CALIFORNIA CLASS ACTION LAW

In a dispute over the distribution of attorneys fees between two former co-counsel in a class action lawsuit, the Court of Appeal for the Second District reversed a trial court’s denial of relief in a declaratory action.  Leonard Carder, LLP v. Patten, Faith & Sandford, No. B221940, — Cal.Rptr.3d —-, 2010 WL 3961275 (Cal. Ct. App. 2d Dist. Oct. 12, 2010).

Plaintiff and appellant Leonard Carder, LLP filed a declaratory relief action against his former co-counsel Patten, Faith & Sandford (Patten) regarding the distribution of attorney fees awarded in a stipulated judgment in a class action lawsuit.  Id. *1.  The trial court entered a judgment denying all relief to Leonard Carder on the basis the complaint did not present a case or controversy and that jurisdiction had been reserved with the judge who approved the class action settlement.  Id. The Second District reversed, holding that the complaint did articulate a justiciable case or controversy, and the class action court specifically declined to retain exclusive jurisdiction over the distribution of attorney fees.  Id.

Background

Leonard Carder and Patten were appointed class counsel in an action tried in 2004 before the Honorable Howard J. Schwab, with the bulk of the work on behalf of the plaintiff class performed by Leonard Carder.  Id. The plaintiff class was determined to be entitled to an award of approximately $14.4 million.  A loadstar chart in support of the motion for attorneys fees  showed 11,414 hours worked by Leonard Carder and 673 by Patten.  Id. The loadstar chart justified total fees of $10,879,272 for Leonard Carder and $373,040 for Patten.  Id. Judge Highberger signed the parties’ stipulation to reasonable attorney fees and costs in the total amount of $12,475,000 to be paid within 45 days to Leonard Carder “as trustees for distribution to all counsel in accordance with the approved stipulation.” Id. The final provision in the stipulated judgment was that “[t]his court shall retain jurisdiction over the parties to enforce the terms of this Stipulated Judgment.”  Id. *2. Judge Highberger orally stated that if there were unresolved issues regarding distribution of the fees, “you’ll find some other forum to resolve them. They don’t automatically come to me as a matter of exclusive jurisdiction.”  Id. All counsel expressed agreement with the court’s statement regarding exclusive jurisdiction.  Id.

Leonard Carder filed a complaint for declaratory relief, alleging the existence of a “current controversy” and dispute over distribution of the attorney fees.  Id. Carder contended that Patten had received the full $373,040 it was entitled to as attorney fees in the class action, there was no agreement for fee sharing, the stipulated judgment is res judicata as to any claim by Patten to additional fees, and by cashing the check denoted as the “Final Settlement” Patten entered into an accord and satisfaction over the attorney fees dispute between Leonard Carder and Patten.  Id. Leonard Carder sought a declaration of its right to fees of $10,879,292 under the stipulated judgment. Id. Patten failed to respond to the complaint, the clerk entered Patten’s default.  Id.

The Honorable Randy Rhodes ruled there was no actual controversy between the parties, only an informal claim and apparent contention that Patten had the right to additional fees.  Id. As a separate ground, Judge Rhodes also ruled that Judge Highberger expressly retained jurisdiction for enforcement of the terms of the settlement, which included the attorney fees.  Id.

Discussion

The court recited the standard for an actual case or controversy pursutant to California Code of Civil Procedure section 1060:

The ‘actual controversy’ language in Code of Civil Procedure section 1060 encompasses a probable future controversy relating to the legal rights and duties of the parties. [Citation.] For a probable future controversy to constitute an ‘actual controversy,’ however, the probable future controversy must be ripe. [Citations.] A ‘controversy is “ ‘ripe’ “ when it has reached, but has not passed, the point that the facts have sufficiently congealed to permit an intelligent and useful decision to be made.’ [Citation.]” ( Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885 ( Environmental Defense ) .) “A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the respective parties under a written instrument and requests that these rights and duties be adjudged by the court.” ( Maguire v. Hibernia Savings & Loan Soc. (1944) 23 Cal.2d 719, 728.)

Id. *3.

Case or Controversy

The court held that “[t]here was ample evidence of a probable future controversy.”  Id. *4.

Judge Rhodes ruled the action was not ripe for decision because Patten had not sought to formally institute a legal claim under the fee-splitting agreement. However, Patten was not required to take that formal step in order for a justiciable claim to exist. (See In re Joshua S. (2007) 41 Cal.4th 261, 272-273 [issue of entitlement of children to “AFDC-FC” was ripe for decision although children had not yet applied for and been denied benefits].)

Here, Leonard Carder pleaded the dispute with Patten in detail, specifically alleging the existence of an actual controversy. The evidence presented in the request for a default judgment was consistent with an ongoing controversy over distribution of the attorney fees. The record demonstrates an actual dispute over the right to a large sum of money awarded as part of a stipulated judgment resolving a long-term class action lawsuit. The difference between 40 percent of a fee in excess of $12 million, as opposed to $373,040, is no trifling matter. Leonard Carder made an adequate showing of an actual controversy under Code of Civil Procedure section 1060.

Id. *4.

Exclusive Jurisdiction Before Judge Highberger

As a separate basis for denial of relief, Judge Rhodes ruled Leonard Carder should have sought relief from Judge Highberger, who had retained jurisdiction to enforce the terms of the stipulated judgment.  Id. The Second District disagreed: “While it is true Judge Highberger’s order retained jurisdiction in ‘this court,’ that language in the judgment did not divest another superior court judge from determining the right of the competing law firms to a specific share of the attorney fee award.” Id. *5.  The court noted that “Jurisdiction lies in the court and not a particular judge.” (citing People v. Osslo, 50 Cal. 2d 75, 103 (1958) and 2 Witkin, Cal. Procedure (3d ed.1985) § 50, Courts, p. 65.)  Thus a “cause is before the court, not the individual judge of that court, and the jurisdiction which the judge exercises is the jurisdiction of the court, not of the judge.” Id. (Citing  People v. Osslo, supra, 50 Cal.2d at p. 104 and In re Marriage of Regnery,  214 Cal. App. 3d 1367, 1377 (1989)).

The court held that given “Judge Highberger’s position regarding exclusive jurisdiction, combined with the general notion that it is the superior court, and not an individual judge, with jurisdiction over a case, it was error to deny a judgment to Leonard Carder based upon the firm’s failure to seek relief from Judge Highberger.” Id. Judge Rhodes “had the inherent authority to transfer Leonard Carder’s action to Judge Highberger as a related action or for consolidation with the class action.” Id.

Judges and Attorneys

Justice Sandy R. Kriegler wrote the opinion for the court.  Justices Orville A. Armstrong and Richard M. Mosk concurred.

Appeal from a judgment of the Superior Court of Los Angeles County, Judge Randolph Rhodes.

Leonard Carder, LLP, Lynn Rossman Faris and Beth Ann Ross for Plaintiff and Appellant.

No appearance for Defendant and Respondent.

By CHARLES JUNG