Monday, November 17, 2014
C.A. Tosses Million Dollar Fee Award Against Lawyer’s Ex-Client
By KENNETH OFGANG, Staff Writer
This district’s Court of Appeal Friday reversed a judgment in favor of a Beverly Hills attorney for more than $1 million in fees and costs that a Los Angeles Superior Court judge awarded in a dispute with an ex-client.
Div. One ruled that the former client, William Dougherty, was—for purposes of costs and contractual attorney fees—the prevailing party in more than a decade of litigation with attorney David S. Karton. It sent the case back to the trial court with directions to treat Dougherty as the prevailing party and to determine how much Karton must pay him in fees and costs.
Dougherty hired Karton to represent him in a marital dissolution action in June 1996, signing a written retainer agreement requiring him to pay the lawyer’s fees on a monthly basis, and to pay interest if the fees were not paid on time. It further provided that the prevailing party in any action to enforce the agreement would be entitled to legal fees and costs.
In March 1999, Karton sued Dougherty for nearly $66,000 in unpaid fees, plus interest. When the former client failed to respond to the complaint, Karton filed a request for default judgment, asking for $79,349.90, plus $2,446.51 in interest, for a combined total of $81,796.41.
The trial court subsequently entered a default judgment in the principal sum of $65,246.63, plus accrued prejudgment interest of $18,224.82, costs of $679.50 and attorney’s fees of $2,525.93, for a total of $86,676.88.
Karton successfully collected $56,000 on the default judgment within two months of its entry, and then pursued further collection efforts against Dougherty in California, Pennsylvania, and Tennessee.
On April 21, 2003, Karton filed an application in the superior court for an award of supplemental attorney’s fees totaling $252,819.29, and the court granted Karton’s unnoticed request, thereby increasing the principal amount of the judgment to $349,340.45, plus interest of $40,575.24.
The attorney again applied to the court for an award of supplemental attorney’s fees, costs, and interest in February 2007 seeking $1,204,298.30. Again, Karton gave no notice to Dougherty, but the court granted Karton’s fee request.
Dougherty later filed a motion for relief from the February 2007 order, based on Code of Civil Procedure Sec. 473, which Los Angeles Superior Court Judge Helen Bendix denied.
The Court of Appeal reversed in David S. Karton, A Law Corp. v. Dougherty (2009) 171 Cal.App.4th 133, holding that the judgment was void on its face because it awarded more money than the plaintiff claimed on the face of the complaint, and that the subsequent fee awards for enforcing the judgment were void for lack of service on the debtor.
On remand, the trial judge vacated the judgment and default, and—ruling on an issue that Dougherty had raised in the Court of Appeal, but which that court did not resolve—concluded that Dougherty had made a timely demand for arbitration under the Mandatory Fee Arbitration Act.
The arbitrators ruled that Dougherty owed Karton nothing beyond what Karton had already collected, and that Karton should reimburse Dougherty $2,500, representing one-half the arbitration fee. Karton asked for trial de novo, which took place before Judge Ralph W. Dau, sitting without a jury.
Dau ruled that Karton had collected $14,383.30, over and above what he was owed, and that Dougherty was entitled to a credit for that amount, but that Karton was the prevailing party because Dougherty had breached the parties’ contract. He then awarded Karton $1,161,565 in attorney fees and $6,266.56 in other costs.
But Rothschild, again writing for the Court of Appeal, said Dougherty was the prevailing party under Civil Code §1717 and Hsu v. Abbara (1995) 9 Cal.4th 863. The Hsu court held that when the trial court “renders a simple, unqualified decision in favor of the defendant on the only contract claim in the action[,] . . . the defendant, who is unquestionably the sole victor, is the party prevailing on the contract as a matter of law and therefore entitled to reasonable attorney fees under section 1717.”
That was the case here, Rothschild said. “The trial court,” she wrote, “rendered a simple, unqualified decision in favor of Dougherty on the only contract claim in the action—the court expressly determined that Dougherty owed Karton nothing on the contract because Dougherty had fully paid his contractual debt to Karton (with interest)....”
She rejected the argument that Karton was the prevailing party because he had met his “litigation objectives” in collecting what was owed. Hsu, the presiding justice wrote, “requires the trial court to compare the relief awarded on the contract claim or claims with the parties’ demands on those claims and their litigation objectives.”
Because Dau awarded Karton nothing on his contract claim, he could not be the prevailing party on the contract within the meaning of §1717, she said.
Attorneys on appeal were Henry S. David and Dana J. Emmer of The David Firm, and Robert A. Olson and Edward L. Xanders of Greines Martin Stein & Richland, for Karton and Cheryl A. Orr of Musick, Peeler & Garrett and James T. Duff for Dougherty.
The case is David S. Karton, a Law Corporation v. Dougherty, B244231.
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