Chodos v. Borman

227 Cal.App.4th 76

173 Cal.Rptr.3d 266

Hillel CHODOS, Plaintiff and Respondent,

v.Navabeh P. BORMAN, Defendant and Appellant.

B252446

Court of Appeal, Second District, Division 5, California.

Filed June 18, 2014

As Modified on Denial of Rehearing July 9, 2014

See 7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 305.

APPEAL from a judgment of the Superior Court of the County of Los Angeles, Barbara Ann Meiers, Judge. Reversed and remanded with instructions. (Super. Ct. No. SC107421)

Law Offices of Ronald Richards & Associates, Ronald Richards; Wilson, Elser, Moskowitz, Edelman & Dicker, Steven J. Joffe and Robert Cooper for Defendant and Appellant.

Hillel Chodos, in pro per; Philip Kaufler for Plaintiff and Respondent.

MOSK, J.

INTRODUCTION

An attorney, who represented a client in two divorce cases and a related Marvin¹ action without a statutorily required written hourly or contingency fee agreement, sued his client for the reasonable value of the services he rendered in the three cases. The jury, using a multiplier of five to increase the attorney's hourly rate to $5,000 per hour, awarded the attorney $7.8 million in attorney fees. That amount greatly exceeded the amount that would have been due under an alleged oral hourly rate agreement and the amount to which the attorney would have been entitled under a contingency fee agreement the parties discussed towards the end of the representation, but to which the parties did not agree. On appeal, the client contends, inter alia, that the trial court erred when its instructions allowed the jury to use the lodestar adjustment method,² including an enhancement or multiplier, in calculating a reasonable fee in attorney's quantum meruit action.

We hold that under the circumstances of this case, there was no legal or equitable justification for applying a multiplier to the lodestar amount of attorney fees found by the jury. Such multipliers generally are appropriate when, from the outset of an action, an attorney voluntarily assumes the contingent risk of nonpayment for his services—a risk not present here. Therefore, the trial court erred by instructing the jury that it could apply a multiplier to the lodestar amount. In addition, the jury award was excessive and inequitable. Accordingly, we reverse the judgment and remand the matter to the trial court with instructions to enter a new judgment on the special verdict form awarding the attorney a $1.8 million lodestar amount, with the adjustments made in the original judgment, based on the jury findings of $1,000 per hour as the reasonable hourly rate and 1,800 hours as the reasonable number of hours expended on the two divorce cases and the Marvinaction.

FACTUAL BACKGROUND³

A. Attorney's Trial Testimony

Client and her future husband, Burt Borman (husband), lived together for 15 years, from 1983 until they married in 1998. In or around May 2007, client hired attorney to defend her in a divorce action filed by husband. Attorney handled that first divorce case, with the assistance of family law specialist Hugh John Gibson (Gibson), from approximately May 2007 to March 2008.

In March 2008, client and husband reconciled, and as part of the reconciliation, husband offered to pay $100,000 toward client's attorney fees, and dismissed the first divorce case. Ultimately, however, the reconciliation failed, and husband never paid the $100,000 for attorney fees. As a result, in or about May 2008, client asked attorney to initiate a second divorce case.

Attorney advised client in connection with the second divorce case that her property claims would require the filing of a Marvinaction. He explained that pursuing such an action was the only way to make a claim for an interest in what was ostensibly her husband's separate property. One of client's claims was for an interest in the couple's home on Broad Beach in Malibu (the beach house). Husband purchased the beach house when he was married to a former wife, and considered it his separate property. The other assets that client intended to pursue included a sculpture by Donald Judd, an American artist, and properties in Moorpark, California, and Telluride, Colorado. Attorney explained to client the difficulties in obtaining a recovery based on these assets through the Marvinaction that he filed on her behalf.

Attorney originally told client he would charge her $1,000 an hour for his time, which would be payable monthly regardless of the result, but there was no written fee agreement. Attorney testified that in connection with the first divorce proceeding, client submitted an income and expense declaration to the trial court in which she stated under oath that she had an agreement to pay attorney $1,000 per hour. But client never paid attorney anything and later told him she could not and would not pay hourly fees.

The parties litigated the second divorce case and the Marvinaction from approximately May 2008 to March or April 2009, when settlement discussions began. The litigation included the taking of the depositions of client, Casey Borman—husband's son—and an appraiser, as well as the filing of a successful opposition to husband's summary judgment motion.

In early March 2009, shortly after the trial court denied the summary judgment motion, attorney Dana Cole informed attorney that client had retained Cole as a consultant. In an effort to resolve the outstanding fee dispute between client and attorney, Cole sent a written contingency-based proposal by e-mail to attorney and client for their signatures. Attorney claimed client accepted this sliding scale fee proposal,⁴ but a few weeks later, when client hired attorney Stephen Johnson, of the law firm of Dempsey and Johnson, as her second advisor in the underlying litigation, Johnson withdrew the proposal. Neither client nor attorney signed any contingency fee agreement.

In or about March 2009, attorney received a written settlement offer from husband's attorneys. Given the difficulty of prevailing at trial and the promising nature of husband's settlement offer, client agreed to move ahead with negotiations. Those negotiations resulted in a letter agreement in early September 2009 settling client's Marvinclaims to the beach house, the Moorpark and Telluride properties, the Judd sculpture, and other works of art.

The settlement was to be formalized in a stipulated judgment in the second divorce case. According to attorney, he and his cocounsel, Gibson, arranged for the judgment—which attorney valued at $26 million—to be filed in the second divorce case, thus making the settlement tax-free to client. The tax-free status of the settlement was confirmed by Gary Wolfe, a tax attorney hired by client. Wolfe described the tax treatment as a “grand slam home run.” After client terminated attorney and Gibson, the parties ultimately signed a stipulated judgment and submitted it to the court in December 2009 to conclude the second divorce case and the Marvinaction. Johnson was client's attorney of record at the time of the settlement and judgment.

Attorney claimed that he spent 300 hours on the first divorce case and 1,500 hours on the second divorce case and the Marvinaction. During his representation of client, however, attorney did not maintain daily time records. Rather, he estimated his time but only for important tasks, not for minor ones such as short phone calls. Attorney said he usually underestimated his time using this practice, and denied that Gibson performed most of the work. Attorney claimed he was responsible for the strategy and the majority of the work. He stated he did not delegate the intellectual tasks of the case, including the opposition to the summary judgment motion, on which he did 90 percent of the work. He said he spent 200 to 300 hours on depositions. Attorney further testified that for the last 25 years, his clients had paid him $1,000 per hour. By contrast, according to attorney, husband's counsel, Quinn, Emmanuel, Urquhart & Sullivan (referred to as “Quinn”) charged its clients $1,100 per hour. Attorney contended that the reasonable value of his legal services was $9 million, representing between 33 percent and 40 percent of the $26 million settlement value that client received as a result of settling the second divorce case and the Marvinaction.

Attorney testified that he had handled some divorce cases, but admitted that he did not do so on a full-time basis. He also admitted that he did not have any “track record” of winning Marvinactions at jury trial.

B. Client's Trial Testimony

Client did not concede that she agreed to pay attorney $1,000 per hour, and in her verified answer, she denied there was any such agreement and insisted that attorney could only recover the reasonable value of his services. Client testified that attorney did not give her a specific estimate of the hours he had worked prior to the settlement of the second divorce case and the Marvinaction. The first time that attorney estimated his hours for client was after he filed his quantum meruit claim against client. Client acknowledged that she owed attorney money, which she was willing to pay him. She explained, however, that each time she attempted to pay, attorney demanded a “humongous” sum of money that was not feasible for her to pay. If attorney had advised client that he would be seeking over $1 million in attorney fees, she would not have settled with husband. Client believed that attorney concealed his fee request until long after he was removed from the case in September 2009.

Cole made a proposal to client regarding the payment of attorney's fees—the proposed contingency fee agreement—but she did not accept that proposal. She explained that one of her other attorneys, either Dempsey or Johnson, advised her that Cole's proposal was not beneficial for her.

Client ultimately terminated attorney after he threatened to withdraw from the second divorce case and the Marvinaction if she did not settle with husband....