Opinion
Editorial Note:
This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA9 Rule 36-3 regarding use of unpublished opinions)
Argued and Submitted July 8, 1997.
Appeal from the Decision of the United States District Court for the Central District of California, Manuel L. Real, District Judge, Presiding.
Before: CANBY and THOMAS, Circuit Judges, and KING, District Judge.
Honorable Samuel P. King, Senior United States District Judge for the District of Hawaii, sitting by designation.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.
The Los Angeles-based law firm of Kananack, Murgatroyd, Baum & Hedlund ("Kananack") and the Shanghai-based Pu Dong Law Office ("Pu Dong") appeal the district court's refusal to approve an award of attorney's fees that Kananack and Pu Dong claim to be entitled to under various contracts. The district court held that the contracts that Kananack and Pu Dong rely on were void as a matter of law. The court awarded Kananack $193,775 in attorney's fees based on quantum meruit and denied altogether an award of attorney's fees to Pu Dong. We affirm the quantum meruit award to Kananack, but reverse the total denial of fees to Pu Dong, and remand the case to the district court for an appropriate quantum meruit determination of Pu Dong's attorney's fees.
I. Background
Lina Li was the plaintiff in the underlying lawsuit. Li is a citizen and resident of the People's Republic of China. Li worked as a flight attendant for China Eastern Airlines until April 1993, when she suffered a severe head injury on a flight from China to Los Angeles. The pilot inadvertently deployed the leading edge wing slats, which sent the aircraft through several violent pitch oscillations and caused the plane to lose 5000 feet in altitude. Li suffered brain damage and thereafter became legally incompetent.
During the year following Li's injury, her relatives began to take legal action against the aircraft manufacturer, Douglas Aircraft Co. ("Douglas"). Li's husband, Shan Zhen, retained the Pu Dong Law Office ("Pu Dong") in Shanghai in February 1994. Li's mother, Guiying Wang ("Wang"), contacted attorney Shin Yang ("Yang") in San Gabriel, California in May or June 1994.
It appears from the record that none of the Pu Dong attorneys are licensed to practice law anywhere in the United States. Pu Dong decided to file the action in the United States, so Pu Dong associated with the Kananack firm in Los Angeles. Pu Dong and Kananack agreed to divide the workload, expenses, and any resulting attorney's fees ("Pu Dong-Kananack agreement"). Meanwhile, Yang referred the case to Magana, Cathcart & McCarthy ("Magana") in Los Angeles. Wang agreed to pay Magana and Yang a contingent fee of 30% of any recovery ("client agreement"), but the client agreement did not state how Magana and Yang were to split the fees. Yang and Magana separately agreed that Yang would receive a third of the total fee award and Magana would receive two thirds ("Yang-Magana agreement").
The two sets of attorneys worked independently in preparation for trial.
Wang, represented by Magana, filed a complaint against Douglas in state court in the summer of 1994. The state court appointed Wang as Li's guardian ad litem. Douglas removed the case to federal court, where a number of related cases were pending. Trial for one of these cases was scheduled to begin in October 1994. Sometime between July and October, a dispute erupted over which of Li's relatives was authorized to proceed as her guardian ad litem. Although the state court had appointed Wang as guardian ad litem, Shan Zhen had custody of Li's visa and all of her medical records in Shanghai. The district court issued an order on October 7, 1994 declaring Wang to be the guardian ad litem because she was initially appointed by the state court.
Up to the time that the district court confirmed that Wang was Li's guardian ad litem, Kananack had assumed that it would be lead counsel in the case. The court's ruling made Magana lead counsel. Magana needed the assistance of Kananack and Pu Dong to bring Li and her medical records to the United States for trial, so Magana asked Kananack to formally associate as counsel of record. Kananack and Magana filed an Association of Counsel with the district court on November 2, 1994. Magana and Kananack agreed that Magana would receive one third of any fee recovery and Kananack would receive two thirds ("Magana-Kananack agreement"). The firms further agreed that Magana would pay Yang out of its one third share, to meet the terms of the existing Yang-Magana agreement, and that Kananack would pay Pu Dong out of its two thirds share, to meet the terms of the existing Pu Dong-Kananack agreement. Yang privately expressed to Magana his displeasure of the Magana-Kananack fee-sharing agreement because the effect of the agreement was to reduce his fee substantially.
In November 1994, Wang and Douglas agreed to a $6 million settlement. At the time of the settlement there were four separate agreements relating to fees: the client agreement, the Magana-Kananack agreement, the Pu Dong-Kananack agreement, and the Yang-Magana agreement. Under the terms of the client agreement, Magana and Yang were to receive 30% of the total recovery, or $1.8 million. The other three agreements provided for how the $1.8 million was to be shared between the four law firms. The Magana-Kananack agreement governed the initial split, and provided that Magana was to receive $600,000 and Kananack was to receive $1.2 million. According to the Yang-Magana agreement, Yang expected to receive a third of Magana's $600,000. Under the Pu Dong-Kananack agreement, Pu Dong was to receive a little more than half of Kananack's $1.2 million ($640,000). The attorneys expected the final breakdown to be: Yang, $200,000; Magana, $400,000; Pu Dong, $640,000; and Kananack, $560,000.
The attorneys included three fee awards in the settlement petition. The petition included a proposed award to Magana of $600,000; an award to Pu Dong of $640,000; and an award to Kananack of $560,000. The petition did not include a direct proposed award to Yang; it appears that Magana intended to share its $600,000 award with Yang after the court signed the petition. Yang objected to the proposed awards, arguing that he deserved a third of the total fees awarded.
The district court ruled that none of the fee agreements were binding on Li's estate because none had been approved by the court. The court requested all of the attorneys to document the hours that they spent working on the case. Upon reviewing the submissions, the court awarded $600,000 to Magana, $200,000 to Yang, $193,775 to Kananack, and $0 to Pu Dong. The awards to Magana and Yang were equal to or greater than the amounts that these attorneys would have been entitled to under the various fee agreements. The quantum meruit award to Kananack was substantially smaller than the $560,000 Kananack was expecting to receive.
The court limited Kananack's award to the value of the services that Kananack performed for Li's benefit after formally associating as counsel. The court ruled that any services performed before the formal association would be governed by Kananck's agreement with Shan Zhen.
The district court denied Pu Dong's request for fees in its entirety on grounds that a United States court cannot award attorney's fees to a law firm that is not licensed to practice law in the United States. The district court also denied fees on grounds that Pu Dong never formally associated as counsel of record.
II. Discussion
As a general rule, we review an award of attorney's fees for an abuse of discretion. Nelson v. Pima Community College, 83 F.3d 1075, 1080 (9th Cir.1996); Haworth v. Nevada, 56 F.3d 1048, 1051 (9th Cir.1995). We review de novo whether the district court applied the correct legal standard in determining an award. Parents of Student W v. Puyallup Sch. Dist., 31 F.3d 1489, 1498 (9th Cir.1994); Price v. Seydel, 961 F.2d 1470, 1475 (9th Cir.1992).
It is a well-settled principle of California law that the court has the authority to disregard fee agreements entered into on behalf of incompetent persons. Such contracts are void. The court has the discretion to approve any agreement for attorney's fees in whole or in part, and to award attorney's fees based on quantum meruit in the absence of an approved fee arrangement. The California Family Code expressly provides that:
A contract for attorney's fees for services in litigation, made by or on behalf of a minor, is void unless the contract is approved, on petition by an interested person, by the court in which the litigation is pending or by the court having jurisdiction of the guardianship estate of the minor. If the contract is not approved and a judgment is recovered by or on behalf of the minor, the attorney's fees chargeable against the minor shall be fixed by the court rendering the judgment.
Cal. Fam.Code § 6602. Although the language of the statute refers to minors, the California Supreme Court has ruled that the statute also applies to contracts made on behalf of legally incompetent persons. See In re Cookingham, 45 Cal.2d 367, 374, 289 P.2d 16 (1955); Stafford v. Superior Court, 1 Cal.2d 321, 324-25, 34 P.2d 988 (1934). The statute makes contracts for contingent fees void where the contract is not approved by the court. Leonard v. Alexander, 50 Cal.App.2d 385, 387, 122 P.2d 984, 985-86 (1942). The statute does not prohibit the award of attorney's fees where the contract is not approved; on the contrary, it indicates that the court awarding a judgment to the minor should fix the fee based on the reasonable value of the services rendered. Id. at 387, 122 P.2d at 985. See also In re Doyle, 126 Cal.App. 646, 14 P.2d 920 (1932); In re Nielsen, 111 Cal.App. 744, 296 P. 122 (1931). The rationale underlying this rule is that legal services rendered an incompetent are necessaries, and the law implies a promise and creates an obligation on the part of the incompetent to pay the reasonable value therefor. Leonard, 50 Cal.App.2d at 388-89, 122 P.2d at 986.
The parties do not dispute that the district court never approved any of the four contracts relating to attorney's fees that Kananack and Pu Dong rely on. Consequently, by operation of the statute, the contracts are void insofar as they purport to bind Li to pay the contractual amounts out of the settlement fund. That the guardian ad litem agreed to pay a 30% contingent fee is irrelevant. That the guardian ad litem did not object to the distribution of fees that the law firms agreed upon is irrelevant. The court has a duty to independently scrutinize fee arrangements purporting to bind incompetent persons. Consistent with this duty, the statute confers broad discretion on the court to fix appropriate fees in cases involving incompetent persons.
With respect to the Kananack firm, the court exercised this discretion, disregarded the fee agreements, and awarded fees according to the reasonable value of the services that Kananack provided to Li from the time that Kananack formally associated as counsel of record. The district court limited Kananack's award by calculating fees based on a reasonable hourly rate. Kananack objects that the district court awarded fees based on an hourly rate that was reduced from what Kananack requested. The record shows that the court awarded fees based on a rate of $100 to $200 per hour, depending on the experience of the attorneys working on the case. There is no basis for holding that this was an abuse of discretion. We therefore affirm the portion of the district court's order awarding quantum meruit fees to Kananack.
The district court refused to award attorney's fees to Pu Dong on grounds that "no grant may be made for fees to a foreign law firm in a United States case." There is no categorical prohibition that prevents a district court from awarding attorney's fees to a foreign attorney who has not formally associated as counsel of record. There are indications in the record that Pu Dong may have performed immigration-related services in China that facilitated the prosecution of this case in the United States. There are also indications that Pu Dong may have played an instrumental role in securing necessary medical records from sources in China. We vacate the portion of the district court's order denying fees to Pu Dong. We remand to the district court for a determination of whether Pu Dong performed services for Li's benefit that did not duplicate the services of the attorneys working on her case in California. If Pu Dong performed such services, the district court should make an appropriate award of attorney's fees based on the reasonable value of the services that Pu Dong performed in Shanghai.
AFFIRMED in part, VACATED in part, and REMANDED.