Pasternack v. McCullough ( 2021 )

Filed 6/7/21 Certified for Publication 6/25/21 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
LAWRENCE PASTERNACK, B302137
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC121723)
v.
THOMAS B. MCCULLOUGH, JR.,
et al.,
Defendants and Respondents.
APPEAL from an order of the Superior Court of Los
Angeles County. Craig D. Karlan, Judge. Affirmed.
Hatton, Petrie & Stackler, Gregory M. Hatton, Arthur R.
Petrie, II and John A. McMahon for Plaintiff and Appellant.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup,
Bartley L. Becker and Caroline E. Chan for Defendants and
Respondents.
_____________________________
Lawrence Pasternack sued Thomas McCullough, Jr. and
his law firm (collectively, McCullough) for malicious prosecution.
In 2018, we reversed an order denying McCullough’s special
motion to strike under the anti-strategic lawsuits against public
participation (anti-SLAPP) statute. (Code Civ. Proc., § 425.16.)1
In our disposition, we ordered the trial court to issue a fee award
pursuant to section 425.16, subdivision (c)(1), which entitles a
prevailing defendant on a special motion to strike to recover his
attorney fees and costs. This appeal arises from the resulting
attorney fees award of $146,010 to McCullough. Pasternack’s
primary dispute with the award is that the trial court
erroneously ordered him to pay an hourly rate for attorney fees
that was greater than what was actually paid for McCullough’s
defense. We conclude the trial court properly determined the
reasonable market value of the attorneys’ services and affirm the
attorney fees order.
PROCEDURAL BACKGROUND2
On remand from our 2018 decision, McCullough moved for
entry of judgment and sought attorney fees in the amount of
$330,420. Lewis, Brisbois, Bisgaard & Smith LLP (Lewis
Brisbois) represents McCullough in these proceedings. The Lewis
Brisbois attorneys presented declarations and a time chart
1 All further section references are to the Code of Civil
Procedure unless otherwise specified.
2 We need not repeat the facts underlying the malicious
prosecution case against McCullough. They are extensively
discussed in our previous opinion, Pasternack v. McCullough
(Feb. 6, 2018, No. B272097) [nonpub. opn.].
2
showing they expended over 500 hours on the action and attested
their market rates ranged from $300 to $600 per hour.
Pasternack opposed McCullough’s fee motion, arguing the
hours claimed were excessive and disputing the amount of the
hourly fees. He submitted a letter from Roy Weatherup,
McCullough’s lead counsel on appeal. Weatherup explained
McCullough’s defense was paid by his insurer at a rate of $140
per hour; Pasternack’s lawsuit against McCullough was part of a
block of hundreds of cases in which Lewis Brisbois gave a volume
discount.
Pasternack also submitted an expert declaration from a
former Lewis Brisbois partner explaining why insurance defense
firms accept lower hourly rates in exchange for large volumes of
case assignments from insurance companies. He asserted the
agreed-upon rates are not “below market” because they are a
product of an arms-length negotiation. These lower rates are
profitable for the law firm because there is no measurable risk of
nonpayment and such an arrangement serves as a gateway for
future business. Insurance clients are courted by defense firms,
in part because a defense firm becomes efficient in handling
similar cases by building up resources -- such as standard briefs -
- from prior similar cases. In this case, for example, Weatherup
had extensive experience in anti-SLAPP matters and the issue
raised in the prior appeal.
The trial court granted McCullough’s attorney fees motion
by order dated August 28, 2019 and awarded McCullough
$146,010 in fees using the lodestar method. It struck time that
was billed for activity unrelated to the motion to strike and that
was “block billed” or failed to specify the tasks accomplished. The
court further found “the nature and complexity of the legal issues
3
on appeal [did] not warrant 528.1 hours of work performed by two
partners billing at the rate of $600.” Thus, the court not only
reduced the hours claimed by the attorneys but also reduced the
hourly rate requested by one of the partners from $600 to $250
per hour.
The trial court declined to adopt Pasternack’s suggested
market rate of $140 per hour for each attorney. The court
explained, “First, $140 per hour is not the market rate for
experienced appellate lawyers in Los Angeles County and the
Court exercises its discretion to not so narrowly focus on the
‘package rate’ agreed to in this matter, especially since the
specific rate for handling anti-SLAPP appeals remains unclear;
neither [Pasternack’s attorney nor the expert presented]
sufficient information for the Court to conclude that $140 is the
prevailing market rate for anti-SLAPP appeals in the insurance
defense setting. Second, the Court finds the reduced amount
awarded herein fully compensates Defendants for their work in
this matter in light of Defendants’ extensive prior experience
handling appeals involving the ‘interim adverse judgment rule.’ ”
Pasternack moved for reconsideration of the fee award,
presenting additional evidence to show the prevailing market
rate for anti-SLAPP appeals in the insurance defense setting was
$140 per hour. Based on the trial court’s previous determination
of the hours reasonably expended on the anti-SLAPP motion and
a $140 per hour market rate, Pasternack calculated the total
attorney fees to be $49,126. The trial court denied the motion for
reconsideration and Pasternack timely appealed.
4
DISCUSSION
The primary issue on appeal is whether the trial court
erred when it applied hourly rates to its lodestar analysis that
exceeded the hourly rate actually paid by McCullough’s insurer
for his defense. Relying on cases not involving attorney fees,
Pasternack contends prevailing parties may not recover more
than the actual fees they paid under a “paid in full” or “make
whole” rule.3 We are not persuaded.
We review a trial court’s fee award using an abuse of
discretion standard. (Hjelm v. Prometheus Real Estate Group,
Inc. (2016) 3 Cal.App.5th 1155, 1177.) We conclude the trial
court did not abuse its discretion in this case.4 It is well
3 We decline to follow the non-attorney-fees cases cited by
Pasternack. They are distinguishable on subject matter alone.
(See Parnell v. Adventist Health System/West (2005) 35 Cal.4th
595 [hospitals may not collect from a third party more than the
amount owed by a patient’s health plan]; Howell v. Hamilton
Meats & Provisions, Inc. (2011) 52 Cal.4th 541 [injury victims
may not collect damages for medical bills in excess of the amount
their health plan paid]; Hand Electronics, Inc. v. Snowline Joint
Unified School Dist. (1994) 21 Cal.App.4th 862, 870 [damages
limited to actual or reasonable cost of auto repair].) We find case
law addressing attorney fees, discussed in the text, to be more
persuasive and relevant to the issue at hand.
4 Although Pasternack acknowledges the abuse of discretion
standard applies to appeals of attorney fee awards, he contends
the standard of review in this case should be de novo because his
appeal presents a pure legal question: whether a trial court has
any discretion to award a greater hourly fee than that bargained
for and accepted as payment in full by the prevailing party’s
counsel. The legal question posited by Pasternack has been
5
established that an attorney who accepts a reduced rate from a
client is not precluded from seeking a reasonable hourly rate
pursuant to the lodestar method. “ ‘The reasonable market value
of the attorney’s services is the measure of a reasonable hourly
rate. [Citations.] This standard applies regardless of whether
the attorneys claiming fees charge nothing for their services,
charge at below-market or discounted rates, represent the client
on a straight contingent fee basis, or are in-house counsel.
[Citations.]’ ” (Chacon v. Litke (2010) 181 Cal.App.4th 1234, 1260
(Chacon); PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084(PLCM); Cal. Civil Courtroom Handbook & Desktop Ref. (2020
ed.) Court Determination of Statutory Attorney Fees Amount,
§ 41:30.)
Section 425.16, subdivision (c)(1) of the anti-SLAPP statute
entitles a prevailing defendant on a special motion to strike to
recover his or her attorney fees and costs. “[B]ecause the anti-
SLAPP [attorney fee] provisions referred to attorney fees and
costs without indicating any restrictions on how they are to be
calculated, we accordingly presume that the Legislature intended
courts use the prevailing lodestar adjustment method.
[Citation.]” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1136.)
The method begins with ascertainment of the lodestar, i.e., the
number of hours reasonably expended multiplied by the
reasonable hourly rate. (Mountjoy v. Bank of America, N.A.
(2016) 245 Cal.App.4th 266, 271–282.) The lodestar figure may
then be adjusted, based on factors specific to the case, to fix the
answered by the California Supreme Court and the Courts of
Appeal. Given this authority, we need only consider whether the
trial court abused its discretion.
6
fee at the fair market value for the legal services provided.
(PLCM, supra, 22 Cal.4th at p. 1095.)
To determine the reasonable hourly rate, courts consider
the rate prevailing in the community for similar work. (In re
Tobacco Cases I (2013) 216 Cal.App.4th 570, 582.) This market
rate approach has been applied in cases involving in-house
counsel, contingency fees, and pro bono work. In each of these
cases, courts have refused to limit the market rate to the
attorney’s fee arrangement with the prevailing party. (PLCM,
supra, 22 Cal.4th at p. 1096; Persson v. Smart Inventions, Inc.
(2005) 125 Cal.App.4th 1141, 1172–1176 [contingency
agreement]; Rosenauer v. Scherer (2001) 88 Cal.App.4th 260,
284–287 [pro bono].) “Although the terms of [a fee] contract may
be considered, they ‘do not compel any particular award.’
[Citations.]” (PLCM, supra, 22 Cal.4th at p. 1096.)
In PLCM, the Supreme Court affirmed a corporate
plaintiff’s entitlement to attorney fees under the contractual
attorney fees provision of Civil Code section 1717, even though
the plaintiff was represented by its in-house counsel. (PLCM,
supra, 22 Cal.4th at p. 1091.) The defendant urged the court to
adopt a “cost-plus” approach based on a precise calculation of the
actual salary, costs, and overhead of in-house counsel. (Id. at p.
1096.) The court refused, concluding “the lodestar method, as
applied to the calculation of attorney fees for in-house counsel is
presumably reasonable, although in exceptional circumstances,
the trial court is not precluded from using other methodologies.”
(Id. at p. 1097.) It noted, “That is not to say that reasonable
attorney fees under Civil Code section 1717 will not reflect many
of the same factors considered in a cost-plus approach. Moreover,
generally prevailing market rates necessarily take into
7
consideration such factors as salaries, overhead, the costs of
support personnel, and incidental expenses.” (PLCM, supra, at
p. 1097.)
Relying on PLCM, this court previously declined to cap the
reasonable hourly rate to what was actually paid by an insurer in
Nemecek & Cole v. Horn (2012) 208 Cal.App.4th 641, 651
(Nemecek). There, a client claimed a law firm was negligent in its
representation of him in a lawsuit. The law firm tendered its
defense to its insurer. The parties’ retainer agreement contained
an arbitration clause and an attorney fees provision. The
arbitrator found the law firm was the prevailing party. (Id. at
p. 644.) The trial court confirmed the arbitration award and
entered judgment in favor of the law firm. It also awarded
attorney fees incurred by the law firm in filing its petition to
confirm the arbitration award. (Id. at p. 645.)
On appeal, the client argued the trial court abused its
discretion when it applied an hourly rate to its lodestar
calculation that was approximately double what the insurer
actually paid for the law firm’s defense. (Nemecek, supra, 208
Cal.App.4th at pp. 650–651.) The client presented expert
testimony that counsel for the law firm billed the insurer $100 to
$215 per hour for attorney services in the arbitration. The law
firm’s counsel sought an hourly rate based on the Laffey Matrix5
5 The Laffey Matrix is a United States Department of Justice
billing matrix that provides billing rates for attorneys at various
experience levels in the Washington, D.C. area and can be
adjusted to establish comparable billing rates in other areas
using data from the United States Bureau of Labor Statistics.
(See Laffey v. Northwest Airlines, Inc. (D.D.C. 1983) 572 F.Supp.
354,affd. in part & revd. in part (D.C.Cir. 1984) 746 F.2d 4,
8
and did not disclose their actual hourly rates in the matter.
The client urged this court to cap the attorney fee award to that
which was actually incurred. We declined to do so. We were
guided by the reasoning in PLCM to hold the rate paid by the
insurer did not represent the maximum reasonable hourly rate.
(Nemecek, supra, at p. 651.)
The court in Syers Properties III, Inc. v. Rankin (2014) 226
Cal.App.4th 691, 702–703 (Syers), also relied on an adjusted
Laffey Matrix to fix a reasonable hourly rate that exceeded the
actual rate paid. There, the prevailing defendants conceded they
were represented by an insurance defense firm that charged
discounted rates. The trial court did not request, and the defense
attorneys did not submit, their actual rates for the trial court’s
consideration. (Syers, supra, at p. 696.)
The court held on appeal that “[t]here is no requirement
that the reasonable market rate mirror the actual rate billed.”
(Syers, supra, 226 Cal.App.4th at p. 701.) The Syers court
rejected the plaintiff’s argument that the lodestar market rate
determination was only meant to apply to contingency fee cases,
not to cases in which payment is guaranteed. The court found
there was no abuse of discretion because the lodestar method was
appropriately used and “the trial court is in the best position to
value the services rendered by the attorneys in his or her
courtroom.” (Id. at p. 702.)
The Syers court observed, “A reasonable trial court might
determine that the ‘similar work’ or ‘comparable legal services’
related to insurance defense litigation, rather than to civil
(Laffey), overruled on other grounds in Save Our Cumberland
Mountains, Inc. v. Hodel (D.C.Cir. 1988) 857 F.2d 1516, 1525.)
9
litigation in general. Were the court to so conclude, it could view
the relevant ‘market’ to be that of insurance defense litigation
and litigators, rather than general civil litigation. The ‘market
rate’ for such services might be limited accordingly. Again, we
emphasize that such determinations lie within the broad
discretion of the trial court. They raise a number of issues, not
the least of which is that the prevailing plaintiff’s privately
retained counsel in such circumstances could claim a ‘market
rate’ reasonable fee far in excess of the ‘market rate’ reasonable
fee that could be claimed by a prevailing opponent whose defense
counsel was retained by an insurer.” (Syers, supra, 226
Cal.App.4th at pp. 702–703; see also Chacon, supra, 181
Cal.App.4th at p. 1260 [attorney fees award affirmed where the
trial court applied a market rate of $350 per hour even though
the fee agreement with the prevailing plaintiffs provided for a
reasonable hourly rate of $300 per hour].)
Pasternack attempts to distinguish these cases on the
ground the hourly rate in these cases was neither paid nor fixed
in advance. Pasternack contends the courts in those cases were
required to set a “reasonable fee” and did so using the lodestar
method. By contrast, he argues, there is no need for the court to
set a reasonable hourly fee in this case because the fee paid by
McCullough’s insurer is undisputed. We are not persuaded.
None of the cases limit their holding in this way. Indeed, Syers
expressly rejected the argument that the market rate approach
only applied to contingency fee cases. (Syers, supra, 226
Cal.App.4th at p. 696.)
Neither are we persuaded by the U.S. Supreme Court cases
cited by Pasternack. City of Burlington v. Dague (1992) 505 U.S.
557, 563, and Perdue v. Kenny A. (2010) 559 U.S. 542, 558–559,
10
address whether an enhancement to a lodestar is appropriate.
Here, the trial court made no enhancement to the lodestar. It
simply determined the market rate for each of the attorneys
working on McCullough’s defense.
In sum, PLCM, Nemececk, Syers, and their like tell us that
a trial court has discretion to award an hourly rate under the
lodestar method that exceeds the rate that was actually incurred
or paid. These cases also disclose the trial court’s wide discretion
to consider the prevailing party’s fee agreement in awarding
attorney fees. Here, the trial court properly determined the
market rate for experienced appellate lawyers in Los Angeles
County and “exercise[d] its discretion to not so narrowly focus on
the ‘package rate’ agreed to in this matter.”
We now turn to decide whether the trial court nevertheless
abused its discretion because the amount it awarded shocked the
conscience. Pasternack argues the lodestar amount calculated by
the trial court was unreasonable and should be reversed.6 Not so.
6 In footnote 21 of the opening brief, Pasternack contends the
fee award should be further reduced by thousands of dollars
because these sums were improper fee enhancements or were for
work unrelated to the anti-SLAPP motion. Pasternack has
forfeited this argument. (Hall v. Department of Motor Vehicles
(2018) 26 Cal.App.5th 182, 193 [argument in footnote forfeited];
Sabi v. Sterling (2010) 183 Cal.App.4th 916, 947 [“Footnotes are
not the appropriate vehicle for stating contentions on appeal.”].)
Even if it were not forfeited, we reject his claim that the trial
court abused its discretion to award an enhancement to
Weatherup’s fee. As discussed, the trial court properly
determined the reasonable hourly rate for work performed by
Weatherup and the other Lewis Brisbois attorneys. The trial
court did not add an enhancement to Weatherup’s rate.
11
The record shows Lewis Brisbois submitted evidence
regarding the hours expended and reasonable rates for the work
done. (Horsford v. Board of Trustees of California State
University (2005) 132 Cal.App.4th 359, 396 [“the verified time
statements of the attorneys, as officers of the court, are entitled
to credence in the absence of a clear indication the records are
erroneous.”].) The trial court was entitled to rely on Lewis
Brisbois’s declarations to determine the reasonable rates for
experienced attorneys in Los Angeles County. “[T]he trial court
is in the best position to value the services rendered by the
attorneys in his or her courtroom.” (Syers, supra, 226
Cal.App.4th at p. 702.)
The trial court thoroughly examined the record and
reduced both the time claimed and the hourly rate for one of the
partners. Indeed, “[t]he award granted was significantly reduced
from the original request as a result of the trial court’s indication
that it did not look favorably on the full request. Thus, it clearly
appears that the trial court exercised its discretion. In these
circumstances, we cannot conclude that the award of attorney
fees shocks the conscience or suggests that passion and prejudice
Moreover, Pasternack acknowledges in his own calculations that
the trial court struck 6.8 hours from the 11.5 hours that
Pasternack argued represented time billed for activities
unrelated to the anti-SLAPP motion. The trial court could have
reached a different conclusion as to the 4.7 hours it did not
exclude from the fee award. It was silent on the issue.
Therefore, “ ‘ “[a]ll intendments and presumptions are indulged
to support [the order] on matters as to which the record is
silent[.]” ’ ” (Wilson v. Sunshine Meat & Liquor Co. (1983) 34
Cal.3d 554, 563.)
12
had a part in it. As such, we conclude that the trial court did not
abuse its discretion in awarding the attorney fees that it did.”
(Akins v. Enterprise Rent–A–Car Co. (2000) 79 Cal.App.4th 1127,
1134.)
DISPOSITION
The attorney fees award is affirmed. McCullough to
recover his costs on appeal.
BIGELOW, P. J.
We concur:
GRIMES, J.
STRATTON, J.
13
Filed 6/25/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
LAWRENCE PASTERNACK, B302137
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC121723)
v.
ORDER CERTIFYING
THOMAS B. MCCULLOUGH, JR., PUBLICATION
et al.
[No change in the judgment]
Defendants and Respondents.
THE COURT:
The opinion in the above entitled matter was filed on June
7, 2021, was not certified for publication in the Official Reports.
For good cause it now appears that the opinion should be
published in the Official Reports and it is so ordered.
____________________________________________________________
BIGELOW, P. J. GRIMES, J. STRATTON, J.