RICHARD PECH v. THOMAS E. MORGAN III et al.
B300524
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION THREE
Filed 3/11/21
CERTIFIED FOR PUBLICATION; Los Angeles County Super. Ct. No. 18STCV02178
APPEAL from orders of the Superior Court of Los Angeles County, Mary H. Strobel, Judge. Affirmed.
Law Offices of Richard Pech and Richard Pech for Plaintiff and Respondent.
In 1993, the State Bar‘s Committee on Mandatory Fee Arbitration published an advisory noting a curious gap in our statutory and case law concerning the recoverability of unpaid fees in an attorney‘s breach of contract action against a client. Although
In this appeal we hold, when an attorney sues a client for breach of a valid and enforceable fee agreement, the amount of recoverable fees must be determined under the terms of the fee agreement, even if the agreed upon fee exceeds what otherwise would constitute a reasonable fee under the familiar lodestar analysis. To be enforceable, the fee agreement cannot be unconscionable. And, as with every contract, the attorney‘s performance under the fee agreement must be consistent with the implied covenant of good faith and fair dealing. This requires a court adjudicating a fee dispute to determine, among other things, whether the attorney used reasonable care, skill, and diligence in performing his or her contractual obligations. This standard
Defendants, former clients of attorney Richard Pech, appeal attachment orders entered in favor of Pech on his claims for unpaid fees in breach of the parties’ fee agreements. The trial court found the fee agreements were valid and Pech had established the probable validity of his claims based on his billing statements, correspondence with defendants, and unrebutted evidence showing defendants disputed only a handful of the billing statements. This evidence was sufficient to support the attachment orders under the standard we articulate in this opinion. We affirm.
FACTS AND PROCEDURAL BACKGROUND
1. Pech Sues Defendants for Breach of the Parties’ Fee Agreements
Plaintiff Richard Pech is an attorney. Defendants Juanita Springs Associates LP (Juanita Springs) and Covina Hills MHC LP (Covina Hills) invest in commercial properties, including a mobile home park. Defendant Thomas Morgan III is a principal of Juanita Springs and Covina Hills.
Pech filed this lawsuit to recover attorney fees allegedly incurred representing defendants in four legal matters related to defendants’ operation and ownership of a mobile home park. The operative complaint refers to these matters as the failure to maintain case, the insurance case, the mandamus case, and the takings case. The parties executed written retainer agreements for the failure to maintain and insurance cases. As for the mandamus and takings cases, the complaint alleges an implied-in-fact contract existed based upon Pech‘s “long history” of providing legal services to defendants and the parties’ understanding that cases related to the mobile home park would be billed at the same rate.
As relevant to this appeal, the complaint asserts causes of action for breach of contract based on defendants’ alleged failure to pay Pech‘s attorney fees as provided in the fee agreements.
2. Pech Applies for Attachment of Defendants’ Assets
Pech filed applications for attachment orders against the assets of Juanita Springs and Covina Hills. In support of the applications, Pech offered a 92-page declaration and over 2,000 pages of exhibits, including the retainer agreements, billing records, and correspondence detailing his communications with Morgan and the services Pech‘s office rendered on the four matters.
In opposition to the applications, defendants offered the declaration of Andre Jardini, an attorney and legal billings expert. Jardini opined that there were “serious issues regarding the compensability of certain fees and costs invoiced by Pech“; that Pech did not use “billing judgment and care” in the submission of his invoices, which were ” ‘wordy’ to the point of being difficult to understand“; and that Pech‘s invoices were “overstated based on his use of a minimum billing increment for every email . . . and review of every piece of paper.” Jardini acknowledged, however, that he had not reviewed all the invoices for the failure to maintain action, which accounted for the bulk
of the unpaid fees.2 And he conceded he was “not able to specifically quantify [his] opinion as to the excessiveness of the fees and costs billed,” other than to opine the invoices were “overstated by at least 20 [percent].”
3. The Trial Court Grants the Attachment Orders
The trial court granted the applications for attachment of defendants’ assets, concluding Pech had established the probable validity of his breach of contract claims. With respect to the failure to maintain and insurance cases, the court found the parties had entered into valid and enforceable fee agreements that complied with
claims for all unpaid fees, but not for the related interest charges, which were not available under the terms of the fee agreements.5 After recounting the relevant evidence supporting the applications—including Pech‘s “detailed account of his correspondence with Morgan,” Pech‘s “various billing statements,” and unrebutted evidence that defendants objected to only a handful of invoices—the court rejected defendants’ contention that the fees were excessive or unreasonable. The trial court explained:
“Jardini‘s opinion that the billing statements are excessive or unreasonable is unpersuasive under the circumstances. In the . . . retainer [agreements], [defendants] expressly agreed to pay the hourly rates stated therein. Thus, the hourly rates are fixed by contract. No lodestar determination of the reasonable fees is required in a breach of contract action where the hourly rates are specified. [Citations.] Factually, Jardini‘s opinion about the reasonableness of the fees is further undermined because he admits that he did not have ‘the opportunity
to perform a complete and thorough analysis of each invoice presented.’ [Citation.] Notably, neither Morgan nor any other representative of the Defendants with knowledge of the history of legal services between the parties has submitted a declaration showing the services reflected on the billings were outside the scope of the agreed upon representation or legal tasks to be performed. Nor is there any declaration showing Morgan, or anyone else, objected to the form or substance of the bills until Pech indicated he would seek to withdraw as counsel.”
Thus, the court granted the applications, concluding: “Plaintiff‘s declaration, as well as the billing statements, [establish] that [Pech] performed a substantial amount of legal work” on the four matters, and “Jardini‘s opinion is belied by evidence that Defendants did not object to nearly all of the billing statements.”
The trial court entered right to attach orders and orders for issuance of writs of attachment. Defendants filed a timely notice of appeal.
1. In an Action to Collect Unpaid Fees based on Breach of a Valid Attorney Fee Agreement, the Terms of the Fee Agreement Determine the Amount of Recoverable Fees
Superior Court (2010) 190 Cal.App.4th 360, 365.)
Under
While
collection of a “reasonable fee” for service rendered on a client‘s behalf (
Recognizing this apparent gap in our law, the State Bar‘s Committee on Mandatory Fee Arbitration (the Committee) undertook to examine what standard arbitrators should apply in determining the fees to be awarded for a client‘s breach of a valid fee agreement.6 The Committee‘s inquiry resulted in
Arbitration Advisory 1993-02, which articulates a two-step process, combining principles of contract law and an unconscionability analysis under rule 1.5 of the Rules of Professional Conduct (Rule 1.5), to determine whether and to what extent an attorney is entitled to collect fees as provided in a statutorily compliant fee agreement. (Com. on Mandatory Fee Arbitration, State Bar, Arbitration Advisory 1993-02, Standard of Review in Fee Disputes Where There Is a Written Fee Agreement (Nov. 23, 1993) pp. 1-2 (Advisory 1993-02).)7
As we will explain, we conclude the standard
Under Advisory 1993-02, when arbitrators are presented with a fee agreement that complies with
“For example, the arbitrators may find that the prevailing hourly rate charged by similarly experienced attorneys for similar work in the community is less than $400 per hour, and, if the issue were the determination of a
‘reasonable fee,’ the arbitrators would choose that amount as the hourly rate. If, however, a valid written contract between lawyer and client provides for an hourly rate of $400.00, the arbitrators should use the terms agreed upon by the parties unless, taking into consideration the factors listed in [Rule 1.5] the arbitrators find that the $400.00 hourly rate is unconscionable. If the agreed upon rate produces an unconscionable result, a reasonable standard should be applied to the ultimate fee on the theory that the written agreement between the parties is not enforceable.” (Ibid.)
If the arbitrators determine the fee agreement is not unconscionable, their next step is to “review the attorney‘s performance under the terms of the agreement.” (Advisory 1993-02, supra, at p. 2, italics added.) That review, the Committee notes, must account for the covenant of good faith and fair dealing, which is implied in every contract. (Ibid.) Thus, under Advisory 1993-02, arbitrators are to apply “a ‘reasonableness’ standard . . . in reviewing the attorney‘s performance” under the fee agreement, including an assessment of “whether the attorney used reasonable care, skill and diligence in performing the duties required of the attorney under the contract, that unnecessary, duplicative or unproductive time is not charged to the client, and that the attorney has not performed services that were required as a result of the attorney‘s negligence or some lack of ordinary skill or diligence.” (Id. at pp. 2-3, italics added.)
relation of the very highest character, and binds the attorney to most conscientious fidelity—uberrima fides.“].) We conclude this is the appropriate standard for adjudicating an attorney‘s claim against a client for breach of a valid fee agreement.
The trial court found the fee agreements in this case were valid under
In determining the appropriate attorney fee award that a litigation adversary must pay to the prevailing party under our fee shifting statutes, California courts begin with the “lodestar“—i.e., “the number of hours reasonably expended multiplied by the reasonable hourly rate.” (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.)
the lodestar approach appropriately limits a prevailing party to a “reasonable fee” award. (
The trial court correctly held a lodestar determination is not required in a breach of contract action where an attorney‘s hourly rate is specified in a fee agreement. To hold otherwise would ignore the statutorily recognized difference between instances where the attorney has entered into a valid fee agreement with his or her client, and those where the attorney has failed to do so and is limited to a “reasonable fee” under
2. Pech Established the Probable Validity of His Claims for Breach of the Fee Agreements
Provisional relief in the form of an attachment is available for money claims based on breach of contract.9 (
it finds, among other things, that “[t]he plaintiff has established the probable validity of the claim upon which the attachment is based.” (Id.,
A claim has probable validity “where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (
A trial court‘s factual findings in an attachment proceeding, including its probable validity finding, are subject to our substantial evidence standard of review. (Loeb & Loeb, supra, 166 Cal.App.3d at p. 1120; Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal.App.3d 260, 273.) “We review the evidence on appeal in favor of the prevailing party, resolving conflicts and drawing reasonable inferences in support of the judgment.” (Claussen v. First American Title Guaranty Co. (1986) 186 Cal.App.3d 429, 431; Bank of America, at p. 273.) “[W]e cannot substitute our inferences for those of the trial court reasonably grounded on substantial evidence.” (Claussen, at p. 436; Bank of America, at p. 273.)
To establish a claim for breach of contract, a plaintiff must prove: (1) the existence of a contract, (2) plaintiff‘s performance or excuse for nonperformance, (3) defendant‘s breach, and (4) resulting damages to plaintiff. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367.) As we held
above, with respect to the second element, when an attorney claims the client breached a valid fee agreement, the attorney must demonstrate he reasonably performed his obligations under the agreement in a manner consistent with the implied covenant of good faith and fair dealing.
Focusing on this second element, defendants challenge the trial court‘s probable validity finding on two grounds. First, they contend Pech failed to make a prima facie showing of the “reasonableness and necessity” of the legal services he performed under the fee agreements. Second, they argue, “even if Pech had made a prima facie showing, [defendants‘] opposition evidence, supported by expert opinion, established that Pech was unlikely to succeed anyway.” The record does not compel reversal on either ground.
With respect to Pech‘s prima facie showing, the evidence supports the trial court‘s implicit finding that Pech reasonably performed his obligations under the fee agreements. Pech‘s evidence consisted primarily of his declaration and the billing statements his office issued to defendants during the four cases. Although the trial court fairly characterized Pech‘s evidence as “unwieldy,” our review of his declaration confirms it outlines the major challenges of each case, correspondence with Morgan showing Morgan was pleased with the work reflected in Pech‘s billing statements, and the results
unreasonable,” the statements show Pech‘s office performed a “substantial amount of legal work” on defendants’ behalf and the undisputed evidence proved defendants did not object to a single invoice until after Pech indicated he intended to withdraw as counsel. (Italics added.) Pech made a sufficient prima facie showing that he reasonably performed his obligations under the fee agreements with respect to the unpaid invoices. (See Loeb & Loeb, supra, 166 Cal.App.3d at p. 1119 [evidence that attorney sent clients monthly billing statements that “were not questioned, disputed or otherwise objected to” by clients was “sufficient evidence of the probable validity” to sustain attorney‘s prima facie burden on breach of fee agreement claim].)
As for the contention that the trial court was compelled, as a matter of law, to resolve the relative merits of the claims in defendants’ favor because they alone offered “expert opinion” evidence, the argument‘s premise is flawed. Without citation to authority, defendants maintain “expert opinion is required to establish that an attorney complied with ethical rules” and, since “Jardini‘s declaration was uncontradicted,” the trial court was obliged to accept his opinions “in the absence of other non-arbitrary bases to reject it.” It is well established, however, that the determination of what constitutes reasonable legal services is committed to the discretion of the trial court, and the “value of legal services performed in a case is a matter in which the trial court has its own expertise.” (Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623.) Thus, the “trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony.” (Ibid.)
In any event, the trial court had nonarbitrary reasons for rejecting Jardini‘s opinions. The court‘s order indicates
it independently reviewed Pech‘s billing statements and found, contrary to Jardini‘s opinions, the statements were timely submitted, concise, and adequately identified the billers by their initials on each billing entry. Additionally, the court found, “[f]actually, Jardini‘s opinion about the reasonableness of the fees [was] undermined because he admit[ted] that he did not have ‘the opportunity to perform a complete and thorough analysis of each invoice presented.’ ” We are satisfied that the court reasonably applied its own expertise in determining the services reflected in the billing statements were reasonable and necessary based on Pech‘s declaration regarding the issues and challenges presented in each of the four cases. We find no error.
The orders are affirmed. Plaintiff Richard Pech is entitled to his costs.
CERTIFIED FOR PUBLICATION
EGERTON, J.
We concur:
EDMON, P. J.
DHANIDINA, J.