Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Mendocino County Super. Ct. No. SCUKCVPM0593908.
Judge of the Superior Court of Alameda County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
A jury awarded damages to plaintiff David Eby (plaintiff) for injuries he sustained in an automobile collision with defendant Philip DeJong (defendant), but the workers’ compensation lien of plaintiff’s employer, the City of Ukiah (the City), exceeded the amount of the judgment on the verdict. Plaintiff therefore sought priority payment of his attorney fees and litigation expenses under a statutory provision requiring equitable apportionment when the employee’s efforts alone result in a third-party judgment benefitting the employer. The trial court denied plaintiff’s request, relying on law governing the allocation of attorney fees and costs when the recovery is produced through the joint efforts of the separate attorneys of the employee and employer. We reverse the trial court’s order, concluding that substantial evidence does not support a finding that the City’s counsel actively participated in procuring the judgment. Accordingly, we remand to the trial court for equitable apportionment of reasonable attorney fees and costs, to be paid first from the judgment. We affirm the judgment and order denying the motion for new trial, from which plaintiff also appeals, as he has waived his claims of error in this regard.
I. FACTUAL AND PROCEDURAL BACKGROUND
In January 2003, plaintiff was driving a City pickup truck in the course of his duties as a municipal employee when he collided with defendant’s vehicle (the accident). Plaintiff filed this negligence action against defendant on January 6, 2005, seeking damages for the injuries he sustained in the accident. The City intervened in the action on January 24, 2005, asserting its subrogation rights and seeking reimbursement for workers’ compensation benefits it had paid out. In February 2006, as part of a $35,000 settlement with defendant, the City assigned defendant its subrogation rights, including lien rights of $46,783.37 (the lien).
We use the term “lien” to refer to the City’s right to recover its reimbursable compensation costs. (See Draper v. Aceto (2001) 26 Cal.4th 1086, 1088, fn. 2 (Draper).)
The case proceeded to a jury trial almost 14 months later, on April 9, 2007. The jury returned a special verdict in which it found defendant negligent and assessed total damages of $38,838.82 ($3,838.82 economic/ $35,000 non-economic). The jury also found plaintiff negligent and 30 percent at fault for the accident, resulting in a $27,182.40 judgment against defendant.
Plaintiff filed a timely motion for a new trial on the sole ground that the damages awarded by the jury were inadequate. Specifically, he took issue with the jury’s special damage award, which represented only a portion of his lost wages, and did not include any past medical expenses for an undisputed injury. The trial court took the matter under submission after the hearing and entered an order denying the motion on June 18, 2007. The trial court inferred from the special verdict that the jury had concluded one of the two injuries plaintiff claimed was not related to the accident, but could not reasonably determine the amount of medical expenses attributable to the remaining injury without a breakdown of the medical bills, which plaintiff failed to provide. The trial court concluded that, under these circumstances, a damage award that included medical expenses would have amounted to rank speculation, unsupported by the evidence.
Defendant, in his capacity as the City’s assignee, filed a motion to offset the lien against the judgment. Plaintiff opposed the motion, claiming he was entitled under Labor Code section 3856, subdivision (b), to priority payment of his reasonable litigation expenses and attorney fees in prosecuting the action. In support of his claim, plaintiff submitted the declaration of his attorney, Tibor E. Major (Major), showing litigation expenses of $29,583.57, and attorney fees of 40 percent of the amount of the judgment after deducting these expenses. Defendant noted in his reply brief that “[t]he City of Ukiah through its attorneys . . . actively participated in the litigation up to the time of the Assignment of Lien” and argued that plaintiff was not entitled to attorney fees and costs because the amount of the judgment was less than the employer’s lien. (See Draper, supra, 26 Cal.4th 1086.) The day before the hearing on the motion, plaintiff filed a “closing memorandum” distinguishing the cases on which defendant relied because the employer’s attorney in each of those decisions had actively participated in procuring the recovery. In addition, Major filed another declaration in which he asserted that the judgment had been achieved entirely through his efforts, and that plaintiff had retained and paid the fees of all the experts in the case. Major noted that the City’s attorney had “sat through two depositions [in which he] asked a few questions [but] did nothing else that can be construed as active participation that resulted in the judgment.” Major observed that the City had assigned its lien to defendant 14 months before trial, and had withdrawn from the case before the first of three scheduled trial dates.
This provision applies when “the action is prosecuted by the employee alone . . . .” (See Lab. Code, § 3856, subd. (b).)
The trial court took the matter under submission after the hearing on the motion. On June 18, 2007, the trial court issued a written ruling granting defendant’s motion to offset the lien against the judgment and denying plaintiff’s claim to priority payment of reasonable attorney fees and litigation expenses. Relying on Draper, supra, 26 Cal.4th 1086, the trial court concluded that plaintiff had not received any benefit from the litigation because the lien exceeded the amount of the judgment. The trial court also cited subdivision (c) of Labor Code section 3856, which addresses attorney fees and costs when the recovery results from the joint efforts of the attorneys of both the employer and the employee. The trial court directed defendant to prepare and submit a formal written order reflecting this ruling.
On July 18, 2007, plaintiff filed notice of appeal from the judgment, the order denying his motion for new trial, and the “Post-Trial Ruling for Lien Offset, filed on June 18, 2007.” On August 6, 2007, the trial court entered a formal order granting defendant’s motion for a setoff against the judgment and denying plaintiff priority over the lien in the recovery of his attorney fees and costs. The order tracks the reasoning and authority set forth in the trial court’s post-trial ruling.
II. DISCUSSION
Plaintiff challenges the judgment, contending that the trial court erred in limiting his rebuttal evidence and argument. Nonetheless, as his arguments in this regard are virtually devoid of supporting legal authority, we deem these issues waived on appeal. (See Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 (Benach).) An appellant must do more than merely assert that the judgment is wrong; he “must affirmatively demonstrate error through reasoned argument and discussion of legal authority.” (Ibid.; Cryoport Systems v. CNA Ins. Cos. (2007) 149 Cal.App.4th 627, 633.) “It is not our place to construct theories or arguments to undermine the judgment and defeat the presumption of correctness.” (Benach, supra, 149 Cal.App.4th at p. 852.) For the same reason, we find that plaintiff has waived review of the order denying his motion for new trial.
Specifically, plaintiff contends that the trial court erred in preventing him from explaining inconsistencies regarding the condition of his pre-existing injury at the time of the accident, refusing to allow his accident reconstructionist to attack the opinions of defense experts that he was speeding at the time of the accident, and limiting the rebuttal portion of his closing argument to 15 minutes.
An order denying a new trial is nonappealable, but may be reviewed on appeal from the underlying judgment. (Walker v. Los Angeles County Metropolitan Transportation Authority (2005) 35 Cal.4th 15, 18.)
Having so concluded, we turn to the trial court’s order denying plaintiff’s request for priority payment of his attorney fees and costs. As a preliminary matter, we note that plaintiff’s appeal from this order was premature. In the interest of judicial economy, however, we treat the notice of appeal as filed immediately after entry of the subsequent formal order and proceed to the merits of the order, which is otherwise appealable. (See Cal. Rules of Court, rule 8.104(e); Webb v. Webb (1970) 12 Cal.App.3d 259, 262, fn. 1; Roden v. AmerisourceBergen Corp. (2005) 130 Cal.App.4th 211, 215-216.)
In his notice of appeal, plaintiff purports to appeal from the trial court’s “Post-Trial Ruling for Lien Offset,” a preliminary order directing defendant to prepare a formal written order. In such cases, the entry date of the order, commencing the time for appeal, is the date the signed formal order was filed, in this case, August 6, 2007, after plaintiff had filed notice of appeal. (See Cal. Rules of Court, rule 8.104(d)(2).)
When an employee obtains a judgment against a third party who caused him injury on the job, Labor Code section 3856 governs the allocation of attorney fees and costs between the employee plaintiff and his employer. This section incorporates the doctrine of equitable apportionment, which requires the passive beneficiaries of a judgment to bear their fair share of the costs of procuring it. (Quinn v. State of California (1975) 15 Cal.3d 162, 166, 169-173 (Quinn); Crampton v. Takegoshi (1993) 17 Cal.App.4th 308, 317 (Crampton), overruled on other grounds by Phelps v. Stostad (1997) 16 Cal.4th 23, 34.) Thus, when the employer benefits from a judgment obtained through the employee’s efforts alone, the trial court must apportion reasonable attorney fees and litigation expenses incurred in effecting the recovery. (Quinn, supra, 15 Cal.3d at pp. 166, 169-173; Kindt v. Otis Elevator Co. (1995) 32 Cal.App.4th 452, 456, 459 (Kindt) [“It is inequitable to force the worker to underwrite the entire cost of obtaining any ensuing judgment”]; see Lab. Code, § 3856, subd. (b).) When the separate attorneys of the employee and the employer are both active in producing the result, however, there are no passive beneficiaries, and equitable apportionment does not apply. (Crampton, supra, 17 Cal.App.4th at p. 318; Hartwig v. Zacky Farms (1992) 2 Cal.App.4th 1550, 1556 (Hartwig).) In such cases, each attorney’s fee comes out of his client’s share of the recovery. (Crampton, supra, 17 Cal.App.4th at p. 318; Draper, supra, 26 Cal.4th at pp. 1093-1094 [applying Lab. Code, § 3856, subd. (c)].)
Labor Code section 3856, subdivision (b) provides: “If the action is prosecuted by the employee alone, the court shall first order paid from any judgment for damages recovered the reasonable litigation expenses incurred in preparation and prosecution of such action, together with a reasonable attorney's fee which shall be based solely upon the services rendered by the employee's attorney in effecting recovery both for the benefit of the employee and the employer. After the payment of such expenses and attorney's fee the court shall, on application of the employer, allow as a first lien against the amount of such judgment for damages, the amount of the employer's expenditure for compensation together with any amounts to which he may be entitled as special damages under Section 3852.”
Plaintiff’s right to equitable apportionment depends, therefore, on the role the City’s counsel played in obtaining the judgment. An employee litigant is entitled to attorney fees unless the lienholder establishes that the employer actively participated in generating the recovery from which fees are sought. (Kindt, supra, 32 Cal.App.4th at pp. 459-460 [concluding that the employee is not required to prove that the judgment resulted from his efforts and not those of his employer].) Whether the employer has done so is a question of fact for the trial court. (Walsh v. Woods (1986) 187 Cal.App.3d 1273, 1278.)
Attorney fees may be apportioned even though the employer has assigned its lien to the third-party defendant. (Hartwig, supra, 2 Cal.App.4th at pp. 1554-1555.) The assignee “ ‘ “steps into the [employer’s] shoes,” ’ ” accepting not only the rights afforded by the lien, but its obligations as well, including its duty to contribute fairly to the cost of obtaining the result. (See Manriquez v. Adams (2003) 108 Cal.App.4th 340, 346-347.)
In this case, the trial court relied on authority governing the recovery of attorney fees and costs in cases of active participation by the employer’s attorney, but made no finding of fact in this regard. (See Lab. Code, § 3856, subd. (c); Draper, supra, 26 Cal.4th 1086.) Nonetheless, as the trial court’s order is presumed correct and supported by the record, we indulge all inferences to support it on matters as to which the record is silent. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564; Higdon v. Superior Court (1991) 227 Cal.App.3d 1667, 1671 (Higdon).) Accordingly, in this case, we imply a finding of fact by the trial court that the City’s attorney actively participated in procuring the judgment if there is substantial evidence in the record to support such a finding. (See Higdon, supra, 227 Cal.App.3d at p. 1671.)
Plaintiff asserts that the record contains no evidence of active participation by the City’s counsel in the litigation and contends that the uncontradicted evidence shows that his attorney alone prosecuted the action. We agree. Defendant did not present any evidence regarding the role played by the City’s attorneys and did not address this issue at all other than to note in argument that the City had “actively participated in the litigation up to the time of the Assignment of Lien.” Such a conclusory assertion does not satisfy the active participation requirement. (See Hartwig, supra,2 Cal.App.4th at pp. 1556-1557 [addressing the nature of proof necessary and concluding that a lienholder cannot defeat an employee’s right to apportionment with “conclusory assertions that do not demonstrate it did anything more than ‘tag along’ ”].) To avoid apportionment, a lienholder must provide sufficient factual detail to establish the activities of employer’s counsel constituted “a conscientious effort in the circumstances to address the substantive issues encompassed by the lienholder’s case.” (See ibid. [rejecting as insufficient a lienholder’s showing that failed to explain the precise nature of the services provided, state the hours expended by counsel, or provide a concrete description of activities tending to show a serious attempt to advance the employer’s case]; Gapusan v. Jay (1998) 66 Cal.App.4th 734, 745-746.) Defendant did not do so.
The only evidence of the City’s participation in this case is reflected in the pleadings it filed and the declaration of plaintiff’s attorney. The record shows that the City filed a complaint in intervention and assigned its lien to defendant a year later. Plaintiff’s attorney (Major) states in his declaration that the City’s attorney sat through two depositions and “asked a few questions,” but that the City assigned its lien to defendant and withdrew from the case 14 months before the first of three trial dates. Denying further activity by the City, Major asserts that the judgment was obtained entirely through his efforts and that plaintiff bore the full cost of the expert witnesses. Defendant does not dispute plaintiff’s contention that this evidence is uncontradicted or identify any additional evidence bearing on the issue. Instead, he claims, without authority, that the limited involvement suggested by this evidence amounts to active participation.
The standard is not whether the City’s counsel “ ‘minimally participated’ ” in the case, but whether he actively participated in obtaining the recovery. (See Manriquez v. Adams, supra, 108 Cal.App.4th 340, 348; see Luque v. Herrera (2000) 81 Cal.App.4th 558, 562 [active participation in the case is not enough: attorney must actively participate in procuring the recovery].) “[M]erely retaining separate counsel or filing a complaint in intervention or a lien, with nothing more, does not satisfy the standard of ‘active participation.’ ” (Hartwig, supra, 2 Cal.App.4th at p. 1556.) Attendance at depositions also is insufficient unless the evidence shows that the employer’s counsel acted as more than just “a warm body.” (See ibid.; Kindt, supra, 32 Cal.App.4th at pp. 459-460 [filing of expert witness designation and attendance at three depositions insufficient where employer’s attorney asked only one question of one witness]; see also Gapusan v. Jay, supra, 66 Cal.App.4th at pp. 745-746 [a token appearance or other nominal participation will not suffice]; Kavanaugh v. City of Sunnyvale (1991) 233 Cal.App.3d 903, 915 [same].) The evidence does not show that the City’s counsel made any effort to address the substantive issues in the case or played any role in obtaining the judgment. We conclude that the record does not contain substantial evidence supporting an implied finding of active participation by the City’s counsel. Labor Code section 3856, subdivision (b), therefore applies, requiring equitable apportionment of reasonable attorney fees and litigation expenses.
Plaintiff’s failure to obtain a net recovery does not affect this result. The trial court emphasized this fact in reliance on Draper, which denied attorney fees to the plaintiff’s attorney because the lien exceeded the settlement proceeds. (See Draper, supra, 26 Cal.4th at pp. 1088-1089, 1094-1095.) The Draper holding applies, however, only when the recovery is obtained “through the joint efforts of attorneys separately representing the employer and employee.” (See id. at pp. 1088-1089.) In such cases, each attorney’s fees are paid out of the client’s share of recovery by reference to the actual benefit he has received. (Id. at pp. 1094-1095.) An employee client who has not obtained a net recovery has not received any such benefit. (Ibid.) When the employee alone prosecutes the action, however, the allocation of attorney fees and costs turns on the benefit the employer has received. (See Crampton, supra, 17 Cal.App.4th at pp. 316, 318-319; Gapusan v. Jay, supra, 66 Cal.App.4th at p. 747, fn. 13; Luque v. Herrera, supra, 81 Cal.App.4th at p. 563 [noting the absurd results produced by requiring a net recovery in such circumstances, as this would relieve an employer of its attorney fees obligation because it was the only one who received a benefit].)
Draper, supra, 26 Cal.4th at pages 1094-1095, applied Labor Code section 3860, which governs the allocation of attorney fees and costs when the employee obtains a settlement against a third-party defendant. This section is the statutory equivalent of Labor Code section 3856 in the settlement context, and these provisions are treated alike. (Quinn, supra, 15 Cal.3d at p. 176, fn. 20; Kaplan v. Industrial Indem. Co. (1978) 79 Cal.App.3d 700, 705-706.)
We conclude, therefore, that the trial court erred in applying subdivision (c) of Labor Code section 3856 and denying plaintiff’s request under Labor Code section 3856, subdivision (b).
In so holding, we reject defendant’s remaining arguments, noting that he failed to raise his procedural and evidentiary objections below and now asserts them as additional grounds for affirmance. Defendant has not shown that California Rules of Court, rule 3.1702 (formerly rule 870.2), which requires a noticed motion for attorney fees, applies to the allocation of judgment proceeds between a workers’ compensation lien and the attorney fees and costs incurred by an employee plaintiff in producing a result that benefits his employer. Defendant also offers no authority to support his contention that plaintiff’s evidence of costs and attorney fees was insufficient because he did not attach confirming documentation.
III. DISPOSITION
The judgment on the verdict and the trial court’s order denying plaintiff’s motion for new trial are affirmed. The trial court’s order granting defendant’s motion for a setoff and denying plaintiff’s request for priority payment of attorney fees and costs is reversed, and the matter is remanded to the trial court for equitable apportionment of reasonable attorney fees and litigation expenses and the entry of a new and different order requiring payment of such amounts first from the judgment. Each party shall bear his own costs on appeal.
We concur: JONES, P. J., SIMONS, J.