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finding no potential individual liability for attorney litigant where the issues, research, and legal arguments were the same
Summary of this case from Gottesman v. SantanaOpinion
CV 15-07623-RSWL-Ex
07-20-2016
TRANSAMERICA LIFE INSURANCE COMPANY, Plaintiff-in-Interpleader, v. YOUSEF RABADI; INTESAR ALTURK; BILL BILTAGI; LYSAGHT LAW GROUP, LLP; and DOES 1 to 10, Defendants-in-Interpleader. YOUSEF RABADI; INTESAR ALTURK; and BILL BILTAGI, Cross-Complainants, v. LYSAGHT LAW GROUP, LLP and BRIAN C. LYSAGHT, Cross-Defendants.
ORDER re: Cross-Defendants' Motion for Attorney's Fees and Costs Sanctions Under C.C.P. § 425.16 and 28 U.S.C. § 1927 [63]
This case is an interpleader action brought by Plaintiff Transamerica Life Insurance Company ("TLIC") against Defendants-in-Interpleader Yousef Rabadi, Intesar Alturk ("Alturk"), Bill Biltagi ("Biltagi") (collectively, Yousef Rabadi, Alturk, and Biltagi are "Cross-claimants"), Lysaght Law Group LLP ("LLG"), and Bryan C. Lysaght ("Lysaght") (collectively, LLG and Lysaght are "Cross-defendants"), to determine the respective rights to a percentage of the Policy proceeds on a life insurance policy issued by TLIC.
On May 17, 2016, this Court granted Cross-defendants anti-SLAPP motion to dismiss Cross-claimants' cross-claim for intentional interference with contractual relations. In its Order granting the anti-SLAPP motion, the Court awarded fees and costs to Cross-defendants. See Order Granting Anti-SLAPP Mot. 2:8-12, ECF No. 59.
Presently before the Court is Cross-defendants' Motion for Attorney's Fees and Costs Sanctions Under C.C.P. § 425.16 and 28 U.S.C. § 1927 [63] ("Motion for Attorney's Fees"). Having reviewed all papers submitted pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the Court DENIES the Motion for Attorney's Fees because Cross-defendants are self-represented litigants who are not entitled to fees.
I. BACKGROUND
On January 13, 2016, Cross-claimants filed two cross-claims against Cross-defendants for: (1) declaratory relief, and (2) intentional interference with contractual relations [12].
On February 23, 2016, Cross-defendants filed: (1) a special motion to strike the intentional interference with contractual relations claim pursuant to California's anti-SLAPP statute, California Code of Civil Procedure 425.16 [34] ("Anti-SLAPP Motion"), and (2) a motion to dismiss the claim pursuant to Federal Rule of Civil Procedure 12(b)(6) [35] ("Rule 12(b)(6) Motion").
On May 17, 2016, this Court granted the Anti-SLAPP Motion, and dismissed as moot the Rule 12(b)(6) Motion [22].
Cross-defendants filed their Motion for Attorney's Fees [63] on May 31, 2016. The Opposition and Reply briefs [67, 68, 70, 71] were timely filed, and the matter was taken under submission on June 30, 2016 [75].
II. DISCUSSION
A. Legal Standard
California's anti-SLAPP statute, California Code of Civil Procedure § 425.16, generally provides that "a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney's fees and costs." Cal. Code Civ. Proc. § 425.16(c)(1); see also Ketchum v. Moses, 24 Cal. 4th 1122, 1131 (Cal. 2001). "The language of the anti-SLAPP statute is mandatory; it requires a fee award to a defendant who brings a successful motion to strike." Cabral v. Martins, 99 Cal. Rptr. 3d 394, 411 (Cal. Ct. App. 2009).
Under Trope v. Katz and its progeny, however, law firms and attorney litigants are precluded from recovering attorney's fees for self-representation. Soni v. Wellmike Enter. Co., 169 Cal. Rptr. 3d 631, 639 (Cal. Ct. App. 2014); see also Carpenter & Zuckerman v. Cohen, 124 Cal. Rptr. 3d 598, 609-10 (Cal. Ct. App. 2011); Witte v. Kaufman, 46 Cal. Rptr. 3d 845, 851-52 (Cal. Ct. App. 2006). Based on this rule, attorney's fees are not recoverable for a law firm that is represented by an employee or associate of the firm. Carpenter, 124 Cal. Rptr. 3d at 609-10. In addition, California courts have not allowed the recovery of attorney's fees under the anti-SLAPP statute where an attorney litigant is not represented by counsel and an attorney-client relationship does not exist. See Witte, 46 Cal. Rptr. 3d at 849 (citing Ramona Unified Sch. Dist. v. Tsiknas, 37 Cal. Rptr. 3d 381, 392-93 (Cal. Ct. App. 2005)).
Trope v. Katz, 902 P.2d 259, 272 (Cal. 1995).
The Ninth Circuit has not addressed the issue of whether a SLAPP suit defendant, who personally defends against a SLAPP with the assistance of another partner in his firm, and successfully moves for dismissal of the claim under California Civil Code § 425.16, is entitled to an award of reasonable attorney's fees under the mandatory attorney's fees provisions of § 425.16(c). This Court finds persuasive the rulings of California appellate courts which suggest the answer to this question is "no." See Carpenter, 124 Cal. Rptr. 3d at 609; Witte, 46 Cal. Rptr. 2d at 849.
In contrast, cases that have allowed attorney's fees under California's contractual fee provisions or the anti-SLAPP statute are marked by the existence of an attorney-client relationship. Witte, 46 Cal. Rptr. 3d at 849; see also Dowling v. Zimmerman, 103 Cal. Rptr. 3d 174, 194 (Cal. Ct. App. 2001) ("[A] defendant who appears in a SLAPP action in propria persona and later retains specially appearing counsel who successfully brings on behalf of the defendant a special motion to strike under section 425.16, is entitled to recover an award of reasonable attorney fees under the mandatory provisions of subdivision (c) of that section.").
Cal. Code Civ. Proc. § 425.16(c).
For example, a corporate litigant which is represented by in-house counsel may recover attorney's fees. PLCM Grp. v. Dexler, 997 P.2d 511, 516-17 (Cal. 2000).
Further, attorney litigants who retain other attorneys to represent their personal interests may recover attorney's fees, just like non-attorney litigants. Soni, 169 Cal. Rptr. 3d at 639. If the matter involves the attorney's personal interests, the attorney litigant may recover attorney's fees, even if represented by other attorneys within the attorney litigant's firm. Gorman v. Tassajara Dev. Corp., 100 Cal. Rptr. 3d 152, 194 (Cal. Ct. App. 2009) (attorney litigant was represented by an associate in connection with a personal matter concerning defective construction of his home); Gilbert v. Master Washer & Stamping Co., 104 Cal. Rptr. 2d 461, 466 (Cal. Ct. App. 2001) (attorney litigant was represented by other members of law firm when attorney litigant was personally sued in a landlord/tenant dispute). B. Discussion
1. Reconsideration of the Order Granting Attorney's Fees
Under Local Rule 7-18, the Court is empowered to reconsider decisions on prior motions. Local Rule 7-18(c) specifically provides that:
"A motion for reconsideration of the decision on any motion may be made . . . on the grounds of . . . a manifest showing of a failure to consider material facts presented to the Court before such decision."
Cross-claimants' Opposition essentially seeks reconsideration of the part of the Court's May 17, 2016 Order [59] awarding fees and costs to Cross-defendants.
The Court reconsiders its award of attorney's fees and costs because the Court failed to consider whether Cross-defendants LLG and Lysaght were self-represented litigants who are not entitled to an award of attorney's fees.
2. Whether to Grant Attorney's Fees
a. LLG is not entitled to attorney's fees.
It is a well-settled principle that "when a law firm is the prevailing party in a lawsuit and is represented by one of its partners, members, or associates, it cannot recover attorney fees even though the litigation is based on a contract with a prevailing party clause." Sands & Assocs. v. Juknavorian, 147 Cal. Rptr. 3d 725, 726 (Cal. Ct. App. 2012). This principle applies with equal force to an award of attorney's fees under California's anti-SLAPP statute. See Witte, 46 Cal. Rptr. 3d at 849 (applying the definition of attorney's fees found in Civil Code § 1717 (contractual attorney's fees provision) to attorney's fees under California Code of Civil Procedure § 425.16(c)).
In Witte, the California Court of Appeal held that a law firm was not entitled to attorney's fees under the SLAPP statute where the law firm was represented by its own members. 46 Cal. Rptr. 3d at 851-52. The court reasoned that an attorney-client relationship did not exist between the law firm and its members, and the firm did not incur any attorney's fees in bringing the anti-SLAPP motion because all the work was done by members of the firm who represented their own interests through their representation of the firm. Id.
Similarly, in Carpenter, the California Court of Appeal held that a law firm was not entitled to attorney's fees under the SLAPP statute for work done by an associate of the firm. 124 Cal. Rptr. 3d at 608. The court found that "the law firm and its partners, in seeking to recover the reasonable value of [the associate's] services . . . in effect, were seeking to recover 'lost opportunity costs.'" Id. Unlike the in-house counsel in PLCM, which could recover fees, the court found that the associate did not represent the interests of the firm, but rather the clients of the firm. Id. The court did not find any evidence that the associate functioned as in-house counsel to the firm, and reasoned that the associate's position was comparable to a sole practitioner representing himself or herself. Id.
Here, Cross-defendant LLG is represented by Natasha Riggs ("Riggs") and Lysaght. Decl. of Natasha Riggs ("Riggs Decl.") ¶ 1, ECF No. 64; Suppl. Decl. of Natasha Riggs ("Suppl. Riggs Decl.") ¶ 1, ECF No. 72. Riggs and Lysaght are both partners at LLG. Riggs Decl. ¶ 1; Decl. of Brian C. Lysaght ("Lysaght Decl.") ¶ 2, ECF No. 64. Both Riggs and Lysaght have appeared as LLG's attorneys in this matter, and both attorneys are listed as attorneys of record for LLG. Based on Riggs' and Lysaght's status as partners, LLG, in seeking to recover the reasonable value of their services on the anti-SLAPP motion, in effect, is seeking to recover "lost opportunity costs." "The involvement of 'lost opportunity costs' is one rationale for denying attorney fees for self-representation." Carpenter, 124 Cal. Rptr. 3d at 608.
Moreover, in contrast to the in-house counsel in PLCM, no evidence has been presented which shows that Lysaght or Riggs represented LLG as independent counsel. Accordingly, an attorney-client relationship does not exist between Riggs or Lysaght and LLG, and LLG is not entitled to attorney's fees.
b. Lysaght is not entitled to attorney's fees.
In Gilbert, the California Court of Appeal held that a lawyer represented by other members of his law firm was entitled to recover reasonable attorney's fees where the representation involved the lawyer's personal interests, and not those of the firm. 104 Cal. Rptr. 2d at 462. Relying on Gilbert, Cross-defendants argue that Lysaght is entitled to recover fees because "he was sued personally, and his own personal interests were at stake." Opp'n to Alturk and Biltagi 4:28-5:2, ECF No. 68.
In Carpenter, however, the California Court of Appeal held that a law firm and its partners were not entitled to attorney's fees under the SLAPP statute for work done by an associate of the firm. 124 Cal. Rptr. 3d at 609. With regards to the individual partners, the court found no evidence that the SLAPP claim against the firm and its partners subjected the individual partners to potential individual liability separate and apart from the potential liability of the firm. Id. The court noted that causes of action were jointly asserted against the firm and its partners, and none of the allegations concerned conduct by the partners that was unrelated to the business or goals of the firm. Id. The court also did not find any evidence that the associate performed services on behalf of the individual partners, in addition to the time she spent representing the interests of the law firm. Id.
This case is more akin to Carpenter than to Gilbert. Cross-defendants admit that Lysaght was sued based on LLG's notice of attorney's lien. Although Lysaght was personally named in the cross-complaint, the tort claim did not involve Lysaght's personal interests, but rather, those of LLG. Thus, unlike in Gilbert, in which other members of the attorney litigant's firm represented the attorney litigant's "personal interests" in a landlord/tenant litigation, the tort allegations against Lysaght were not personal, but were directly related to the business of LLG.
Moreover, Riggs states in her Supplemental Declaration that "[t]here was no additional work involved due to the fact that the firm was sued. There was no additional time spent because LLG was sued; the issues, research and legal arguments were the same." Suppl. Riggs Decl. ¶ 4. Thus, although Lysaght was named in his individual capacity in the cross-complaint, there was no indication in the record that there was any potential individual liability, separate and apart from the potential liability of LLG.
In sum, "[i]n order to recover attorney fees for work done on behalf of individual attorneys in a law firm, there must be a showing that the fees sought to be recovered are not attributable to representation of the law firm." Carpenter, 124 Cal. Rptr. 3d at 610. No such showing is made here. In this litigation, Riggs represented the interests of LLG on the anti-SLAPP motion. Thus, Riggs performed services for the law firm that employed her. She did not form an attorney-client relationship with Lysaght individually. Accordingly, this case is governed by the general rule that a law firm which represents itself in litigation cannot recover its own attorney's fees under California's anti-SLAPP statute. Cross-defendants are not entitled to fees for services rendered to Lysaght.
c. Attorney's fees are not warranted under 28 U .S.C. § 1927 or the Court's inherent power.
Under 28 U.S.C. § 1927, any attorney "who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. This Court also has inherent power to "levy fee-based sanctions when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, delaying or disrupting litigation, or has taken actions in the litigation for an improper purpose." Fink v. Gomez, 239 F.3d 989, 991-92 (9th Cir. 2001).
Cross-defendants argue that the filing of the second cross-claim merits sanctions because the cross-claim lacked probable cause and did not state a claim for relief under Federal Rule of Civil Procedure 8.
Cross-defendants' argument is misplaced. This Court did not rule on the merits of Cross-defendants' Rule 12(b)(6) Motion because it granted Anti-SLAPP Motion. Accordingly, Cross-claimants' filing of the cross-claim, without more, does not support a finding of bad faith or vexatious conduct.
III. CONCLUSION
For these reasons, the Court DENIES the Motion for Attorney's Fees. Lysaght and LLG are not entitled to attorney's fees as self-represented litigants.
IT IS SO ORDERED.
DATED: July 20, 2016
s/ RO N ALD S.W . LEW
HONORABLE RONALD S.W. LEW
Senior U.S. District Judge