Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County, No. 04CC10904, Gail Andrea Andler, Judge.
Lakeshore Law Center and Jeffrey Wilens for Plaintiffs and Appellants.
Sheppard, Mullin, Richter & Hampton, Robert S. Beall and Ruben D. Escalante; Sheppard, Mullin, Richter & Hampton, and Karin Dougan Vogel, for Defendant and Respondent.
OPINION
BEDSWORTH, ACTING P. J.
Gerald and Glenda Worley (the Worleys) appeal, for the second time, from an order setting the amount of attorney fees they can recover in this class action case. They argue the court erred by relying upon a single factor – “overlitigation” of the case through redundant, unnecessary or excessive legal work – as a justification for both reducing the lodestar fee amount and then applying a negative multiplier to that amount. We disagree.
The court’s most recent fee order explains, in significant detail, that its reduction of the lodestar amount from the $263,606 in fees requested by the Worleys, to $174,339, was based largely upon its view that the original number included tasks which were “redundant, ” “unnecessary” and “excessive, ” as well as tasks which were too vaguely described to be evaluated. The Worleys do not challenge those determinations on appeal. The court then stated it would apply a negative multiplier of.15 to that lodestar amount, reducing it by 85 percent, on the ground that, as it had already explained in connection with its prior fee award, the case had been “overlitigated.”
As explained in footnote 6, post, the court appears to have erroneously included the Worleys’ costs and expenses within the lodestar analysis contained in the order at issue in this appeal. That was improper, as a lodestar analysis has no application to cost awards. Thus, where we reference the fees at issue herein, our numbers are adjusted to reflect the exclusion of costs.
In our view, the court’s order does not reflect an impermissible reliance upon the same factor to justify both a reduction in the lodestar amount and the application of a multiplier. Instead, the court’s order reflects that after reviewing the attorney’s billings in painstaking detail, and discovering numerous examples of what it considered inflated billings – adding up to a significant percentage of the fees claimed – the court then relied upon the unreasonable inflation of the fee request as a special circumstance which justified an election to “reduce the award or deny one altogether.” It was entitled to do so.
Viewed in this light, it is clear the court’s calculation of the inflated billings, which reduced the lodestar amount of fees significantly, was merely the justification for the subsequent severe reduction in the fee award. It was within the court’s discretion to reduce the award on that basis, and we cannot disturb its decision on appeal.
FACTS
This case centered on allegations that defendant Storage USA, which operates many such facilities in California, violated the provisions of the Self-Storage Facility Act (Bus. & Prof. Code, § 21701 et seq.), which was incorporated into its contracts with customers. Among other things, the Self-Storage Facility Act specifies what notice must be given before a renter’s property can be sold for nonpayment of rent, and limits late charges. The Worleys’ complaint alleged Storage USA failed to give adequate notice prior to selling their property and charged excessive late fees. It alleged Storage USA did the same thing to several thousand other individuals throughout California who had rented space at its facilities.
Four causes of action were set out. Individually, the Worleys claimed conversion and breach of contract. On behalf of the class, they claimed each violation of the Self-Storage Facilities Act (inadequate notice and excessive fees) was an unfair business practice under the Unfair Competition Law. (Bus. & Prof. Code, § 17200 et seq.) The relief sought was certification as a class action, a declaration of rights, an injunction against continuing the illegal practices, an accounting of money received as a result of those practices, restitution of profits, damages, and, on the contract claim, reasonable attorney fees and costs.
The settlement agreement provided Storage USA would pay $125 to each class member who filed a timely claim (the Worleys estimated the average proceeds from sale of a delinquent renter’s property was $308, while Storage USA put it at $245). Storage USA agreed to pay the cost of identifying class members, providing notice, and administering the settlement. It was ultimately determined the class included over 2, 100 members, and when that number is multiplied by the $125 payment, we view the value of the settlement as being in excess of $260,000.
In this respect, we disagree with what seemed to be the trial court’s analysis of the settlement value. In connection with its earlier fee award, the court implied it viewed the case as worth only the total amount that would actually be paid to those class members who filed claims. But as the Worleys make clear, there is simply no reason why any class member who could be located (and many could not) would not wish to submit a claim. This was not the sort of class settlement where the benefits negotiated on behalf of the class members were of value only if they continued to do business with the defendant; e.g., discounts on future purchases, merchandise credits which could be applied to the purchase of another item, or the extension of some service by defendant that the class member might not want. When a class action entitles members to those types of benefits, it is generally assumed (and reasonably so) that a certain percentage of the class will simply have no interest in making use of the benefit. By contrast, the settlement here provided for a rather significant cash payment to any class member who asked for one, with no strings attached. That is an objectively valuable benefit offered to each class member, no matter what their feelings about defendant, and we presume any who could be contacted, and made aware of it, would have taken advantage of it.
It was also agreed the Worleys would apply to the court for an award of attorney fees and costs, which would be paid by Storage USA separate and apart from settlement payments to class members.
In August 2008, the Worleys moved to approve the settlement and determine reasonable fees and costs. The Worleys asked for $266,221, consisting of $263,606 fees and $2,615 costs. In a supporting declaration, class counsel Jeffrey Wilens said he spent 448.8 hours on the case, at a reasonable hourly rate of $495 ($246,906). Another attorney, who was admitted in Utah but not California, put in 83.5 hours at $200 per hour ($16,700). Detailed billing records accompanied the motion, and Wilens’ declaration described the work his firm had done.
Storage USA’s opposition argued fees should be discounted for unnecessary litigation, and the court apparently agreed, explaining “[T]he court finds... the case was overlitigated.... [T]here was work that... had to be redone, or had to be supplemented because it wasn’t done right the first time. [¶] [F]or example, the latest round of motions. There were violations of the California Rules of Court, because points and authorities longer than allowed were filed, declarations were not attached that were referenced, ex partes were brought that the court didn’t think really needed to be brought. [¶] When I look... at the nature of this case, and the complexity of this case, and on the billing, ... the case was over-litigated. [¶]... [¶] [W]hen I look at... the causes of action in the complaint that didn’t yield fruit, that maybe should not have even been there... it didn’t start out as a clean narrow case.... [T]here was a lot in this case that didn’t need to be there.” (Worley v. Storage USA, Inc. (Dec. 21, 2009, G041170) [nonpub. opn.], p. 4.) Unfortunately, while it was clear the court found the requested fee was excessive because the case was overlitigated, it did not quantify the excess.
The one item the court did quantify – and excluded – was the $16,700 fee requested for work performed by Utah Attorney Hornbeck. As the judge put it, “I would not... permit any recovery for the out-of-state attorney not licensed in... California who... billed for work as associate counsel.” In our prior opinion, we affirmed the propriety of that exclusion.
The court was also unclear about the method it was applying to determine a reasonable attorney fee award, discussing both the “value of the case” approach, which it acknowledged was not used in California, as well as a contingency measure, a “common fund” approach, and the lodestar method. Ultimately, the court explained that while it believed “an award... more along the lines of a common fund approach is more appropriate, or a percentage approach..., [¶] taking into account a combination of all of the approaches... I’ve discussed, taking a look at the hours that should have been expended, reasonably, the result obtained, the reasonable billing rate – and I don’t have any quarrel with... Wilens’ billing rate... [¶] But, taking into account those factors, the lodestar method, and looking at it along the other ways the court has indicated... an appropriate legal fee in this matter is $20,000.” (Worley v. Storage USA, Inc., supra, G041170, p. 5.) The court also awarded the requested costs in the amount of $2,615.
The Worleys appealed the fee award, and we reversed the order. In our opinion, we explained that while the court’s decision to award the Worleys less than 10 percent of the fees they had requested may have been justified on the merits, the court had failed to clearly indicate that it was adhering to the lodestar method to determine that fee award, as it was required to do. We also explained that when applying the lodestar method, it is within the judge’s discretion to reduce the lodestar for excessive work or overlitigating the case, and noted that the court “went into more than sufficient detail in explaining why she found the case was overlitigated.” (Worley v. Storage USA, Inc., supra, G041170, p. 8.) However, we faulted the court for not” “tak[ing] the next step and put[ting] a number on the excess.” (Worley v. Storage USA, Inc., supra, G041170, p. 8.)
We also questioned whether a 90 percent reduction in fees could be justified on a claim of “overlitigation” alone, but did not decide the issue, noting only that even if such a conclusion were possible, there had been no determination in this case of “how much excessive time was spent.” (Worley v. Storage USA, Inc., supra, G041170, p. 11.) We consequently remanded the case with directions to “redetermine a reasonable award of fees under the lodestar method, with appropriate adjustments clearly stated in the record.” (Worley v. Storage USA, Inc., supra, G041170, p. 13.)
On remand, the court declined to consider additional arguments submitted by the parties, or to hold a hearing. Instead, it simply announced the result of its redetermination by minute order. In that order, the court first explained it had relied on the lodestar method in its prior fee decision, while also acknowledging it had “failed to make [that] clear.” The court then stated it had “re-examined the evidence submitted prior to the entry of judgment, ” and “based on the lodestar method and the instructions from the Court of Appeal, ” determined that “$26,543.10 constitutes reasonable fees and costs in connection with pre-appellate work….”
The Worleys argued the court was required to conduct an entirely new fee hearing, and to consider additional briefs filed in connection with that hearing, before announcing the result of its redetermination, because our opinion had recited that the court’s “redetermination” of fees should “include reasonable attorney fees on appeal.” (Worley v. Storage USA, Inc., supra, G041170, p. 13, italics added.) While we might agree that a new hearing would have been a good idea, we intended no such requirement as pertaining to the trial court fees previously considered by the court. The court could, if it chose, redetermine those fees based upon the arguments and information previously submitted. The only new information the court was actually required to consider on remand was information pertaining to the separate amount of fees to award in connection with the appeal. The court apparently chose to address those fees in a separate proceeding, rather than including them in its “redetermination” of the trial court fees, and we cannot say the Worleys were prejudiced by that decision.
The court then provided a detailed explanation of how it arrived at that number. It started with the requested amount of $263,606 in fees and costs. It then subtracted $16,700 in fees charged by the out-of-state attorney who was not licensed to practice in California, reducing the total to $246,906. The court then set out in painstaking detail a series of deductions totaling $59,944.50 for “redundant work, unnecessary work, work for which too much time was billed, and work on which an indeterminate amount of time was spent, ” bringing the total to $186,961.50. And finally, the court set forth another series of 13 deductions, totaling $12,622.50, for “vaguely described items … as the court cannot determine that they are reasonable” – resulting in a lodestar figure of $176,954.
These deductions include 25 separate items, identified by date, description of the work, and the fee amount originally claimed for that work.
Technically, then, this lodestar figure included not only fees, but also costs and expenses, as the court’s calculations begin with the total amount of fees and costs requested by the Worleys, and then fails to reduce that number by what it acknowledges are the “$2,615 in costs and expenses” included therein. That was error, as the court then proceeded to apply a negative multiplier to that lodestar figure, which resulted in a severe reduction in not only the award of fees, but of costs as well. The lodestar method has no application to cost awards, and the court has no power to either enhance or reduce a cost award based thereon.
The court then applied a negative multiplier of.15 (meaning it discounted the lodestar by 85%), for what it stated were “the reasons previously stated on the record which the court of appeal found to be in ‘more than sufficient detail, ’ but indicated that the court needed to quantify the excess, which has been set forth above.” The only finding we identified in our prior opinion as having been stated in “more than sufficient detail” was the court’s determination that the case had been “overlitigated.” (Worley v. Storage USA, Inc., supra, G041170, p. 8.)
As a result of that 85 percent reduction in the lodestar amount for what was previously characterized as “overlitigation, ” the court awarded the Worleys $26,543.10 in fees and costs.
I
In assessing the propriety of the fee award in this case, we are guided by two important considerations. First, as with all orders and judgments, this fee order “is presumed correct, all intendments and presumptions are indulged in its favor, and ambiguities are resolved in favor of affirmance.” (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 765-766, citing Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Second, it is well-established that “ascertaining the fee amount is left to the trial court’s sound discretion. (Ketchum [v. Moses (2001) 24 Cal.4th] at p. 1132; Maughan v. Google Technology, Inc. (2006) 143 Cal.App.4th 1242, 1252....) Trial judges are entrusted with this discretionary determination because they are in the best position to assess the value of the professional services rendered in their courts. (Ketchum [v. Moses, supra, 24 Cal.4th] at p. 1132; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-1096); see Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623 [‘trial court has its own expertise’ on the question of fees].)” (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1321.) Thus, the court’s fee award “‘will not be disturbed unless the appellate court is convinced that it is clearly wrong.’” (Serrano v. Priest (1977) 20 Cal.3d 25, 49, quoting Harrison v. Bloomfield Building Industries, Inc. (6th Cir. 1970) 435 F.2d 1192, 1196.)
It is with these principles in mind that we evaluate the order before us.
II
“[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, Inc. v. Drexler, supra, 22 Cal.4th at p. 1095.) “Under this method, the court ‘begins with a touchstone or lodestar figure, based on the “careful compilation of the time spent and reasonable hourly compensation of each attorney... involved in the presentation of the case.”’ (Ketchum v. Moses[, supra, ] 24 Cal.4th [at pp.] 1131-1132 ....) The lodestar ‘should ordinarily include compensation for all the hours reasonably spent’ on the case (id. at p. 1133, original italics), but the court must ‘carefully review attorney documentation of hours expended; “padding” in the form of inefficient or duplicative efforts is not subject to compensation.’ (Id. at p. 1132.) The lodestar may then be adjusted ‘to fix a fee at the fair market value for the particular action.’ (Ibid.) The adjustment can be based on ‘factors including, as relevant herein, (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, (4) the contingent nature of the fee award.’ (Ibid.)” (Komarova v. National Credit Acceptance, Inc. (2009) 175 Cal.App.4th 324, 348.)
In this case, the court’s lodestar fee analysis properly began with a determination of the hours “reasonably spent” on the litigation (Ketchum v. Moses, supra, 24 Cal.4th at p. 1133), multiplied by the hourly rate of the attorneys involved. As a result of that analysis, the court here excised a significant number of the hours claimed by the attorneys, finding them “redundant, ” “unnecessary” or “excessive, ” while leaving the hourly rates unchanged. Thus, the court concluded that the lodestar figure of attorney fees in this case was $174,339 – nearly $100,000 less than the amount requested. It is at this point when the court would normally consider whether it is appropriate to apply a multiplier – usually a positive one – as a means of adjusting the lodestar figure to more properly reflect the value of the attorneys’ efforts, considering extraneous factors such as the circumstances surrounding the litigation itself, the burden it placed upon the attorneys, and the exceptional quality of their work.
In connection with the prior fee motion, the court specifically noted it had no concerns about the hourly rate claimed by the Worleys’ attorney.
However, on the negative side, “‘[a] fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether.’” (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 990, citing Serrano v. Unruh (1982) 32 Cal.3d 621, 635, and Ketchum v. Moses, supra, 24 Cal.4th 1122, 1137.)
In Chavez, the trial court had denied, in its entirety, the fee request of a plaintiff who has prevailed on only one civil rights claim out of several alleged, and recovered only $11,500. The Supreme Court explained that “the trial court reasonably could and presumably did conclude that plaintiff’s attorney fee request... for 1, 851.43 attorney hours was grossly inflated when considered in light of the single claim on which plaintiff succeeded, the amount of damages awarded on that claim, and the amount of time an attorney might reasonably expect to spend in litigating such a claim. This fact alone was sufficient, in the trial court’s discretion, to justify denying attorney fees altogether.” (Chavez v. City of Los Angeles, supra, 47 Cal.4th at p.991, italics added.)
That fact was also present in this case, as demonstrated by the court’s lengthy analysis of the billing records submitted by the Worleys’ attorney. Of course, the Worleys contend that once the court relied on their inflated billing records as a means of reducing the lodestar fee amount, it was precluded from relying upon that same factor as a justification for any further reduction. We disagree. Each of the cases the Worleys rely upon, Ketchum v. Moses, supra 24 Cal.4th 1122, 1138-1139, Ramos v. Countrywide Home Loans, Inc. (2000) 82 Cal.App.4th 615, 626, Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 647, and Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 822, addresses so–called “double counting, ” where a court cites factors such as the perceived difficulty of the work and the skills displayed by the attorney as a basis for both increasing the lodestar figure itself, above what would be established by an ordinary calculation of attorney hours reasonably spent multiplied by actual billing rates, and then applying a multiplier to that already increased lodestar, for those same reasons. The problem there is that the court has, in effect, given the attorney two separate multipliers, each of which increases the fees over and above a reasonable hourly rate for the time legitimately spent – one as part of the lodestar calculation, and one after – when only one was appropriate.
But those enhanced lodestar cases have no application to the situation before us. This court’s decision to trim the inflated parts of the Worleys’ attorney fee bills in calculating the lodestar figure is not the negative equivalent of a multiplier. It did not reduce the lodestar number to a figure below that which represented the attorneys’ actual hourly rate for the time legitimately spent. Instead, the court was merely stripping away the inflated parts of the billings, as a means of getting to a more realistic assessment of the time which may have been legitimately devoted to the case. Once that was done, the court was free to apply a negative multiplier – for the first time – if one were warranted.
In fact, as Chavez itself makes clear, the court’s power to address an unreasonably inflated fee request is not limited to simply identifying and excising the overinflated portion of the fee request and then awarding the prevailing party whatever is left over. If that were the case, then no court could actually deny a prevailing party’s fee claim in its entirety, as the Supreme Court allowed in Chavez. After all, any time a party actually prevails in litigation, it would seem that at least some of the time claimed by his attorney should have to be considered as legitimate.
However, as exemplified in Chavez, when the court identifies the unreasonably inflated fee request (as the court here also did as part of its calculation of the lodestar amount) it can then rely upon that determination as a special circumstance which not only justifies a decision to deny the inflated portions of the claim, but also to further reduce or even deny the fee claim in its entirety. Such a decision does not reflect “double-counting” of the same factor, as the Worleys claim, but instead demonstrates the court’s express authority to go beyond simply fixing the inflated request, and take additional action designed to affirmatively discourage such conduct. “‘If... the Court were required to award a reasonable fee when an outrageously unreasonable one has been asked for, claimants would be encouraged to make unreasonable demands, knowing that the only unfavorable consequence of such misconduct would be reduction of their fee to what they should have asked in the first place. To discourage such greed, a severer reaction is needful....’” (Serrano v. Unruh, supra, 32 Cal.3d at p. 635, quoting Brown v. Stackler (7th Cir. 1980) 612 F.2d 1057, 1059.)
The court here did not go so far as to deny the fee claim entirely (as did the court in Chavez, despite a hard-fought litigation which culminated in a five-day trial.) Instead, the court merely reduced the claim to an amount it considered more reasonable in light of all the circumstances. We cannot say that was an abuse of discretion.
The order is affirmed. Storage USA is to recover its costs on appeal.
WE CONCUR: O’LEARY, J., MOORE, J.