Metropolitan News-Enterprise


Friday, January 22, 2021


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Court of Appeal:

Restitution in Criminal Case Can Include Attorney Fees


By a MetNews Staff Writer


The Court of Appeal for this district has affirmed a $221,140.40 award to the financial services giant Charles Schwab & Co., Inc. under the Penal Code’s restitution statute based on moneys it paid to its lawyers in establishing that an independent investment advisor with whom it had contracted, then stopped doing business with, was contacting its employees, in violation of a restraining order.

“Here we decide that victims may recover attorney fees and costs occasioned by a defendant’s criminal conduct,” Presiding Justice Arthur Gilbert of Div. Six said in an opinion that was certified for publication yesterday.

The appellant was Michael Patrick Kelly, whose conviction for false personation and other offenses was affirmed in an opinion by Gilbert on Dec. 3, 2019 in People v. Kelly, B296697. In the present appeal, he contested the restitution award by Ventura Superior Court Judge Gilbert A. Romero.

Representation by Crowther

That award was based on attorney fees and costs paid to the international law firm of Steptoe & Johnson in connection with services of Robin Crowther, a partner in its Los Angeles office.

While denying fees and costs to Schwab relating to obtaining a workplace violence restraining order against Kelly in 2013—based on “a campaign of harassment, threats, and intimidation against Schwab and its employees that is escalating in nature,” according to the petition—Romero did award Schwab what it paid out to establish that Kelly was violating the order.

Kelly contacted Schwab employees using the name of Craig Cross, an actual person with a financial advisory firm. Romero awarded $905.00 to Cross “as reimbursement for attorney’s fees associated with being a victim of identity theft,” which Gilbert’s opinion also upholds.

Penal Code §1202.4

Romero made the awards under Penal Code §1202.4, which declares: “It is the intent of the Legislature that a victim of crime who incurs an economic loss as a result of the commission of a crime shall receive restitution directly from a defendant convicted of that crime.”

Kelly pointed out that the only mention in the statute to attorney fees is to “[a]ctual and reasonable attorney’s fees and other costs of collection accrued by a private entity on behalf of the victim” which, he noted, is inapplicable.

Gilbert said, in an opinion initially filed Dec. 23 and not certified for publication:

“The People respond that the list of examples in the statute is not an exclusive list of economic losses. They claim the trial court could reasonably infer the amounts it awarded were economic losses in the form of attorney fees and costs that were incurred by Schwab and Cross as a direct result of Kelly’s criminal conduct. We agree.”

Full Reimbursement Required

He explained:

“Restitution may include expenses incurred to protect the crime victim from the defendant….Awarding restitution to Schwab because it hired counsel to protect itself from a criminal course of conduct falls within the scope and remedial purpose of section 1202.4….Failure to award them as restitution would be ‘to fail to fully reimburse’ the victim.…That would mean the victim would incur the losses instead of the one whose criminal conduct caused them. These were consequently economic losses that may be awarded as restitution under the statute….”

Gilbert continued:

“Kelly notes these were not attorney fees to collect damages against him. But they were legal fees and costs in response to his on-going criminal conduct. They were more important for the protection of the crime victim’s current safety than merely suing for damages after the fact. They included costs for immediately protecting Schwab from Kelly, investigating his conduct, obtaining evidence, and assisting in the criminal prosecution. A business that is a crime victim, and has incurred ‘out-of-pocket expenses assisting’ law enforcement ‘in the investigation and prosecution’ of the defendant, has incurred ‘economic loss’ and is entitled to restitution.”

The case is People v. Kelly, 2021 S.O.S. 253.

Kelly sued Schwab for terminating a contract in 2011 under which Schwab had conducted trades for Kelly’s clients. When Schwab sought verification from a client of Kelly that the transfer of funds had been authorized by him, Kelly impersonated that client in a phone conversation.

The suit went to arbitration and the arbitrator found in favor of Schwab, ordering Kelly and his firm to pay $35,860 in connection with the arbitration. Ventura Superior Court Judge Rocky J. Baio denied Kelly’s motion to vacate the award and added prejudgment interest of $4,202.96.

Div. Six of the Court of Appeal for this district, in an unpublished opinion by Justice Martin J. Tangeman, last Sept. 28 affirmed the judgment, except as to one aspect.

Kelly had posted videos on YouTube containing confidential matter obtained from Schwab in discovery. The arbitrator ordered that it be removed, assessing sanctions of $300 per day until there was compliance.

Tangeman said the “arbitrator exceeded his authority,” explaining that an arbitrator has no power to enforce judgments.

That case is Kelly v. Charles Schwab & Co., B265826.


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