Concepcion v. Amscan Holdings, Inc. , 168 Cal. Rptr. 3d 40 ( 2014 )

Filed 2/18/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
STEFANI CONCEPCION et al., B247832
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC454990)
v.
AMSCAN HOLDINGS, INC. et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of Los Angeles County, Kenneth R.
Freeman, Judge. Reversed and remanded.
Fox Rothschild, David F. Faustman, Cristina K. Armstrong and Tyreen G. Torner,
for Defendants and Appellants, Amscan Holdings, Inc., Party City Corporation and P.A.
Acquisition Corporation.
Stonebarger Law, Gene J. Stonebarger, Richard D. Lambert, Elaine W. Yan;
Patterson Law Group, and James R. Patterson, for Plaintiffs and Respondents, Stefani
Concepcion et al.
__________________________
Amscan Holdings, Inc. Party City Corporation and P.A. Acquisition Corporation
(collectively Party City) appeal from the trial court’s order awarding $350,000 in attorney
fees and costs to class counsel after approving a settlement of coordinated cases alleging
Party City had violated the Song-Beverly Credit Card Act of 1971 (Civ. Code, § 1747
et seq.). The settlement provided for distribution of $300,000 in merchandise certificates
to individuals who had used a credit card to purchase any item from a Party City store in
California between February 10, 2010 and March 11, 2010 and whose ZIP Code was
requested and recorded as part of the transaction.
Party City contends class counsel failed to submit sufficient evidence to justify the
fee award and, in particular, did not demonstrate the time expended by the six law firms
involved was reasonably necessary and nonduplicative. Party City also argues the trial
court’s in camera review of class counsel’s billing records to support the award was
fundamentally unfair and denied it due process. We agree it was improper for the court
to rely upon billing information not provided to Party City and which Party City had no
opportunity to challenge. We reverse the fee and cost award and remand the matter for a
new fee hearing at which class counsel presents, and the trial court considers, only
evidence made available to Party City.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Class Action Complaints, Mediation and Settlement
Civil Code section 1747.08 (section 1747.08) prohibits retailers from requesting or
requiring as a condition of accepting a credit card as payment that the cardholder provide
“personal identification information” that is then recorded on the credit card form or
otherwise. In Pineda v. Williams-Sonoma Stores, Inc. (2011) 51 Cal. 4th 524, 527-528,
the Supreme Court held a ZIP Code constitutes “personal identification information” as
that phrase is used in section 1747.08 and requesting and recording a cardholder’s ZIP
Code during a credit card transaction is unlawful even if no other information is
provided.
2
The opinion in Pineda v. Williams-Sonoma Stores, Inc. was issued on February 10,
2011. On the following court day an eight-page, single-cause-of-action complaint was
filed in Los Angeles Superior Court initiating Montion-Garcia v. Party City Corporation
(Super. Ct. L.A. County, BC454990), a putative class action alleging Party City had
violated section 1747.08 by routinely requiring customers to provide ZIP Code
information to complete credit card purchases. The proposed class consisted of all
individuals in California who had used a credit card for the payment of goods purchased
from Party City during the one-year period prior to the filing of the complaint.
Two days later Hernandez v. Party City Corporation was filed in San Diego
County Superior Court with substantially similar allegations in a 10-page, single-cause-
of-action complaint on behalf of a similarly defined statewide class. The following week
Concepcion v. Amscan Holdings, Inc. was filed in Placer County Superior Court
containing the same basic allegations, class definition and single cause of action for
1
violation of section 1747.08. A parallel federal class action lawsuit was filed the same
week in the United States District Court for the Central District of California, Landeros v.
Party City Corporation, CV11-01636 DMG (FFMx). The final complaint, Shughrou v.
Amscan Holdings, Inc., was filed several months later, also in Placer County.
Party City demurred in both Hernandez and Concepcion, seeking to abate the
actions on the ground another, earlier filed action (Montion-Garcia) was pending and
also sought to dismiss or stay the federal action. On June 2, 2011 the district court ruled
the federal case should proceed. On June 11, 2011 the initial three state court cases were
coordinated in Los Angeles County Superior Court (JCCP 4678), and Party City
withdrew its demurrers. On December 13, 2011 Shughrou v. Amscan Holdings, Inc. was
joined as an add-on case to the coordinated action.
No formal discovery was conducted in the state actions prior to their settlement.
However, Party City made available to class counsel the written discovery produced in
1
Counsel for plaintiff in Concepcion, Gene J. Stonebarger, had represented the
putative class in Pineda v. Williams-Sonoma Stores, Inc., supra, 51 Cal. 4th 524.
3
the federal action pursuant to rule 26 of the Federal Rules of Civil Procedure. No class
certification motions were filed.
A one-day mediation was conducted on January 23, 2012. One mediation brief
was submitted on behalf of all plaintiffs in the four coordinated state actions and the
related federal case. With the assistance of the mediator the parties reached a tentative
class-wide settlement.
Party City provided an initial draft of the settlement agreement; the parties
negotiated revised language; and plaintiffs filed an unopposed motion for preliminary
approval of class settlement on May 11, 2012. The agreement defined the settlement
class as all persons who had purchased merchandise from Party City stores in California
using a credit card between February 14, 2010 and March 11, 2010 and whose personal
information, including but not limited to a ZIP Code, was requested and recorded in
connection with the credit card transaction. During this period Party City engaged in
approximately 68,135 credit card transactions. (The agreement explained that Party City
discontinued collection of ZIP Codes in early 2010, did not combine the ZIP Codes with
any other information about the customer and did not use the ZIP Codes to obtain
additional information about the customer.) The agreement provided that settlement class
members who submitted a valid claim would receive a merchandise certificate (not a gift
card) for up to $20.00 off a single purchase with no minimum purchase required. Party
2
City agreed to issue a total of $300,000 in certificates and to bear all costs of providing
class notice, as well as all costs associated with the administration of the settlement
agreement. (The parties subsequently clarified that administration fees, attorney fees and
costs are separate and independent of the $300,000 award to the class.)
The parties agreed the court could make an incentive award to each of the class
representatives of $3,500. However, no agreement was reached as to the amount of
2
If less than $300,000 was claimed by class members, Party City agreed to print
additional merchandise certificates at the bottom of purchase receipts until a total of
$300,000 in certificates had been distributed.
4
attorney fees and costs to be recovered by class counsel. The settlement agreement
provided, “The parties have met and conferred through arms-length negotiations and
agreed that Class Counsel shall be entitled to an award of attorneys’ fees and that Class
Counsel shall file a motion with the JCCP Court for attorneys’ fees, and Defendant will
have the opportunity to oppose the motion as to the amount of attorneys’ fees sought.”
The trial court preliminarily approved the class settlement on October 19, 2012.
The order set a final approval hearing for January 22, 2013.
2. The Motion for Attorney Fees, Costs and Incentive Awards
On December 21, 2012 class counsel filed a motion for attorney fees and costs, as
well as incentive awards to the representative plaintiffs of $3,500, with a hearing date of
January 22, 2013. The motion sought fees under both the terms of the settlement
agreement and the private attorney general doctrine codified in Code of Civil Procedure
3
section 1021.5.
Class counsel requested an aggregate award of attorney fees and costs of
$350,000. Their moving papers, including declarations from attorneys at each of the law
firms representing plaintiffs in the five lawsuits that had been filed, reflected a total of
720 hours in prosecuting the action to date. The amount of the award was based on the
lodestar method—the time spent multiplied by the reasonable hourly compensation for
the attorney involved—without an additional multiplier. The hourly rates claimed ranged
from $700 per hour for one of the most experienced partners to $350 per hour for several
associates. (An hourly rate was included for each lawyer.) Costs incurred through the
date of the motion totaled $20,735.66.
In his declaration Gene J. Stonebarger of Stonebarger Law, APC, counsel for
Concepcion, used nine general categories to organize and describe the total 159.1 hours
of work performed by him and two associates. Mr. Stonebarger stated he had personally
spent 131.4 hours at the rate of $650 per hour; one associate had spent 15.8 hours at the
3
While the parties were disputing the amount of attorney fees and costs, an
unopposed motion seeking final approval of the settlement was also filed.
5
rate of $500 per hour; and a second associate had spent 11.9 hours at the rate of $350 per
4
hour.
Mark Van Buskirk on behalf of Westrup Klick, LLP, counsel for Montion-Garcia,
testified his firm had spent a total of 109.7 hours on the cases, which he summarized in
12 categories. No per-lawyer breakdown was provided by Mr. Van Buskirk. H. Tim
Hoffman of Hoffman & Lazear, counsel for Landeros, used nine categories and specified
the total time billed by each of the four firm lawyers who had worked on the matter
(more than 66 hours for the firm). Elaine A. Ryan of Bonnett, Fairbourn, Friedman &
Balint, counsel for Hernandez, reported a total of 206.6 hours in six categories. The total
time billed by each of the four firm lawyers was provided. Ms. Ryan also explained her
firm had associated with James B. Drimmer in San Diego, who spent a total of 58.5 hours
in six general categories of work. Finally, James R. Patterson of the Patterson Law
Group, counsel for Shughrou, used eight of the nine categories identified by Mr.
Stonebarger and declared he had spent 53.8 hours and a second firm lawyer 66.7 hours
prosecuting the case. Mr. Stonebarger and all but one of the other declarants offered to
provide their firms’ daily billing records for in camera review if the court requested them.
Party City agreed class counsel was entitled to fair compensation but opposed the
motion on the ground the fees and costs claimed were excessive, the time charges
4
Mr. Stonebarger’s declaration provided the following summary of his firm’s time:
research on defendants and draft complaint (4.8 hours); draft and review defendants’
demurrer; legal research regarding issues in demurrer; review and revise opposition
(14.2 hours); review petition for coordination; review and revise response to petition for
coordination; attend hearing on petition for coordination (15.3 hours); draft mediation
brief; legal research regarding issues in mediation brief; travel and attend mediation
(33.9 hours); settlement discussions; drafting of settlement agreement, notices, claim
form, etc. (19.9 hours); draft preliminary approval papers and supporting declarations;
legal research regarding preliminary approval; attend preliminary approval hearing
(37.1 hours); draft motion for attorneys’ fees, costs, and incentive awards; legal research
regarding attorneys’ fees issues (22.7 hours); review miscellaneous briefs, pleadings,
stipulations (4.3 hours); and miscellaneous correspondence (6.9 hours).
The descriptions of services in the other declarations from class counsel contained
substantially the same level of detail.
6
duplicative and the declarations inadequate and subject to proper evidentiary objections.
Party City, noting the amount sought in fees was more than the face value of the
settlement itself, suggested the award be no more than $137,062.80, the value billed by
Party City’s counsel (and approximately 40 percent of the award to the settlement class,
5
giving the merchandise certificates full value). Objections were filed to each of the
declarations submitted by class counsel, primarily on grounds of lack of personal
knowledge, hearsay and lack of foundation. Class counsel filed a reply memorandum,
arguing they had adequately supported their fee application and repeating the offer to
submit detailed billing records for in camera review. No additional evidence was
submitted with the reply memorandum.
3. The Tentative Ruling
The January 22, 2013 hearing was continued to January 29, 2013. The January 29,
2013 proceedings were not reported. The court provided the parties with a tentative
ruling that indicated the court was inclined, in part, (1) to defer ruling on the motion for
attorney fees, finding that an award of fees was not justified under Code of Civil
Procedure section 1021.5 and explaining, “In order to determine that lodestar amount is
reasonable, plaintiff[s’] counsel to provide (in camera) the detail of hours expended in the
litigation to assess whether the hours claimed were necessary and nonduplicative”; and
(2) to defer a final ruling on total costs but finding that $1,293.34 of the costs claimed
were not recoverable, $4,129.65 could be recovered. Class counsel was to submit further
documentation to demonstrate the remaining $15,313.67 sought “was reasonably
necessary to the conduct of the litigation and reasonable in amount.”
With respect to the lodestar calculation the court’s tentative ruling stated, “It is
apparent that all five firms utilized skill in prosecuting the case. It is also apparent that
counsel spent significant time on the case . . . . However, the 720 hours in prosecuting
this case seems to be very high. . . . [¶] There is nothing currently before the Court to
5
In a supporting declaration Party City indicated its lawyers had billed a total of
294.08 hours to the litigation.
7
assess whether the time expended by the five firms involved in this case was necessary
and non-duplicative. The ‘block entries’ provided by five class counsel declarations
above do nothing to remedy this issue. This is especially important here, given the fact
that the five cases contained essentially the same allegations with regard to Party City’s
alleged former ‘zip code’ policy. . . . Under these circumstances, counsel should be
prepared to submit time records for in camera review, and to justify why the time
requested by class counsel is not duplicative.”
A minute order entered January 29, 2013 reflects that the court issued its tentative
ruling and called the matter for hearing. The minute order then states, “Parties are to file
declarations on or before February 15, 2013.” The matter was continued to February 22,
2013.
4. The Supplemental Declarations
On February 15, 2013 additional declarations were filed by Messrs. Van Buskirk,
Hoffman, Stonebarger, Patterson and Ms. Ryan. Mr. Drimmer also filed a declaration.
Mr. Stonebarger declared that his firm had assumed the role of lead counsel in
prosecuting the action since its beginning and had “taken the lead role in drafting and
filing pleadings and briefs, including the Petition for Coordination, Mediation Brief,
Motion for Preliminary Approval of Class Action Settlement, Motion for Attorneys’
Fees, Costs and Incentive Awards and Reply to Defendants’ Opposition thereof, and
Motion for Final Approval of Class Action Settlement.” He also stated he had spent an
additional 17.8 hours and his associate an additional 5.2 hours since the prior submission,
bringing his firm’s total to 208.7 hours. He included as an exhibit detailed time records
for in camera review. The declaration itself contained an unredacted and detailed
description of expenses incurred in connection with the case.
Ms. Ryan declared, from its inception, her firm had “assumed a primary role in the
litigation and settlement of this case including, inter alia, the formulation of Plaintiffs’
litigation strategy, conducting legal and factual research, drafting and editing of pleadings
and submissions to the Court, and preparing discovery requests. My firm also took a
8
primary role in all settlement negotiations and the mediation before Judge Infante and in
preparing the settlement documents.” Although her original declaration had reported a
total of 206.6 hours in six categories, the amended declaration stated 194.4 hours had
been billed. Detailed time and cost records were provided to the court for in camera
review.
Mr. Drimmer, whose fee claim had originally been included in Ms. Ryan’s
declaration, provided a six category summary of his 58.5 hours and explained he was
primarily responsible for all client communications with plaintiff Lesley J. Hernandez. It
does not appear that Mr. Drimmer provided any billing records for in camera review.
Mr. Patterson’s declaration explained he and his firm had “worked closely with
other plaintiffs’ counsel to avoid duplication of efforts. Even though there are several
counsel involved, my firm has a professional responsibility to our client to monitor all
proceedings in the case independently of the work of other counsel. . . . We appeared by
telephone at most hearings in order to minimize attorney time and travel costs. We did
not duplicate research and drafting efforts.” Mr. Patterson stated he had spent an
additional 9.3 hours and his colleague at the firm an additional 2.6 hours participating in
the January 29, 2013 hearing, reviewing the ruling and preparing this declaration.
Detailed time and cost records were provided for in camera review. In his supplemental
declaration Mr. Van Buskirk also provided detailed time and cost records.
Finally, Mr. Hoffman, counsel for plaintiff in the federal action, declared the time
expended by his firm was neither duplicative nor cumulative of work done by other class
counsel “because my client, Lourdes Landeros, has a separate action pending from this
action in United States District Court . . . . The primary work in Ms. Landeros’ case
involved briefing an opposition to a motion to dismiss the case, which my firm was able
to defeat. However, once the parties here agreed to the terms of a settlement on behalf of
the Class, and in the interests of judicial economy, Ms. Landeros agreed to stay her
9
Federal action while this Court decided whether to approve the settlement in this action.”
6
Mr. Hoffman provided detailed time records for in camera review.
5. The Final Order for Fees and Costs
At the continued hearing on February 22, 2013 Mr. Van Buskirk appeared in
person and Mr. Stonebarger, Patricia Syverson of Bonnett, Fairbourn, Friedman & Balint
(Ms. Ryan’s law firm) and counsel for Party City appeared by telephone. After calling
the case, the court stated, “This is actually a continuation of the fairness hearing. Since
then counsel has submitted supplemental information including time sheets and time
records that have been submitted in camera to the court. Everything is in order. The
Court approves the settlement. It is signing an order granting final approval of the class
action settlement; is signing an order granting the motion for attorneys’ fees, costs, and
incentive awards as requested. So that comes to attorneys’ fees in the amount of
$350,000; incentive awards in the amount of $3,500 to each named plaintiff; and costs of
$20,735.66 which is what the court believes you have requested. So you’re getting
everything you’ve requested.”
The court then discussed with class counsel appearing at the hearing a procedure
for dividing the total fees awarded among the firms representing the class since the
amounts identified totaled more than $350,000. At the conclusion of that discussion the
court asked, “Anything else we need to discuss?” Mr. Van Buskirk responded, “Nothing
further Your Honor.” No other counsel spoke at that point. After thanking counsel, the
court recessed the hearing.
The minute order for February 22, 2013 directed the parties to submit a revised
order granting the attorney fee and costs motion. The final order granting the motion for
6
During briefing in this court, Party City moved to augment the record on appeal to
include the “complete, unredacted copies of the supplemental declarations (and exhibits
attached thereto) which Plaintiffs lodged with the Trial Court on or about February 15,
2013 for the Trial Court’s in camera review.” Respondents did not file any opposition.
However, the superior court file, which was forwarded to us at our request, does not
contain any of the materials provided solely for the court’s in camera review.
Accordingly, we must deny Party City’s motion.
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attorney fees, costs and incentive awards was signed by the court and filed February 26,
2013. It provided a total of $350,000 in fees and costs and set forth an allocation of fees
and costs to each of the six law firms (including Mr. Drimmer’s) that had represented the
class.
DISCUSSION
1. Standard of Review
An order granting an award of attorney fees is generally reviewed for abuse of
discretion. (Powerhouse Motorsport Group, Inc. v. Yamaha Motor Corp., U.S.A. (2013)
221 Cal. App. 4th 867, 887; MHC Financing Ltd. Partnership Two v. City of Santee
(2005) 125 Cal. App. 4th 1372, 1397.) In particular, “[w]ith respect to the amount of fees
awarded, there is no question our review must be highly deferential to the views of the
trial court.” (Children’s Hospital & Medical Center v. Bontá (2002) 97 Cal. App. 4th 740,
777; see PLCM Group, Inc. v. Drexler (2000) 22 Cal. 4th 1084, 1095 [recognizing trial
court’s broad discretion in determining amount of reasonable attorney fees because
experienced trial judge is in the best position to decide value of professional services
rendered in court]; Ketchum v. Moses (2001) 24 Cal. 4th 1122, 1132 [same].) “An
appellate court will interfere with the trial court’s determination of the amount of
reasonable attorney fees only where there has been a manifest abuse of discretion.”
(Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal. App. 4th 972, 1004; accord,
PLCM Group, Inc., at p. 1095.)
2. The Lodestar Method for Assessing Reasonable Attorney Fees
Class counsel and Party City agree the attorney fee award in this case must be
grounded in the first instance on the number of hours reasonably worked multiplied by
the reasonable hourly rate for each lawyer involved—the lodestar figure: “[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. ‘California courts
have consistently held that a computation of time spent on a case and the reasonable
value of that time is fundamental to a determination of an appropriate attorneys’ fee
11
award.’” (PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th at p. 1095; accord, Serrano v.
Priest (1977) 20 Cal. 3d 25, 48 & fn. 23 [“‘[t]he starting point of every fee award, once it
is recognized that the court’s role in equity is to provide just compensation for the
attorney, must be a calculation of the attorney’s services in terms of the time he has
expended on the case’”].)
Of particular significance here, this initial calculation requires the court to
determine the reasonable, not actual, number of hours expended by counsel entitled to an
award of fees. (See EnPalm, LLC v. Teitler (2008) 162 Cal. App. 4th 770, 774 & fn. 4.)
Thus, class counsel “are not automatically entitled to all hours they claim in their request
for fees. They must prove the hours they sought were reasonable and necessary.” (El
Escorial Owners’ Assn. v. DLC Plastering, Inc. (2007) 154 Cal. App. 4th 1337, 1366.)
“The evidence should allow the court to consider whether the case was overstaffed, how
much time the attorneys spent on particular claims, and whether the hours were
reasonably expended.” (Christian Research Institute v. Alnor (2008) 165 Cal. App. 4th
1315, 1320.) Indeed, “[a] fee request that appears unreasonably inflated is a special
circumstance permitting the trial court to reduce the award or deny one altogether.”
(Serrano v. Unruh (1982) 32 Cal. 3d 621, 635; accord, Chavez v. City of Los Angeles
(2010) 47 Cal. 4th 970, 990; see also Ketchum v. Moses, supra, 24 Cal.4th at p. 1132
[“[i]n referring to ‘reasonable’ compensation, we indicated that trial courts must
carefully review attorney documentation of hours expended; ‘padding’ in the form of
inefficient or duplicative efforts is not subject to compensation”].)
After making the lodestar calculation, the court may augment or diminish that
amount based on a number of factors specific to the case before it, including the novelty
and difficulty of the case, the attorneys’ skill in presenting the issues, the amount
involved and degree of success achieved, the extent to which the case precluded the
attorneys from accepting other work and the contingent nature of the work. (See PLCM
Group, Inc. v. Drexler, supra, 22 Cal. 4th 1084, 1096; Serrano v. Priest, supra, 20 Cal.3d
at p. 49.) There is “no hard-and-fast rule limiting the factors that may justify an exercise
12
of judicial discretion to increase or decrease a lodestar calculation.” (Thayer v. Wells
Fargo Bank (2001) 92 Cal. App. 4th 819, 834.) “The purpose of such adjustment is to fix
a fee at the fair market value for the particular action.” (Ketchum v. Moses, supra,
24 Cal.4th at p. 1132; see Center for Biological Diversity v. County of San Bernardino
(2010) 188 Cal. App. 4th 603, 616.)
Although the court may consider the amount at issue in the litigation, as well as
counsel’s relative success in achieving the client’s litigation objectives in adjusting the
lodestar figure, the attorney fee award need not bear any specific relationship to the dollar
amount of the recovery. (See Taylor v. Nabors Drilling USA, LP (Jan. 13, 2014,
B241914) 222 Cal. App. 4th 1228, 1251 [affirming $680,000 attorney fee award based on
lodestar figure and multiplier in action under California Fair Employment and Housing
Act with jury verdict for $160,000; “[a]ppellant has not cited any authority requiring that
fee awards be proportional to the amount of damages recovered”]; cf. Harman v. City and
County of San Francisco (2007) 158 Cal. App. 4th 407, 420-421 [rejecting in awarding
fees in civil rights action any requirement of proportionality of fees sought to verdict
although recognizing the court may consider plaintiff’s success in determining the
reasonableness of fees].)
As discussed, class counsel did not seek to enhance or even to recover the full
amount of the lodestar figure as they had calculated it: Their request for an aggregate
award of fees and costs totaling $350,000 was approximately 10 percent below their
lodestar figure of $366,990.50 plus costs claimed of $20,735.66.
3. Party City Did Not Waive the Right To Appeal the Award of Attorney Fees or
Forfeit Their Objection to the In Camera Procedure Used by the Trial Court
Paragraph 2.5 of the settlement agreement recited the parties’ agreement that class
counsel was entitled to an award of attorney fees and provided a motion for fees would be
filed by class counsel with the trial court (referred to as the “JCCP Court”) and Party City
would have the opportunity to oppose the motion as to the amount of fees requested.
That paragraph also stated, “Defendant agrees to pay the attorneys’ fees and costs
approved by the JCCP Court to Plaintiffs’ counsel within seven (7) days after the Final
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Settlement Date.” Paragraph 1.13 defines “Final Settlement Date,” in part, to be either
31 days after notice has been served of entry of the court’s final approval order and
judgment “if no appeal or request for review is filed or made in the JCCP Action,” or,
“[i]f any appeal or request for review is filed or made in the JCCP action as a result of a
timely objection,” 14 days after notice has been served that the final approval order and
judgment has been affirmed.
Class counsel on behalf of respondents argue, because the “Final Settlement Date”
is extended only if an appeal is filed “as a result of a timely objection,” the right to appeal
any aspect of the settlement agreement was granted only to class members who had
submitted a timely objection. Accordingly, they assert, Party City did not reserve its
right to appeal from the trial court’s order approving the amount of attorney fees and
costs awarded to class counsel.
It is fundamental that “any waiver of the right to appeal must be clear and
express.” (Guseinov v. Burns (2006) 145 Cal. App. 4th 944, 952; accord, Ruiz v.
California State Auto. Assn. Inter-Ins. Bureau (2013) 222 Cal. App. 4th 596, 604 [waivers
of right to appeal must be “clear and explicit”].) Any doubt will be resolved against a
waiver of the right to appeal. (Guseinov, at p. 952; Bischel v. Fire Ins. Exchange (1991)
1 Cal. App. 4th 1168, 1172.) “[I]f the parties to a contract want their agreement to
encompass a waiver of the right to appeal from an anticipated judicial ruling, they must
say so explicitly and unambiguously; they cannot leave their intent to be inferred from
the language of the agreement.” (Ruiz, at p. 605.)
The language relied upon by respondents fails to satisfy these demanding criteria.
Nothing in the settlement agreement bound Party City to accept the amount of fees and
costs awarded by the trial court or clearly and expressly prohibited Party City from
challenging the fee order by an appeal to this court.
Our conclusion there has been no waiver of Party City’s right to appeal the trial
court’s ruling on the amount of attorney fees and costs finds strong support in both Lovett
v. Carrasco (1998) 63 Cal. App. 4th 48—a personal injury case—and Ruiz v. California
14
State Auto. Assn. Inter-Ins. Bureau, supra, 222 Cal. App. 4th 596—a recent decision
involving class counsel’s appeal of the trial court’s award of attorney fees following a
class-wide settlement. In Lovett the Court of Appeal held the agreement of medical care
provider/lienholders “to be bound by the decision” of the trial court determining what
each lienholder would receive “‘without need of further litigation bringing closure to the
entire matter’” was insufficient to constitute an express waiver of the right to appeal.
(Lovett, at p. 53.)
Similarly, the appellate court in Ruiz held class counsel’s agreement to accept in
full satisfaction of their right to attorney fees either the maximum specified in the
7
settlement agreement or the amount awarded by the trial court, whichever was less, did
not preclude an appeal from an award of fees class counsel considered to be too low
($350,000 rather than the $2.32 million requested). Relying on the analysis in Lovett, the
Ruiz court held, “[T]he language in the Agreement in the present case is equivalent to that
used in Lovett, supra, 63 Cal. App. 4th 48, in that it sets forth the parties’ agreement to
accept a ruling to be made by the trial court, but does not expressly state that the parties
are waiving their right to appeal that ruling.” (Ruiz v. California State Auto. Assn. Inter-
Ins. Bureau, supra, 222 Cal.App.4th at p. 605.)
The language from which respondents here attempt to infer a waiver of the right to
appeal is even less clear than that in Lovett and Ruiz. The cited provisions concern the
timing of Party City’s obligation to pay the award of fees and costs. There is simply no
reference to, let alone waiver of, Party City’s right to appeal.
7
The Ruiz court explained the parties’ settlement agreement contained an attorney
fee provision known as a “clear sailing” provision. (Ruiz v. California State Auto. Assn.
Inter-Ins. Bureau, supra, 222 Cal.App.4th at p. 598.) “Such provisions allow counsel for
the plaintiff class (class counsel) to seek an award of attorney fees from the trial court,
with the assurance that defendant will not oppose the fee application if the amount sought
is less than or equal to a specified dollar amount.” (Ibid.) The agreement in Ruiz
contained an additional clause, giving rise to the waiver issue, that required class counsel
to accept, in full satisfaction of their right to attorney fees, the lesser of the maximum
specified in the clear sailing provision and the amount awarded by the trial court. (Ibid.)
15
Equally unpersuasive is respondents’ argument that Party City waived (forfeited)
any objection to the trial court’s in camera review of billing records because its counsel
8
remained silent at the February 22, 2013 hearing when the court issued its final ruling.
As discussed, at the outset of the hearing the court stated, “Everything is in order. The
Court approves the settlement. It is signing an order granting final approval of the class
action settlement; is signing an order granting the motion for attorneys’ fees, costs, and
incentive awards as requested.” These announcements were immediately followed by a
court-initiated discussion of the need for a revised form of order that properly divided the
$350,000 awarded among the six law firms representing the named plaintiffs. The court
invited no argument or discussion regarding its rulings. Read in context, the court’s final
inquiry before concluding the hearing, “Anything else we need to discuss,” was directed
to the logistics of final documentation, not the substance of its orders. Under these
circumstances silence by Party City’s counsel did not forfeit its right to challenge the trial
court’s use of undisclosed billing records as a basis for its fee award.
In any event, an appellate court has discretion to consider for the first time on
appeal an issue of law, particularly if it is not dependent on the production of additional
evidence and, as here, the parties have been afforded a reasonable opportunity to address
the question. (See Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal. 4th 1, 24; Matera v.
McLeod (2006) 145 Cal. App. 4th 44, 59; see also City of Maywood v. Los Angeles Unified
School Dist. (2012) 208 Cal. App. 4th 362, 416, fn. 24.) Although Party City did not
formally object to the trial court’s in camera review of class counsel’s billing records, we
choose to exercise that discretion and to decide the propriety of the procedure utilized by
the trial court to rule on the request for an award of attorney fees.
8
Respondents do not contend Party City forfeited its objection at the unreported
January 29, 2013 hearing when the trial court issued its tentative ruling and first invited
the in camera submission of class counsel’s billing records.
16
4. The Trial Court Improperly Relied upon Evidence Not Provided to Party City
To Award Class Counsel the Full Amount of Fees and Costs Requested
It is not necessary to provide detailed billing timesheets to support an award of
attorney fees under the lodestar method. (Wershba v. Apple Computer, Inc. (2001)
91 Cal. App. 4th 224, 254 [affirming lodestar fee award based on “declarations evidencing
the reasonable hourly rate for [the attorneys’] services and establishing the number of
hours spent working on the case”; “California case law permits fee awards in the absence
of detailed time sheets”]; see Mardirossian & Associates v. Ersoff (2007)
153 Cal. App. 4th 257, 269 [“there is no legal requirement that an attorney supply billing
statements to support a claim for attorney fees”].) Declarations of counsel setting forth
the reasonable hourly rate, the number of hours worked and the tasks performed are
sufficient. (Steiny & Co. v. California Electric Supply Co. (2000) 79 Cal. App. 4th 285,
293 [“[a]n attorney’s testimony as to the number of hours worked is sufficient to support
an award of attorney fees, even in the absence of detailed time records”].) “‘Although a
fee request ordinarily should be documented in great detail, it cannot be said . . . that the
absence of time records and billing statements deprive[s] [a] trial court of substantial
evidence to support an award . . . .’” (City of Colton v. Singletary (2012)
206 Cal. App. 4th 751, 784-785.)
Each of the initial declarations submitted in support of class counsel’s request for
attorney fees reported the total number of hours spent in various generalized categories of
9
services (ranging from six to 12) by all firm lawyers working on the Party City matter.
Although most of the declarations also included the total number of hours spent by each
lawyer on the case, none indicated how much time a specific lawyer spent on the tasks in
a category, let alone on discrete projects. No time records were attached.
9
The declarations also stated the hourly rate charged by each of the lawyers
involved and provided information about the lawyers’ and the law firms’ experience in
similar matters. Party City has not challenged the reasonableness of the hourly fees used
in the trial court’s lodestar calculation.
17
Party City opposed the fee request, arguing it included unnecessary and
duplicative activity that should be excluded from the lodestar calculation. The trial court
appeared inclined to agree with Party City, indicating in its tentative ruling both that 720
hours seemed high and that it was unable to assess from the information provided in the
declarations whether the time expended by the firms was necessary and nonduplicative.
(See generally In re Vitamin Cases (2003) 110 Cal. App. 4th 1041, 1054-1055 [expressing
concern with “specter of duplicative and superfluous litigation and hence unnecessary
fees and costs” in fee request following settlement of multiple, overlapping private
putative class actions].) At that point it was certainly within the trial court’s discretion to
request additional information to allow it to determine the number of hours reasonably
worked for inclusion in the lodestar calculation. What was not permissible, however, was
for the court to invite an in camera review of time sheets and billing records not also
made available to Party City and then to award fees without providing an opportunity for
further argument based on the supplemental evidence presented.
As discussed, class counsel had the burden of proving the reasonable number of
hours they devoted to the litigation, whether through declarations or redacted or
unredacted time sheets or billing records. (See, e.g., Ellis v. Toshiba America
Information Systems, Inc. (2013) 218 Cal. App. 4th 853, 883; El Escorial Owners’ Assn. v.
DLC Plastering, Inc., supra, 154 Cal.App.4th at p. 1366.) “A trial court may not
rubberstamp a request for attorney fees, but must determine the number of hours
reasonably expended.” (Donahue v. Donahue (2010) 182 Cal. App. 4th 259, 271.)
Under our adversarial system of justice, once class counsel presented evidence to
support their fee request, Party City was entitled to see and respond to it and to present its
own arguments as to why it failed to justify the fees requested. “This system is premised
on the well-tested principle that truth—as well as fairness—is ‘“best discovered by
powerful statements on both sides of the question.”’” (Penson v. Ohio (1988) 488 U.S.
75, 84 [109 S. Ct. 346, 102 L. Ed. 2d 300]; see generally Abourezk v. Reagan (D.C.Cir.
1986) 785 F.2d 1043, 1060 [“It is a hallmark of our adversary system that we safeguard
18
party access to evidence tendered in support of a requested court judgment. The
openness of judicial proceedings serves to preserve both the appearance and reality of
fairness in the adjudications of United States courts. It is therefore the firmly held main
rule that a court may not dispose of the merits of a case on the basis of ex parte, in
camera submissions.”].)
Respondents defend the trial court’s action, asserting “courts routinely review
detailed time records for in camera review, without providing access to opposing
counsel.” The sole California authority cited to support that sweeping generalization is
In re Vitamin Cases, supra, 110 Cal. App. 4th 1041 in which the Court of Appeal
described the trial court’s in camera review of billing records in its recitation of the
factual and procedural background of the case (see id. at p. 1049), but did not consider
the propriety of that procedure in its discussion reversing the fee award. That decision,
which clearly expressed the court’s concern that multiple sets of class counsel were being
compensated for duplicative and unproductive services, does not support the trial court’s
in camera receipt and review of billing records to support its fee award here. (See Sonic-
Calabasas A, Inc. v. Moreno (2013) 57 Cal. 4th 1109, 1160.)
Relying on an unpublished Ninth Circuit decision, Marshall v. Kelly Services, Inc.
10
(9th Cir. 1999) 1999 U.S.App.Lexis 8754, respondents also suggest class counsel’s
10
Respondents quote the court’s statement, “submission of attorney billing records
in camera is permissible to preserve attorney client privilege.” (Marshall v. Kelly
Services, Inc., supra, 1999 U.S.App.Lexis at *5.) That language is immediately followed
by the court’s explanation that the purpose of the submission was to “determine whether
the information is privileged or should be disclosed” and its observation that the party
submitting the material eventually disclosed its unredacted billing records after which the
district court explicitly offered the opposing party the opportunity to respond.
Accordingly, the court found any challenge to this procedure was moot. (Ibid.)
There is no suggestion in Kelly that evidence submitted in camera could properly
be used to decide the merits of the controversy before the court.
19
11
billing records contain privileged information, thus justifying in camera review. We
reject that rationale for several reasons. First, we seriously doubt that all—or even
most—of the information on each of the billing records proffered to the court was
privileged. Certainly the trial court made no such finding. Nor is there any explanation
why the supplemental information requested by the court could not have been provided
by filing—and serving on Party City—redacted copies of the bills deleting any privileged
information. (See Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995)
39 Cal. App. 4th 1379, 1382 [prevailing defendant on special motion to strike under Code
Civ. Proc., § 425.16 may support request for attorney fees with billing records redacted to
conceal information protected by the attorney-client privilege; defendant was not required
to waive the privilege to obtain fees]; Banning v. Newdow (2004) 119 Cal. App. 4th 438,
454 [redacted bills adequate to allow challenge to reasonableness of fees requested].)
Finally, to the extent class counsel made the judgment they needed to offer their full,
unredacted billing records to support their request for fees, they may well have impliedly
waived any privilege that otherwise protected them. (See Chicago Title Ins. Co. v.
Superior Court (1985) 174 Cal. App. 3d 1142, 1149 [implied waiver of lawyer-client
privilege occurs when plaintiff has placed in issue a communication that goes to the heart
of the claim in controversy]; cf. Titmas v. Superior Court (2001) 87 Cal. App. 4th 738, 744
[“the privilege applies even to disclosures to the court”].) If so—an issue we need not
11
Under appropriate circumstances Evidence Code section 915, subdivision (b),
authorizes the trial court to receive in camera disclosure of information to assist in
deciding whether it is privileged and thus protected from disclosure. (See Costco
Wholesale Corp. v. Superior Court (2009) 47 Cal. 4th 725, 736 [information claimed to
be privileged work product]; Applera Corp. v. MP Biomedicals, LLC (2009)
173 Cal. App. 4th 769, 788 [information claimed to constitute trade secrets]; but see
Costco, at p. 736 [“[n]o comparable provision permits in camera disclosure of
information alleged to be protected by the attorney-client privilege”].) Neither Evidence
Code section 915 nor any other statutory provision authorizes the court to use that
information to decide the merits of a case if the other side has not had an opportunity to
review the material and be heard.
20
decide at this point—there was, as a consequence, no basis to bar Party City from full
access to the evidence presented to the court.
5. Reconsideration of the Cost Award Is Necessary
In their original moving papers class counsel requested an award of $20,735.66 in
costs. In its tentative ruling, based on Party City’s objections, the court indicated
$1,293.34 in costs were not recoverable and questioned whether an additional $15,313.67
of costs were reasonably necessary to the conduct of the litigation and reasonable in
amount. The court’s final order awarded the full $20,735.66 originally requested
although respondents contend they had withdrawn specific cost items disallowed in the
tentative ruling (postage, telephone and photocopying costs).
We recognize class counsel’s $350,000 lid on the aggregate amount of fees and
costs to be awarded might well make academic determination of the precise amount of
recoverable costs. Nonetheless, because the cost portion of the final order, like the fee
portion, was based at least in part on the court’s improper in camera review of class
counsel’s billing records, we remand for reconsideration of the cost order as well.
DISPOSITION
The order awarding attorney fees and costs is reversed, and the matter remanded
for further proceedings not inconsistent with this opinion. The parties are to bear their
own costs on appeal.
PERLUSS, P. J.
We concur:
ZELON, J. SEGAL, J.*
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
21