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It Pays to be Nice: What Karton v. Ari Design & Construction, Inc. Means for Collecting Attorney’s Fees

On March 9, 2021, the Court of Appeal of California, Second Appellate District, issued a ruling in Karton v. Ari Design & Construction, Inc.  on a trial court’s judgment awarding attorney’s fees under Code Civ. Proc., §§ 1032(b) and 1033.5(a)(10), to homeowners who won a judgment against an unlicensed contractor.

Starting in 2015, litigating the case took over five years. The amount under controversy was only $22,096; however, the Plaintiffs won a judgment for $133,792.11 (six times the amount in controversy), plus post-judgment interest.  The Plaintiffs thereafter sought attorney’s fees of $271,530, which with interest equated to $292,140.

After the smoke settled, the trial court awarded only $90,000 in attorney fees (a $200k+ loss of fees).

There are two ways to calculate Attorney’s fees: (i) the Lodestar method, which is, roughly, the reasonable hourly rate multiplied by a reasonable number of hours; or (ii) the percentage-of-recovery approach. It is at the discretion of the trial court which approach to choose, and here they used the Lodestar method (likely due to the embedded allowance to reduce the fees as they see fit).

The trial court had determined that Plaintiffs’ counsel’s $450 an hour rate was reasonable; however, it still denied their overall request for attorney’s fees due to Plaintiffs’ counsel’s lack of civility and inability to justify their work. For example, the Court specifically drew attention to the Plaintiffs’ filed briefings “replete with attacks on defense counsel such as that defense counsel filed ‘knowingly false claims of witness tampering,’ ‘her comments were frivolous,’ something was ‘typical of the improper tactics employed by defendants and their counsel’”, and generally how “offensive” their arguments were. The Court drew attention to how the Plaintiffs had filed “300 pages of documents” and had spent an amount of time on the case which was “so far beyond what was necessary on this matter.”

Through the Court of Appeals does discuss the simplicity of the matter and other factors under review, its Opinion consistently highlights and makes it known the most important factor was how Counsel for plaintiff took this matter personally:

“[C]ivility in litigation tends to be efficient by allowing disputants to focus on core disagreements and to minimize tangential distractions. It is a salutary incentive for counsel in fee-shifting cases to know their own low blows may return to hit them in the pocketbook.” …. “In short, in this appeal the [Plaintiffs] have come out swinging, apparently believing the best defense is a good offense. This approach demonstrates the trial court was within its discretion to conclude the [Plaintiff] conducted litigation that was less than civil.

The Court of Appeals concluded that this, and the other factors, were a sound basis for reducing the requested attorney’s fees from about $300,000 to $90,000.

What does this mean? Any seasoned litigator knows that clients are personally invested in their cases and sometimes want their attorneys to likewise be as passionate as they are, and even to cause pain to the other side. It is a tactic many lawyers feel they have to engage in, or perhaps subconsciously lean toward to meet client’s expectations, despite the fact that Rules 3.1 and 3.2 of the California Rules of Professional Conduct specifically disapprove of this behavior.

Nevertheless, going forward, attorneys need to be aware that such aggravated actions and use of hyperbole will continually and increasingly be scrutinized by the Courts, and may hit them where it hurts: their wallets. As advocates, our job is to be adversarial; however, unless we can do so professionally and courteously, financial compensation may be targeted.

Call 916-822-8700 for more information. You can read the full case here at: https://law.justia.com/cases/california/court-of-appeal/2021/b298003.html