Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. CV004984.
Mihara, J.
Plaintiff William Palmer entered into a contingency fee agreement with defendant Chris Lusby Taylor under which Palmer agreed to act as Taylor’s attorney in an action against Intel Corporation (Intel). The contingency fee agreement did not fully comply with Business and Professions Code section 6147. After the Taylor/Intel action settled, Taylor refused to fully compensate Palmer under the agreement. Palmer filed an action against Taylor for breach of the contingency fee agreement seeking $131,000 in fees, plus his costs and attorney’s fees. Palmer also alleged many other causes of action against Taylor. Taylor exercised his right under Business and Professions Code section 6147 to void the contingency fee agreement, and, as a result, prevailed on the breach of contract cause of action. The Palmer/Taylor action proceeded to trial on a single cause of action for quantum meruit, and Palmer prevailed. After judgment was entered for Palmer, Taylor filed a motion to recover over $239,000 in attorney’s fees and costs under the attorney’s fees provision in the contingency fee agreement pursuant to Civil Code section 1717. The trial court found that Taylor was the prevailing party on the contract and awarded him all of the fees and costs he sought.
On appeal, Palmer contends that (1) the trial court erred in finding Taylor to be the prevailing party under Civil Code section 1717, (2) the trial court’s award of fees to Taylor conflicted with the legislative intent underlying Business and Professions Code section 6147, and (3) the trial court abused its discretion in awarding Taylor an unreasonable amount of attorney’s fees. We reject his first two contentions. However, we conclude that the trial court failed to properly exercise its discretion in determining the amount of the attorney’s fees award. Consequently, we reverse the order.
In his reply brief, Palmer contends, for the first time, that the trial court lacked jurisdiction to amend the judgment to award attorney’s fees because Taylor had already filed a notice of appeal from the judgment. Appellate courts ordinarily will not consider a new issue that is raised for the first time in the appellant’s reply brief, as the respondent has no opportunity to counter such a contention. (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764-765.) It is only upon a showing of good cause for failing to raise the issue earlier that an appellate court will address an issue that is initially raised in the reply brief. (Ibid.) Palmer makes no attempt to explain his failure to raise this issue in his opening brief, so we consider this contention forfeited. (Ibid.) Since Palmer failed to raise this issue in his opening brief, we decline to consider it. We note, however, that his contention plainly lacks merit. (Bankes v. Lucas (1992) 9 Cal.App.4th 365, 368-369 [filing of notice of appeal does not divest trial court of jurisdiction to award attorney’s fees].)
I. Background
In 2000, Palmer and Taylor executed a contingency fee agreement. This agreement contained an attorney’s fees clause which provided: “The prevailing party in any action or proceeding to enforce any provision of this Agreement will be awarded reasonable attorney’s fees and costs incurred in that action or proceeding or in efforts to negotiate the matter.”
Palmer filed an action against Intel on Taylor’s behalf in March 2001. In January 2002, that action was resolved by a settlement agreement under which Intel agreed to deliver two batches of stock to Taylor. After Intel made the first delivery in March 2002, Taylor paid Palmer his agreed contingency fee in stock for the first delivery. In May 2002, Intel made the second delivery of stock. Palmer asked Taylor to pay his contingency fee in cash for the second delivery. Taylor refused to pay Palmer anything for the second delivery.
In September 2003, Palmer filed an action against Taylor alleging breach of contract and numerous other causes of action. Taylor filed a demurrer, which was sustained with leave to amend. Palmer amended the complaint in June 2004. Taylor filed an answer in August 2004. Taylor thereafter moved for judgment on the pleadings on the ground that the contingency fee agreement was void because it did not comply with Business and Professions Code section 6147. Business and Professions Code section 6147 provides: “Failure to comply with any provision of this section renders the agreement voidable at the option of the [client], and the attorney shall thereupon be entitled to collect a reasonable fee.” (Bus. & Prof. Code, § 6147, subd. (b).) In December 2004, Taylor’s motion was granted, but Palmer was granted leave to amend.
In January 2005, Palmer filed a second amended complaint alleging all of the original causes of action plus a cause of action for quantum meruit. The quantum meruit cause of action alleged that Palmer was entitled to a reasonable fee if the contingency fee agreement was found to be defective or voidable. Palmer alleged that a reasonable fee would be $800,000. Taylor again demurred, and his demurrer was sustained. In May 2005, Palmer filed a third amended complaint. In August 2005, Taylor’s demurrer to the third amended complaint was sustained without leave to amend as to the breach of contract cause of action, but overruled as to the quantum meruit cause of action. In September 2005, Palmer filed a fourth amended complaint which no longer alleged breach of the written contingency fee agreement. Taylor again demurred with a similar result. The case proceeded to a court trial at which Palmer sought $147,455 on his quantum meruit cause of action. The trial court awarded Palmer $55,000. Taylor appealed, but this court affirmed the trial court’s judgment.
Taylor filed a noticed motion seeking to recover his attorney’s fees and costs. In his motion, he asserted that he was the “ ‘prevailing party on the contract’ ” under Civil Code section 1717 because he had prevailed on the breach of contract cause of action on demurrer. Taylor sought $239,825.50 in attorney’s fees that he had incurred between July 2002 and August 2005, and he argued that this was a reasonable amount of attorney’s fees. Taylor’s motion was accompanied by nearly 250 pages of documentation describing the services for which these fees had been incurred.
Palmer filed opposition in which he made the same contentions that he now raises on appeal. He claimed in particular that the fees sought were unreasonable because (1) they were out of proportion to the amount at issue in the case, (2) Taylor’s attorney was inexperienced, lacked “sophistication, ” and spent an inordinate amount of time on the case, and (3) the issues were neither novel nor difficult.
At the hearing on Taylor’s motion, the court noted that Palmer had not suggested how much Taylor was entitled to in fees if the requested amount was excessive. “You haven’t assisted me in that respect, other than saying, well, gee, Judge, we shouldn’t pay the full boat here of 220 [sic], because, after all, we were in litigation for a year and a half before they even raised this issue. So what am I supposed to do with that?” Palmer responded: “If the Court wants assistance, I would go through the bill, if the Court’s asking for that. I was given fifteen pages to brief this.” “I would request an opportunity, if the Court’s going to be giving a blanket payment, I would ask for an opportunity to at least comment on the bills.” The court responded: “I was hoping that was going to happen in your brief.” The court noted that it had already granted Palmer a continuance of the hearing over Taylor’s objection. “What I’m saying is you’ve had ample opportunity to get into this case and to make whatever positions you have to the Court available through written briefing. [¶] I mean you’ve had these same bills that I had for months and months and months, and there’s plenty of them, let me tell you, together with the outline that [Taylor’s attorney] has provided for [Taylor] as to the description of the work that’s been done by his law firm....” Palmer provided no specifics and acknowledged that the amount of fees “is fully at your discretion.”
The trial court granted Taylor’s motion and awarded Taylor the amount of fees and costs he sought. Palmer timely filed a notice of appeal.
II. Discussion
“In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717, subd. (a).) “The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment.” (Civ. Code, § 1717, subd. (b).)
The attorney’s fees clause in the contingency fee agreement between Palmer and Taylor provided that “[t]he prevailing party in any action or proceeding to enforce any provision of this Agreement will be awarded reasonable attorney’s fees and costs incurred in that action or proceeding or in efforts to negotiate the matter.” Palmer brought an action to enforce a provision of the contingency fee agreement when he filed a breach of contract cause of action against Taylor alleging that Taylor had breached the contingency fee agreement by failing to pay Palmer his fee for the second delivery. This breach of contract cause of action was clearly covered by the attorney’s fees clause in the contingency fee agreement. Taylor prevailed on that cause of action when the superior court sustained Taylor’s demurrer to that cause of action without leave to amend. Since Taylor prevailed in the only action to enforce the contingency fee agreement, it seems readily apparent that he was entitled, under the plain language of the attorney’s fees clause, to recover his “reasonable attorney’s fees and costs” incurred in defending against Palmer’s cause of action for breach of the contingency fee agreement. It is in this context that we consider Palmer’s contentions.
A. Prevailing Party Determination
“[W]hen a defendant defeats recovery by the plaintiff on the only contract claim in the action, the defendant is the party prevailing on the contract under section 1717 as a matter of law.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876 (Hsu).) “If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.)
“[A] trial court cannot consider a party’s success on noncontract causes of action, or in achieving its litigation objectives in general (i.e., on all contract and noncontract causes of action) in determining which party is the prevailing party on the contract for purposes of Civil Code section 1717.” (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 358, fn. 12; Hsu, supra, 9 Cal.4th at pp. 873-874 [“the determination of prevailing party for purposes of contractual attorney fees [must] be made without reference to the success or failure of noncontract claims.”].)
Palmer conveniently ignores the rule that a trial court’s determination of which party prevailed “on the contract” cannot take into consideration the success or failure of any causes of action that are not “on the contract.” He contends that the trial court abused its discretion in failing to consider his achievement of his litigation objectives by prevailing on his quantum meruit cause of action. As the prevailing party determination under Civil Code section 1717 is limited to consideration of a party’s success “on the contract, ” and Taylor indisputably prevailed “on the contract, ” Palmer’s success on his quantum meruit cause of action was irrelevant. The trial court did not abuse its discretion in limiting its consideration to success or failure on the breach of contract cause of action.
Palmer claims that “Taylor did not file the motion required by 1717(b)(1).” The cited subdivision states: “The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment.” (Civ. Code, § 1717, subd. (b), italics added.) Taylor filed a notice and motion seeking to recover his attorney’s fees and costs. In both his notice and his motion, he asserted that he had prevailed on the contract for purposes of Civil Code section 1717. Taylor’s notice and motion clearly complied with the requirements of Civil Code section 1717, subdivision (b).
Palmer claims that the trial court erroneously “broke the case into phases or stages of litigation” instead of looking at the “ ‘overall success’ ” of each party. We perceive no such error. The breach of contract cause of action was disposed of on demurrer. Since it played no role in the subsequent proceedings, which were limited to the quantum meruit cause of action, those subsequent proceedings were irrelevant to the trial court’s determination that Taylor was the prevailing party on the breach of contract cause of action. The trial court did not abuse its discretion in looking solely at the portion of the litigation that concerned the breach of contract cause of action.
B. Business and Professions Code Section 6147
Palmer claims that awarding Taylor his fees means that Taylor’s election to void the contingency fee agreement under Business and Professions Code section 6147, subdivision (b) automatically entitled Taylor to recover his attorney’s fees, a result which Palmer deems absurd.
Business and Professions Code section 6147, subdivision (b) provides: “Failure to comply with any provision of this section renders the agreement voidable at the option of the plaintiff, and the attorney shall thereupon be entitled to collect a reasonable fee.” (Bus. & Prof. Code, § 6147, subd. (b).)
Palmer argues that an award of attorney’s fees to a client who exercises his option to void a contingency fee agreement cannot be what the Legislature intended by its enactment of Business and Professions Code section 6147 because the Legislature did not expressly so provide. Missing from Palmer’s argument is any foundation for his claims about the Legislature’s intent. Business and Professions Code section 6147 is a simple statute which sets forth the requirements for creating a contingency fee agreement, grants the client the option to void a contingency fee agreement that does not meet those requirements, and allows an attorney to collect a reasonable fee if the client voids the contingency fee agreement. The statute does not address the subject of a lawsuit concerning a contingency fee agreement and says nothing about the availability of attorney’s fees to any party to such a lawsuit.
The fact that Business and Professions Code section 6147 says nothing about a lawsuit or the application of an attorney’s fees clause in a voided contingency fee agreement tells us nothing about the Legislature’s intent in this regard. “This court has no power to rewrite the statute so as to make it conform to a presumed intention which is not expressed. This court is limited to interpreting the statute, and such interpretation must be based on the language used.” (Seaboard Acceptance Corp. v. Shay (1931) 214 Cal. 361, 365.) Since Business and Professions Code section 6147 is completely silent with regard to its possible impact on the application of an attorney’s fees clause in a voided contingency fee agreement, we may not presume that the Legislature intended anything other than the application of other relevant statutes governing that situation. Here, Civil Code section 1717 applies to this situation, so we must presume that the Legislature intended that Civil Code section 1717 should govern it.
Palmer also contends that “the only provision impacted” by Business and Professions Code section 6147, subdivision (b) was “the manner in which the fees were to be allocated and decided, ” and “[t]he contract and statutory rights still exist between the parties.” Not so. Business and Professions Code section 6147, subdivision (b) provides that a failure to meet its requirements “renders the agreement, ” not just the fee provision in the agreement, voidable. (Italics added.) Once the client voids “the agreement, ” the agreement ceases to exist and is supplanted by the statutory provision that the attorney is entitled to a reasonable fee.
Palmer claims that Civil Code section 1717’s intended “mutuality” is subverted in this situation because the client will always prevail when Business and Professions Code section 6147 applies. We see no subversion of mutuality. The attorney is the person charged with ensuring that the contingency fee agreement meets Business and Professions Code section 6147’s requirements, and it is the attorney who has the power to determine whether such an agreement includes an attorney’s fees clause in the first place. Thus, when the attorney violates those statutory requirements and includes an attorney’s fees clause in the voidable agreement, the attorney faces the risk of liability for the client’s attorney’s fees. If, in this situation, the attorney initiates a lawsuit, the attorney may still avoid liability for significant attorney’s fees by pleading alternative causes of action for breach of contract and quantum meruit, and asking the client to decide at the outset whether to exercise the option to void the agreement. Should the client exercise his right under Business and Professions Code section 6147 at that time, the attorney’s fees incurred on the breach of contract cause of action will be minimal, because the action has just been initiated. If, on the other hand, the client chooses not to exercise that right, the lawsuit will proceed on the merits of the breach of contract cause of action, and the prevailing party, whoever that may be, will be entitled to recover his or her attorney’s fees.
Had Palmer pursued such a strategy here, Taylor would not have incurred significant attorney’s fees attributable solely to the breach of contract cause of action. And Palmer could have limited his liability for Taylor’s attorney’s fees if he had not continued to pursue the breach of contract cause of action after Taylor first exercised his option to void the agreement in his motion for judgment on the pleadings. Because the attorney who enters into a contingency fee agreement that violates Business and Professions Code section 6147 and contains an attorney’s fees clause is responsible for creating this dilemma and has options for limiting any impact it might have on the availability of attorney’s fees to the client in fee litigation, we do not believe that the application of Civil Code section 1717 to this situation subverts mutuality.
C. Amount of Fees
Palmer challenges the amount of the attorney’s fees award to Taylor, which he characterizes as “usurious.” He asks us to “remand the case to allow discovery and a proper determination of the reasonableness of [Taylor’s] fees.”
The party seeking attorney’s fees bears the burden of proving that the fees sought are “reasonable.” (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4th 21, 65.) “[T]he trial court has broad authority to determine the amount of a reasonable fee [under Civil Code section 1717].” (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 (PLCM).) Ordinarily, the court begins by determining the lodestar, which is the number of hours “reasonably expended” on the litigation multiplied by a reasonable hourly rate. (PLCM, at p. 1095.) After the court determines the lodestar, “ ‘it shall consider whether the total award so calculated under all of the circumstances of the case is more than a reasonable amount and, if so, shall reduce the section 1717 award so that it is a reasonable figure.’ ” (PLCM, at p. 1096.) “ ‘The trial court makes its determination [of a reasonable fee] after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case.’ ” (PLCM, at p. 1096.) “Nevertheless, trial court discretion is not unlimited. ‘The discretion of a trial judge is not a whimsical, uncontrolled power, but a legal discretion, which is subject to the limitations of legal principles governing the subject of its action, and to reversal on appeal where no reasonable basis for the action is shown.’ ” (Westside Community for Independent Living, Inc. v. Obledo (1983) 33 Cal.3d 348, 355.)
In this case, there is no “reasonable basis” in the record for the amount of the trial court’s attorney’s fees award.
Taylor bore the burden of establishing that the fees he sought were “reasonable.” (Ajaxo Inc. v. E*Trade Group Inc., supra, 135 Cal.App.4th at p. 65.) Taylor sought to recover virtually all of the attorney’s fees he incurred, regardless of the nature of the services provided, between July 23, 2002 (when Taylor first engaged his attorneys, more than a year before Palmer sued Taylor) and August 19, 2005 (when the trial court sustained Taylor’s demurrer without leave to amend to the breach of contract cause of action). His motion was based on a declaration by his lead attorney to which was attached copies of the bills for the attorney’s fees Taylor had incurred. These bills described the services for which discrete amounts of fees had been charged to Taylor.
When Palmer contended at the hearing on Taylor’s motion that the fees sought were unreasonable, the trial court asserted that Palmer had failed to adequately argue that issue because Palmer had not identified the amount that he believed would be reasonable. Since Taylor bore the burden of proving that the fees he sought were reasonable, the trial court was incorrect in shifting this burden to Palmer.
There was a substantial disparity between the amount at issue in the breach of contract cause of action and the amount of attorney’s fees sought for defending against it. Palmer’s cause of action for breach of the contingency fee agreement, in all four of its iterations, sought $131,000 plus attorney’s fees and costs. Taylor was awarded over $239,000 in attorney’s fees for his defense against this cause of action. The fact that the attorney’s fees expended in defending against the cause of action greatly exceeded the amount sought in the cause of action suggests that these attorney’s fees might not have been “reasonably expended” in defense against this cause of action. Palmer’s tort causes of action may have motivated Taylor to incur additional attorney’s fees, but the trial court was restricted to awarding only the amount of fees that was reasonably expended in defense of the breach of contract cause of action. Although the substantial disparity between the amount at issue in the contract cause of action and the amount of attorney’s fees awarded raises concerns about whether this amount of fees was reasonably expended in defense against the contract cause of action, this fact alone would not establish that the trial court abused its discretion.
Many of the services described in these bills were unrelated to defense of the breach of contract cause of action and therefore could not properly be included in the attorney’s fees award. For instance, the bills for the period from July 2002 through October 2002 totaled $12,876. Taylor claimed $12,636 in fees for this period in his motion. Thus, only $240 in fees was excluded. However, the bills for this period show that fees of $448.50, $69, $276, $241.50, and $379.50 (a total of $1,414.50) were associated solely with the “federal action.” While Palmer was seeking to recover his fees from Taylor for the Taylor/Intel state court action, Palmer was simultaneously representing Taylor in a federal action. Any fees incurred by Taylor associated with the federal action could not have been incurred in defending against Palmer’s breach of contract cause of action, which involved only the prior state court action. Such examples appear throughout the bills. Taylor claimed $412.50 in fees for his attorney’s services in January and February 2003 even though those services were in regard to a “federal fee agreement” between Taylor and Palmer. Taylor claimed $1,277 in fees for services in April 2003 that were also associated with the federal fee agreement. Since these services were unrelated to the breach of contract cause of action, they could not properly be included in the fee award.
One of the problems with the level of detail provided in these bills was that the bills often did not distinguish between the breach of contract cause of action and the other causes of action. Where the bills did provide detail, this detail rebutted Taylor’s claim that he was entitled to recover all of the attorney’s fees sought. The July 2004 bill for $6,765.50, for instance, included $316 in fees for Taylor’s attorneys discussing the case with a codefendant’s attorney. The codefendant was not a party to the contingency fee agreement upon which the breach of contract cause of action was exclusively based. The July 2004 bill also included charges of $276.50, $1,230, and $474 associated exclusively with causes of action other than the breach of contract cause of action. The August/September 2004 bill for $17,996.50 included charges of $270, $216, $395, $72, $255, $395, $330, $276.50, $45, $270, $948, and $255 (a total of $3,727.50) associated exclusively with causes of action other than the breach of contract cause of action.
In many cases, the detail provided for a specific period of time for which attorney’s fees were incurred indicated that a host of services had been provided, some of which may have been associated with the breach of contract cause of action while others were not. Since the time was not broken down within that specific period of time, the billings do not demonstrate which fees were recoverable.
Much of the October 2004 bill, which totaled $34,534, was associated with discovery. Since the facts regarding the breach of contract cause of action were undisputed and well established, no substantial amount of this discovery could have been associated with the breach of contract cause of action. The October 2004 bill also included fees of $185 and $92.50 incurred to determine whether a client may owe an attorney a fiduciary duty, which bore no apparent relationship to Palmer’s breach of contract cause of action against Taylor. The December 2004 bill, which totaled $16,275, included charges of $197.50 and $158 relating to the codefendant’s answer to the complaint. Again, the codefendant was not involved in the breach of contract cause of action so these fees could not reasonably be attributed to defense of the breach of contract cause of action. The July 2005 bill included a charge of $75 associated with research on “unjust enrichment, ” which could not have related to Taylor’s defense of the breach of contract cause of action.
We have not attempted to make a complete catalog of the items in the bills which do not relate to the breach of contract cause of action. That is not our role. We enumerate these examples for the sole purpose of explaining why we are compelled to conclude that the trial court could not reasonably have found that all of the fees it awarded to Taylor were associated with Taylor’s defense against the breach of contract cause of action. The trial court was obligated to segregate the fees incurred in defense of the breach of contract cause of action from the fees incurred for other purposes, and to determine whether the fees incurred in defense of the breach of contract cause of action were reasonably incurred. Because the bills submitted by Taylor could not support a finding by the trial court that the amount sought by Taylor, and awarded by the court, was reasonably expended by Taylor in defense against the breach of contract cause of action, the trial court abused its discretion.
III. Disposition
The order is reversed, and the matter is remanded to the trial court with directions to determine the amount of attorney’s fees reasonably expended by Taylor in his defense against the breach of contract cause of action. Palmer shall recover his costs on appeal.
WE CONCUR: Premo, Acting P. J., Elia, J.