On 10/11/2016 JORDAN GROSSMAN filed an Other - Declaratory Judgment lawsuit against JESSICA HERWILL. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The case status is Pending - Other Pending.
Pending - Other Pending
Los Angeles County Superior Courts
Stanley Mosk Courthouse
Los Angeles, California
WAGNER JONES KOPFMAN & ARTENIAN LLP
BENEFIT OF JORDAN GROSSMAN AND JESSICA
LARRY A. ROTHSTEIN
ROTHSTEIN LARRY A.
LAW OFFICES OF LARRY A. ROTHSTEIN
ROBINSON JON D.
AALAEI ALI A.
COLE MARSHALL RYAN
ROTHSTEIN LARRY A.
WAXLER ANDREW J.
1/31/2018: REPLY TO CROSS-DEFENDANTS' OPPOSITION TO CROSS-COMPLAINANT'S MOTION FOR LEAVE TO AMEND CROSS-COMPLAINT
2/4/2019: Memorandum of Points & Authorities
3/5/2019: Ex Parte Application
4/19/2019: Minute Order
4/19/2019: Other -
5/24/2019: Minute Order
5/16/2017: JESSICA HERWILL'S OPPOSITION TO DEMURRER OF NICHOLAS WAGNER AND WAGNER, JONES, KOPFMAN & ARTENIAN LLP;
7/24/2017: CROSS-DEFENDANTS NICHOLAS WAGER AND WAGNER, JONES, KOPFMAN & ARTENIAN LLP'S ANSWER TO CROSS-COMPLAINANT'S FIRST AMENDED CROSS-COMPLAINT
11/24/2017: Minute Order
12/4/2017: INFORMAL DISCOVERY CONFERENCE
Order Appointing Court Approved Reporter as Official Reporter Pro TemporeRead MoreRead Less
at 09:30 AM in Department 78; Jury Trial - Held - ContinuedRead MoreRead Less
Minute Order ( (Jury Trial)); Filed by ClerkRead MoreRead Less
at 09:30 AM in Department 78; Jury Trial - Held - ContinuedRead MoreRead Less
Trial Brief (RE: ATTORNEYS FEES INCURRED LITIGATING THIS ACTION); Filed by Nicholas Wagner (Cross-Defendant); Wagner, Jones, Kopfman & Artenian LLP (Cross-Defendant)Read MoreRead Less
Minute Order ( (Jury Trial)); Filed by ClerkRead MoreRead Less
at 09:30 AM in Department 78; Jury Trial - Held - ContinuedRead MoreRead Less
Minute Order ( (Jury Trial)); Filed by ClerkRead MoreRead Less
Order (Ruling No. 1 Re Trial Issues); Filed by ClerkRead MoreRead Less
at 09:30 AM in Department 78; Jury Trial - Held - ContinuedRead MoreRead Less
JESSICA HERWILL'S ANSWER AND CROSS-COMPLAINT AGAINST JORDAN GROSSMAN, WAGNER, JONES, KOPFMAN & ARTENIAN LLP, NICHOLAS WAGNERRead MoreRead Less
Summons on Cross ComplaintRead MoreRead Less
DEFENDANT/CROSS-COMPLAINANT JESSICA HERWILL'S NOTICE OF POSTING JURY FEESRead MoreRead Less
CIVIL DEPOSITRead MoreRead Less
NOTICE OF CASE MANAGEMENT CONFERENCERead MoreRead Less
Notice of Case Management Conference; Filed by ClerkRead MoreRead Less
Complaint; Filed by nullRead MoreRead Less
COMPLAINT FOR DECLARATORY RELIEFRead MoreRead Less
SUMMONSRead MoreRead Less
Miscellaneous-Other; Filed by Cross-ComplainantRead MoreRead Less
Case Number: BC636672 Hearing Date: July 20, 2020 Dept: 78
JESSICA HERWILL, et al.;
AND ALL RELATED CROSS-ACTIONS
July 20, 2020
[TENTATIVE] RULING RE:
Cross-defendants’ motion to strike or tax cross-complainant jessica herwill’s costs
Cross-Defendant s’ motion to strike cross-complainant jessica herwill’s claim for prejudgment interest
CROSS-DEFENDANTS NICHOLAS WAGNER AND WAGNER, JONES, KOPFMAN AND ARTENIAN’S AND CROSS COMPLAINANT JESSICA HERWILL’S MOTIONS FOR AN AWARD OF ATTORNEY’S FEES AS COSTS UNDER C..C.P. § 2033.420
Cross-Defendants Nicholas Wagner and Wagner, Jones, Kopfman and Artenian (hereinafter collectively “WJKA”) Motion to Strike or Tax Costs is GRANTED as to: taxation on the $11,707.04 filing fees, $9,550.41 of court reporter fees; $1,032.45 of interest charges and $733.75 of non-court-ordered court reporters for motion hearings. Cross complainant Jessica Herwill (herein after “Herwill”) may recover the remainder of the $81,542.96 costs requested.
WJKA’s and Herwill’s Motion for an Award of Attorney’s Fees as Costs Under C..C.P. § 2033.420 are denied.
Cross-Defendants Motion to Strike Prejudgment Interest is GRANTED as to Grossman’s costs of $30,000 and the $25,725 held in WJKA’s trust account; and DENIED as to the $144,000 arbitration attorneys’ fees and $100,000 in secret profits.
FACTUAL AND PROCEDURAL BACKGROUND
The facts of this case have been set forth in detail our orders and need not be repeated here. Insofar as they are relevant to the motions this Ruling was addressing, they are as follows:
On July 14, 2017, Herwill filed her First Amended Cross-Complaint (“FAXC”)
On May 21, 2019, trial of this action before a jury commenced.
On June 3, 2019, Herwill rested. WJKA thereupon made a motion for Directed Verdict.
On June 3, 2019 the Court, for the reasons stated in the Court’s opinion of that date, granted that motion on Herwill’s Negligence cause of action and her cause of action for Fraud, Intentional and Negligent Misrepresentation and Concealment and granted the motion in part as to Herwill’s causes of action for Breach of Fiduciary Duty and Breach of Contract. The Court also granted the Motion on Herwill’s claim for Punitive Damages.
WJKA thereupon presented their case in chief, Herwill presented her rebuttal case, and the matter was submitted to the jury. On June 6, 2019 the jury returned a verdict for Herwill in the amount of $749,725, including awards of: $144,000 for the attorney’s fees Herwill incurred in the arbitration between her and Jordan Grossman (“Grossman”), $25,725 as to money in the WJKA trust account, and $30,000 as to costs charged to Herwill.
On November 1, 2019, Phase II of non-jury trial began to adjudicate the equitable issues in the case. In addition to the issues listed above.
On December 18, 2019, the Court issued a statement of decision. The Court found in favor of WJKA on the equitable issues, with the exception that WJKA was ordered to pay Herwill $100,000 representing attorneys’ fees it received from Grossman’s attorney for the representation of Grossman in the underlying action.
On February 24, 2020, after reviewing Herwill’s objections to the statement of decision, the Court issued a Final Statement of Decision with the same result as stated on December 18, 2019.
On May 13, 2020, the Court entered judgment for Herwill in the amount of $849,725 against Wagner and WJKA.
On May 15, 2020, Herwill filed a Memorandum of Costs.
On May 28, 2020, WJKA filed a Memorandum of Costs, Motion for Attorneys’ Fees, and Notice of Intent to Move for New Trial.
On May 29, 2020, WJKA filed a Motion to Tax Costs and Motion to Strike Herwill’s Claim for Prejudgment Interest.
On May 29, 2020, Herwill filed an Amended Memorandum of Costs.
On June 5, 2020, WJKA filed a Motion for New Trial.
On June 12, 2020, WJKA filed a Motion to Strike or Tax Cross-Complainant Jessica Herwill’s Costs in Amended Memorandum of Costs.
On June 12, 2020, Herwill filed a Motion to Strike or Tax WJKA’s Cost Bill.
On June 19, 2020, Herwill filed a Motion for Attorneys’ Fees.
On July 7, 2020, Herwill filed an Opposition to WJKA’s Motion to Tax Costs and an Opposition to WJKA’s Motion to Strike re Prejudgment Interest.
On July 13, 2020, WJKA filed Replies to the Motion to Tax Costs and Motion to Strike.
MOTION TO STRIKE OR TAX COSTS
The right to recovery costs of suit is determined by statute.¿(California Code of Civil Procedure § 1032.)¿¿
¿“Code of Civil Procedure section 1032, subdivision (b) , guarantees prevailing parties in civil litigation awards of the costs expended in the litigation: ‘Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.’” (Williams v. Chino Valley Independent Fire Dist.¿(2015) 61 Cal.4th 97, 100.).¿¿
“If the items on a verified cost bill appear proper charges, they are prima facie evidence that the costs, expenses and services therein listed were necessarily incurred.” (Rappenecker v. Sea-Land Service, Inc.¿(1979) 93 Cal.App.3d 256, 266.) Although individual cost items are ordinarily challenged by a motion to tax costs, no cost-item is effectively put in issue by “mere statements” claiming them to be unreasonable. (Ibid.)¿
In the present case Herwill and WJKA request costs in three categories: (1) Herwill and WJKA seek an award of attorneys’ fees as costs under C..C.P. § 2033.420. (2) Herwill seeks an award of prejudgment interest, and (3) Herwill seeks an award of for $81,542.96 in costs as the prevailing party, which includes $15,239.80 in filing fees, $19,170.02 in deposition costs, $17,150.45 in court reporter costs, and approximately $30,000 in other costs. (Memo of Costs.). These requests will be discussed below.
Attorneys’ Fees as Costs Under C..C.P. § 2033.420
As the court held in Miller v. American Greetings Corp. (2008) 161 Cal.App.4th 10561066, even when a summary judgment is granted against a party who denied a request for admission, “Awarding costs of proof is improper if the party who denied the request for admission ‘held a reasonably entertained good faith belief [it] would prevail on the issue at trial.”). All of the costs of proof cited by either party fall squarely within this category and additionally do not come close to supporting the attorneys fees that are requested.
As an example, WJKA claims that it should be awarded its attorneys fees incurred because Herwill denied requests for admission that Herwill would not have received an award against Bancroft (RFA 43, would not have prevailed in a lawsuit against Bancroft (RFA 44) and that Herwill did not have any evidence that it would have been able to collect any judgment against Bancroft RFA 45). The evidence showed that the first two requests for admissions are directly rebutted by the evidence at trial. The third request called for admission that Herwill had good reason to contest at the time she filed her response.
Herwill, on the other hand, requests an award of what she characterizes as “reasonable attorneys fees incurred in proving a conflict of interest and lack of informed written consent”. With respect to WJKA’s representation of Grossman (RFAs 2,16, 17 and 24). In fact WJKA admitted that it did not have Herwill’s written consent (Response and related interrogatory answers with respect to RFA 2) and has consistently denied that its representation of Grossman created a potential or actual conflict of interest. While the jury found to the contrary, there is no basis for finding that Mr. Wagner did not believe he had no such a conflict or potential conflict and that issue was not decided until the jury returned its verdict in the circumstances of this case, where the Court has found that Mr Wagner’s representation of Grossman had a substantial benefit for Herwill, the Court cannot find this belief unreasonable.
Accordingly, both motions are DENIED.
As to the other requested costs, the Court agrees with WJKA that they could not object to the Memorandum of Costs without additional information. In her Opposition’s Declaration, Herwill’s attorney declares that the MC-011 Memorandum of Costs worksheet was filed in this case (Aalaei Decl., ¶ 1), however, the Court finds this not to be the case. This worksheet, which breaks down and identifies the individual costs, was not previously included. While the burden is on the objecting party to show costs to be unreasonable, this is impossible if the costs are not listed. (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 131, as modified on denial of reh'g (June 14, 1999).)
“[I]f the items are properly objected to, they are put in issue and the burden of proof is on the party claiming them as costs.” (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 774.) Here, because the Memorandum of Costs did not list any specific costs, and the Motion to Tax Costs raises this as an objection to the Memorandum, the Court considers the Motion to Tax Costs to properly object to all costs. The burden shifts to Herwill.
Herwill now presents invoices and billing statements relating to filing fees with One Legal, invoices paid for depositions, reservation fees, telephonic appearance fees, costs for printing, and costs for lodging/taxis/parking. (Aalaei Decl.)
In Reply, WJKA argue that they recalculated several of Herwill’s requested amounts based on the invoices filed and Herwill’s numbers are inflated. (Reply at p. 3.) WJKA contend that Herwill requests $15,239.80 in filing fees including One Legal filing fees of $9,325.59, but that the One Legal invoices total $7,973.23 and thus should be taxed the difference of $1,352.36. (Reply at p. 3.) WJKA further argue that they are unable to decipher which filings were made and whether they were reasonably necessary for litigation, also that Herwill incurred “One Legal Convenience Fees” which are not recoverable. WJKA also argue that “Courtcall Fees” are not recoverable. (Reply at p. 5.) Further, WJKA contend that Herwill’s requested deposition costs should be taxed because Herwill is seeking to collect for: 4 rough drafts of the transcripts, late payment interest charges of up to $488.55, for a $600 charge that was credited back, for “expedite” charges that are not specified how much they cost,
In reviewing Herwill’s invoices the Court agrees with WJKA as to the “Convenience Fee,” which is essentially a financing fee. Herwill cannot recover the $15.21 convenience fee per filing. The Court also agrees that the Gmail email receipts, which do not specify the filing to which each receipt is associated nor any included fees, are extraordinarily difficult to review. (Aalaei Decl., Exh. B.) It is impossible for the Court to identify which filings included convivence fees. Accordingly, the Court orders taxes on the $11,707.04 filing fees.
The Court also agrees that Herwill cannot recover for interest charges for untimely payments. (Aalaei Decl., Exh. E.) The invoices for Veritex Legal Solutions include interest charges of $488.55, $240.27, and $303.63. (Aalaei Decl., Exh. E.) Accordingly, the Court strikes these charges in the amount of $1,032.45.
The Court agrees that Herwill cannot recover for copies of motion hearing transcripts without evidence that they were ordered by the Court. (Code Civ. Proc., § 1033.5(b)(5).) Accordingly, the Court strikes the following: $87.70 from 7/13/18, and $646.05 from 2/22/19. (Aalaei Decl., Exh. E.) The Court also agrees that Herwill may not recover expedited surcharges. Due to the frequency and high amount of these expedited surcharges, the Court taxes the California Court Reporters invoice (requested amount $10,284.16, minus the stricken amounts above of $733.75).
The Court, however, disagrees with WJKA as to the Courtcall fees, deposition transcript drafts, and other objections.
Accordingly, the Motion to Strike or Tax Costs is GRANTED as to taxation on the $11,707.04 filing fees, and $9,550.41 of court reporter fees; and strike $1,032.45 of interest charges and $733.75 of non-court-ordered court reporter for motion hearings. Herwill may recover on the remainder of the $81,542.96 costs requested.
MOTION TO STRIKE CLAIM FOR PREJUDGMENT INTEREST
“A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day.” Civ. Code § 3287(a). “Under subdivision (a) the court has no discretion, but must award prejudgment interest upon request, from the first day there exists both a breach and a liquidated claim.” (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 828.)
WJKA argue that Herwill is not entitled to pre-judgment interest because she has failed to file for prejudgment interest with a noticed motion. (Motion at p. 3.) WJKA also contend that, even assuming Herwill followed the correct procedure, the Court cannot award interest because she has not submitted any legal arguments. (Motion at p. 1.)
In Opposition, Herwill argues that WJKA are miss-stating the record. (Oppo. at p. 2.) She contends she has already “submitted substantial briefing on the question of prejudgment interest” and that the Court’s Phase II Order instructed Herwill to resubmit her claim for prejudgment interest after entry of judgment with her cost bill, which she did. (Oppo. at p. 2.)
The Court agrees with Herwill. “[R]equests for prejudgment interest under section 3287 by a successful plaintiff must be made by way of motion prior to entry of judgment, or the request must be made in the form of a motion for new trial no later than the time allowed for filing such a motion.” (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 831.) The Court finds that this was done. On July 11, 2019, Herwill filed a Brief re: Prejudgment Interest, approximately 10 months before the final judgment was entered. In this Court’s May 13, 2020 order, this Court ordered that “Herwill shall resubmit her prejudgment interest claim in connection with the filing of her Memorandum of Costs. Interest will accrue at the rate of 10% (ten percent) per annum from the date of this judgment until paid, together with any costs, prejudgment interest, or attorney’s fees.”
Liquidated claims are those damages “certain, or capable of being made certain by calculation[.]” (Civ. Code, § 3287(a).) “Courts generally apply a liberal construction in determining whether a claim is certain, or liquidated.” (Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 535, as modified on denial of reh'g (Sept. 9, 2010).)
Here, the amount of the$144,000 in attorneys fees Herwill incurred in connection with the arbitration with Grossman and the $100,000 in “secret profits” the Court awarded were both “certain or capable of being made certain” before the judgment was entered. . Accordingly, Herwill may recover prejudgment interest on these both these amounts. Herwill suggests the date of September 12, 2018 is a starting date for calculation of interest on the $144,000 arbitration attorneys’ fees and July 7, 2017 as the starting date for interest on the $100,000. Both dates are reasonable and would be ordered as the base upon which the interest calculation begins was capable of being made certain as of the date requested by Herwill (July 7, 2017). Accordingly, WJKA’s motion to strike these amounts is DENIED.
Herwill also requests prejudgment Interest on the $30,000 awarded by the jury as Grossman’s which were paid by Herwill $30,000 and the $25,725 held in WJKA’s trust account. Neither of these amounts were liquidated before the jury verdict. WJKA’s motion to strike these sums is GRANTED
DATED: July 20, 2020 ________________________________
Hon. Robert S. Draper
Judge of the Superior Court
Case Number: BC636672 Hearing Date: February 26, 2020 Dept: 78
nicholas wagner and wagner, jones, kopfman & artenian
November 1, 2019
FINAL STATEMENT OF DECISION RE:PHASE ii OF TRIAL
Cross-Complainant Jessica Herwill’s (“Herwill) First Amended Cross-Complaint, which is the operative pleading in this action, was filed on July 14, 2017. The Cross-Complaint alleges six causes of action against Wagner, Jones, Kopfman & Artenian (“WJKA”) and Nicholas Wagner (“Wagner”) and demands compensatory damages as well as punitive damages and injunctive relief. The causes of action are:
Fraud, Intentional and Negligent Misrepresentation, Concealment
Breach of Fiduciary Duty
Unfair Business Practices
Breach of Contract
On May 21, 2018, after discussions with and briefing by counsel, the Court ruled that Herwill was entitled to a jury trial on the Breach of Fiduciary Duty cause of action. The Court also ruled that the causes of action for Unfair Business Practices under Business and Professions Code §17200 seeking an injunction against wrongful acts by WJKA in the future and the Declaratory Relief cause of action, seeking disgorgement or forfeiture of the fees WJKA withheld from the settlement proceeds pursuant to their contingency fee agreement, raised equitable issues to be tried by the court after the conclusion of the jury trial on the other causes of action.
On May 19, 2019 the jury trial in this action commenced. On June 3, 2019 Herwill rested. WJKA thereupon made a motion for Directed Verdict. On June 3, 2019 the Court, for the reasons stated in the Court’s opinion of that date, granted that motion on Herwill’s Negligence cause of action and her cause of action for Fraud, Intentional and Negligent Misrepresentation and Concealment and granted the motion in part as to Herwill’s causes of action for Breach of Fiduciary Duty and Breach of Contract. The Court also granted the Motion on Herwill’s claim for Punitive Damages.
WJKA thereupon presented their case in chief, Herwill presented her rebuttal case, and the matter was submitted to the jury. On June 6, 2019 the jury returned a verdict for Herwill in the amount of $749, 725, including awards of $144,000 for the attorney’s fees Herwill incurred in the arbitration between her and Jordan Grossman (“Grossman”) to determine how the $3,000,000 settlement with the defendant in the underlying action would be allocated (which will be discussed below) and $550,000 for emotional distress.
On November 1, 2019 the bench trial in Phase II to adjudicate the equitable issues in the case was held. In addition to the issues listed above, Herwill also asserted that she was entitled to recover $100,000 in “secret profits” Wagner received from Grossman’s lawyer Larry Rothstein. This represented a portion of the attorneys’ fees earned by Rothstein under his contingency fee agreement with Grossman. Since there was no objection to the addition of this issue, and since the Court believes consideration of it is justified since evidence of this fact was admitted at trial, that claim will be addressed in this ruling.
The parties elected to conduct Phase II by argument without offering further exhibits or witnesses, instead relying on the evidence received by the Court during the first phase of the trial. In all this consisted of multiple exhibits as reflected in the minute orders and the testimony of 15 witnesses. Each party also submitted declarations and memoranda in support of their positions and the court heard oral argument on November 1, 2019, at which time the matter was submitted to the Court for decision.
The Court read, reviewed and considered all of the above and, based thereon, issued its Tentative Statement of Decision for Phase II of the trial. On December 19, 2019. On January 2, 2020 counsel for Herwill filed her Response filed and Objections to the Tentative Statement of Decision. On January 31, 2020 counsel for Herwill filed her Request for an Additional Statement of Decision.
The Court has read and reviewed Herwill’s Objections to the Tentative Statement of Decision and her Request for an Additional Statement of Decision. Herwill’s Objections are overruled and the request for an Additional Statement of Decision is denied except as set forth below. For the convenience of the parties the Court is furnishing each party with a redlined copy of this Statement of Decision showing the changes made to the Tentative. With those changes this is the Final Statement of Decision of the Court on Phase II of the Trial.
Both sides have made objections to evidence offered by the other. Herwill’s objection to WJKA’s reference to exhibits which have not been admitted into evidence are sustained. The Court is able to distinguish between evidence that is pertinent and relevant, and the remaining objections are overruled.
The Court of course accepts the jury’s verdict finding that WJKA breached their fiduciary duties to Herwill and that these breaches were intentional. By “intentional” the Court believes the jury’s verdict was based on a finding that WJKA intentionally performed the acts which constituted the breaches, not that WJKA did what it did with an intent to injure Herwill, and Herwill’s counsel’s questioning of Wagner was phrased in this manner. If the jury was required to find that WJKA ‘s acts at issue were “intentional” in the sense that WJKA performed the acts with an intent to harm Herwill, the Court would seriously consider post-trial motions because there was not an iota of evidence that would support even an inference that this was WJKA’s purpose. But, as stated, the Court does not believe that this was the basis for the jury’s finding.
The jury’s verdict in this case fully compensated Herwill for the economic damages she suffered as a result of WJKA’s breaches of fiduciary duty and breach of contract as well as her damages for the emotional distress caused by these breaches. The issue the Court is called on to address in this phase is: do the facts proven at trial justify additional damages or other remedies based on equitable principles? To address this issue and explain the basis for the Court’s conclusions, the Court needs to set forth the facts it believes the evidence established.
When Herwill retained WJKA to represent her on September 5, 2012, she had been seriously injured in a car accident. Herwill had been woken up in the middle of the night on July 9, 2012 by Grossman and taken to the home of Devin Bancroft (“Bancroft”), who was apparently a close friend of hers. Bancroft, Grossman and third person named Nicholas Venovich (“Venovich”) had been drinking and at least Bancroft had been taking drugs.
Bancroft decided he needed to get Venovich out of his house because Bancroft’s parents were returning from a trip and did not approve of Venovitch. So the four of them got into Bancroft’s open top jeep with Bancroft driving. Herwill was sitting in the back seat as was Grossman; Vinovich was sitting in the right front passenger seat.
Shortly after Bancroft started to drive he lost control of the car. Herwill and Grossman were ejected, and the car plunged down an embankment, landing upside down. Both Bancroft and Vinovich were still in the car when it went into the embankment. Vinovich, who was wearing a seat belt, suffered only minor injuries. Bancroft, who was not wearing a seat belt, suffered severe injuries, was in critical condition, and remained in a coma for two days after he was airlifted to a hospital. Grossman was also airlifted to a hospital where he remained for five days. Herwill was taken by ambulance to a hospital and released two hours later.
There seems to the Court to have been a bit of revisionist history in this trial about what next occurred and the reality of the task of WJKA was facing. What was immediately obvious was that because Bancroft had insured his car through his father’s company, he had an insurance policy with a liability limit of $3,000,000. Which was good. What also became obvious shortly thereafter was that neither Bancroft nor Grossman had any cognizable assets and Bancroft was over 18 so his parents could not be held responsible. Any meaningful recovery would therefore need to come out of the $3,000,000 limits of the insurance policy. The question was, how best to do this?
As will be discussed below, ultimately Wagner decided that the best way to accomplish this was by joining forces with Grossman’s lawyer. In this litigation Herwill’s attorneys have vociferously criticized this decision, claiming that Wagner instead should have counter claimed against Grossman because he “pushed her out of the car” and was therefore responsible for her injuries. The claim that Grossman injured Herwill by pushing her out of the car was neither Herwill’s view at the time nor is it consistent with the facts.
When Herwill texted Bancroft shortly after the accident, she expressed great concern about Grossman’s well-being. She said she needed to keep her distance from them [Grossman and Bancroft) because there is a “l’ll drama” but “I want to thank him for saving my life…If it wasn’t for him I’d be dead.” That statement is almost indisputably true. There were two people in the Jeep when it went over the embankment and landed upside down: Vinovich, who was wearing a seatbelt, and Bancroft who was not. As noted, Vinovich suffered only minor injuries. Bancroft was in a coma with “open fracture to left ankle, multiple fractured ribs, multiple abrasions and contusions to the entire body, laceration to back of head.”
Herwill also was not wearing her seatbelt. Had Grossman not “pushed [Herwill] out of the jeep,” she like Bancroft would have been in the jeep when it over the embankment and turned upside down. And she indisputably would have suffered the same or more serious injuries.
This raises another factor that the Court believes needed to be considered. Counsel for Herwill assert that Grossman faced greater difficulty than Herwill in seeking recovery because Wagner later told him that the jury might believe he was partly responsible for the accident because he, Bancroft and Vinovich had been partying that night. Wagner explained that if the jury believed this, they could find him partially responsible for the accident and for his own injuries because he knew Bancroft was inebriated.
But Grossman was inebriated and presumably impaired in his judgment in making that decision. At the time Herwill made the same decisions she was not. When Herwill made the decision to get into the car with Bancroft driving, she had full knowledge that he and the others were seriously inebriated. Asked by Bancroft a few days later to if she could explain how the accident happened since Bancroft had been in a coma and had no recollection, Herwill responded “Yes, I was the only one sober that night.”
Herwill also was not wearing a seatbelt, although there was one in her seat, when, in the middle of the night, she got into an open roofed Jeep driven by a person she knew was badly impaired. When asked in her deposition in the underlying case about the fact that she was not wearing a seatbelt, Herwill responded “that’s on me.” In the context of a personal injury case where contributory negligence is always a prime issue, the reality was that Herwill faced substantial difficulties. There was another reality: Herwill was never going to get the whole $3,000,000—even if it was on the table,there was always going to be a need to determine how to split it with Grossman.
In defending litigation all lawyers face judgment calls on how best to proceed. In the context of this case the Court does not believe it was unreasonable for Wagner to conclude that joining forces with Grossman was in the best interests of Herwill. Wagner testified without contradiction that Rothstein, Grossman’s lawyer, was not experienced in personal injury litigation. Making the election that he did allowed Wagner to control the steps taken in defense of the litigation and, most importantly, in placing the case in a posture where at the last moment the insurance company had to either offer policy limits or waive them.
There were in fact serious risks Wagner avoided by agreeing to represent both Herwill and Grossman. Exhibit 730 Contains a March 10, 2016 998 offer of $304,388 to Herwill from Bancroft’s carrier. By June 16, 2016 it was $800,000. On July 7, 2016 Bancroft’s insurance carrier offered the whole $3,000,000 jointly to Herwill and Grossman. On July 11, 2016 the case settled for that joint payment.
Now assume that counsel for Herwill and counsel for Grossman had been operating independently. Instead of a $3,000,000 joint offer to Herwill and Grossman assume Bancroft’s insurance carrier offered each $1,500,000. The insurance carrier would be off the hook for bad faith liability because it had offered its policy limits. But Herwill would be infinitely worse off. If she rejected the offer and Grossman accepted the offer to him, the effective cap on what she can recover would be $1,500,000 because that was the remaining limit of the insurance company’s policy limits. If she accepted the offer, the result would be the same. Only by orchestrating the settlement in a way that made it a joint settlement did Wagner avoid this result.
In sum, this Court’s conclusion is the same as it was on the Motion for Directed Verdict: WJKA achieved the best result that could have been achieved. To put it colloquially, there was no more blood in the turnip once Bancroft’s insurer tendered its full policy limits.
THE CLAIM THAT WJKA’S FEES MUST BE DISGORGED AS PUNISHMENT FOR THEIR BREACHES OF FIDUCIARY DUTY
Citing Sheppard, Mullin, Richter &Hampton v. J-M Manufacturing Corp. (2018) 6 Cal. 5th 59, Herwill claims that WJKA should be required to disgorge its entire fee in the underlying litigation because it violated numerous Rules contained in the Rules of Professional Conduct. There are two important distinctions, however, between Sheppard Mullin and this case.
First, Sheppard Mullin involved an inadequately disclosed conflict at the time the contract was signed that made the contract void ab Initio. This case involves claimed breaches of fiduciary duty that occurred well after the contract was signed. No case has ever held that breaches of fiduciary duty occurring during the course of the representation requires disgorgement of the attorney’s entire fee as opposed to an award of the damages caused by that breach.
More importantly, Sheppard Mullin involved a client who was in fact severely damaged by Sheppard Mullin’s failure to disclose its conflict to both Sheppard Mullin and to Sheppard Mullin’s adversary at the time it accepted the representation of the client. By the time this issue was later raised by the client’s adversary Sheppard Mullin’s client had already paid Sheppard Mullin close to $2 million for its work in the litigation and Sheppard Mullin was suing the client for over $1 million more. None of the information gathered or research done by Sheppard Mullin could be used by successor counsel because that would be using the “fruit of the poisonous tree.” Here, by contrast and as a result of WJKA’s efforts, Herwill received the maximum amount she ever could recover for her injuries.
The more relevant case to the disgorgement issue here is Slovensky v. Friedman (2006) 142 Cal. App. 4th 1518. In Slovensky, a toxic tort case, the defendant lied to plaintiff when plaintiff retained him by telling plaintiff that the lawyer would not take any more toxic tort clients at the apartment complex where plaintiff’s injury occurred. He then signed up 20 more clients. The attorney lied when he settled the case in a global settlement, falsely representing to the plaintiff that it was not a global settlement. The lawyer also induced plaintiff to agree to this settlement by lying and falsely telling her that she was receiving more than the other plaintiffs. The client sued for breach of fiduciary duty, demanding disgorgement of the fees she had paid the defendant.
In Slovensky the Court recognized that “the attorney–client relationship is a fiduciary relationship of the very highest character” and that “Disgorgement of fees may be an appropriate remedy for an attorney’s breach of fiduciary duty.” The Court acknowledged the serious nature of the breaches involved there but nevertheless affirmed the trial court’s order granting summary judgment for defendant. This was because “Where an attorney’s misrepresentation or concealment has caused the client no damage, disgorgement of fees is not warranted.” Slovensky, 142 Cal. App. 4th, supra, at 1536.
In Slovensky the basis for the Court’s holding that plaintiff was not damaged by the lawyer’s acts was that plaintiff’s cause of action was barred by the statute of limitations at the time she retained the defendant. Therefore, by receiving a settlement she obtained more than she was legally entitled to. While the situation here is somewhat different, the principle is the same.
Counsel for Herwill points out that in Slovensky the Court noted in a footnote that the plaintiff was not seeking damages for emotional distress. While that is true, that actually makes this case a stronger case for refusing to order disgorgement of fees. If the plaintiff in Slovensky had asserted that she had suffered emotional distress damages, the Court would have been required to consider whether the plaintiff had suffered this damage and, if so, whether she was entitled to be compensated for it. That is not the case here because Herwill has both alleged and received full compensation for these damages. Ordering a disgorgement of fees in this case would result in clearly inappropriate double dipping.
To determine whether disgorgement of fees is an appropriate remedy here, the Court must consider both the nature of the breach of fiduciary duty and whether Herwill has been damaged by that act. If Herwill has been damaged by that act, the Court also must consider whether the jury award fully compensated her for that damage.The main thrust of Herwill’s complaint is that WJKA was negligent or fraudulent in preventing her from exercising her constitutional right to a jury trial. In the Court’s ruling on the Directed Verdict Motion the Court found that there was never a possibility of recovering more than $3,000,000 from Bancroft and was never a possibility of Herwill taking all of whatever recovery was obtained. IN these circumstances, the only way Herwill could claim any damage from WJKA’s acts in settling her case would be to claim that the representation she received in the arbitration to determine the split was inferior to the representation she would have received if WJKA had been able to represent her. The Court does not understand Herwill’s counsel to be making that argument.
Herwill claims that WJKA had a conflict of interest and that in these circumstances the disclosure of confidential information to Grossman is “presumed.” That certainly can be true for concurrent representation where disqualification of counsel is requested. The issue here is whether there was actually a disclosure that actually damaged Herwill. No one is better situated to analyze this question than Herwill’s counsel here, who both prosecuted the arbitration on behalf of Herwill and had full access to WJKA’s files in this case. Yet there has never been any evidence or offer of proof that anything WJKA disclosed to Grossman’s counsel injured Herwill in the arbitration.
Herwill claims that WJKA breached his ethical duties to her by removing it’s contingent fee of $750,000 from its trust account despite Herwill’s instructions that it not do so. This claim illustrates the relevance of the statement in the Rules of Professional Conduct that “A violation of a rule does not itself give rise to a cause of action for damages for failure to comply with the rule.” Absent an order of disgorgement, which the Court does not find proper here, WJKA was entitled to receive the $750,000 as it agreed contingency fee. Whether it removed the funds earlier or not is irrelevant.
Herwill claims she won the breach of contract cause of action and therefore is somehow entitled to disgorgement of WJKA’s fees. Actually, the bulk of breach of contract cause of action was dismissed by the order granting the Motion for Directed Verdict. The only contract issue presented to the jury was whether WJKA breached its duty of good faith and fair dealing by placing itself in a position where it could not represent Herwill in the arbitration. The jury award of $144,000 fully compensated Herwill for the fees she paid her present counsel to represent her in that arbitration and the jury’s award of emotional distress damages included any such distress to a jury found Herwill had suffered from this breach.
Finally, counsel for Herwill claims that Herwill suffered damage because she had a life care and loss of wages claim of $5 million that she could have presented to the jury but for Wagner’s acts in persuading her to settle the case. We seem to be going in circles. The maximum Herwill could actually recover, no matter what proof she submitted, was $3,000,000, subject to a split with Grossman was
The Court therefore finds that there is no equitable basis for an order requiring WJKA to disgorge any portion of its agreed contingency fee.
THE CLAIM FOR INJUNCTIVE RELIEF AND DISGORGEMENT OF FEES (“RESTITUTION”) UNDER BUSINESS AND PROFESSIONS CODE § 17200
Herwill is also requesting an injunction and return of WJKA’s fees under Business and Professions Code §17200. The request for an injunction is denied because there is no showing that this case involves anything other than a dispute between Herwill and WJKA and no showing that anything WJKA did justifies or requires an injunction.
With respect to the return of fees, both parties acknowledge that the typical remedy under § 17200 is an injunction. The cases are also clear that disgorgement is not a remedy available under § 17200. The only monetary remedy available is restitution, being the “return of property obtained through an unfair business practice to those persons in interest from whom the property was taken.” Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal 4th 1134, 1144-5.
While WJKA’s removal of $750,000 from its trust account could fit this definition if the Court had found that this removal was wrongful in the sense that this money in fact belonged to Herwill, as set forth above Court did not make this finding. The §17200 claim adds nothing substantive and cannot form the basis for an equitable remedy.
VIOLATION OF RULE 6147(a)(3) OF THE BUSINESS AND PROFESSSIONS CODE
Herwill claims that the retainer agreement between her and WJKA is voidable and counsel say she elects now to void it, thereby requiring disgorgement of all of WJKA ‘s fees. This assertion is based on the claim that WJKA’s contract violates the requirement in Rule 6147(a)(3) of the Business and Professions Code that a contingency fee agreement between an attorney and his client shall include “a statement as to the extent, if any, the client could be required to pay as compensation to the attorney for related matters that arise out of their agreement that are not covered by their contingent fee contract.” (emphasis added)
The WJKA form agreement used in this case, Exhibit 807, provided for a graduated contingency fee scale from 33 1/3% to 40% to 45% depending on whether the case was settled before trial, after the commencement of trial, or at the start of a second trial. Wagner testified without contradiction that he crossed off the second two paragraphs because he assured Herwill that he would never charge for more than 33 1/3% for the case whether it was settled, tried, or appealed.
In fact, despite Herwill’s creative attempts to argue to the contrary, there never were any “related matters” and Herwill’s case against Bancroft settled before trial, entitling WJKA to the 33 1/3% contingent fee. Herwill’s counsel argues, however, that the fee agreement violated Section 6147(a)(3) anyway because even if there were no “related matters,” the fee agreement was still voidable if it did not describe how such hypothetical matters would be charged. The Court finds the analysis of WJKA’s counsel to the contrary on the interpretation of the statute to be persuasive on this issue .
In any event, the concept that a client could accept the full benefit of the representation afforded the client and then deny any obligation to pay the fees after the attorney has obtained for the client the maximum amount the client ever could recover because the client elects to “void” the fee agreement based on a failure to provide for a contingency that never occurred seems to the Court to be the opposite of an equitable argument. The Court also finds that in any event WJKA would be entitled to recover the full fees on a quantum meruit basis. While not all the evidence to which WJKA refers was admitted, there is ample evidence of an actually quite exceptional result achieved by WJKA for Herwill after four years of effort that more than justifies payment of WJKA’s fees on a quantum meruit basis.
Herwill claims that as a result of WJKA’s alleged violation of Section 6147(a)(3) WJKA can only recover its fees on a quantum meruit basis if it proves that its conduct was “neither willful nor egregious,” citing Sheppard, Mullin, Richter &Hampton v. J-M Manufacturing Corp. (2018) 6 Cal. 5th 59, 90. While the Court does believe that WJKA’s representation of Herwill in the overall context passes this test, it should be noted that this is the standard applied to serious violations of the Rules of Professional Conduct, not to technical violations of the Business and Professions Code.
RETURN OF WJKA’S FEES ON THE GROUNDS THAT NO “RECOVERY” WAS RECEIVED BY HERWILL BEFORE THE CONTRACT BETWEEN HERWILL AND WJKA WAS TERMINATED
In 1972, in Fracasse v Brent (1972) 6 Cal. 3rd 59, the California Supreme Court, in a matter of first impression held that a client has an absolute right to discharge his or her attorney. The Court also held that when that attorney has the case on a contingency fee basis, and the discharge occurs before any order for recovery in the case, the attorney is only entitled to recover his or her fees on a quantum meruit basis. The Court also was careful to make clear, however, that:
“To the extent that such discharge occurs ‘on the courthouse steps’ where the client executes a settlement agreement obtained after much work by the attorney, the factors involved in a determination of reasonableness would certainly justify a finding that the entire fee was the reasonable value of the attorney’s services.” (Id., at 791)
In this case the “settlement” did occur on the “courthouse steps” but it occurred while WJKA was employed by Herwill under its contingency fee agreement and as the direct result of WJKA’s efforts. Fracasse has no application. Even if it did, the Court has found that the reasonable value of WJKA’s services is the $750,000 it obtained under the contingent fee agreement.
THE CLAIM THAT WJKA SOUGHT AND OBTAINED “SECRET PROFITS” BY SEEKING AND RECEIVING A SHARE OF THE CONTINGENCY FEE PAID BY GROSSMAN
The remaining equitable claim is the assertion that Wagner breached his duties to Herwill by soliciting and receiving from Grossman’s a portion of the contingency fee the attorney received from Grossman. This is in many ways the most difficult claim because the Court has found and believes that there were good and valid reasons for Wagner to take over the representation of Grossman as well as Herwill. But these good and valid reasons all related to the benefit to Herwill that flowed from Wagner’s coordination of the defense. WJKA had a duty of undivided loyalty to Herwill. If it believed that assuming the representation of Grossman was to the benefit of Herwill, as the Court believes it was, undertaking that representation would not violate this duty because it was for the benefit of Herwill, although Wagner should have explained this to Herwill and obtained her informed written consent.
But soliciting and accepting additional compensation from Grossman cannot be justified on this ground. There was no benefit to Herwill from soliciting this fee, only a benefit to WJKA. Under the authorities cited by Herwill, and particularly the holding in American Master Lease, LLC v. Idanta Partners, Ltd (2014)) 225 Cal App 4th 1451, the Court believes that the appropriate equitable remedy is to require WJKA to pay the fees it received from Grossman to Herwill.
ACCORDINGLY, on the equitable issues tried in Phase II, judgment will be entered for WJKA with the exception that WJKA is ordered to pay Herwill all funds it received from Grossman’s attorney for the representation of Grossman in the underlying action.
Plaintiff is to give notice. The parties are ordered to meet and confer and submit a judgment on all of the issues tried in this case.
DATED: February 24, 2020
Hon. Robert S. Draper
Judge of the Superior Court
 Unless otherwise indicated references to WJKA will be deemed to include Wagner.
 Herwill's right to a jury trial on the Fraud, Intentional and Negligent Infliction of Emotional Distress, Negligence and Breach of Contract causes of action was not contested.
 By contrast, the Court believes Herwill's request for prejudgment interest is more properly a matter to be addressed in connection with Herwill's cost bill, so it will not be addressed here.
 Trial Exhibit 502.
 Trial Exhibit 502, page 502-3.
 Trial Exhibit 2.page 2-3.
 Id.,page 502-4.
 The same is true of Herwill’s claim that the Courts finding requiring WJKA to pay Herwill the money it received from Grossman’s attorney should require a disgorgement of fees. The Court made this finding not because the act of taking these fees injured Herwill but in spite of the fact that it did not.
 There also could be no damage to Herwill for this early removal since interest in funds held in an attorney's trust account are paid to the State Bar.
 This holding was in the context of an attorney who claimed he was entitled to his full contingency fee for a settlement subsequently achieved by his successor without regard to the amount of work he had done before his discharge.
 Additionally, as the Court made clear in Joseph E. Loretto Inc. v. O’Neill (1991) 1 Cal 4th 149, 158 , subsequent cases have made clear that when an attorney has fully performed his services, recovery under the contingency fee contract is appropriate.
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