Trial Court Cannot Consider The Financial Impact Of An Award of Contractual Attorneys Fees.
Can a trial court consider the financial impact of the attorney fees award in determining reasonable attorney fees under contract per Civil Code Section 1717? California’s First District Court of Appeals says it cannot. Adassa Walker v. Ticor Title Company of California – Court of Appeal Case No: A126710. In Walker, the trial court had considered the financial impact of the award on the plaintiffs in determining the amount of reasonable fees awarded to the prevailing defendants under contract per Civil Code Section 1717. The Court of Appeals held that the trial court had abused its discretion in doing so. The Walker court acknowledged that an award of contractual attorneys fees per Section 1717 may be subject to equitable considerations, but held that “a losing party’s financial condition should not be considered in setting the amount of such an award”. The court noted that unlike statutory fee awards, contractual fees are “voluntarily incurred”.
“The possibility of an award of contractual attorney fees exists because the parties chose to enter into an agreement containing an appropriate provision. The award is a business risk assigned as a matter of mutual agreement by the parties. As a result, contractual attorney fees cannot fairly be characterized as a punishment. Nor can the possibility of an award of contractual attorney fees constitute an improper denial of access to the courts, since the risk of such an award has been undertaken in return for the benefits of the contract”.
The court noted that under Section 1717 courts are instructed to consider such factors as the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case. But, the losing party’s financial condition may not properly be considered and, presumably, evidence of such financial condition would be irrelevant and inadmissible as to the issue of contractual “prevailing party” attorney fees.
Lesson to be learned – if you agree to pay attorneys fees if you lose, crying poor will not work when you do!
Application of Computer Fraud and Abuse Act – Criminalizing Everyday Computer Activity – Nosal: 9th Circuit says No!
Real interesting new 9th Cir. opinion. U.S. v. Nosal. Does an employee who violates an employer policy prohibiting the use of work computers for non-business purposes commit a federal crime under the Computer Fraud and Abuse Act? 9th says No. Nosal – http://1.usa.gov/Hq5Ks9
Real interesting opinion. Turns on statutory construction but makes broader point on criminalizing what might otherwise been considered day-to-day activities by millions of people. Look at this passage:
Minds have wandered since the beginning of time and the computer gives employees new ways to procrastinate, by gchatting with friends, playing games, shopping or watching sports highlights. Such activities are routinely prohibited by many computer-use policies, although employees are seldom disciplined for occasional use of work computers for personal purposes. Nevertheless, under the broad interpretation of the CFAA, such minor dalliances would become federal crimes. While it’s unlikely that you’ll be prosecuted for watching Reason.TV on your work computer, you could be. Employers wanting to rid themselves of troublesome employees without following proper procedures could threaten to report them to the FBI unless they quit. Ubiquitous, seldom-prosecuted crimes invite arbitrary and discriminatory enforcement.
Employer-employee and company-consumer relationships are traditionally governed by tort and contract law; the government’s proposed interpretation of the CFAA allows private parties to manipulate their computer-use and personnel policies so as to turn these relationships into ones policed by the criminal law. Significant notice problems arise if we allow criminal liability to turn on the vagaries of private polices that are lengthy, opaque, subject to change and seldom read. Consider the typical corporate policy that computers can be used only for business purposes. What exactly is a “nonbusiness purpose”? If you use the computer to check the weather report for a business trip? For the company softball game? For your vacation to Hawaii? And if minor personal uses are tolerated, how can an employee be on notice of what constitutes a violation sufficient to trigger criminal liability?
Basing criminal liability on violations of private computer use polices can transform whole categories of otherwise innocuous behavior into federal crimes simply because a computer is involved. Employees who call family members from their work phones will become criminals if they send an email instead. Employees can sneak in the sports section of the New York Times to read at work, but they’d better not visit ESPN.com. And sudoku enthusiasts should stick to the printed puzzles, because visiting www.dailysudoku.com from their work computers might give them more than enough time to hone their sudoku skills behind bars.
The effect this broad construction of the CFAA has on workplace conduct pales by comparison with its effect on everyone else who uses a computer, smart-phone, iPad, Kindle, Nook, X-box, Blu-Ray player or any other Internet-enabled device. The Internet is a means for communicating via computers: Whenever we access a web page, commence a download, post a message on somebody’s Facebook wall, shop on Amazon, bid on eBay, publish a blog, rate a movie on IMDb, read www.NYT.com, watch YouTube and do the thousands of other things we routinely do online, we are using one computer to send commands to other computers at remote locations. Our access to those remote computers is governed by a series of private agreements and policies that most people are only dimly aware of and virtually no one reads or understands.
Take a look, interesting stuff – also an issue that will be before Supreme Court. Other circuits have come down differently on application of the Computer Fraud and Abuse Act.
Crosby Moves to Klinedinst PC.
Effective January 2, 2012, I will be moving my business litigation practice into Klinedinst PC (www.klinedinstlaw.com), a long-established and very well-respected San Diego business law firm. This career move has been the subject of several weeks of discussions and negotiations with the Klinedinst firm management, and I am quite excited about it. The firm has almost 60 attorneys across four Southern California offices, about 40 of whom are at the firm’s main office located blocks from the state and federal courts in downtown San Diego. Some of the best attorneys in San Diego and Southern California are in this firm. I will become a shareholder at the firm and maintain complete control over my existing cases.
As you might expect, the reasons for this move are many. But, principal among them is my desire to better serve my clients. The solo practice model has many positive attributes, including personal autonomy and a good degree of flexibility in the way I work and the manner in which I deliver legal services. It has served me and my clients quite well for many years. But, in recent years, the complexity and, more significantly, the pace of the types of financial and business cases I handle has increased significantly. And, while my work product has never suffered and my court-imposed deadlines are always met, at times my solo practice has strained to efficiently handle case flow and effectively meet the needs of my clients. The move to Klinedinst will immediately remedy this situation. I will have significant staffing and office capacity behind me, as well as paralegals and other fine attorneys to assist as necessary with cases. When I am in trial or at extended depositions, progress in other cases will not stop. Other attorneys will be available to work on the cases, as necessary. I will also have the acumen and experience of some of the best business attorneys and litigators around to provide input on case substance and strategy. And, personally, I will have a lot of very nice, interesting people to work with! It should be a win-win situation for all involved, including my clients.
Effective January 2, 2012, my new contact information will be as follows:
James D. Crosby
Shareholder
Klinedinst PC
501 W. Broadway, Suite 600
San Diego, CA 92101
Phone: (619) 239-8131
Fax: (619) 238-8707
Cell: (858) 705-0083
Email: [email protected]
Website: www.klinedinstlaw.com
Twitter: @crosbyattorney
Blog: www.crosbyattorneyblog.com
Thanks and Happy New Year!
Jim Crosby
Sales tax on California attorney services – How will attorneys react?
Originally posted December 1, 2011
The LA Times and New York Times report a possible ballot initiative this fall in California to, among other things, impose a sales tax on attorney services. It will be fascinating to observe how California law firms react if this tax is approved and imposed. Will they simply levy the tax without comment? Will they increase their fees to address the added firm administrative costs associated with the new tax? Or, will they absorb the tax to keep clients happy in these lean times? Perhaps they will lower rates to account for the additional tax to keep clients happy? Much depends upon the specifics and size of the proposed tax, and a particular firm’s client base.
Regardless, it seems a good marketing opportunity for law firms seeking a competitive advantage. The pitch: “We know these are tough times. The imposition of a sales tax on the valuable and necessary services we render for our clients will only make matters worse for our business clients struggling in a tough economy or facing the costs of litigation. So, effective upon imposition of the new tax, we will cut our rates in an amount commensurate with the sales tax. Thank you.”
The calculation is simple – accept a small percentage reduction in revenues in hopes of keeping existing clients happy, generating new clients and increasing market share. But, would this really work? And would it be fair? Should the attorneys and accountants bear the true burden of the proposed tax?
If this new sales tax is imposed, we will see how California law firms react. If it happens, it will certainly make for lively discussion in partner meetings across the state.
Civility? Really?
Originally posted November 22, 2011
Civility, across the broad arch of a career, is a successful and lucrative business model. I believe it will enhance your professional career, better serve your clients, make you more profitable, and keep you sane.
Civility is typically discussed in lofty abstract terms at collegial meetings of judges and attorneys. You’d think it was written in stone or tablet. Yet civility is much more difficult to apply in the aggressive, day-to-day jockeying of a litigation practice. We’ve all had that Friday afternoon call with an aggressive, uncivil, opponent whose been jacking you around in discovery for six months. Or that call from a lawyer who has denied you multiple extensions and who now wants one himself because his kid is sick. How about that senior partner who wants an associate to draft and serve 300 special interrogatories, simply to make the opponent “spend some money?”
Being civil is all the more difficult in lean economic times. After all, our clients are our customers. And we want to keep our customers happy. In addition to representing clients, we have to pay the rent, meet payroll, and keep the doors open. When a good-paying client wants us to stop being nice, start being a “bulldog,” and start making the other side spend money, it’s tempting to play into that client’s worst instincts. Why not keep the money flowing? The reality is that attorneys, like anybody, will do what works – especially when it’s lucrative. I hate to be cynical, but if being an uncivil jerk works and makes them money, that is what a great many attorneys will do. But, I think the contrary is true. Civility, though hard to apply at times, is good for business.
One can always point to a particular case or client where a more uncompromising and uncivil approach worked. After all, pre-trial litigation is really all about the imposition of risk and cost on the other side. And, like most litigators, this author cannot claim that he has not yielded to base competitive urges, including anger, at times. It would be impossible not to. Yet, I have litigated many more cases wherein civility significantly assisted in securing a good result for the client. And the best and most successful attorneys I know after almost 30 years in the trenches are those that, calmly, professionally and with a civil approach and a good-natured slap on the back, pick your case apart and destroy your position. I believe adopting and working hard to apply a more civil, professional approach in daily litigation practice is the better and, ultimately, the more lucrative approach. Civility is good business. I’d welcome your thoughts.
An Ideal Balance.
Originally posted – Spetember 9, 2011
Last week I appeared at a trial readiness conference in an employment termination case set for jury trial in a few weeks. As my opposing counsel and I walked into chambers, the trial judge said, “It’s good to see a couple of experienced veterans. We can dispense with these trial preparation matters rather quickly”. And so we did.
This got me thinking.
There is a much to be said for reaching the level of an “experienced veteran”. I have spent all of my professional life appearing in court. Or getting ready to appear in court in some form. That amount of experience comes with benefits: Instant credibility from the bench is one. Good instincts for how the court will likely rule on particular matters is another. More examples include an understanding of what a Judge likely will or won’t find persuasive. The ability to edit extraneous matters in briefs and pleadings. And finally, the confidence to estimate how long it takes to do something.
These things are very beneficial to clients involved in risky, expensive litigation.
But, such ease and confidence hold dangers as well. There’s the false belief that you have seen and heard it all before. The risk of under-preparing for a motion or hearing (“winging it”) because you’ve “been there, done that.” Smugness and overconfidence that can lead to mistakes. Complacency. Underestimating less-experienced opponents. All of this can easily morph into arrogance and complacency.
Perhaps an optimal combination is to balance the ease and confidence of a veteran trial attorney with a rookie’s drive and paranoid fear of screwing up. You are confident and at ease handling your cases, but you still lie awake at night worrying about covering all the bases and doing your best.
It seems this balance is a good insurance policy for staying at the top of your game. Do you agree?
Trial Tactics – Sometimes Simple is Better.
A couple of months ago, I took on a new case with a rapidly approaching trial. It was a relatively straightforward Federal Court action. An equipment supplier was seeking to recover about $250K in equipment rentals provided to a Federal construction project.
I took over from another attorney who’d had the case for about 18 months. This prior attorney had approached the case with a “no-holds barred” mentality. There seemed no limit to the extensive case preparation: databases, trial software, digital visual presentations, hours and hours of paralegal time scanning and indexing documents, etc. An expert had reviewed thousands of pages of materials and worked up detailed opinions. Billings to the client reflected this “over the top” approach.
When I got the case, we adopted a new approach – simplify and streamline! We waived jury, significantly reduced the trial documents, nixed the visual presentations, withdrew the expert, and pared down the witness list. We had a strong case on the facts and the law. In my view, a busy California Federal Court judge wouldn’t need all the bells and whistles, and corresponding court time, to decide this case.
We tried the case last week. The result? We were awarded about 85% of the claim with interest and legal fees – a big victory for the client. Strong case – simple trial presentation – good result!
This streamlined approach would not have worked in all cases. The facts, the law, the amounts at stake and the forum in which the case will be decided will dictate the approach in any given case. But, at least in this case, simple was better.
I’d be interested to know of cases in which you found simpler to be the best approach.
Use of Visuals and Digital Presentations At Trial – Pricing Out Small Firm/Solo Litigators?
Juries in this media age expect to see visuals and digital presentations at trial. Is this expectation giving big firms with significant litigation budgets an advantage at trial? Is it pricing small firms and solo litigators out of all but the smallest cases?
This week I chaired a meeting of the Civil Litigation Section of the San Diego North County Bar Association (www.bansdc.org). The presenter was with a consulting firm that assists trial attorneys with visual presentations. As he demonstrated various multi-media presentations and animations, the implication was that today’s juries — and even judges — expect digital visuals at trial.
The questions posed by the audience, mostly small firm litigators, centered on cost. Sure, the demos were nifty, effective animations, but how much do they cost?
The rise of technology – computers, cheap software, connected notebooks and tablets, smart phones, and now social media – has leveled the playing field. Today small firms and solo practitioners can compete with big firms like never before.
The one caveat is in this area of visual presentations at trial. Big firms, well-heeled clients and big litigation budgets still hold the edge. Larger firms can afford IT personnel to do the work, or their clients can afford to hire the costly consultants to do it for them. They can put on a better TV show at trial. This presents a problem for smaller firms and clients with limited resources. It also gives larger firms a marketing edge. If a firm can offer its IT expertise to prepare effective trial visuals, that firm surely has an edge in marketing significant cases.
With this one exception, smaller firms and solos are generally becoming more competitive. What are their options? They can simply choose to try cases like they did 10-15 years ago, without the bells and whistles. But that could get risky with today’s juries. Or, they can hire the same consultants the big firms do. Finally, they can purchase trial presentation software, invest the time to learn it, or hire a paralegal to learn it. But these solutions increase overhead and decrease the bottom line.
There are no easy answers. Will smaller firms and solos continue to be squeezed in bigger cases by large firms, well-heeled clients and ample budgets? It will require creative thinking by small firms/solos and newer cost-effective solutions from vendors to counter this big firm competitive edge.
California State Courts Complicit in Civil Discovery Abuses.
In the idealized world of self-executing civil discovery, disputes should be rare. They should be worked out by reasonable counsel without the courts. But that is not the world of aggressive modern day business litigation. Discovery is not just a means to secure information and narrow issues. For some litigants, it has become a strategic tool to delay cases, frustrate opponents and drive up costs. Civil litigators publicly decry these abuses, but candidly acknowledge them as, increasingly, a regular part of civil practice. And through no fault of their own, California state courts are becoming complicit in these discovery abuses.
Due to overcrowded civil calendars, discovery motions are being calendared months out. This substantially delays resolution of discovery disputes. In San Diego, where I have a business litigation practice, discovery motions are being calendared as much as three months out by civil departments. In California, cases are supposed to be tried within one year. Summary judgment motions require 75 days’ notice. So, a three month delay in resolving a dispute over a document request is significant. And such delays lead to tactically-driven discovery abuses.
The calculation is clear and, in a tactical sense, compelling. If delaying a deposition for several months will disrupt the opponent’s discovery plan and trial preparation, why not file a motion for protective order? Or object and force a motion? In significant cases, even the risk of discovery sanctions may not discourage such actions. The cold calculation is clear: what’s a few thousand dollars in sanctions and some harsh words from a judge if one can significantly disrupt an opponent’s case? Cynical, yes. Improper, yes. Unethical, maybe. Is this the custom and practice of most trial lawyers? No. But, effective as a tactic? Most likely, yes.
The solution? Obviously, more judges and more civil trial departments. But, come on, is that going to happen any time soon? Other possible solutions – give more calendar priority to discovery motions, decrease the statutory notice for such motions, streamline briefing requirements or set up separate civil departments to expeditiously address only discovery motions.
Until something is done to expedite discovery motions heard in California courts, those same courts will remain complicit, though innocently so, in the very discovery abuses they are supposed to guard against.
I welcome your comments.
Westlaw & Kindle – An Easy Way To Keep Current.
My litigation practice subscribes to Westlaw, and recently upgraded to WestlawNext. I particularly like the California Update feature which summarizes new California cases and legislative updates on a daily basis. These updates are not only available online, they are also sent daily to my email account and, in turn, to my Blackberry. But, in the past, I have gotten bogged down actually reading new cases as they appear in the update. I would either print them and stuff them into my briefcase for later reading, or convert them to .pdf and move them to a “Stuff to Read” file on my laptop. Either way, the files grew and often times the cases went unread as I moved on to other things. For me, and I suspect for many others, the best way not to read something is to stick it into a file of stuff you plan to read.
But, now, I am keeping up with new case developments using a Kindle with WestlawNext. Cases and other content can be sent directly from WestlawNext to a Kindle. (You can also do it out of Westlaw with an extra step.) It really works great. I send new cases summarized in the California Update directly to my Kindle. I put the Kindle in my briefcase and read new cases over the course of my work day; for example, while waiting in court for a hearing or during a deposition lunch break. And, I take it to the gym and read cases while putting my time in on the stationary bike or elliptical. It’s a simple and very efficient way to keep current. I find that I am now reading new cases shortly after they come out, rather than weeks or months later, or, sometimes, not at all. Give it a try.