FAREED CASSIM et al., Plaintiffs and Respondents, v. ALLSTATE INSURANCE COMPANY, Defendant and Appellant.
No. S109711
Supreme Court of California
July 29, 2004
33 Cal. 4th 780
Horvitz & Levy, Peter Abrahams, Nina E. Scholtz; Pollak, Vida & Fisher, Michael M. Pollak and Lawrence J. Sher for Defendant and Appellant.
Greines, Martin, Stein & Richland, Irving H. Greines, Feris M. Greenberger and Robert A. Olson for Truck Insurance Exchange, Farmers Insurance Exchange and Fire Insurance Exchange as Amici Curiae on behalf of Defendant and Appellant.
Dunn Koes, Pamela E. Dunn and Daniel J. Koes for State Farm General Insurance Company and United Services Automobile Association as Amici Curiae on behalf of Defendant and Appellant.
Law Offices of Ian Herzog, Evan D. Marshall, Ian Herzog and Amy Ardell for Plaintiffs and Respondents.
Mannion & Lowe and E. Gerard Mannion for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiffs and Respondents.
OPINION
WERDEGAR, J.—In this case involving an insurance company‘s bad faith, the insureds’ counsel engaged in a line of reasoning during closing argument to which the insurer‘s counsel objected. The trial court overruled the objection, and a verdict for the insureds resulted. A divided Court of Appeal reversed the judgment, finding the closing argument was prejudicial error. We consider on review whether the insureds’ counsel committed misconduct in closing argument and, if so, whether the misconduct was prejudicial. In resolving these issues, we necessarily address the proper standard of review on appeal for attorney misconduct in closing argument. In addition, we consider whether the trial court erred in awarding tort damages under Brandt v. Superior Court (1985) 37 Cal.3d 813 [210 Cal.Rptr. 211, 693 P.2d 796] (Brandt).
We conclude that, assuming the insureds’ counsel committed misconduct in closing argument, no prejudice resulted. We also conclude the trial court‘s decision to award damages pursuant to Brandt was correct, but we must remand the case to the trial court for recalculation of the proper amount.
FACTS
A. The Fire, the Investigation and Allstate‘s Bad Faith
Plaintiffs Fareed and Rashida Cassim (the Cassims) successfully sued defendant Allstate Insurance Company (Allstate) for bad faith in the handling of their insurance claim. As the Cassims were the prevailing parties at trial, we view the evidence, which was conflicting and vigorously contested, in a light most favorable to them, resolving all conflicts in their favor. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053 [68 Cal.Rptr.2d 758, 946 P.2d 427]; Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660 [190 Cal.Rptr. 355, 660 P.2d 813].)
The Cassims purchased a home in Palmdale in 1989 and insured the property against loss with Allstate. In December 1990, a fire later determined to be arson caused damage to the home; although the fire burned only in the master bedroom and the kitchen, the extensive heat, smoke and water damage to the rest of the structure rendered the home uninhabitable. Deborah Birkmeyer, an Allstate representative, met the Cassims at the house, inspected the scene, photographed the damage, and gave the Cassims a check for
The Cassims initially moved to a motel in Palmdale, then to one nearer Fareed‘s job, where they rented two rooms for themselves and their three children. (Rashida was pregnant with a fourth child.) They later moved back to Palmdale, but after renting an unfurnished apartment, buying two mattresses, a television, bedding and towels, and making a mortgage payment on their Palmdale home, the $10,000 ALE was almost exhausted. The Cassims had been in contact with Parker, but Allstate neither offered nor paid any further ALE. Allstate made no settlement offer, although Parker had informed Allstate that his initial estimate for the value of the home‘s lost contents was $40,000 and for repairing the home‘s structural damage was $60,000.
Frustrated by the slow pace in which the matter was being resolved, the Cassims hired Anthony Thompson, a public adjuster, who determined that repairing the Cassims’ home would cost $87,000. Birkmeyer rejected that estimate as inflated, and her supervisor decided to refer the matter to a law firm to have the Cassims submit to an examination under oath (EUO). At this point Allstate began to breach its duty to handle the Cassims’ claim with good faith and fair dealing. Numerous instances were presented to the jury. For example, Birkmeyer stated in a declaration under oath that the Cassims’ home was sparsely furnished, suggesting they were attempting to claim replacement value to which they were not entitled. She later admitted at trial her declaration was incorrect and the home was adequately furnished. Further, although Allstate‘s position was that the Cassims had themselves set the fire1 and there was no sign of forced entry, one of Birkmeyer‘s photographs showed glass debris from a sliding glass door scattered inward into the home, indicating someone had broken in from the outside. Parker testified he never suspected the Cassims set the fire, nor did Birkmeyer or Allstate‘s attorneys ever suggest he investigate that possibility. Gary Fye, plaintiffs’ expert, testified the fire was a “message fire” that was not intended by the arsonist to destroy the home but to instead cause great discomfort to the occupants. (Fareed Cassim is of Iranian descent; Rashida is of Indian descent.) Birkmeyer admitted at trial that, because the Cassims had so little equity in the home, they had little financial incentive to set the fire because any insurance payout would simply benefit the mortgagor.
Rashida paid cash every day for the motel rooms her family occupied after the fire. During this time, the family ate at fast-food establishments and a
Other examples of bad faith relate to how Allstate exploited its knowledge of the Cassims’ perilous financial condition resulting from the exhaustion of the $10,000 ALE payment and the impending foreclosure on their home. Aware of these facts, Allstate unfairly delayed resolving the Cassims’ claim, insisting that small aspects of the case justified the delay. For example, Allstate denied the Cassims’ claim in part because it concluded they had been “materially false with regard to the submission of information concerning the nature and extent of the property claimed,” citing the Cassims’ request for reimbursement for an antique set of china. Allstate asserted “there were no signs that such property existed even though the debris in the cabinet area was sifted in hopes of finding some remnants.” At trial, however, Thompson testified he and Parker (Allstate‘s adjuster) conducted a joint walk-through of the Cassims’ home, videotaping the home‘s interior, and they observed the broken china. (Although Allstate assured Thompson it would give him a copy of the tapes, it never did so.)
Allstate decided it would pay $35,400 for dwelling repair and refused to consider a higher amount, although many estimates were much higher. Allstate informed the Cassims that if they wanted more, they would have to follow through on their previous request for an appraisal. The Cassims, lacking the approximately $10,000 needed to pay for an appraisal and facing imminent foreclosure, eventually accepted Allstate‘s low estimate for the house so they could begin repairs and forestall foreclosure.
The Cassims claimed the amount of their loss for the contents of their house was $43,000; Parker (Allstate‘s adjuster) estimated the loss to be
Rashida Cassim approached Birkmeyer and informed her the mortgage company was going to foreclose on her home and asked whether the claim could be resolved. Birkmeyer told Rashida she would have to fire Thompson, the public adjuster the Cassims had hired, and Birkmeyer gave Rashida instructions on how to do that. After Rashida did as she was instructed, Birkmeyer nevertheless offered no more than the $7,000 already offered and falsely told Rashida that Thompson had already accepted the check for that amount.
In the meantime, the Cassims were evicted from their apartment for nonpayment of rent and lived with relatives for a time. When repairs were finished on their home, they moved back, but subsequently lost the house to foreclosure. Allstate eventually denied their claim on the policy, asserting both that the Cassims had set fire to their own home and that they had been “materially false with regard to the submission of information concerning the cause and origin of this loss and the nature and extent of the property claimed.”
The Cassims filed this suit against Allstate for breaching the implied covenant of good faith and fair dealing in connection with their insurance claim.
B. The Trial Court‘s Comments to the Jury
At the end of the court day on Monday, October 25, 1999, the trial judge gave this admonishment to the jury: “Don‘t talk about the case. Don‘t form any opinions. And we‘ll reconvene then on Wednesday at 8:45 a.m., all right, for a full day, for a full day. Okay. We‘ll see you Wednesday. Only those who want to get credit, come tomorrow.” (Italics added.)
At the end of the day on Wednesday, October 27, 1999, the trial court similarly directed the jury: “No court tomorrow. But I‘m going to allow you to come in and have credit. And we‘ll pick up on Friday morning. Attorneys, I want you here at 8:30. We have a few things we have to talk about. Attorneys at 8:30. Jurors at 8:45. Don‘t talk about the case. Don‘t
C. The Challenged Closing Argument
For this factually complicated case, the closing arguments of counsel comprise several hundred pages in the trial record. During the final argument, Ian Herzog, the Cassims’ counsel, addressed whether Allstate had adequately shown that the Cassims had engaged in intentional misrepresentation by presenting reconstructed receipts for their alternative living expenses following the fire in their home. He said: “Now, let‘s talk about intentional misrepresentation for a second. I think we have a direct analogy to what goes on in this case. Let‘s think of this for a second if you would. Just think, you‘re at a job. You have worked at it real hard. You‘re a good employee. And then a new boss comes along. He doesn‘t like you. Maybe it‘s because of your sex, your race or whatever. And he discharges you. And he wrongfully discharges you. And you go get a lawyer and you sue for wrongful discharge.
“And your employer does what Allstate has done here is they look under every rock you were ever under. Look for every skeleton, everything in your life that they can use. And they go and they do a check and they say, oh, you were on jury duty in a case called Cassim. Okay. And they say you were supposed to be on jury duty but there‘s a couple days in which there wasn‘t court, but you said you were on jury duty and we paid you. That‘s a misrepresentation.
“[Defense Counsel Pollak]: Your Honor, I‘m going to object. This is improper argument.
“Mr. Herzog: I don‘t think so.
“Mr. Herzog: And they will take something, like Allstate has done here, the mortgage file or whatever, it‘s even worse, what they‘ve done here and say we have grounds now to fire you because you misrepresented about you being on jury duty on certain days and you got paid when you really weren‘t.
“And you say but, but, but Judge Cherness said it was okay. He says what I was doing was appropriate. And he says, no, you intentionally misrepresented. I didn‘t misrepresent anything. I thought that was the right thing to do.
“She said I didn‘t [mis]represent anything. I was relying on Tony Thompson [the public adjuster]. I thought it was the right thing to do. I didn‘t intend to fool anybody.
“And your whole career, bang you‘re out.
“Isn‘t that what they‘ve done here? They want to put an artificial standard on what is meant by intentional misrepresentation, a standard that would apply in a courtroom setting like this that we would never apply to ourselves. That we would not think that anything was intentional or wrong in that regard.
“But in trying to carry their burden of proof when they have this kind of flimsy . . . evidence, when they haven‘t done what they should have done and they‘re doing the lawyers’ thing. They will have you now crucify these people with an extraordinary artificial interpretation of what is intentional misrepresentation and that is not fair.” (Italics added.)
D. The Jury Instructions and Special Verdicts
Before closing argument, the trial court delivered most of the jury instructions. In particular, the court instructed the jury:
“The defendant has the burden of proving by a preponderance of the evidence all the facts necessary to establish:
“1. Plaintiffs set fire to their home.
“2. Plaintiffs made intentional material misrepresentations to defendant in the presentation of their claims.
“3. Plaintiffs breached the implied covenant of good faith and fair dealing.
As to Allstate‘s defense, the trial court delivered these instructions:
“Allstate has asserted a defense of intentional material misrepresentation by the plaintiffs.
“A misrepresentation is material if it concerns a subject reasonably relevant to the insurer‘s investigation and a reasonable insurer would attach importance to the fact misrepresented.
“Mere over-evaluation does not void a claim on a fire policy under a fraud and false swearing provision, because there must be deliberate over-statement with intent to deceive.
“An insured‘s over-valuing a fire loss due to mere opinion, mistake or error of judgment regarding quality, value or authenticity will not defeat an insured‘s recovery.
“An insured is bound by any intentional, material misrepresentation his or her agent made to the insured‘s insurance company whether or not the insured knew the agent made the misrepresentation.
“If you find there is contributory breach of the duty of good faith and fair dealing on the part of plaintiffs themselves which, combining with a breach of the duty of good faith and fair dealing by the defendants contributes as a legal cause in bringing about their injury, such contributory breach will result in a reduction of plaintiffs’ recovery in an amount proportionate to plaintiffs’ alleged bad faith. This will be calculated based upon your findings in the special verdict form.”
Following closing arguments by both sides, the trial court gave its final instructions, including this one: “I‘ve not intended by anything I‘ve said or done or by any questions I‘ve asked to suggest how you should decide the questions of fact, or that I believe or disbelieve any witness. If anything I‘ve done or said seemed to so indicate, you must disregard it and form your own opinion.
“The purpose of the court‘s instructions is to instruct you in the applicable law so you may arrive at a just and lawful verdict. Whether some instructions apply will depend on what you find to be the facts. Even though I‘ve
After a 38-day trial, the jury returned a series of special verdicts, specifically finding that plaintiffs had made no intentional material misrepresentations with respect to the claim on their policy, they did not set fire to their own home, Allstate had breached the implied covenant of good faith and fair dealing, plaintiffs did not breach the covenant, and Allstate was responsible for 100 percent of the comparative bad faith. The jury awarded $1,797,300 in compensatory damages each to Fareed and Rashida Cassim. In addition, finding Allstate acted with oppression, fraud or malice, the jury also jointly awarded the Cassims $5 million in punitive damages.3 The parties having stipulated to have the trial court sit as the trier of fact for the award, if any, of damages under Brandt, supra, 37 Cal.3d 813, the trial court awarded the Cassims $1,193,533 in Brandt fees.
In a split decision, the Court of Appeal reversed the judgment. The appellate court found Herzog‘s argument constituted prejudicial misconduct requiring reversal. One justice dissented, finding any misconduct was harmless. We granted review.
DISCUSSION
A. Waiver
At the outset, the Cassims suggest Allstate failed to preserve its claim of attorney misconduct because, although it objected during counsel‘s closing argument, it did not request the jury be admonished. An admonition would have been curative in this case, they argue, because the claim of misconduct is premised on the jury‘s drawing improper inferences from the challenged line of argument, and a timely admonishment could have dispelled any misunderstanding.
We disagree Allstate forfeited the issue. “Generally, to preserve for appeal an instance of misconduct of counsel in the presence of the jury, an objection must have been lodged at trial.” (Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739, 761 [161 Cal.Rptr. 322].) In addition to objecting, a litigant faced with opposing counsel‘s misconduct must also “move for a mistrial or seek a curative admonition” (Neumann v. Bishop (1976) 59 Cal.App.3d 451, 468 [130 Cal.Rptr. 786]) unless the misconduct is so persistent that an
The latter rule applies in this case. Herzog, the Cassims’ counsel, raised in his closing argument the subject of the trial court‘s direction that jurors sign in on days when court was not in session. Pollak, Allstate‘s counsel, objected immediately, but the trial court summarily overruled his objection, giving him no opportunity to request a curative admonition. Herzog then continued with this challenged line of argument. As in the case of People v. Hall (2000) 82 Cal.App.4th 813, 817 [98 Cal.Rptr.2d 527], plaintiffs “[do] not explain how the court might have been persuaded to give a curative admonition since it found the objection meritless.” (Id. at p. 817.) Under the circumstances, we find defendant Allstate had no opportunity to request the jury be admonished, and its timely objection was thus sufficient to preserve the issue for our review.
B. Attorney Misconduct in Closing Argument
When presentation of the evidence is concluded in a civil trial, “unless the case is submitted to the jury on either side or on both sides without argument, the plaintiff must commence and may conclude the argument.” (
An attorney who exceeds this wide latitude commits misconduct. For example, “[w]hile a counsel in summing up may indulge in all fair arguments in favor of his client‘s case, he may not assume facts not in evidence or invite the jury to speculate as to unsupported inferences.” (Malkasian v. Irwin (1964) 61 Cal.2d 738, 747 [40 Cal.Rptr. 78, 394 P.2d 822].) Nor may counsel properly make personally insulting or derogatory remarks directed at opposing counsel or impugn counsel‘s motives or character. (Garden Grove School Dist. v. Hendler (1965) 63 Cal.2d 141, 143 [45 Cal.Rptr. 313, 403 P.2d 721].) Additional examples abound; these are but a few. (See 7 Witkin, Cal. Procedure (4th ed. 1997) Trial, § 227, p. 260 et seq.)
Allstate contends Herzog‘s reference to the trial court‘s permitting jurors to claim unearned service credit constituted misconduct in two respects. First, Allstate claims counsel‘s argument was an improper appeal to the jurors’ self-interest. Second, Allstate claims counsel suggested the manner in which the Cassims documented their alleged fire losses and postfire living expenses had judicial approval.
1. Appealing to the jury‘s self-interest
An attorney‘s appeal in closing argument to the jurors’ self-interest is improper and thus is misconduct because such arguments tend to undermine the jury‘s impartiality. (People v. Pitts (1990) 223 Cal.App.3d 606, 696 [273 Cal.Rptr. 757] [“it is improper to appeal to the self-interest of jurors or to urge them to view the case from a personal point of view“].) For example, in Du Jardin v. City of Oxnard (1995) 38 Cal.App.4th 174 [45 Cal.Rptr.2d 48], the city delivered a dumpster to the local school district. The dumpster had a dangerous hole in the floor, which district employees saw but did not fix. The plaintiff, a maintenance worker for the district, sued the city after he was injured when he accidentally stepped into the hole. In closing argument, the city‘s attorney argued that ” ‘[w]hen a public agency, be it a school or a library or a hospital is held liable for the admittedly negligent conduct of other people [presumably referring to the school district‘s employees], we just have to sit back and start counting the public services that will disappear when we hold a public entity liable for the negligence of other persons.’ ” (Id. at p. 177.) The Court of Appeal held this argument was misconduct: “Counsel had appealed directly to the jurors’ personal passions and prejudices. This is not a situation where remarks were focused on some corporate entity or on a litigant. Instead, these salvos struck at the heart of the jurors’ pocketbooks.” (Id. at p. 179.)
Contrary to Allstate‘s contentions, Herzog‘s argument did not appeal to the jurors’ personal self-interest. Unlike in the cases cited above, nothing in the challenged argument suggested the jurors were themselves personally or financially at risk if they returned a verdict in Allstate‘s favor. The argument implied neither that a verdict for Allstate would somehow invalidate the trial court‘s direction that jurors could sign in for service on days when no court session was scheduled nor that a judgment for Allstate would render the jurors personally liable for defrauding their employers were they to do as the court had suggested. This case is thus distinguishable from Du Jardin v. City of Oxnard, supra, 38 Cal.App.4th 174, where the argument in question suggested a verdict for the city would result in reduced public services for all (including the jurors), and from Graziadio, supra, 231 Cal.App.2d 525, where the argument suggested the jury should not be overly generous in awarding compensation because the money ultimately would come from taxpayers such as themselves.
The Court of Appeal below did not directly address the concern of juror self-interest, but instead construed Allstate‘s contention to be that Herzog‘s argument was an impermissible variant of the so-called golden rule argument, in which counsel asks jurors to put themselves in the plaintiff‘s shoes and ask what compensation they would personally expect. (See Beagle v. Vasold (1966) 65 Cal.2d 166, 182, fn. 11 [53 Cal.Rptr. 129, 417 P.2d 673]; Loth v. Truck-A-Way Corp. (1998) 60 Cal.App.4th 757, 765 [70 Cal.Rptr.2d 571].)4 The Court of Appeal found that, by his argument, plaintiff‘s counsel “placed at least some of the jurors in the shoes of the Cassims when he thinly intimated they [the jurors] had committed a fraud by not going to work while collecting pay on days when the court was not in session. Counsel knowingly exploited the fact that many employers would have refused to pay for jury
The appellate court thus found Herzog had improperly suggested that if the Cassims had intentionally misrepresented their living expenses, the jurors who had signed in for jury service when court was not in session had engaged in similar misrepresentation. The evil of such argument is that it risks converting the jurors from impartial decision makers into personal partisans. As one appellate court explained: “The appeal to a juror to exercise his subjective judgment rather than an impartial judgment predicated on the evidence cannot be condoned. It tends to denigrate the jurors’ oath to well and truly try the issue and render a true verdict according to the evidence. (
Although Herzog‘s argument, perhaps ill advisedly, asked the jurors to consider their personal experience in the courtroom in reaching their verdict, the argument could not have converted them into “partisan advocate[s]” for the Cassims. The clear point of the argument was that people do not commit the type of “intentional misrepresentation” that would void an insurance policy if they misrepresent something at the direction of someone in authority (presumably, in this case, invoking plaintiffs’ reliance on Thompson‘s advice that they reconstruct living expense receipts as best they could). Herzog never urged the jurors to put themselves in the Cassims’ position or to view the case from the Cassims’ personal perspective. We thus find the disputed argument was not improper for either appealing to the jurors’ self-interest or urging them to decide the case subjectively rather than objectively.
2. Suggesting judicial approval
The Court of Appeal found Herzog‘s argument was misconduct for a second reason. Relying on Sanguinetti v. Moore Dry Dock Co. (1951) 36 Cal.2d 812 [228 P.2d 557] (Sanguinetti), the appellate court concluded Herzog had committed misconduct by arguing the Cassims’ asserted misrepresentations in their claims of losses and living expenses were equivalent to the misrepresentations the trial court condoned when it authorized jurors to claim credit for days when no court sessions took place. As the Court of Appeal majority reasoned: “Here, in a case where fraud in an insurance claim
As the appellate court recognized, Sanguinetti, supra, 36 Cal.2d 812, provides a useful precedent. In that case, the plaintiff sued to recover for injuries he suffered while working on the defendant‘s tugboat. At the close of the plaintiff‘s case, his attorney moved in the presence of the jury to increase the prayer for damages from $50,000 to $75,000. After argument by the parties outside the jury‘s presence, the trial court granted the motion. The defendant then moved for a mistrial, claiming the plaintiff‘s counsel had committed misconduct by moving to increase the damages in front of the jury. The trial court denied the motion. After both sides rested, the trial court instructed the jury that damages could not be in excess of $75,000. The jury returned a verdict for the plaintiff in the amount of $75,000. (Id. at pp. 815-816.)
This court reversed and remanded for a new trial. While admitting that no direct California authority prohibited the practice, we held that moving before the jury, after the production of evidence, to increase the prayer for damages “should be unhesitantly condemned and stricken down.” (Sanguinetti, supra, 36 Cal.2d at p. 819.) We explained that if the trial court grants such a motion, the implied message is that the trial court believes the increased damages are warranted by the evidence. Because the trial court‘s views would necessarily have undue weight with the jury, implying the trial court approves of some portion of a litigant‘s case is improper. (Cf. People v. Carpenter (1997) 15 Cal.4th 312, 353 [63 Cal.Rptr.2d 1, 935 P.2d 708] [trial court commits misconduct if, by its remarks, it “create[s] the impression it is allying itself with the prosecution“].)
The Court of Appeal in Neumann v. Bishop, supra, 59 Cal.App.3d 451, cited Sanguinetti, supra, 36 Cal.2d 812, with approval. In closing argument in Neumann, the plaintiff‘s attorney suggested the superior court would not have accepted his lawsuit for filing unless the amount of damages prayed for had qualified for the monetary jurisdiction of the court. (Neumann, supra, at p. 486.) In addition, counsel implied that the trial court had approved or endorsed the testimony of his expert witnesses; in fact, the court had simply approved his right to present such experts. (Ibid.) The appellate court found the plaintiff‘s counsel had committed misconduct in his argument because “it
As the appellate court recognized, Sanguinetti, supra, 36 Cal.2d 812, provides a useful precedent. In that case, the plaintiff sued to recover for injuries he suffered while working on the defendant‘s tugboat. At the close of the plaintiff‘s case, his attorney moved in the presence of the jury to increase the prayer for damages from $50,000 to $75,000. After argument by the parties outside the jury‘s presence, the trial court granted the motion. The defendant then moved for a mistrial, claiming the plaintiff‘s counsel had committed misconduct by moving to increase the damages in front of the jury. The trial court denied the motion. After both sides rested, the trial court instructed the jury that damages could not be in excess of $75,000. The jury returned a verdict for the plaintiff in the amount of $75,000. (Id. at pp. 815-816.)
This court reversed and remanded for a new trial. While admitting that no direct California authority prohibited the practice, we held that moving before the jury, after the production of evidence, to increase the prayer for damages “should be unhesitantly condemned and stricken down.” (Sanguinetti, supra, 36 Cal.2d at p. 819.) We explained that if the trial court grants such a motion, the implied message is that the trial court believes the increased damages are warranted by the evidence. Because the trial court‘s views would necessarily have undue weight with the jury, implying the trial court approves of some portion of a litigant‘s case is improper. (Cf. People v. Carpenter (1997) 15 Cal.4th 312, 353 [63 Cal.Rptr.2d 1, 935 P.2d 708] [trial court commits misconduct if, by its remarks, it “create[s] the impression it is allying itself with the prosecution“].)
The Court of Appeal in Neumann v. Bishop, supra, 59 Cal.App.3d 451, cited Sanguinetti, supra, 36 Cal.2d 812, with approval. In closing argument in Neumann, the plaintiff‘s attorney suggested the superior court would not have accepted his lawsuit for filing unless the amount of damages prayed for had qualified for the monetary jurisdiction of the court. (Neumann, supra, at p. 486.) In addition, counsel implied that the trial court had approved or endorsed the testimony of his expert witnesses; in fact, the court had simply approved his right to present such experts. (Ibid.) The appellate court found the plaintiff‘s counsel had committed misconduct in his argument because “it
The reasoning of Sanguinetti, supra, 36 Cal.2d 812, and Neumann v. Bishop, supra, 59 Cal.App.3d 451, suggests plaintiffs’ counsel may have ventured into improper argument by implying the trial court had endorsed the Cassims’ alleged misrepresentation in presenting Allstate with reconstructed and allegedly inflated receipts for their living expenses. Such endorsement could be inferred, Herzog arguably implied, because any misrepresentation by the Cassims was analogous to the court-approved practice of jurors falsely signing in for jury service. However, we need not decide whether Herzog improperly suggested his clients’ actions had judicial approval because, as we explain below, even if he did commit misconduct,5 it was harmless.
C. Prejudice
Our state Constitution provides that “[n]o judgment shall be set aside, or new trial granted, in any cause, . . . for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.” (
The phrase “miscarriage of justice” has a settled meaning in our law, having been explained in the seminal case of People v. Watson (1956) 46 Cal.2d 818 [299 P.2d 243] (Watson). Thus, “a ‘miscarriage of justice’ should be declared only when the court, ‘after an examination of the entire cause, including the evidence,’ is of the ‘opinion’ that it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.” (Id. at p. 836.) “We have made clear that a ‘probability’ in this context does not mean more likely than not, but merely a reasonable chance, more than an abstract possibility.” (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 715 [34 Cal.Rptr.2d 898, 882 P.2d 894].)
Conversely, we also have cited the Watson standard in finding that state law error required reversal of the judgment and a new trial. (See, e.g., People v. Ortiz (1978) 22 Cal.3d 38, 48 [148 Cal.Rptr. 588, 583 P.2d 113] [denial of severance]; People v. Dewberry (1959) 51 Cal.2d 548, 557-558 [334 P.2d 852] [failure to instruct jury that if a reasonable doubt exists between a greater and lesser offense, a verdict for the lesser is required].) Misconduct in closing argument can, depending on the circumstances, require reversal of a criminal judgment. (People v. Herring (1993) 20 Cal.App.4th 1066, 1073-1077 [25 Cal.Rptr.2d 213] [unsupported reference to defendant‘s character and personal attack on integrity of defense counsel]; see also People v. Hill, supra, 17 Cal.4th at pp. 823-844 [reversal for pervasive prosecutorial misconduct, including misconduct during closing argument].)
Although the Watson standard is most frequently applied in criminal cases, it applies in civil cases as well. For example, we cited Watson, supra, 46 Cal.2d 818, with approval in Soule v. General Motors Corp. (1994) 8 Cal.4th 548 [34 Cal.Rptr.2d 607, 882 P.2d 298], where we explained that
As in criminal cases, misconduct by counsel in closing argument in civil cases can constitute prejudicial error entitling the aggrieved party to reversal of the judgment and a new trial. “It is . . . well settled that misconduct [by counsel] has often taken the form of improper argument to the jury, such as by urging facts not justified by the record or suggesting that the jury may resort to speculation (Malkasian v. Irwin, supra, 61 Cal.2d 738, 747); by informing the jury that an injured party has been compensated by a codefendant (Tobler v. Chapman (1973) 31 Cal.App.3d 568, 575 [107 Cal.Rptr. 614]); and by informing the jury of an offer of settlement and compromise (Granville v. Parsons (1968) 259 Cal.App.2d 298, 304 [66 Cal.Rptr. 149]).” (City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 870 [135 Cal.Rptr. 647, 558 P.2d 545].)
Accordingly, we must determine whether it is reasonably probable Allstate would have achieved a more favorable result in the absence of that portion of Herzog‘s closing argument now challenged. Examining the entire case, including the evidence adduced, the instructions delivered to the jury, and the entirety of Herzog‘s argument, we conclude any suggestion on his part that the trial court approved of his construction of the term “intentional misrepresentation,” even if misconduct, was harmless. To begin with, the offending argument was fleeting, comprising just two sentences in the reporter‘s
It is true, as the Court of Appeal majority observed, that “there is no inherent requirement that the misconduct be of a continuous nature” and that a single instance of misconduct can justify reversal. For example, in Hoffman v. Brandt (1966) 65 Cal.2d 549 [55 Cal.Rptr. 417, 421 P.2d 425], this court reversed the judgment for essentially a single comment, made before the jury, that a verdict for the plaintiff would force the defendant, an elderly man, into a home for the indigent. Certainly the improper revelation of strongly prejudicial information from outside the record, such as the defendant having compromised with a third party to an accident (Brown v. Pacific Electric Ry. Co. (1947) 79 Cal.App.2d 613 [180 P.2d 424]), or the defendant being insured (Swift v. Winkler (1957) 148 Cal.App.2d 927 [307 P.2d 666]), can, under some circumstances, alone require reversal. Nevertheless, that a single instance of attorney misconduct during closing argument could, standing alone, theoretically justify reversal does not mean Herzog‘s arguments rose to this level. As noted, his reference to the trial court‘s approval of the jury sign-in procedure was brief. Nor did he directly or explicitly ask the jury to draw the conclusion of judicial approval, leaving the linkage merely implied. Such indirect comments, even if improper, are generally found harmless. (Cf. People v. Boyette (2002) 29 Cal.4th 381, 455-456 [127 Cal.Rptr.2d 544, 58 P.3d 391] [“’ [I]ndirect, brief and mild references to a defendant‘s failure to testify, without any suggestion that an inference of guilt be drawn therefrom, are uniformly held to constitute harmless error‘“]; accord, People v. Bradford (1997) 15 Cal.4th 1229, 1340 [65 Cal.Rptr.2d 145, 939 P.2d 259].) Such misconduct is far from the type of bombshell revelation that could, standing alone, require reversal.
In addition to the brevity and obliqueness of the challenged comments, we also consider the ameliorating effect of the trial court‘s instructions to the jury to guide its decisionmaking. Absent some contrary indication in the record, we presume the jury follows its instructions (NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1223 [86 Cal.Rptr.2d 778, 980 P.2d 337]; People v. Hardy (1992) 2 Cal.4th 86, 208 [5 Cal.Rptr.2d 796, 825 P.2d 781]) “and that its verdict reflects the legal
Of further significance is that the trial court instructed the jury not to take its cue from anything the trial court may have suggested or implied. (See BAJI Nos. 15.20, 15.21.)8 From this instruction, we can infer that although Herzog suggested to the jury that the trial court condoned the Cassims’ actions, the jury would have declined the suggestion and instead focused on the evidence. An analogous situation was presented in Gist v. French (1955) 136 Cal.App.2d 247 [288 P.2d 1003].9 In that case, involving a claim of medical malpractice, the defendant physician‘s attorney questioned the plaintiff‘s medical expert witness, focusing on the fact he was from outside the
In like fashion, to the extent Herzog‘s argument encouraged the jury to view the trial court‘s approval of the jury sign-in procedure as somehow indicating its approval of the Cassims’ actions, the court‘s delivery of BAJI No. 15.21 would have dispelled any improper inference. (See People v. Proctor (1992) 4 Cal.4th 499, 543 [15 Cal.Rptr.2d 340, 842 P.2d 1100] [BAJI No. 15.21]; Neumann v. Bishop, supra, 59 Cal.App.3d at p. 486 [BAJI No. 15.20].)
Considering the brevity and indirect nature of the challenged argument, together with the court‘s jury instructions (a) explaining the meaning of an “intentional misrepresentation” and (b) cautioning the jury not to take its cue from the trial court‘s actions or comments, we conclude Herzog‘s argument referring to the trial court‘s direction, even if misconduct, did not result in a miscarriage of justice under
D. Attorney Fees Under Brandt v. Superior Court
The jury awarded the Cassims a combined $3,594,600 in compensatory damages and $5 million in punitive damages. Before the verdict, the parties stipulated that the trial court, sitting as a trier of fact, would separately decide the issue of Brandt fees, that is, the amount of attorney fees payable as damages. (Brandt, supra, 37 Cal.3d 813.) Thereafter the trial court, without explanation, awarded plaintiffs $1,193,533 in Brandt fees. Allstate contends the trial court erred by calculating the Brandt fees as a percentage of the entire compensatory damage award, rather than as a percentage of only that portion of the award that represented lost benefits on the insurance policy. We conclude Allstate is incorrect, but because the trial court‘s decision is not supported by substantial evidence, it abused its discretion in awarding as much in Brandt fees as it did.
In Brandt, this court established a notable exception to this rule for insurance bad faith cases. We explained that if an insurer fails to act fairly and in good faith when discharging its responsibilities concerning an insurance contract, such breach may result in tort liability for proximately caused damages. Those damages can include the insured‘s cost to hire an attorney to vindicate the insured‘s legal rights under the insurance policy. “When an insurer‘s tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits due under a policy, it follows that the insurer should be liable in a tort action for that expense. The attorney‘s fees are an economic loss—damages—proximately caused by the tort. [Citation.] These fees must be distinguished from recovery of attorney‘s fees qua attorney‘s fees, such as those attributable to the bringing of the bad faith action itself. What we consider here is attorney‘s fees that are recoverable as damages resulting from a tort in the same way that medical fees would be part of the damages in a personal injury action.” (Brandt, supra, 37 Cal.3d at p. 817.)
Brandt distinguished the limitation set forth in
Because, however, entitlement to attorney fees as compensatory damages is premised on an insured‘s need to hire an attorney to vindicate his or her contractual rights under an insurance policy, we placed a critical limitation on the amount of fees recoverable. “The fees recoverable, however, may not exceed the amount attributable to the attorney‘s efforts to obtain the rejected payment due on the insurance contract. Fees attributable to obtaining any portion of the plaintiff‘s award which exceeds the amount due under the policy are not recoverable.” (Brandt, supra, 37 Cal.3d at p. 819, italics added.) As if to underscore this point, we immediately thereafter explained that the calculation of fees was best done by the trial court sitting as trier of fact, after the jury had reached its verdict. (Id. at pp. 819-820.) If the issue is submitted to the jury, however, “the court should instruct along the following lines: ‘If you find (1) that the plaintiff is entitled to recover on his cause of action for breach of the implied covenant of good faith and fair dealing, and (2) that because of such breach it was reasonably necessary for the plaintiff to employ the services of an attorney to collect the benefits due under the policy, then and only then is the plaintiff entitled to an award for attorney‘s fees incurred to obtain the policy benefits, which award must not include attorney‘s fees incurred to recover any other portion of the verdict.‘” (Id. at p. 820, italics added.)
The Cassims agreed to pay their attorney a 40 percent contingency fee, that is, 40 percent of all sums recovered. Nothing in the contingent fee agreement differentiated between recovery on the contract and recovery on the tort, or between compensatory damages and punitive damages. The amount due on their insurance policy apparently was $40,856.40.11 According to Allstate, the Brandt fees therefore should have been 40 percent of $40,856.40, or $16,342.56. By contrast, plaintiffs argue the Brandt fees awarded by the trial court were correct. As they argued to the trial court, “[a]ll of the causes of action and all of the defenses were inextricably bound in the litigation as Allstate has always taken the position that the policy was void because of its allegations that the Plaintiffs had committed arson and fraud. These defenses, if established, would defeat any obligation to pay on the insurance policy and the Plaintiffs would never have received any policy benefits at all.” Plaintiffs’
Brandt, supra, 37 Cal.3d 813, does not disclose whether the plaintiff in that case had a contingent or an hourly fee arrangement and thus provides no express direction on how to calculate Brandt fees in a contingent fee case. Nevertheless, we reject both proffered methods of calculation. Although Allstate argues that Brandt fees should be limited to 40 percent of the recovery on the contract, that method of calculation is flawed. First, it is premised on the assumption that when plaintiffs agreed to pay a 40 percent contingent fee, they were agreeing to pay separately 40 percent of the contract recovery and 40 percent of the tort recovery. From this unstated and unsupported premise, Allstate reasons that plaintiffs paid their attorney only $16,342.56 (40 percent of $40,856.40) to recover on the contract. More accurate, however, is to say that plaintiffs agreed, as is generally the case, to pay their attorney an unallocated and undifferentiated 40 percent of their total recovery, whatever that might be. To conclude that to obtain a $40,856.40 contract recovery plaintiffs are out of pocket precisely $16,342.56, no more and no less, is therefore a fiction.
To be sure, had the jury failed to return a verdict on any of the tort causes of action, plaintiffs would have been out of pocket exactly 40 percent of the contract recovery.12 (Of course, without a tort judgment, there could be no Brandt fees.) But here the jury found Allstate‘s actions tortious and awarded plaintiffs both contract and tort compensatory damages. Plaintiffs, in turn, were obligated to pay a percentage of the total compensatory damages judgment as an attorney fee. If plaintiffs can prove that some portion of that fee was for legal work solely or partially attributable to the contract, failure to reimburse plaintiffs for that out-of-pocket expense would necessarily result in a diminution of their policy benefits.
Campbell v. Cal-Gard Surety Services, Inc., supra, 62 Cal.App.4th 563 (Campbell), is illustrative. In that case, the insurer promised to pay the insured $2,500 if her car was stolen while equipped with a certain antitheft system. When the insured made a claim after her car was stolen despite the antitheft system, the insurer failed to pay. The insured sued on the contract and for bad faith; she recovered $2,500 on the contract, $7,288 for emotional distress, and $64,417 in punitive damages. (Id. at p. 569.) The trial court denied her Brandt fees, but the Court of Appeal reversed. Because the insured documented that the amount of attorney fees attributable to the contract cause of action was $13,010, and the defendant did not contest the amount, the appellate court directed the trial court, on remand, to enter an order awarding her that amount. (Id. at pp. 572, 575.)
The appellate court in Campbell correctly awarded Brandt fees in an amount greater than the benefits owing under the contract. The key question is how much did it cost the insured—how much were her damages—to hire an attorney when her insurer acted in bad faith and denied the benefits due her under her policy. As the appellate court held: “At trial she documented that amount to be $13,010. [Her insurer] did not challenge the reasonableness of the amount.” (Campbell, supra, 62 Cal.App.4th at p. 572.) Had the court limited the recoverable Brandt fees to a set percentage of the contract recovery, the plaintiff in Campbell would not have received the full measure of her policy benefits.13
Theoretically, the opposite could also be true. That is, the amount of legal fees attributable to the contract might be less than 40 percent of the contract recovery. Were we to preclude defendant Allstate from attempting to prove the damages flowing from its breach were less than 40 percent of the contract recovery, we arguably would deprive it of important rights as well.
Focus on the work plaintiffs’ attorney did in this case, what Brandt termed “the attorney‘s efforts” (Brandt, supra, 37 Cal.3d at p. 819), is thus relevant, but not because he is deserving of some fair measure of compensation for his work. In agreeing to a contingent fee arrangement, he accepted the risk that the recovery would be small or nonexistent. Focus on the attorney‘s work is relevant instead because, plaintiffs having received a sizeable tort recovery, the 40 percent contingent fee they were required to pay their attorney was also sizeable. To the extent some portion of that legal fee represents legal work that was related to both the tort and the contract recoveries and was thus at least partially “attributable to the attorney‘s efforts to obtain the rejected payment due on the insurance contract” (ibid., italics added), failure to reimburse plaintiffs for a portion of that shared amount would necessarily diminish their contract recovery and violate Brandt‘s premise that plaintiffs should recover, as tort damages, the legal fees incurred to recover their policy benefits. Accordingly, we reject Allstate‘s argument that Brandt fees in this case should have been limited to 40 percent of the benefits owing under the contract.
Our conclusion does not necessarily mean the trial court‘s award to plaintiffs of over $1 million in Brandt fees was correct. The parties apparently agreed to submit the matter on their pleadings, and the trial court made no findings in ruling for plaintiffs. Nothing in the record indicates how the trial court arrived at its figure, although the amount is roughly equal to 33-1/3
Permitting plaintiffs, however, in a mixed contract/tort case, to recover the majority of their attorney fees attributable to the entire compensatory damages award (here, about 83 percent of those fees), is inconsistent with the premise of our decision in Brandt, supra, 37 Cal.3d 813. Beginning with the general rule that parties are expected to shoulder their own legal fees, we recognized in Brandt only a limited exception to that rule. We have no doubt that many bad faith insurance cases involve an identity of several issues, requiring counsel to work simultaneously on tort and contract issues. (See Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, ¶ 13:129, p. 13-28 [“The attorney‘s efforts are often directed at both the contract and bad faith claims“].) Nevertheless, the premise of our decision in Brandt is that a plaintiff is entitled to only a portion of the overall legal fees as damages. As one treatise author advises, if an attorney spends time “in pursuit of both contract and extracontractual claims simultaneously, plaintiff should be entitled to a portion of any nonsegregated fees and costs for pursuing these joint claims.” (Id., ¶ 13:135, p. 13-29, italics added.) Thus, to the extent some overlap in legal work occurs, the trial court should exercise its discretion to apportion the fees.
Moreover, that virtually all of the legal work in this case was indivisibly attributable to both the contract and tort causes of action seems unlikely. For example, common sense suggests that fees attributable to legal work relevant to establishing the existence and valuation of the emotional distress the Cassims suffered as a result of Allstate‘s bad faith are fairly apportionable to only the tort causes of action and are thus not properly includable in the Brandt fees. Other issues, such as the reason for the low estimate for the replacement value of the lost home furnishings and Birkmeyer‘s insistence that the Cassims fire Thompson as a condition of receiving a settlement, also seem relevant only to the bad faith cause of action.
Having found fault with the methods of calculating Brandt fees proffered by both parties, we turn to explaining the proper method of calculating such damages in a contingent fee context. This method requires
To determine the percentage of the legal fees attributable to the contract recovery, the trial court should determine the total number of hours an attorney spent on the case and then determine how many hours were spent working exclusively on the contract recovery. Hours spent working on issues jointly related to both the tort and contract should be apportioned, with some hours assigned to the contract and some to the tort. This latter figure, added to the hours spent on the contract alone, when divided by the total number of hours worked, should provide the appropriate percentage.
An example of this calculation, with numbers similar to the instant case, illustrates the point. Suppose the compensatory damages are $3,594,000. Suppose further that the attorney and the client have a 40 percent contingent fee agreement. The total legal fee for the compensatory award is thus 40 percent of $3,594,000, or $1,437,600. Now suppose counsel spent 1,500 hours on the case, and can prove this breakdown: 200 hours on issues related solely to the contract, 500 hours on issues relevant to both the contract and the tort, and 800 hours on issues related solely to the tort. The trial court could reasonably conclude that half the hours spent on the joint contract/tort issues are fairly attributable to the contract (i.e., half of 500 hours, or 250 hours), and thus 30 percent of the hours worked (200 hours plus 250 hours, divided by 1,500 total hours) is attributable to the contract recovery. Thirty percent of the total legal fee (30 percent of $1,437,600) is $431,280. This is the amount a trial court should award as Brandt fees in this hypothetical situation.15
Second, trial courts retain discretion to disregard fee agreements that appear designed to manipulate the calculation of Brandt fees to the plaintiff‘s benefit. For example, a client who enters a fee agreement in an insurance bad faith case in which an attorney will take 40 percent of the entire compensatory damage award as his fee for working to obtain the contract recovery, and agrees to work on the tort recovery pro bono, cannot expect to receive Brandt fees of 40 percent of the entire compensatory award.
Because the record fails to indicate that the trial court apportioned legal fees to ensure that the Brandt fee award reflected only those fees “attributable to the attorney‘s efforts to obtain the rejected payment due on the insurance contract” (Brandt, supra, 37 Cal.3d at p. 819), we conclude the court abused its discretion.
Conclusion
The judgment of the Court of Appeal is reversed. As Allstate raised a number of legal issues left unresolved by the appellate court‘s reversal, the cause is transferred back to that court for further consideration. Should the appellate court find no other reversible error, it is directed to remand the case to the trial court and direct it to hold a new hearing on the proper apportionment of Brandt fees in accordance with the views stated herein.
George, C. J., Kennard, J., and Moreno, J., concurred.
This complicated yet uncertain method of calculation, which must nonetheless be applied every time an insured prevails on a claim of a breach of the implied covenant of good faith and fair dealing, all but guarantees increasingly complicated and protracted litigation over Brandt fees. Because a request for Brandt fees will now “result in a second major litigation” (Hensley v. Eckerhart (1983) 461 U.S. 424, 437 [76 L.Ed.2d 40, 103 S.Ct. 1933]), I respectfully (and regretfully) dissent.
The majority discusses the issue of Brandt fees at length and gives preclearance to a variety of hypothetical fee awards not presented here (such as approving a Brandt fee award, when the attorney is retained on an hourly basis, in excess of the damages recoverable under the policy itself)2 but nowhere acknowledges the purpose of Brandt fees. My analysis begins there.
In Brandt, we held that “[w]hen an insurer‘s tortious conduct reasonably compels the insured to retain an attorney to obtain benefits due under a policy, it follows that the insurer should be liable in a tort action for that
We underscored the purpose of a Brandt fee award by emphasizing that “[f]ees attributable to obtaining any portion of the plaintiff‘s award which exceeds the amount due under the policy are not recoverable.” (Brandt, supra, 37 Cal.3d at p. 819, italics added.) The reason that “[t]hese fees must be distinguished from recovery of attorney‘s fees qua attorney‘s fees, such as those attributable to the bringing of the bad faith action itself” (id. at p. 817) is that Brandt is not designed to make the insured whole for all of the attorney fees incurred as a result of the insurer‘s tortious conduct. Rather, Brandt merely entitles the insured to all of the benefits due under the policy, undiminished by the expenses incurred in retaining an attorney to recover under the policy.
In sum, “the theory of Brandt (and the cases on which it relies) . . . [is] that a plaintiff is entitled to be made whole for the harm he suffered by reason of the defendant‘s tortious conduct in denying benefits due under the insurance policy.” (Burnaby v. Standard Fire Ins. Co. (1995) 40 Cal.App.4th 787, 795 [47 Cal.Rptr.2d 326]; May v. Miller (1991) 228 Cal.App.3d 404, 408 [278 Cal.Rptr. 341] [“The theory is the insured is not made whole unless such fees are awarded“]; Fuhrman v. California Satellite Systems (1986) 179 Cal.App.3d 408, 430 [225 Cal.Rptr. 140, 231 Cal.Rptr. 113] (conc. & dis. opn. of Sims, J.) [“The court‘s answer to that question is that where a plaintiff is necessarily required to pay attorneys to make the plaintiff whole as a result of a tort, amounts paid by the plaintiff to the attorneys are compensatory tort damages and not attorneys’ fees“], disapproved on other grounds in Silberg v. Anderson (1990) 50 Cal.3d 205, 219 [266 Cal.Rptr. 638, 786 P.2d 365].)
What damages would be necessary to make plaintiffs whole in this case? Plaintiffs agreed to pay their attorney 40 percent of any damages recovered. The tort and punitive damages need not concern us here, though, inasmuch as Brandt was not intended to make the plaintiff whole for the cost of retaining an attorney to recover tort or punitive damages. Rather, Brandt fees allow the plaintiff to recover the policy benefits in full, undiminished by the “attorney‘s fees incurred in connection with the contract cause of action.” (Brandt, supra, 37 Cal.3d at p. 816.) Accordingly, plaintiffs’ out-of-pocket expense for
Indeed, had the jury failed to return a verdict on the tort causes of action, “plaintiffs would have been out of pocket exactly 40 percent of the contract recovery.” (Maj. opn., ante, at p. 808.) Similarly, “[i]f the insured were to recover benefits under the policy in a separate action before suing on the tort, the distinction between fees incurred in the policy action, recoverable as damages, and those incurred in the tort action, nonrecoverable, would be unmistakable.” (Brandt, supra, 37 Cal.3d at p. 818.) Once again, the insured would be out of pocket 40 percent of the contract recovery. Likewise, if the trial court were to bifurcate the causes of action and try the contract claim first, plaintiffs again would be out of pocket only the 40 percent of the contract recovery. (Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061, 1074–1075 [13 Cal.Rptr.3d 586] [affirming Brandt fee award limited to 40 percent of the recovery under the policy].)
The majority, however, refuses to embrace this logical solution. In its view, none of these hypotheticals applies here because plaintiffs did prevail on their tort claim and the tort claim and contract claim were tried together. This is true, but irrelevant. That plaintiffs prevailed on their tort claim affects their entitlement to—but not the amount of—Brandt fees, since their out-of-pocket expenses for recovering under the policy remain unaffected by any tort recovery (or, for that matter, by their punitive damages award). That the contract and tort causes of action were tried simultaneously rather than sequentially is equally beside the point. Whether the claims are tried together or separately, in separate trials or in bifurcated proceedings, the out-of-pocket cost to the plaintiff under a contingent fee agreement remains the same. We said as much in Brandt, where we observed there is “‘no disadvantage to defendant in the fact that the causes, although separate, were concurrently tried.‘” (Brandt, supra, 37 Cal.3d at p. 818.)
The majority‘s fundamental error is in failing to acknowledge the purpose of the Brandt rule. Only by failing to comprehend the purpose of a Brandt fee award could the majority assert (1) that Brandt might authorize an award of less than 40 percent of the contract recovery in this case, even though plaintiffs are obligated to pay their attorney 40 percent of the contract recovery (maj. opn., ante, at p. 810); and (2) that an award of only 40 percent
By untethering Brandt from its moorings, the majority inevitably finds itself at sea. I do not dispute that the legal issues in this litigation were to some extent intertwined or that some portion of the attorney‘s work was used for both the contract and tort claims. But, under a contingent fee agreement, the nature and extent of the work actually performed is irrelevant to the costs actually incurred by the client. (Rader v. Thrasher (1962) 57 Cal.2d 244, 253 [18 Cal.Rptr. 736, 368 P.2d 360] [“‘[a] contingent fee contract, since it involves a gamble on the result, may properly provide for a larger compensation than would otherwise be reasonable‘“]; accord, Mau v. Woodburn, Forman, Wedge, Blakey, Folsom & Hug (Nev. 1964) 80 Nev. 184 [390 P.2d 721, 722] [under a contingent fee arrangement, “compensation is not related to services actually performed“].) In other words, regardless of whether almost all or virtually none of the work undertaken for the contract claim was also applicable to the tort claim, plaintiffs’ out-of-pocket costs to retain an attorney—and, in particular, their costs to recover on the contract—remained the same.4 That is why we said in Brandt that “[f]ees attributable to obtaining any portion of the plaintiff‘s award which exceeds the amount due under the policy are not recoverable.” (Brandt, supra, 37 Cal.3d at p. 819, italics added.)
Without any support in Brandt, the majority is forced to rely heavily (but only inferentially) on a single Court of Appeal decision, Campbell v. Cal-Gard Surety Services, Inc. (1998) 62 Cal.App.4th 563 [73 Cal.Rptr.2d 64] (Campbell), in which the Brandt fee award did exceed the contract recovery. The problem with Campbell, of course, is that the Court of Appeal supplied no legal analysis for its ruling, nor did it provide the basis for its calculation. It relied instead on the fact that the defendant insurer “did not challenge the reasonableness of the amount.” (Id. at p. 572, italics added.)5
I would rely instead on Textron Financial Corp. v. National Union Fire Ins. Co., supra, 118 Cal.App.4th 1061, a subsequent decision by the same
Finally, the majority‘s approach suffers from a number of fatal inconsistencies and uncertainties. For example, under the majority‘s approach, the trial court must apportion hours spent working on issues jointly related to both the tort and contract, “with some hours assigned to the contract and some to the tort.” (Maj. opn., ante, at p. 812.) But the majority offers no guidance for making such an apportionment. The majority‘s hypothetical assumes that the trial court “could reasonably conclude that half the hours spent on the joint contract/tort issues are fairly attributable to the contract” but fails to explain why that would be so. (Ibid.) Indeed, the majority fails to foreclose other apportionment methods (such as 95 percent to the contract and 5 percent to the tort, or vice versa). Yet, at another point, the opinion states in passing that plaintiffs may not recover “the majority of their attorney fees attributable to the entire compensatory damages award” (id. at p. 811), which suggests the existence of some arbitrary (but unknown) upper limit on the apportionment.
Later on, the majority advises that, as an “immediately discernible” outer limit, “the Brandt fees can never exceed the legal fees for the combined tort and contract recovery.” (Maj. opn., ante, at p. 812.) But in Campbell—the only “illustrative” case the majority has been able to find (maj. opn., ante, at p. 809)—the Brandt fee award of $13,010 substantially exceeded the entire compensatory damage award (Campbell, supra, 62 Cal.App.4th at p. 569 [$2,500 for the contract claim; $7,288 for the tort claim]). The Brandt fee award therefore greatly exceeded the legal fees for the combined tort and contract recovery, since the case was handled on a contingent fee basis. (Campbell, supra, 62 Cal.App.4th at pp. 569, 572.)
Another inconsistency involves the tension between, on the one hand, the majority‘s statement that fees for legal work on issues that are intertwined with the contract issue are recoverable under Brandt and, on the other hand, the majority‘s other “immediately discernible” limitation that Brandt fees must exclude legal fees related to the punitive damage award. (Maj. opn., ante, at p. 812.) If, as the majority contends, an entitlement to fees beyond those necessary to make the plaintiff whole arises whenever some portion of the attorney‘s efforts are jointly attributable to contract and tort theories, then logic suggests the same would be true when (as here) a portion of the attorney‘s efforts are jointly attributable to contract and punitive damage theories. A review of plaintiffs’ closing argument reveals that the asserted lack of evidence for some of Allstate‘s allegations—which the majority concedes was part of the contract litigation—was also part of plaintiffs’ contention that Allstate was “trying to set these people up” and had therefore acted with “malice,” which was essential to an award of punitive damages. Thus, the majority‘s logic, if taken seriously, would require the trial court to apportion this legal work among the contract, the tort, and punitive damage awards. The majority offers no legitimate reason for refusing to do so.
Brandt entitles the plaintiff insured to full recovery of policy benefits, undiminished by the attorney fees incurred to recover those benefits. In this case, where the attorney was retained under a contingent fee agreement of 40 percent, the correct award is 40 percent of the recovery under the policy. The method proposed by the majority is not only inconsistent with Brandt but will
Brown, J., and Sims, J*., concurred.
Appellant‘s petition for a rehearing was denied October 13, 2004, and the opinion was modified to read as printed above. Chin, J., did not participate therein.
* Associate Justice of the Court of Appeal, Third Appellate District, assigned by the Chief Justice pursuant to
Notes
“If anything I have done or said has seemed to so indicate, you must disregard it and form your own opinion.
“At this time, however, and for the purpose of assisting you in properly deciding this case, I am permitted by the Constitution of California to comment on the evidence and the testimony and believability of any witness.
“My comments are intended to be advisory only and are not binding on you as you must be the exclusive judges of the questions of fact submitted to you and of the believability of the witnesses.”
BAJI No. 15.20 is similar: “I have not intended by anything I have said or done, by any questions that I have asked, or by any rulings that I have made, to suggest how you should decide any questions of fact, or that I believe or disbelieve any witness.“If anything I have done or said has seemed to so indicate, you must disregard it and form your own opinion.”