MANN v. QUALITY OLD TIME SERVICE, INC

Filed 5/9/06

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from an order of the Superior Court of San Diego County, Linda B. Quinn, Judge. Affirmed as modified.

Carl M. Hancock for Plaintiffs and Appellants.

Ross, Dixon & Bell, James J. Dalessio and Lindsay J. Reese for Defendants and Respondents.

Continued from Part I ………..

Applying these principles, we conclude the trial court did not abuse its discretion in determining defendants were prevailing parties in the underlying litigation. Defendants successfully eliminated the trade libel cause of action. Although trade libel bears similarity to the defamation claim that remained in the litigation, the two causes of action are not identical. Whereas defamation concerns injury to the reputation of a person or business, trade libel involves false disparagement of the quality of goods or services. (Guess, Inc. v. Superior Court (1986) 176 Cal.App.3d 473, 479; Erlich v. Etner, supra, 224 Cal.App.2d at pp. 73-74.) The elimination of the trade libel cause of action thus had the potential to narrow the litigation with respect to the damage issues and the focus of the claimed false statements. Additionally, the Mann court's acknowledgment that an absolute privilege applies to defendants' reports of WSSI's activities to government entities precluded WSSI from thereafter pursuing any recovery based on defendants' communications with government agencies. (Mann, supra, 120 Cal.App.4th at p. 108.) By bringing the anti-SLAPP motion, defendants thus successfully narrowed the scope of the lawsuit, limiting discovery, reducing potential recoverable damages, and altering the settlement posture of the case.

In its reply brief, WSSI contends that even assuming there was a factual basis for the trial court to have found defendants were prevailing parties, the order must be reversed because the trial court did not exercise its discretion on this issue. WSSI argues that the trial court erroneously based its prevailing party finding on this court's award of appellate costs to defendants in the prior appeal. (Mann, supra, 120 Cal.App.4th at p. 113.) We agree that the trial court's reliance on the appellate cost award in Mann was improper. A "prevailing party" with respect to an appellate cost award is not necessarily the same as a "prevailing party" under the anti-SLAPP statute. (Compare § 425.16, subd. (c) with Cal. Rules of Court, rule 27.) Moreover, although a prevailing party is generally entitled to costs on appeal, appellate courts have the discretion to deviate from the general "prevailing party" rule in "the interests of justice," and make any award or apportionment of costs that it determines is appropriate. (Cal. Rules of Court, rule 27(a)(4); see Eisenberg et al., Cal. Practice Guide: Civil Appeals & Writs (The Rutter Group 2004) ¶ 14:61, p. 14-12; see Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 798; Stuckey v. Stuckey (1964) 231 Cal.App.2d 382, 387.) Because the Mann decision was silent on the reason for the cost award, the trial court erred in inferring the award reflected a determination that defendants were the prevailing parties for purposes of the anti-SLAPP proceedings.

The court's reliance on the appellate cost award, however, was not prejudicial because it was merely an alternate basis for the trial court's conclusion on the prevailing party issue. In its written order, the court stated it found defendants were the prevailing parties based on their success in striking the trade libel cause of action. Absent a contrary indication, we presume this finding constituted an independent ground for the prevailing party finding. An order is presumed correct; all inferences are drawn in favor of the order and error must be affirmatively shown. (See Howard v. Thrifty Drug & Discount Stores (1995) 10 Cal.4th 424, 443; Corenevsky v. Superior Court (1984) 36 Cal.3d 307, 321; Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)

II. Amount of Attorney Fees

WSSI alternatively contends the court erred in refusing to reduce the claimed attorney fees to reflect that defendants were unsuccessful on three of the challenged causes of action and that these causes of action remained in the litigation after the anti-SLAPP motion was resolved.

The trial court awarded defendants $57,000, which constituted its claimed fees of $64,065 minus $7,065. The court did not explain the basis for this amount or the reduction, except to state that it found the $57,000 was "reasonable and appropriate under the circumstances."^[1] The court also expressly declined to apportion the fees between the successful and unsuccessful causes of action because it found the same legal and factual theories were involved on each of the claims.

The California Supreme Court has upheld the lodestar method for determining the appropriate amount of attorney fees for a prevailing defendant on an anti-SLAPP motion. (Ketchum, supra, 24 Cal.4th at p. 1136.) Under this method, a court assesses attorney fees by first determining the time spent and the reasonable hourly compensation of each attorney. (Id. at pp. 1131-1132.) The court next determines whether that lodestar figure should be adjusted based on various relevant factors (id. at p. 1132), including a plaintiff's limited success in the litigation (Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 249; Californians for Responsible Toxics Management v. Kizer (1989) 211 Cal.App.3d 961, 973-975; see also Feminist Women's Health Center v. Blythe (1995) 32 Cal.App.4th 1641, 1674). In determining the lodestar amount, a prevailing party generally may not recover for work on causes of action on which the party was unsuccessful. (See ComputerXpress, supra, 93 Cal.App.4th at p. 1020.)

Defendants do not dispute these general principles, but contend a reduction was inappropriate in this case because the facts and law were essentially the same on the cause of action for which they were successful (the trade libel claim) and the causes of action on which they did not prevail (the defamation and interference claims). They argued below, and the court agreed, that because the legal work on each of the causes of action was overlapping, apportionment was improper because it was not possible to separate the claims. They rely on judicial interpretations of various fee-shifting statutes, in which the courts have held that attorney fees need not be reduced for work on unsuccessful claims if the claims "are so intertwined that it would be impracticable, if not impossible, to separate the attorney's time into compensable and noncompensable units." (Bell v. Vista Unified School Dist. (2000) 82 Cal.App.4th 672, 687; see, e.g., Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129-130 [Civ. Code, § 1717]; Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1133 [Civ. Code, § 1788.30].)

Although we recognize that courts have frequently adhered to the general rule of nonapportionment if claims are overlapping, we are not bound by these decisions because they concern different attorney fee statutes. The issue of the proper amount of fees to be awarded when an attorney's time is attributable to recoverable and nonrecoverable claims depends on the legislative intent and policies underlying the specific fee-shifting scheme at issue. (See Carver v. Chevron U.S.A., Inc. (2004) 119 Cal.App.4th 498, 504-505 [interpreting Cartwright Act to hold that fees on common issues should not be awarded to defendant on contract claims because the award would undermine legislative intent underlying the Cartwright Act]; Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 811 [Brandt fees may not be obtained for all attorney services even if claims are overlapping]; Hensley, supra, 461 U.S. 424 [court should reduce for partial success even where work on claims was overlapping].) In examining this issue in the context of section 425.16, subdivision (c), we find instructive the United States Supreme Court's decision in Hensley, supra, 461 U.S. 424.

The Hensley court considered an attorney fees award to the prevailing plaintiffs in a federal civil rights action under which a prevailing plaintiff is presumptively entitled to fees. (Hensley, supra, 461 U.S. at p. 429; see 42 U.S.C. § 1988.) Although the plaintiffs prevailed on some claims but not others, the district court awarded the plaintiffs their fees attributable to all claims because the court found overlapping factual and legal issues involved in those claims and a reduction would fail to "consider" several relevant factors, including "'the relative importance of various issues'" and "'the extent to which plaintiffs prevailed on the issues.'" (Id. at p. 438.) The Supreme Court held that because of "the interrelated nature of the facts and legal theories," the district court "did not err in refusing to apportion the fee award mechanically on the basis of respondents' success or failure on particular issues." (Ibid.) The court, however, remanded the case for the court to exercise its discretion as to whether the attorney fee award should be reduced to account for the plaintiffs' lack of success on several claims. The court explained that "[w]here the plaintiff has failed to prevail on a claim that is distinct in all respects from his successful claims, the hours spent on the unsuccessful claim should be excluded in considering the amount of a reasonable fee. Where a lawsuit consists of related claims, a plaintiff who has won substantial relief should not have his attorney's fee reduced simply because the district court did not adopt each contention raised. But where the plaintiff achieved only limited success, the district court should award only that amount of fees that is reasonable in relation to the results obtained." (Id. at p. 440, italics added.) In conducting this analysis, a court "may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success." (Id. at pp. 436-437, italics added.)

Accordingly, under Hensley, a partially prevailing party is not necessarily entitled to all incurred fees even where the work on the successful and unsuccessful claims was overlapping. (Hensley, supra, 461 U.S. at p. 440; see Harman v. City and County of San Francisco (2006) 136 Cal.App.4th 1279, 1312.) Instead, the court must consider the significance of the overall relief obtained by the prevailing party in relation to the hours reasonably expended on the litigation and whether the expenditure of counsel's time was reasonable in relation to the success achieved. (Ibid.)

Although Hensley interpreted the federal civil rights statute, the court's approach is consistent with the policies underlying the anti-SLAPP statute. The fee-shifting provisions of section 425.16, subdivision (c) were enacted to impose litigation costs on those who assert meritless claims burdening the exercise of the defendant's constitutional free speech and petition rights. (Ketchum, supra, 24 Cal.4th at p. 1131.) The Legislature also sought to encourage private representation for defendants who might not otherwise have the financial resources to retain an attorney. (Ibid.) However, when a defendant is only partially successful in challenging portions of the complaint, these policies to ensure prompt and meaningful redress for defendants subject to SLAPP suits must be balanced with the plaintiff's constitutional right to petition for redress of his or her claims. If, after a court rules on an anti-SLAPP motion, a partially successful plaintiff is required to bear the entire cost of the anti-SLAPP litigation even though the defendant achieved only a relatively minor benefit and the essential thrust of the plaintiff's complaint remains viable, this could impose a potential financial barrier to the plaintiff continuing with the lawsuit, burdening the plaintiff's right to exercise his or her right to petition for the redress of grievances. The Legislature recently declared that "there has been a disturbing abuse of Section 425.16 . . . which has undermined the exercise of the constitutional rights of freedom of speech and petition for the redresses of grievances," and that it is "contrary to the purpose and intent of Section 425.16" to "chill[ ]" a plaintiff's petitioning rights through the use of the anti-SLAPP procedure. (§ 425.17.)

An award of attorney fees to a partially prevailing defendant under section 425.16, subdivision (c) thus involves competing public policies: (1) the public policy to discourage meritless SLAPP claims by compelling a SLAPP plaintiff to bear a defendant's litigation costs incurred to eliminate the claim from the lawsuit; and (2) the public policy to provide a plaintiff who has facially valid claims to exercise his or her constitutional petition rights by filing a complaint and litigating those claims in court. (§§ 425.16, 425.17; see Ketchum, supra, 24 Cal.4th at p. 1131.) In balancing these policies, we conclude a defendant should not be entitled to obtain as a matter of right his or her entire attorney fees incurred on successful and unsuccessful claims merely because the attorney work on those claims was overlapping. Instead, the court should first determine the lodestar amount for the hours expended on the successful claims, and, if the work on the successful and unsuccessful causes of action was overlapping, the court should then consider the defendant's relative success on the motion in achieving his or her objective, and reduce the amount if appropriate.

This analysis includes factors such as the extent to which the defendant's litigation posture was advanced by the motion, whether the same factual allegations remain to be litigated, whether discovery and motion practice have been narrowed, and the extent to which future litigation expenses and strategy were impacted by the motion. The fees awarded to a defendant who was only partially successful on an anti-SLAPP motion should be commensurate with the extent to which the motion changed the nature and character of the lawsuit in a practical way. The court should also consider any other applicable relevant factors, such as the experience and abilities of the attorney and the novelty and difficulty of the issues, to adjust the lodestar amount as appropriate. (See Ketchum, supra, 24 Cal.4th at p. 1132.)

Applying these principles, we conclude the court erred in failing to reduce the attorney fees award for fees attributable to the causes of action that remained in the litigation. Although the amount to be awarded could not be calculated through a purely mechanical approach by allocating particular hours to particular claims, the court should have considered the significance of the overall relief obtained by defendants in relation to the hours reasonably expended on the litigation and whether the expenditure of counsel's time was reasonable in relation to the success achieved. We are required to presume all facts to support the court order (see Ketchum, supra, 24 Cal.4th at p. 1140), but the trial court's statement declining to apportion the fees necessarily reflects that the court did not consider defendants' relative lack of success in determining the appropriate amount of fees. Moreover, a reduction of approximately $7,000 to account for defendants' lack of complete success was clearly insufficient.

In this regard, we are unpersuaded by defendants' argument that they are entitled to all of their attorney fees because their efforts established new law in California. The issue of first impression in Mann--whether a court should deny an anti-SLAPP motion if the plaintiff proves a probability of prevailing on only a portion of the SLAPP claim--resulted in a holding rejecting defendants' legal arguments. (Mann, supra, 120 Cal.App.4th at p. 106.) On this issue, we held a plaintiff meets its burden to oppose an anti-SLAPP motion if the plaintiff proves a probability of prevailing on any one theory underlying the claim. (Ibid.)

Although normally we would remand for the court to exercise its discretion on the issue of the proper amount of attorney fees, we conclude that under the particular circumstances of this case it is appropriate that we perform the analysis here. The basis of the broad discretion afforded to the trial judge in ruling on an attorney fee motion is the judge's familiarity with the proceedings and the work performed by the attorneys. (See PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.) Here, the trial judge did not preside over the underlying litigation, and the court did not have first hand knowledge of the work because defendants did not submit the underlying trial or appellate court briefs to support their attorney fees request. In contrast, this court is familiar with the case and the attorneys' work based on our prior appellate review and the record is sufficiently explicit that we can properly perform the necessary calculations. Additionally, counsel have advised this court that the matter has settled, except for the attorney fees issue. Under these circumstances, it would be wasteful to remand and invite a new round of litigation. (See Hensley, supra, 461 U.S. at p. 437 [warning courts against turning fee applications into major collateral litigation].)

After conducting the analysis, we conclude defendants are entitled to recover $32,032.50 (50 percent of the claimed fees). This amount fairly compensates defendants for the results achieved in pursuing the anti-SLAPP motion and avoids reimbursing them for the objectives that were not attained. Militating against compensation, defendants had only limited success, and WSSI was compelled to defend the anti-SLAPP motion notwithstanding that two of the challenged causes of action were not even governed by the anti-SLAPP statute and there were facts showing a probability of prevailing on the defamation cause of action subject to the statute. Further, defendants did not achieve one of their anti-SLAPP objectives--to strike all claims based on defendants' alleged false statements to WSSI's customers.

On the other hand, the practical impact of the motion was far more significant than the mere dismissal of the trade libel cause of action. In Mann, we recognized defendants' reports to government agencies were absolutely privileged (Civ. Code, § 47, subd. (b)), thus eliminating any actionable theory arising from the alleged false statements to these agencies. By establishing this legal principle, defendants effectively restricted the factual allegations, reduced viable theories of recovery, limited discovery, lessened the work involved, and permitted both sides to more realistically evaluate liability, damages and future legal expenses. An award of $32,032.50 reflects the fact that defendants prevailed on important issues that materially changed the litigation, but does not reward them for legal efforts that were meritless.

In our view, allowing partially successful defendants to recover virtually all of their fees because the facts and legal theories are so "intertwined" that they "cannot" be segregated underestimates the ability of attorneys and experienced trial judges to evaluate the value of legal services associated with limited success. By contrast, an approach that concentrates on the practical impact of a partially successful motion on the overall litigation advances the objectives of the anti-SLAPP statute and minimizes abuses.

DISPOSITION

We affirm the order to the extent it finds defendants were the prevailing parties on the anti-SLAPP motion, but strike the $57,000 amount awarded and modify the order to award defendants $32,032.50. As so modified, we affirm. Each party to bear its own costs on appeal. No party is entitled to recover attorney fees incurred on this appeal.

CERTIFIED FOR PUBLICATION

HALLER, Acting P. J.

WE CONCUR:

McDONALD, J.

McINTYRE, J.

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Analysis and review provided by El Cajon Apartment Manager Attorneys.

^[1] Although a more detailed explanation would certainly have been helpful, a trial court is not required to issue a statement of decision with regard to a fee award, unless a party timely requests one. (See Ketchum, supra, 24 Cal.4th at p. 1140.)