Metropolitan News-Enterprise


Wednesday, January 26, 2011


Page 1


Court of Appeal Panel Rejects Yagman’s Bid for Fees From Ex-Client Under Arbitration Statute




The Court of Appeal for this district yesterday affirmed an order denying disbarred lawyer Stephen Yagman’s bid to collect attorney fees for having prevailed in a fee dispute with an ex-client.

Div. Four said Los Angeles Superior Court Judge Allan J. Goodman did not abuse his discretion when he declined to award fees to Yagman, whom he said engaged in “opprobrious conduct” by refusing to return unearned fees, although he prevailed in the ensuing litigation because Michael Colello waited too long to sue.

Colello, a former executive of now-defunct Cross Financial Services, Inc. in Irvine, was charged in 1999 with helping the firm’s founder divert investor funds to personal use. He hired Yagman, paying him a retainer of $290,000, but Yagman was subsequently disqualified by the district judge.

Colello, after retaining new counsel, was convicted and spent more than two years in prison. In 2005, he initiated a nonbinding State Bar arbitration proceeding for a refund of unearned fees.

The arbitrators concluded that Yagman’s refusal to refund fees was “outrageous, egregious, unethical” and that a four-year statute of limitations applied. They awarded a $261,000 refund.

But Yagman asked for a trial de novo and won on the ground that the claim was subject to Code of Civil Procedure Sec. 340.6, which requires that a suit against a lawyer for professional misconduct be brought within one year of the plaintiff’s discovery of grounds to sue.

The judgment was affirmed on appeal, and Yagman moved for nearly $65,000 in attorney fees for the appeal, under Business and Professions Code Sec. 6204(d). The statute permits a discretionary award of attorney fees to the prevailing party in a trial de novo following mandatory nonbinding arbitration of an attorney fee dispute.

Goodman, in denying the motion, said that in his 39-year legal career, he could “think of only a few instances in which a party has so sought to over-reach.” The judge said that Yagman had already received a windfall by being allowed to keep the unearned fees, and that “any award of fees [for the litigation] is inappropriate and unmerited.”

The court, he said, would not “stamp its imprimatur on Mr. Yagman’s opprobrious conduct.”

Yagman appealed. Colello argued on appeal that Yagman was not the prevailing party because the statute makes no mention of attorney fees for handling an appeal, and that Yagman could not recover fees because his firm’s name, not his, was on the billing records.

Justice Stephen Suzukawa, in an unpublished opinion for the Court of Appeal, said that the court would assume for purposes of argument that Yagman was the prevailing party. The denial of fees, however, was within the trial judge’s discretion, the justice said.

Yagman, Suzukawa said, failed to rebut the arbitrators’ finding that he lacked a factually valid reason for retaining the bulk of what he was paid that those findings were incorrect. The trial judge was thus entitled to rely on that finding in determining that it would be unfair to award additional fees for the fee litigation, Suzukawa concluded.

Yagman, long a prominent but controversial civil rights attorney, was ordered disbarred last month as a result of his 2007 conviction for aiding and abetting money laundering, bankruptcy fraud, and tax evasion. Bureau of Prison Records show that he was released from custody in November.

Yagman was represented on appeal by Jonathan B. Cole and David B. Owen. Frear Stephen Schmid and J. Curtis Edmonson represented Colello.

The case is Yagman v. Colello, B223412.


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