Reasonable Attorneys Fees Award

What is a reasonable attorney’s fee award to a prevailing party?  That was the issue recently decided by the Court of Appeal for the First District in Syers Properties III, Inc. v. Ann Rankin et al (2014) 226 Cal.App.4th 691.

In Syers, the defendant attorneys represented plaintiff over the course of seven years in a construction defect case. Thereafter, the plaintiffs sued the defendants alleging legal malpractice and breach of fiduciary duty. Following numerous hearings and motions in limine, the empaneling of the jury, and opening statements, the trial court granted the defendants’ pending nonsuit motion. The defendants then sought their attorneys’ fees in the amount of $843,245.27 for a total of 2,324.5 hours of attorney and paralegal time spent on the case.

In support of the fees, the law firm that had represented defendants in the malpractice action filed declarations setting forth each attorney’s qualifications, experience, and hours worked. The reasonable rate of pay for these attorneys was based on the lead attorney’s 20 years of civil experience and  his understanding of the prevailing market rate in the San Francisco Bay Area. It included $300 for an attorney admitted to the bar in 2006, $250 for an attorney admitted in 2010, and $150 per hour for each paralegal. Last of all, the defendants relied upon the Laffey Matrix, an official source of attorney rates of the District of Columbia area, which, it was argued, could be adjusted to the San Francisco Bay Area using Locality Pay Tables. This formula had previously been utilized by Chief Judge Walker in In re HPL Technologies, Inc. Securities Litigation (N.D.Cal.2005) 366 F.Supp.2d 912, 922. Utilizing the Laffey Matrix, the amounts billed for each attorney was accurate.

Plaintiff opposed the attorneys’ fees on the grounds that it was unreasonable and that the hourly rate requested was significantly higher than the rate actually billed. It further argued that the declarations were inadequate to document the hours expended on the case and that the defendants had failed to provide sufficient information to determine the reasonableness of the fees. Plaintiff claimed that the defense counsel marketed itself as an insurance defense firm and that such firms typically charge a lower than market rate to insurance companies. Therefore, plaintiff contended that the award should be for attorneys’ fees actually incurred.

The trial court found that regardless of what was billed to the insurance company by the law firm, that was not the standard. The standard for an attorney’s fee award is a reasonable fee. Finding the fee to be reasonable, the court granted the motion for attorneys’ fees in the entire amount requested. The plaintiffs thereafter appealed.

On appeal, the Court reviewed the standard methods for determining attorney compensation. Under the lodestar method, “attorney fees are calculated by first multiplying the number of hours reasonably expended on the litigation by a reasonable hourly rate of compensation.” The California Supreme Court has recognized that this computation should be based upon a basic fee for comparable legal services in the area, and may be adjusted to provide for other factors, such as the risk involved and the legal skill needed. Therefore, the Court found that the method utilized to compute the award was correct.

In reviewing the actual computation of hours, the Court found that the trial court did not abuse its discretion in accepting the defendant’s computation of attorney hours as set forth in the declarations. It stated that it is well established that “California courts do not require detailed time records, and trial courts have discretion to award fees based on declarations of counsel describing the work they have done and the court’s own view of the number of hours reasonably spent.” Furthermore, because time records are not required in California, there is no required level of detail that must be achieved.  It has been previously held that the purpose of this is to prevent trial courts from completing a meticulous analysis of professional representation, and rather, focus on what a reasonable fee is. The categorical breakdown of time by each attorney, such as that provided in this case, was specifically approved by former Chief Judge Vaughn Walker of the United States District Court for the Northern District of California. The Hon. Walker stated that such a breakdown was “an especially helpful compromise between reporting hours in the aggregate (which is easy to review, but lacks informative detail) and generating a complete line-by-line billing report (which offers great detail, but tends to obscure the forest for the trees).” (In Re HPL Technologies, supra, 366 F.Supp.2d 912, 920.)

On the issue of what constitutes a reasonable rate, the Court considered the plaintiff’s contention that the “market rate” should be that rate actually charged in insurance defense cases, where typically that amount charged is below other market amounts, in effect creating a new market. Here, the Court noted that “[t]he determination of the ‘market rate’ is generally based on the rates prevalent in the community where the court is located.” Furthermore, there is no requirement that the reasonable market rate mirror the actual rate billed. As previously stated by this Court, the reasonable market value of the attorney’s services is the measure of a reasonable hourly rate, and will apply regardless of what the attorneys actually billed for their services, whether a discount rate, contingency fee, or nothing at all.

In the instant case, the trial court’s rate determination was supported not only by the adjusted Laffey Matrix (which it was not required to follow), but also by the defense counsel, with more than twenty years of experience in the area. Furthermore, the trial judge, utilizing his experience in the area, noted that the rates charged in this case were not the highest he had seen. The Court pointed out that the trial court is in the best position to value the services provided by the attorneys. Unless the judge was clearly in error, there can be no abuse of discretion.

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