McElwainv.Kaiser Found. Hosps.

COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREEDec 20, 2018
G055049 (Cal. Ct. App. Dec. 20, 2018)

G055049

12-20-2018

CHERYL MCELWAIN, Plaintiff and Appellant, v. KAISER FOUNDATION HOSPITALS et al., Defendants and Respondents.

Alexander Krakow + Glick, J. Bernard Alexander, III, Tracy L. Fehr; Law Office of Helen Kim and Helen Kim for Plaintiff and Appellant. Miller Law Group, Joseph P. Mascovich, Janine Simerly, and Kerry McInerney Freeman for Defendants and Respondents.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2015-00768685) OPINION Appeal from a postjudgment order of the Superior Court of Orange County, James L. Crandall, Judge. Affirmed. Alexander Krakow + Glick, J. Bernard Alexander, III, Tracy L. Fehr; Law Office of Helen Kim and Helen Kim for Plaintiff and Appellant. Miller Law Group, Joseph P. Mascovich, Janine Simerly, and Kerry McInerney Freeman for Defendants and Respondents.

* * *

Cheryl McElwain filed suit against Kaiser Foundation Hospitals (Hospitals) and Southern California Permanente Medical Group (Medical Group) (collectively Defendants) after she was terminated from her position as a nurse. McElwain alleged disability discrimination premised upon the Fair Employment and Housing Act (FEHA) claims. (Gov. Code, § 12900 et seq.) The jury found for McElwain on two causes of action, with the jury awarding her $187,762 in economic damages, $100,000 in non-economic damages, and $20,000 in punitive damages, for a total recovery of $307,762.

All further statutory references are to the Government Code.

McElwain moved for an award of attorney fees under section 12965, subdivision (b), seeking over $2.7 million. The court awarded her nearly $710,000 for her attorney fees. McElwain now appeals the court's attorney fee order. McElwain contends the court improperly denied her request for a multiplier and erroneously used a negative multiplier because it sought to award a predetermined number instead of performing a lodestar analysis. Defendants argue the attorney fee award was fair and reasonable.

"'A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether.'" (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1137 (Ketchum).) This is such a case. We affirm the postjudgment order.

FACTS

McElwain was a registered nurse who worked for Defendants. Because of a medical condition, McElwain asked to be transferred from night shifts to day shifts. Ultimately, McElwain was terminated. McElwain's operative complaint against Defendants asserted five causes of action under FEHA: (1) failure to engage in a good faith interactive process (§ 12940, subd.(n)); (2) discrimination (§ 12940, subd. (a)); (3) failure to accommodate (§ 12940, subd. (m)); (4) retaliation (§ 12940, subd. (h)); and (5) failure to prevent/investigate/remedy discrimination (§ 12940, subd. (k)). McElwain also alleged a cause of action for wrongful termination in violation of public policy. The parties have not cited any reference in the record to show the disposition of the wrongful termination claim, but we do know the claim was not submitted to the jury.

Because the underlying factual issues in this case have little bearing on our consideration of the attorney fees issue, we provide only a brief overview of the action and its outcome.

McElwain retained attorneys Helen Kim, David Mallen, and Elise Sanguinetti to initiate her lawsuit against Defendants. The latter two attorneys withdrew in January 2016. The next month, the firm of Alexander Krakow + Glick LLP (the Alexander firm), associated in as counsel for McElwain. The Alexander firm took the lead in preparing for trial and trying the case. McElwain conducted extensive discovery of Defendants. Indeed, McElwain served a total of more than 1,000 separate discovery requests. She also filed numerous motions to compel answers to interrogatories and requests for production of documents. Her motions had limited success.

McElwain also sued Kaiser Foundation Health Plan, Inc. (Health Plan), which apparently never employed her. She alleged Health Plan was liable as a joint employer and pursued extensive discovery against it, but near the conclusion of trial the court directed a verdict in favor of that defendant.

At trial, McElwain asked the jury to award up to $2.2 million in economic damages, $3.5 million in non-economic damages, and $1.9 million in punitive damages. The jury found for McElwain on two causes of action. It concluded Defendants were liable for failure to engage in the interactive process and Hospitals was liable for failure to accommodate McElwain's disability. It awarded $187,762 in economic damages, $100,000 in non-economic damages, and $20,000 in punitive damages.

After judgment, McElwain moved for an award of attorney fees under section 12965, subdivision (b). She requested a lodestar amount of $2,264,233, and requested a 1.2 multiplier, for a total attorney fee award of $2,717,079.60.

In support of her request for attorney fees, McElwain asked for premium hourly rates for each of her counsel: $815 an hour for J. Bernard Alexander, III, $575 an hour for Tracy Fehr, $525 an hour for Helen Kim, $515 for Joshua Arnold, $350 an hour for Renee Amador, $290 an hour for Amelia Alvarez, and $275 for Jessica Choi. She provided evidence that other courts have awarded similar hourly rates for the Alexander firm attorneys. McElwain also argued the hours billed by her attorneys were reasonable. She claimed Helen Kim billed 2,376.2 hours on her case, while the six Alexander firm attorneys collectively spent about 1,490 hours on the case. Defendants opposed McElwain's attorney fee request on the grounds that the requested lodestar was excessive and that no multiplier was warranted.

The court issued a lengthy order awarding McElwain $709,431.90 in attorney fees. The court determined the hourly rates sought by McElwain exceeded "the reasonable rates in the Orange County legal community." The court determined Mr. Alexander's rate would be $600, not $815; Ms. Fehr's rate would be $475, not $575; Mr. Arnold's rate would be $425, not $515; Ms. Amador's rate would be $300, not $350; Ms. Kim's rate would be $300, not $525, noting that she had "sat motionless through most of the trial"; and the rate for two junior associates, Ms. Alvarez and Ms. Choi, would be $225, not $290 and $275, respectively. The court also based the loadstar for Ms. Kim on 1,500 hours, observing the almost 2,400 hours claimed were equivalent to "more than one year of 40 hour weeks." The total loadstar amount was $1,182,386.50.

After determining the loadstar amount, the trial court considered whether the amount should be adjusted. The court considered the jury's damages award was a small fraction of the damages sought, and that the jury declined to award damages for future economic and non-economic damages. The court then applied a 0.4 negative multiplier, reducing the fee award to $709,431.90. The court noted it "spent a lot of time" analyzing the issue and was "shocked" by the fees requested by McElwain.

DISCUSSION

McElwain first argues the court erred in calculating the initial lodestar by making drastic cuts to the attorneys' hourly rates and Ms. Kim's billed hours. She also contends the court erred by applying a negative multiplier. We disagree. McElwain obtained a significant fee award of nearly $710,000. The hours and fees simply do not shock our conscience as too low.

We review an attorney fee award pursuant to FEHA for abuse of discretion. (Greene v. Dillingham Construction, N.A., Inc. (2002) 101 Cal.App.4th 418, 422.) The standard of review is highly deferential. "'The "experienced trial judge is the best judge of the value of professional services rendered in [the] court, and while [the judge's] judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong["]'— meaning that [the trial judge] abused [his or her] discretion." (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 (PLCM Group).) "The only proper basis of reversal of the amount of an attorney fees award is if the amount awarded is so large or small that it shocks the conscience and suggests that passion and prejudice influenced the determination." (Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1134; Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 581 ["the awarding of attorney fees and the calculation of attorney fee enhancements are highly fact-specific matters best left to the discretion of the trial court"].)

"[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, supra, 22 Cal.4th at p. 1095.) "The reasonable hourly rate is that prevailing in the community for similar work." Ibid.) "Such an approach anchors the trial court's analysis to an objective determination of the value of the attorney's services, ensuring that the amount awarded is not arbitrary." (Ibid.)

The court may then adjust the lodestar amount based on consideration of several factors. (PLCM Group, supra, 22 Cal.4th at p. 1095.) An adjustment is not required, but if one is used, it may have the effect of increasing the lodestar or decreasing it. (Nichols v. City of Taft (2007) 155 Cal.App.4th 1233, 1240-1241.) Among the factors that the trial court should consider in determining whether an adjustment is needed are: "'(1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, [and] (4) the contingent nature of the fee award.'" (Id. at p. 1240.) However, "[t]here is no hard-and-fast rule limiting the factors that may justify an exercise of judicial discretion to increase or decrease a lodestar calculation." (Thayer v. Wells Fargo Bank, N.A. (2001) 92 Cal.App.4th 819, 834.) The entire aim of the court's task of setting the lodestar amount and determining whether to adjust the lodestar is to arrive at the fair market value of the legal services provided. (Ketchum, supra, 24 Cal.4th at p. 1132.)

The Trial Court Did Not Abuse Its Discretion by Calculating the Lodestar

McElwain contends the court erred in calculating the initial lodestar by making drastic cuts to the attorneys' hourly rates and Ms. Kim's billed hours. We perceive no abuse of discretion.

The court issued an eight-page order detailing its analysis of the attorney fee issue, as well as its mathematical calculation of the lodestar. The court determined the rates claimed by counsel for McElwain exceeded the reasonable rates in the Orange County legal community. As detailed above, it reduced the rates accordingly. McElwain argues the court used its own experience "defending insurance companies in bad faith cases across the country" and compared the amount of work required in medical malpractice cases with the amount of work required in an employment case. She further asserts the "court was required to analyze the lodestar components based on the local southern California community and the specific work necessary to prosecute this employment law case. In failing to do so, the trial court abused its discretion."

The trial court did not abuse its discretion by reducing the requested rates. Contrary to McElwain's assertions that the court improperly looked to rates outside of the Orange County legal community, the court based the reduction on Defendants' evidence and its own experience with and knowledge of the Orange County legal market. The evidence Defendants submitted showed attorney fee awards within Orange County were generally based on hourly rates that were less than those requested by the Alexander firm. Likewise, the court made clear that, in its experience, the prevailing hourly rates in Orange County were less than those sought by the Alexander firm.

McElwain argued previous fee awards, including some to the Alexander firm, were based on higher hourly rates. The court properly reasoned those awards could not be viewed as establishing a guaranteed minimum hourly rate for future cases. Counsel were entitled to no more than a market value rate, not a rate as high as the market could bear in a particular case. The trial court did not abuse its discretion in awarding hourly rates to the Alexander firm just because those rates were lower than the rates other courts have used.

In addition to reducing rates, the court also made cuts to time billed by Ms. Kim. The court found that the number of hours—2,376.2—was unjustified and that a lodestar amount based on 1,500 hours of time was reasonable. Even with the reduction, Ms. Kim's lodestar hours were still slightly more than the 1,490 hours billed by all six of the attorneys in the Alexander firm, which had assumed the lead role in the case in early 2016.

This court's decision Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315 illustrates the discretion trial courts have when confronted with what appears to be an exorbitant fee request. After prevailing on a motion to dismiss the plaintiff's complaint, the defendant sought fees based on about 640 hours of time for handling the pretrial motion and the ensuing appeal. (Id. at p. 1319.) The trial court, however, awarded fees based on just 71 hours, noting that the case was not overly complex and that the time allegedly devoted to it was not "'appropriate.'" (Id. at 1319-1320.) We affirmed, explaining in part that (1) we were entitled to "presume the [trial] court concluded the fee request was padded" (id. at p. 1325), which undermined counsel's credibility (id. at pp. 1325-1326), (2) a padded fee request warrants a "severe reduction" (id. at p. 1318-1319), and (3) counsel "may not leverage the [attorneys fee] statute to obtain an 'unjust' award" (id. at. 1329).

The record, trial court order and the reporter's transcript all demonstrate Ms. Kim's requested hours were excessive. Indeed, Ms. Kim admitted she spent "all of [her] time" on the case. However, an attorney is not entitled to all of the time billed on a FEHA case, but rather the fee must be based on "hours reasonably spent." (Ketchum, supra, 24 Cal.4th at p. 1137; Hensley v. Eckerhart (1983) 461 U.S. 424, 434 [court should exclude from its "initial fee calculation hours that were not 'reasonably expended'"].)

Additionally, Ms. Kim's billing entries were replete with duplications and errors. Some of the most egregious entries showed her bill more than 24 hours of time in a single day: 31.8 hours on September 29, 2016; 26.9 hours on November 13, 2016; 24.2 hours on December 17, 2016; and 30 hours on December 18, 2016. She also billed 54.2 hours in the 48-hour period before closing argument at trial, which she did not handle. Indeed, almost 90 percent of Ms. Kim's time entries for trial preparation, totaling 657 hours in less than two months, were accompanied by an identical task description: "Review deposition transcripts of Plaintiff, Green, Batzloff, Gill, and other Kaiser witnesses in preparation for trial and take notes." The court did not abuse its discretion in reducing attorney rates and Ms. Kim's billed time in calculating the lodestar.

The Court Did Not Abuse Its Discretion by Applying a Negative Multiplier

McElwain contends the court abused its discretion by rejecting its request for a positive multiplier and instead using a negative multiplier of 40 percent. It did not.

The court explicitly considered the underlying law and all factors in determining whether to use McElwain's requested 1.2 multiplier. It ultimately determined "[e]ven at the reduced attorney rates noted above, the court finds that the relevant market rates for plaintiff employment work compensates for the contingency risk." There was no error in denying McElwain's desired multiplier.

Section 12965, subdivision (b) provides, in pertinent part: "In civil actions brought under this section, the court, in its discretion may award to the prevailing party . . . reasonable attorney's fees and costs . . . ." "[T]he court must consider the significance of the overall relief obtained by the prevailing party in relation to the hours reasonably expended on the litigation and whether the expenditure of counsel's time was reasonable in relation to the success achieved." (Mann v. Quality Old Time Service, Inc. (2006) 139 Cal.App.4th 328, 344.) "[A] defendant should not be entitled to obtain as a matter of right his or her entire attorney fees incurred on successful and unsuccessful claims merely because the attorney work on those claims was overlapping. Instead, the court should first determine the lodestar amount for the hours expended on the successful claims and, if the work on the successful and unsuccessful causes of action was overlapping, the court should then consider the defendant's relative success on the motion in achieving his or her objective, and reduce the amount if appropriate." (Id. at pp. 344-345.)

The court believed the lodestar it had calculated was too high, taking into account McElwain's limited success in relation to stated litigation goals, the hours spent on litigation, and equitable considerations. McElwain sought damages of over $7 million. The jury awarded her just over $300,000. Indeed, the jury found for Defendants on the causes of action for discrimination based on disability, retaliation, and failure to prevent discrimination or retaliation. The jury did not award McElwain damages for future lost earnings or future non-economic damages. Under these circumstances the court determined "McElwain achieved limited success in relation to her litigation goals of obtaining a multi-million dollar verdict against [Defendants]." The court had the discretion to reduce the lodestar amount by a negative multiplier of 40 percent, in order to achieve an award that fairly reflected the value of the legal services provided.

McElwain cites Wysinger v. Automobile Club of Southern California (2007) 157 Cal.App.4th 413 (Wysinger) and Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44 (Gorman) to support her claim that the trial court abused its discretion by applying negative multiplier. We are not persuaded.

In Wysinger, a defendant challenged a FEHA fee award of $889,810, plus an upward modifier of 1.1, as excessive. (Wysinger, supra, 157 Cal.App.4th at p. 430.) The Court of Appeal found no abuse of discretion. (Id. at p. 431.) There, the court noted the plaintiff "obtained excellent results" and that the issues were intertwined. (Ibid.)

Here, by contrast, McElwain appealed the fee order and as the moving party must demonstrate the trial court abused its discretion in awarding insufficient fees. Additionally, the trial court in Wysinger concluded the plaintiff had achieved "excellent results" in the litigation while McElwain achieved only limited success. Finally, even assuming the issues were factually related, Wysinger does not preclude a negative lodestar for limited success. (See Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 985.)

The Gorman court reversed and remanded an attorney fee award because it could not determine the basis for the court's fee calculation, which resulted in an award of "a little under 61 percent of [the] lodestar amount." (Gorman, supra, 178 Cal.App.4th 44 at p. 99.) The trial court did not give any reason for reducing the award below the amount sought by the appellant or explain how it arrived at the amount it chose to award. (Gorman, at pp. 53, 57, fn. 7.) Indeed, the court did not ask questions of the parties at the hearing on the fee motion and issued a mere 27-word order awarding fees as costs. (Id. at pp. 56-57.) The amount awarded was very precise—$416,581.37—it did not correspond with any calculation the Court of Appeal could conceive. (Id. at p. 101.) For these reasons, the court found that the award appeared to be "snatched whimsically from thin air" and was therefore an abuse of discretion. (Ibid.)

We note that in Save Our Uniquely Rural Community Environment v. County of San Bernardino (2015) 235 Cal.App.4th 1179, 1189, the appellate court disagreed with Gorman's analysis, stating: "We respectfully disagree with Gorman's analysis. In our view, the precision of the amount awarded indicates that rather than acting arbitrarily, the trial court applied some rational calculation, even though the appellate court could not discern what it was." --------

Here, unlike Gorman, the trial court stated the lodestar amount, explained precisely how it arrived at the underlying numbers, and made clear why it applied certain reductions and deductions. It issued a lengthy order reciting its underlying decision-making process. It noted the case was not complicated and that McElwain achieved limited success. These were all legitimate bases for ascertaining a reasonable attorney fee award. There was no error.

Finally, McElwain asserts the trial court, based on comments it made at the hearing, arbitrarily used the negative multiplier of the lodestar figure based on its belief that the fees awarded could not greatly exceed the damages award. We note the court's comments may not be used to impeach its order. (Transport Ins. Co. v. TIG Ins. Co. (2012) 202 Cal.App.4th 984, 1009 (holding that "oral remarks or comments made by a trial court may not be used to attack a subsequently entered order or judgment"); Jie v. Liang Tai Knitwear Co. (2001) 89 Cal.App.4th 654, 667, fn. 9 (trial court's remarks "not embodied in the written findings or judgment, may not be used to impeach the findings" actually made).) It is indisputable the court analyzed the governing law regarding lodestar adjustments at length and observed that its task, required by settled law, was to determine a "reasonable" fee award. McElwain fails to demonstrate an abuse of discretion.

DISPOSITION

The postjudgment order is affirmed. Defendants shall recover their costs on appeal.

IKOLA, J. WE CONCUR: O'LEARY, P. J. GOETHALS, J.