litigation over the November 1999 transaction, and its result, properly come within the common fund doctrine and there is no basis for excluding fees incurred in litigating that issue from Gary’s award.

The trial court did not abuse its discretion in determining the amount of the fees to which Gary was entitled.

III. DISPOSITION

The order awarding fees is affirmed.

We concur: Marchiano, P. J., Stein, J.


Summaries of

Poon v. Poon

California Court of Appeals, First District, First Division
Dec 19, 2007
No. A114652 (Cal. Ct. App. Dec. 19, 2007)
Case details for

Poon v. Poon

Case Details

Full title:GARY P. POON, Plaintiff and Respondent, v. GORDON M. POON, Defendant and…

Court:California Court of Appeals, First District, First Division

Date published: Dec 19, 2007

Citations

No. A114652 (Cal. Ct. App. Dec. 19, 2007)