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California Appellate Court Overturns Award of Attorneys’ Fees on Prevailing Party Grounds – Glass & Goldberg | Financing, Property & Bankruptcy Law
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California Appellate Court Overturns Award of Attorneys’ Fees on Prevailing Party Grounds

California Appellate Court Overturns Award of Attorneys’ Fees on Prevailing Party GroundsA California Court of Appeal has reversed a lower court’s award of more than $1 million in attorneys’ fees and costs to a Beverly Hills attorney who has been in litigation with an ex-client since 1999.

Case Background

Attorney David S. Karton represented William Dougherty in a divorce case in 1996. The attorney’s written retainer, which was signed by Dougherty, required monthly payment of attorneys’ fees with an interest penalty if the fees were not paid on time. Dougherty failed to pay, and Karton sued him in March 1999 for almost $66,000 in unpaid fees, plus interest.

A trial court entered a default judgment against Dougherty for $86,676, which included the principal sum, prejudgment interest and attorneys’ fees and court costs. Karton collected $56,000 on this judgment and then pursued collection against Dougherty in California, Tennessee and Pennsylvania.

Karton filed applications without notice for the award of supplemental attorneys’ fees and interest in April 2003 and February 2007, which brought the total sought against Dougherty to $1.2 million. Both applications were granted. Dougherty then brought a motion for relief, which a Los Angeles Superior Court denied.

Prior Ruling

The Court of Appeal reversed the decision in David S. Karton, A Law Corp. v. Dougherty (2009) 171 Cal.App.4th 133, finding that since the original judgment was more than Karton claimed in his complaint and because subsequent awards that enforced that judgment were given without notice to Dougherty, the judgment was void on its face.

Upon remand, the trial court vacated its judgment and default and sent the dispute to arbitration. Arbitrators ruled that Karton was owed nothing, and ordered Karton to reimburse Dougherty for half of the costs of arbitration ($2,500). Karton requested a trial de novo, which was held before Judge Ralph W. Dau without a jury.

Dau ruled that Karton had collected more than $14,000 more than he was owed, and that Dougherty was due a credit. However, Dau also found that Karton was the prevailing party since Doughtery breached the original contract and he awarded Karton $1.17 million in attorneys’ fees and costs.

Prevailing Party Ruling

Upon appeal, the appellate court said that Dougherty was the prevailing party under Civil Code §1717 and a prior decision in Hsu v. Abbara (1995), which held that when a trial court renders an unqualified decision in favor of the defendant on the sole contract claim in the action, the defendant is the prevailing party. Since the trial court had ruled in Dougherty’s favor on the contract claim, he was the prevailing party. And since Dau awarded Karton nothing on the contract claim, he could not be the prevailing party under Civil Code §1717.

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