Judge Stephen P. Pfahler, Case Number: 20STCV19615, Date: 2024-02-21 Tentative Ruling

Judge: Stephen P. Pfahler, Case: 20STCV19615, Date: 2024-02-21 Tentative Ruling

Case Number: 20STCV19615 Hearing Date: February 21, 2024 Dept: 68

Dept. 68

Date: 2-21-24 c/f 2-5-24

Case 20STCV19615

Trial Date: N/A

ATTORNEY FEES

MOVING PARTY: Plaintiff, David Joe

RESPONDING PARTY: Defendant, Advisors LLP

RELIEF REQUESTED

Motion for Attorney Fees

SUMMARY OF ACTION

On May 22, 2020, plaintiffs Jordan Fishman, David Joe, and Tony Lee filed a complaint Declaratory Relief, PAGA, Quantum Meruit, Accounting, Restitution, Conversion, and additional individual and PAGA based wage and hour violation claims against Advisors LLP, Leigh Morris, and Robert Plotkowski. A 170.6 challenge was filed on June 5, 2020, thereby leading to assignment to Department 68.

On September 28, 2020, the court deemed the instant case related to 20STCP01618 (lead case) and 20STCV19615. On December 16, 2020, the court granted the motion to compel arbitration, and stayed the action. On February 21, 2023, the arbitrator presented the decision, summarized as follows: “Pursuant to the Section 998 agreement, Respondent Advisors LLP must pay Claimant [David Joe] $5,000.00 within thirty (30) calendar days of its receipt of this Final Award. ... Within thirty (30) calendar days of its receipt of this Final Award, Respondent Advisors LLP also must pay Claimant $220,817.00 in attorneys' fees and $5,024.00 in costs.”

On August 17, 2023, the court denied the motion to vacate the arbitration award, specifically, the award of attorney fees to David Joe. On the same date, Plaintiffs dismissed the second and fifteenth causes of action (PAGA claims). On November 9, 2023, the court entered judgment. On November 16, 2023, Defendants filed a notice of appeal.

On November 21, 2023, Plaintiffs filed a memorandum of costs, with two entries—filing fees and a claim for attorney fees “TBD.”

RULING: Denied.

Plaintiff David Joe moves for $155,071.14 in post arbitration attorneys fees incurred as a result of opposing the motion to vacate the arbitration award. Defendant Advisors LLP challenges the right to any recovery of fees, and alternatively maintains the requested fees are inflated. Plaintiff in reply cites to the language of the statutes for recovery of attorney fees, and challenges Defendant’s reliance on certain case law. The majority of the reply addresses the reasonableness of the sought after amount, including the hourly rate and time presented.

A motion for attorney fees prior to the entry of judgment must be served and filed within the time for the filing of a notice of appeal in a civil case. (Cal. Rules Ct., rule 3.1702(b)(1).) The time for the filing of a notice of appeal in an unlimited action is 60 days if a “Notice of Entry” of Judgment was served by the court clerk or a party to the action, or within 180 days of entry of judgment. (California Rules of Court rule 8.104.) The motion was timely filed 56 days after entry of judgment.

Plaintiff relies on a presumptive argument for recovery under the statutory basis for recovery via the plain language of Code of Civil Procedure section 1293.2 read in conjunction with California Labor Code section 218.5. A prevailing party in entitled to recover costs, including attorneys’ fees when authorized by statute. (Code Civ. Proc., §§ 1032(a)(4); 1033.5(a)(10)(B).) “The court shall award costs upon any judicial proceeding under this title ...” (Code Civ. Proc., § 1293.2.) “(a) In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney's fees and costs to the prevailing party if any party to the action requests attorney's fees and costs upon the initiation of the action. ... (b) This section does not apply to any cause of action for which attorney's fees are recoverable under Section 1194.” (Lab. Code, § 218.5.) “A court must award costs in a judicial proceeding to confirm, correct or vacate an arbitration award.” (Corona v. Amherst Partners (2003) 107 Cal.App.4th 701, 707; Carole Ring & Associates v. Nicastro (2001) 87 Cal.App.4th 253, 260.)

Defendant effectively concedes that contractual recovery of attorney remains available under the existing authority, but emphasizes the lack of any available contractual basis of recovery in the instant action, due to the lack of any such term in the underlying employment agreement. Defendant additionally challenges any statutory recovery for the subject action under Code of Civil Procedure section 1293.2 via Labor Code Section 218.5.

The arbitration award itself considered the exact same argument presented by Plaintiff, whereby Plaintiff cited to Labor Code sections 218.5, 226, subdivision (e), 226, subdivision (h), 1194, and 1198.5, subdivision (l). The arbitrator found that Labor Code section 218.5 supported the recovery of attorney fees for a non-employee claim, and specifically excluded any recovery on the remaining sections. [Declaration of James Goldman, Ex. D.]

In the most recently published opinion on the subject matter, the Sixth Appellate District wrote: “Plaintiff argues she is entitled to attorney fees under section 218.5, but she cites no authority supporting the notion that a statutory attorney fees provision applying to a substantive claim extends to a petition to vacate an arbitration award resolving that claim, and we know of none. ... [¶] Even if a statutory attorney fees provision applicable to a claim resolved by arbitration could be extended to a proceeding to vacate, correct, or confirm an arbitration award, section 218.5 does not apply to the claims in this case. Kirby held that section 218.5 does not apply to section 226.7 claims, and, as we have already explained, plaintiff's section 203 penalty claim likewise does not fall under section 218.5. Corona v. Amherst Partners (2003) 107 Cal.App.4th 701, 707, 132 Cal.Rptr.2d 250, also cited by plaintiff, provides that a court must award costs, including attorney fees if authorized by contract, in a proceeding to confirm, correct or vacate an arbitration award. Plaintiff does not claim that the arbitration agreement authorizes attorney fees. Because we vacate the award as lacking any basis in law or contract, we do not address defendant's reasonableness challenge to the fee amount.” (Ling v. P.F. Chang's China Bistro, Inc. (2016) 245 Cal.App.4th 1242, 1263–1264 disapproved of by Naranjo v. Spectrum Security Services, Inc. (2022) 13 Cal.5th 93 on unrelated grounds (“Ling”).)

The arbitration award itself lacks any reference to consideration of the Ling case. In the August 17, 2023, motion to vacate, the court also declined to consider any substantive challenge the underlying decision awarding attorney fees on grounds that any such challenge was not properly considered by the trial court. “Defendants also argue that the arbitrator exceed her authority by awarding fees to Plaintiff because the arbitrator misapplied what Labor Code § 218.5 allows in an arbitration. Defendants argue that the part of the section allowing a party to recover attorney’s fees only applies in actions, not arbitrations. However, delineating what may be recoverable in a court action versus what is recoverable in an arbitration would go against the principle in the JAMS Minimum Standards that states in part that ‘All remedies that would be available under the applicable law in a court proceeding, including attorney’s fees…must remain available in the arbitration.’ On the chance that the arbitrator misapplied the law and should not have awarded fees, that decision would not be reviewable by this Court. Finally, Defendants appear to argue that the amount of fees awarded by the arbitrator should be reviewable. Whatever factual or legal findings led the arbitrator to award the amount that she did would not be reviewable, either.” [August 17, 2023, Minute Order.]

The subject matter of the motion to vacate and subsequent entry of judgment prompts consideration of the November 16, 2023, filed Notice of Appeal. The “perfecting” of an appeal imposes an automatic stay on the case on “matters embraced therein…but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order.” (Code Civ. Proc., § 916, subd. (a).)

The appeal directly relates to the entry of the judgment incorporating the arbitration award. Given the issue before the appellate court at least in part involves the authority of the arbitrator to render the fee award, an argument can be made that consideration of an award of fees on the basis of the challenged arbitration, renders consideration of the subject item potentially subject to a stay. However, any potential award of attorney fees reliant on the challenged judgment and incorporated arbitrator award is not integral to any ruling for attorney fees in the instant motion. The subject motion for attorney fees in no way impacts the “effectiveness of the appeal.” (Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180, 189.) The court therefore declines to stay the instant motion.

In considering the right to statutory recovery of attorney fees from an arbitration proceeding, the Ling court was presented with fundamental public policy issues regarding reciprocity in the recovery of attorney fees for arbitration employment cases. While Code of Civil Procedure 1194 allows for one-sided recovery of attorney fees in favor of the employee for wage claims, absent a claim governed by 1194, and a contractual provision, the American rule of each party bearing its own costs applies. (Ling v. P.F. Chang's China Bistro, Inc., supra, 245 Cal.App.4th at pp. 1253 accord Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1254 (“Kirby”) [“We conclude that section 1194 does not authorize an award of attorney's fees to employees who prevail on a section 226.7 action for the nonprovision of statutorily mandated rest periods”]; see Villinger/Nicholls Development Co. v. Meleyco (1995) 31 Cal.App.4th 321, 328.)

Prior to Ling, the Kirby court considered any basis of recovery under Labor code section 218.5. The plain language of the statute appears unchanged from criteria considered by the Kirby court. The statute limits recovery to claims for “the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions.” (Lab. Code, § 218.5, subd. (a).) The Kirby court adhering to both the plain language and context of the statute found that a claim under Labor Code section 226.7 in no way expanded the recovery of attorney fees to claims beyond the recovery of wages into claims for employee health and welfare. (Kirby v. Immoos Fire Protection, Inc, supra, 53 Cal.4th at pp. 1255-1259.) Adhering to the reasoning of Kirby, Ling also found the non-wage recovery rule extended to the relied upon bases of recovery beyond just Labor Code section 226.7. (Ling v. P.F. Chang's China Bistro, Inc., supra, 245 Cal.App.4th at p. 1255.)

While the authority and holding in Kirby remains indisputable, the court also finds Ling definitively rules on statutory recovery in employment arbitration cases as well. The court follows the authority from the Sixth Appellate District. (Sarti v. Salt Creek Ltd. (2008) 167 Cal.App.4th 1187, 1193 accord Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal.2d 450, 455.) The court therefore finds that California law only allows for statutory recovery of attorney fees in the arbitration context, absent a written agreement, when strictly based on an unpaid wage claim. All other forms of recovery are barred.

It appears that the arbitrator awarded fees based on reasoning that because Plaintiff recovered $5,024 in costs and $5,000 under the 998 offer, Plaintiff was a prevailing party for purposes of recovering fees under Labor Code section 218.5. Plaintiff logically follows this argument in the instant motion, but the relied upon case law depends on a finding under contractual recovery (e.g. recovery of attorney fees was provided in the terms of the arbitration employment agreement). (Marcus & Millichap Real Estate Investment Brokerage Co. v. Woodman Investment Group (2005) 129 Cal.App.4th 508, 513-514.) Consistent with the authority addressed above, however, merely prevailing on the underlying claim still requires a showing of recovery in a wage based claim as defined and interpreted in Labor Code section 218.5. Again, nothing in the motion seeks recovery under any contractual provision. The subject motion itself otherwise offers no support that any of the underlying claims in fact exclusively arise from statutory unpaid wage claims. Such a position could arguably in fact violate the findings of the arbitration award itself, in that the award specifically disclaims any employment relationship.

Thus, consistent with Kirby and Ling, the court finds no support for this position under the plain language of the statute regarding “the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions.” Lab. Code, § 218.5, subd. (a); Kirby v. Immoos Fire Protection, Inc, supra, 53 Cal.4th at pp. 1255-1259; Ling v. P.F. Chang's China Bistro, Inc., supra, 245 Cal.App.4th at p. 1255.) The motion for attorney fees is therefore denied on grounds of no basis for statutory or contractual recovery.

The court declines to consider the extensive dedicated argument and support regarding the reasonableness of the amount requested given the lack of any basis of recovery. [See Declarations of Danny Abir, Nick Ebrahimian, Eric Kingsley, and Emanuel Shiraz.] (Ling v. P.F. Chang's China Bistro, Inc., supra, 245 Cal.App.4th at p. 1264.)

The court will set an OSC re: Status of Appeal at the time of the hearing.

Moving parties to give notice.