Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. CGC-06-452689
Haerle, J.
I. INTRODUCTION
Don L. Beck (Don Beck) retained Silicon Valley Law Group (SVLG) to defend him and his closely held corporation, Don L. Beck Associates, Inc. (Beck Inc.), in litigation arising out of a partnership dispute. After the partnership litigation was settled, Beck Inc. sued SVLG for malpractice for failing to timely advise it that a law firm that previously represented Beck Inc. in connection with the partnership dispute was potentially liable for malpractice. SVLG then filed claims against Beck Inc. and Don Beck for unpaid attorney fees incurred during the partnership litigation. The actions were consolidated in the superior court and, after a court trial, judgment was entered in favor of SVLG. The judgment holds Beck Inc. and Don Beck jointly and severally liable to SVLG in the amount of $197,720, for unpaid attorney fees incurred in the partnership litigation.
Three appeals were filed and are consolidated before us. First, Beck Inc. appeals the judgment on the ground that the trial court erred by finding that Beck Inc. failed to prove that SVLG committed malpractice. Second, Don Beck appeals the judgment on the ground that it erroneously holds him personally liable for fees SVLG charged to defend Beck Inc. in the partnership litigation. Finally, SVLG appeals from a post-judgment attorney fees order on the ground that the court failed to adequately compensate it for attorney fees incurred in these consolidated actions.
We affirm the judgment and the post-judgment attorney fees order.
II. STATEMENT OF FACTS
A. Silvertree Associates
In 1998, Beck Inc. and David Wheeler became partners in a general partnership called Silvertree Associates. Silvertree’s sole asset was an office building located in Cupertino. Both partners were tenants in the office building. Almost immediately after the partnership was formed, problems developed. Beck Inc.’s President, Don Beck, had loaned Wheeler $50,000 so that Wheeler could buy into the partnership and Wheeler failed to make timely payments on that loan. Further, according to Don Beck, Wheeler was always late with his rent payment for the space he leased in the Silvertree office building.
In September 2000, Wheeler informed Don Beck that he intended to terminate the Silvertree partnership and sell the office building. Don Beck’s immediate concern was that he did not want to move Beck Inc. out of the building. Don Beck retained Hoge, Fenton, Jones and Appel (Hoge) to advise him of “what protections [he] would have to remain in the building.” Don Beck also sought guidance from two colleagues, Perry Olson, who was his personal financial advisor, and David Thede, who was his former real estate attorney. Ultimately, Don Beck decided to commence proceedings to dissolve the partnership and buy-out Wheeler’s interest. Hoge represented Beck Inc. in connection with an attempted buyout in November 2000.
B. The November 2000 Buy-Out Option
On November 29, 2000, Don Beck sent Wheeler formal written notice that Beck Inc. had exercised an option to purchase Wheeler’s interest in Silvertree, pursuant to the terms of the Silvertree partnership agreement. That agreement identified circumstances under which one partner could obtain an option to buy out the interest of the other partner and further provided that, upon exercise of such an option, an appraisal would be conducted to set the value of the office building. If the value was not acceptable to the purchaser, he could revoke his option within 14 days by giving notice to the other partner “in accordance with Section 23.1” of the agreement. Section 23.1 set forth the procedure for giving “[a]ny written notice” required by the agreement.
By letter dated April 23, 2001, the Silvertree partners were notified that an appraisal of the office building had been completed and the property was valued at $3,325,000. Don Beck concluded that the appraisal price was inflated and instructed Hoge attorney James Towery to reject it. Towery met with Wheeler on April 30 and told him that Beck Inc. rejected the appraisal. Later that day, Towery sent an e-mail to Don Beck confirming that he had met with Wheeler and rejected the appraisal. In this e-mail, Towery also said: “Don, feel free to do the revocation letter yourself, if you prefer. I can do it for you, though my life is a little complicated given the trial starting today.”
On Wednesday, May 9, 2001, Towery and Don Beck exchanged e-mails. Towery’s first message began: “I thought you were sending the letter rejecting the offer.” Towery went on to say that Wheeler’s attorney, Steve Siner, had returned from a vacation and left a message that Towery had not yet returned. Towery suggested that Don Beck call Wheeler to set up a meeting between the partners. Don Beck replied that he wanted Towery to “respond to Siner for the record” and also said Towery should tell Siner that Beck would call Wheeler directly to schedule a meeting. Towery replied that he would send “the letter” on Monday.
In a May 11, 2001, letter to Towery, Siner discussed plans to proceed with Beck Inc.’s buy out of Wheeler’s interest. Siner expressed the view that Beck Inc. could no longer revoke its buy-out option or reject the appraisal because the 14-day revocation period had expired and Beck Inc. had not sent a written revocation notice in accordance with the terms of the partnership agreement.
On May 14, 2001, Don Beck sent an e-mail to his advisor, David Thede, which began: “I met with Towery. He informed me of his responsibility and my right to have a lawyer to represent me against Hoge Fenton. I told him to put that aside at this time and proceed to get me out of this mess.” Don Beck told Thede that Towery planned to send Siner a letter outlining Beck, Inc.’s position that it had timely revoked its buy-out option and rejected the April 2001 appraisal.
In a May 14, 2001, letter to Siner, Towery stated that “Don Beck does not intend to buy out your client at the appraised price.” Towery noted, among other things, that the appraisers’ valuation was inflated, that Don Beck rejected the appraisal and that Towery communicated the rejection to Wheeler at their April 30 meeting. Towery further advised that Beck Inc. was prepared to either proceed with a termination of the partnership or with a face to face meeting so that the partners could attempt to resolve their business differences.
On May 15, 2001, Don Beck sent David Thede an e-mail containing the following message: “Per Towery conference call with Siner he acknowledged the turn down of the offer to buy at the appraisal price.”
In a June 12, 2001, letter to Towery, Siner addressed various issues relating to an anticipated dissolution of the Silvertree partnership. At the conclusion of the letter, Siner requested that Don Beck reimburse Wheeler for his share of the cost of the April 2001 appraisal. After receiving this letter, Don Beck inquired of Towery whether he was required to pay the appraisal fees and Towery responded that, yes, the partnership agreement expressly required that the revoking purchaser reimburse the other partner for the appraisal fees.
In September and October 2001, Wheeler and Don Beck agreed to a plan for dissolving the partnership by attempting to sell the office building to a third party for a period of time and then, if the property did not sell, the two partners would participate in an auction and the highest bidder would purchase the property. A third party buyer was not secured, the auction was held and Beck Inc. was the high bidder with an offer of $2.5 million. By letter dated, February 1, 2002, Wheeler accepted “Don Beck’s offer,” but also expressly reserved his right to pursue other potential claims relating to the partnership. Additional agreements were executed to ensure that the sale of the sole partnership asset to Beck Inc. would not affect either partner’s potential claims against each other. The sale of the office building closed in early April 2002. Because Beck Inc. did not have sufficient cash to pay the buy out amount, Don Beck used personal funds to close the transaction.
C. The Wheeler Action
In June 2002, Don Beck retained SVLG to represent him and Beck Inc. with respect to the unresolved matters relating to the Silvertree Partnership. Prior to his first meeting with SVLG attorneys, Don Beck sent them an “executive summary” of the events of the dispute, wherein he identified the following unresolved issues: (1) Wheeler owed Beck $20,000 interest on a promissory note; (2) Wheeler’s name was still on the partnership title; (3) Wheeler claimed that the formula in the partnership agreement for distributing assets after a buy out contained a scrivener’s error; and (4) Wheeler claimed that Don Beck charged himself below market rent to lease space in the office building. Don Beck did not identify the failure to give written notice of revocation of the November 2000 buy out option as a potential issue or make any reference to that event at all.
SVLG’s first meeting with Don Beck was held on June 20, 2002. SVLG attorney Myron Brody, who attended the meeting, subsequently testified at trial in the present action that Don Beck complained during the meeting that Hoge attorneys made errors which resulted in Beck having to pay commissions on the sale of the office building that Beck believed Wheeler should have paid. However, according to Brody, Don Beck did not mention Towery’s alleged failure to send a written notice rejecting the April 2001 appraisal. Don Beck testified during trial that he did tell SVLG attorneys that Hoge “screwed up by not doing their homework on the revocation letter,” but that at the time he thought the problem had been fixed.
In August 2002, Wheeler filed a complaint against Beck, Inc. and Don Beck (the Wheeler action) in Santa Clara County Superior Court. In it, he attempted to allege 14 causes of action, including claims for breach of fiduciary duty, fraud, unfair business practices and reformation of contract. The breach of fiduciary duty claim was supported by allegations that Beck Inc. unreasonably blocked and/or delayed efforts to sell the office building by “[i]nvoking in bad faith an option to purchase the Foothill office when defendants did not have the funds to complete the purchase.” However, Wheeler did not allege that Beck Inc. had failed to provide timely notice of its revocation of the November 2000 buy out option or make any reference to that issue.
On December 4, 2002, SVLG attorney Kathryn Barrett sent an e-mail to Don Beck regarding her review of documents pertaining to the Wheeler action. Barrett asked if the two appraisers who conducted the April 2001 appraisal of the office building had agreed on a valuation and, if so, whether there was a document to that effect. Barrett also stated that she had been unable to locate a document pursuant to which Beck Inc. rejected the appraisal and revoked its November 2000 buy-out option. Barrett asked if such a document existed. Don Beck replied by e-mail that the two appraisers did agree and that Beck Inc.’s notice of rejection of the appraisal was sent “after the fact.” Don Beck told Barrett that “I will fill you in on this.” That same day, Don Beck sent Barrett copies of documents relating to Beck Inc’s rejection of the April 2001 appraisal, including Towery’s May 14, 2001, letter to Siner. In a short cover note, Beck asked Barrett to review the documents and then to call him, noting that “there is one skeleton in the closet you should be aware of.”
After completing her document review and talking with Don Beck, Barrett concluded that the revocation of the November 2000 buy-out option and the rejection of the April 2001 appraisal were non-issues. At the time, Don Beck had not told Barrett that Towery made any error in connection with the notice of revocation, but rather appeared to blame himself for failing to send a written notice. More important, there was no cause of action in the Wheeler complaint challenging the validity of the revocation, and the document history showed that the partners had moved past that matter and on to a deal.
On June 26, 2003, Wheeler gave his deposition in the Wheeler action and was asked about the April 2001 appraisal of the office building and whether Don Beck or any representative of the defendant told him that Beck Inc. was not going to pay that much for Wheeler’s partnership interest. Wheeler gave the following response: “Well, actually, that was a little clouded because he only had a certain amount of days to say no. He didn’t say no by the time the time had expired.” Wheeler testified that he thought Beck Inc. was going to buy out his interest at that time because Don Beck’s bookkeeper had told him that Don Beck was in the process of getting a loan and that he was going to proceed with the buy-out. Wheeler admitted that Beck’s “attorney told us that he was not going to buy,” but Wheeler testified that “when we told Towery that the bookkeeper said he was getting a loan, Towery said, ‘Well, I don’t even know. I haven’t talked to him lately, maybe he is.’ ” According to Wheeler, it was not until after the “time frame” expired that he received another communication from Towery that said that Beck Inc. would not buy the building for the appraised value because it was too high.
In August 2003, Wheeler filed a second amended complaint pursuant to which he added a new third cause of action for breach of contract. Wheeler alleged that Beck Inc. had exercised an option to buy out Wheeler’s interest in 2000 and that “[i]t did not revoke its option election in a timely manner.” Wheeler further alleged that Beck Inc. breached the partnership agreement by failing to pay Wheeler the value of his interest as established by the April 2001 appraisal. Wheeler did not allege, however, that Beck Inc. failed to provide written notice of revocation or that such written notice was required by the partnership agreement.
In a demurrer to the second amended complaint, the Beck parties argued that the new third case of action failed as a matter of law because the claim of untimely notice was both contradicted by Wheeler’s own deposition testimony and waived by Wheeler’s subsequent conduct. Wheeler opposed the demurrer to this third cause of action on the sole ground that the court could not properly take judicial notice of his deposition testimony at that stage in the litigation.
When SVLG attorneys prepared the demurrer to this complaint, they were not aware that anyone, including Don Beck, believed that Towery had committed an error by the way he conveyed notice of revocation of the buy out option.
On April 5, 2005, Don Beck gave his deposition and was asked about the May 14, 2001, e-mail that he sent to David Thede, in which he stated that Towery had admitted “responsibility” for failing to send a written revocation notice to Wheeler. Don Beck testified: “[Towery] told me that he had not properly executed the document of my rejection and that he could be held-I could hold him responsible for whatever, I’m not sure. I’m not an attorney... but it was a mess and it was not a mess on my bequest.” When asked whether Towery had told him that he had a potential malpractice claim against Hoge because of the failure to send a written revocation notice, Beck responded, “He didn’t use the word malpractice, as I recall, but I read it in as malpractice.”
SVLG attorney Christopher Ashworth represented Don Beck at his deposition. Ashworth had not previously seen or known about the Thede e-mail, which had been produced only a few weeks earlier at Thede’s deposition but had not been discussed at that time. At the first opportunity to talk privately, Ashworth asked Don Beck about the Thede e-mail. Don Beck told Ashworth that Towery had admitted at the time that he made an error. Ashworth advised Don Beck to consider filing suit against Hoge and Towery. Don Beck responded that he did not want to sue them, but he wanted Ashworth to contact Hoge and have them start contributing to his litigation fund. Ashworth subsequently referred Don Beck to a lawyer who could represent him in a malpractice action against Hoge. Beck Inc. filed a malpractice complaint against Hoge on April 29, 2005. That complaint was dismissed after Beck Inc. and Hoge executed a tolling agreement.
The Wheeler action culminated in a bench trial in June 2005, before the Honorable Joseph Huber. Don Beck was dismissed as an individual defendant at the commencement of the trial. By that time, Wheeler’s claims had been reduced to four, one of which was his third cause of action for breach of contract. As to that claim, Wheeler’s trial theory was that Beck Inc. breached the partnership agreement by failing to give timely written notice of rejection of the April 2001 appraisal.
In October 2005, Judge Joseph Huber of the Santa Clara County Superior Court filed a tentative statement of decision which became the court’s statement of decision on December 23, 2005. Although the court rejected some of Wheeler’s claims, and also found that Wheeler owed Beck Inc. for unpaid interest on his promissory note, it ruled in favor of Wheeler on the third cause of action. The court reasoned that the partnership agreement required written notice of rejection of the April 2001 appraisal and that Beck Inc. failed to provide that notice. The court also found that Wheeler did not intentionally waive his right to written notice and was not estopped from asserting that right. Ultimately, the court awarded Wheeler damages in the amount of $843,126.
Beck Inc. filed an appeal from the judgment in the Wheeler action, but that appeal was dismissed pursuant to a March 2006 settlement agreement between the parties.
D. The Present Action
On May 30, 2006, Don Beck filed a malpractice complaint against Hoge in San Francisco Superior Court. That same day, Beck Inc. filed a complaint in San Francisco Superior Court against Hoge and SVLG, alleging legal malpractice and seeking declaratory relief. These cases were consolidated for all purposes pursuant to an order filed June 9, 2006. On or about July 21, 2006, SVLG filed a cross-complaint against Beck Inc. for breach of contract and quantum meruit, seeking to recover unpaid fees incurred in the Wheeler action.
On May 18, 2007, SVLG filed a breach of contract complaint against Don Beck in Santa Clara County Superior Court, pursuant to which it sought to recover the unpaid Wheeler fees pursuant to the terms of the SVLG retainer agreement. This separate action against Don Beck was consolidated with the San Francisco consolidated action for purposes of trial.
The Beck parties settled their malpractice case against Hoge shortly before trial. Pursuant to the settlement agreement, Hoge paid the Beck parties $1,450,000.
On June 25, 2007, a bench trial was conducted by the Honorable Richard L. Patsey. Beck Inc. advanced two alternate theories in support of its malpractice claim against SVLG: (1) SVLG was negligent by allowing the statute of limitations on the malpractice claim against Hoge to lapse, and (2) even if the statute of limitations did not lapse, SVLG’s failure to advise Beck Inc. to preserve its claims earlier was a breach of duty and caused Beck Inc. to incur additional expenses and reduced the value of its case against Hoge.
The case was tried before Judge Patsey pursuant to a voluntary stipulation for judicial reference. (See Code Civ. Proc., § 638.)
At the conclusion of the trial, the court filed a 25-page statement of decision pursuant to which it concluded that Beck Inc. failed to carry its burden of proving malpractice and that both Beck Inc. and Don Beck breached their contract with SVLG by failing to pay attorney fees incurred in the Wheeler action. Pursuant to a January 31, 2008, judgment, the court ordered that (1) Beck Inc. was to take nothing in its complaint against SVLG; (2) Beck Inc. and Don Beck were jointly and severally liable for attorney fees incurred pursuant to their fee agreement with SVLG in the amount of $197,720; (3) SVLG was the prevailing party, entitled to recover costs and attorney fees.
On or around February 21, 2008, SVLG filed its motion to recover attorney fees as the prevailing party, pursuant to an attorney fee provision in the SVLG retainer agreement. SVLG sought to hold Beck Inc. and Don Beck jointly and severally liable for a total fee award of $1,779,795. Pursuant to this fee request, SVLG sought payment for work performed by three law firms: (1) SVLG itself, (2) Lerch Sturmer LLP (Lerch), who had been retained by SVLG’s insurance carrier to defend Beck Inc.’s malpractice claims, and (3) McManis Faulkner & Morgan (McManis), who had been retained by SVLG to assist with both the defense of the malpractice claims and prosecution of the breach of contract claims.
On or around April 7, 2008, the trial court issued an order regarding the claim for attorney fees. The court ruled that neither Beck Inc. nor Don Beck were liable for fees generated by SVLG itself, that Beck Inc. and Don Beck were jointly and severally liable for a portion of the McManis fees in the amount of $237,450, and that Beck Inc. was severally liable for the balance of the McManis fees, in the amount of $117,200, and for all of the Lerch fees in the amount of $508,539.
III. BECK INC.’S APPEAL
Beck Inc. seeks reversal of the judgment and a retrial of its malpractice claims. It contends that the trial court failed to apply controlling authority, applied incorrect legal standards, and ignored undisputed evidence. In making these arguments, Beck Inc. fails to address the trial court’s rulings in context; indeed, it does not even separately address the two distinct causes of action that it pursued at trial. We will not adopt that approach.
A. The First Cause of Action
1. Background and Issue Presented
Beck Inc.’s first cause of action was for damages resulting from the failure to preserve the statute of limitations on the malpractice claim against Hoge based on Towery’s alleged failure to send a timely written notice of revocation of the November 2000 buy-out option. Beck Inc. alleged that SVLG had breached a duty to advise Beck Inc. to seek a tolling agreement or file an action against Hoge before the statute of limitations expired. An essential premise of this claim was that the statute of limitations did in fact expire before Beck Inc. filed its complaint against Hoge on April 29, 2005. Accordingly, Beck Inc. conceded at trial that “if the [statute of limitations] had not expired by April 29, 2005, then the First Cause of Action is without merit.”
The statute of limitations for legal malpractice claims is set forth in section 340.6 of the Code of Civil Procedure (section 340.6) which provides that, except in the case of fraud, a malpractice claim must be filed within one year from the date of discovery or within four years from the wrongful act or omission, whichever occurs first. Section 340.6, subdivision (a) further provides: “In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist: [¶] (1) The plaintiff has not sustained actual injury; [¶] (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred....” (Italics added.)
In the present case, the trial court found that Beck Inc. did not suffer actual injury as a result of Towery’s alleged error “until Judge Huber determined that a written revocation notice was required, whether that requirement had been waived under the various theories of waiver, and what the legal consequences were of his ruling. This only occurred in October, 2005, well after the tolling agreement with Hoge was obtained.” Therefore, the court concluded, the statute of limitations on the Hoge claim did not expire and, in light of this fact, Beck Inc’s. first cause of action failed.
Beck Inc. contends that the trial court’s finding that Beck Inc. did not suffer actual injury until Judge Huber issued his decision in the Wheeler action constitutes reversible error because the court failed to apply correct legal principles announced by our Supreme Court in Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739 (Jordache).
2. Jordache and the Actual Injury Requirement
In Jordache, supra, 18 Cal.4th 739, the plaintiff retained the law firm of Brobeck, Phleger & Harrison (Brobeck) to defend it in litigation. Brobeck failed to investigate or advise plaintiff as to potential liability insurance coverage for the lawsuit. After Brobeck was replaced, plaintiff’s new attorney tendered defense of the third party litigation to plaintiff’s insurance company. However, the delay in tendering that defense led to litigation between plaintiff and its insurer which plaintiff ultimately settled for less than the full amount of its claim. (Id. at pp. 744-745.) After plaintiff settled with its insurance company, it sued Brobeck for malpractice. The Jordache trial court ruled that the plaintiff’s malpractice claim was barred by the statute of limitations, but the Court of Appeal reversed, finding that the statute was tolled by the actual injury provision until the plaintiff settled with its liability insurance carrier for less than the full amount of its claim. (Id. at pp. 746-747.) The Jordache court concluded that the Court of Appeal erred, and that the plaintiff suffered actual injury more than a year before it filed its malpractice action.
In its decision, the Jordache court announced or affirmed the following principles which govern the actual injury inquiry:
The “test for actual injury under section 340.6... is whether the plaintiff has sustained any damages compensable in an action other than one for actual fraud, against an attorney for a wrongful act or omission arising in the performance of professional services.” (Jordache, supra, 18 Cal.4th at p. 751.) “‘The mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm-not yet realized-does not suffice to create a cause of action for negligence. [Citations.] Hence, until the client suffers appreciable harm as a consequence of [the] attorney’s negligence, the client cannot establish a cause of action for malpractice.’ [Citation.] ‘The cause of action arises, however, before the client sustains all, or even the greater part, of the damages occasioned by [the] attorney’s negligence. [Citations.] Any appreciable and actual harm flowing from the attorney’s negligent conduct establishes a cause of action upon which the client may sue.’ [Citation.]” (Id. at p. 750.) Thus, the relevant “inquiry concerns whether ‘events have developed to a point where plaintiff is entitled to a legal remedy....’ [Citation.]” (Id. at p. 752.)
There is no bright line rule for fixing the point of actual injury. (Jordache, supra, 18 Cal.4that p. 764.) “[T]he particular facts of each case must be examined in light of the wrongful act or omission the plaintiff alleges against the attorney.” (Id. at p. 763) Therefore, “determining when actual injury occurred is predominantly a factual inquiry.” (Id. at p. 751.)
Applying these principles, the Jordache court found that the plaintiff suffered actual injury more than a year before it filed its malpractice claim, when it spent millions of its own dollars defending the original action during the period before it tendered its coverage claim, money that would otherwise have been available for a profit making use. (Jordache, supra, 18 Cal.4th at p. 752.) These damages were “sufficiently manifest, nonspeculative, and mature that [plaintiff] tried to recover them as damages in its insurance coverage suits.” (Ibid.)
The court also found that the plaintiff suffered a second type of actual injury prior to the resolution of the insurance action. (Jordache, supra, 18 Cal.4th at pp. 752-753.) Brobeck’s alleged error “diminished” plaintiff’s insurance coverage rights because the years of delay in tendering defense of the original claim gave the insurer a defense to payment that it would not have had. This diminishment of plaintiff’s insurance contract right caused actual damage because plaintiff “necessarily incurred additional litigation costs to meet the defense, and the settlement value of its claims decreased.” (Id. at p. 753.)
The Jordache court identified several flaws in the analysis which led the Court of Appeal to erroneously conclude that the plaintiff did not suffer actual injury until the insurance coverage action concluded. First, the lower court erred by applying a bright line requirement that “an adjudication or settlement must first confirm a causal nexus between the attorney’s error and the asserted injury.” (Jordache, supra, 18 Cal.4th at p. 752.) Such a rule ignores that “[a]ctual injury refers only to the legally cognizable damage necessary to assert the cause of action.” (Ibid.) Thus, while there may be some cases in which actionable injury may occur only when a related action is adjudicated, in other cases actual injury will occur before or independent of the related action, such as when a “collateral suit [is] a consequence of the alleged malpractice or simply an alternative means of obtaining relief. [Citations.]” (Id. at p. 755.)
Second, the Court of Appeal mistakenly assumed that the resolution of the insurance action actually did establish a causal nexus between Brobeck’s alleged error and the plaintiff’s injury. Because “the alleged failure to advise [plaintiff] on insurance matters was not at issue in the coverage lawsuits.... [t]he resolution of that litigation would not determine whether Brobeck breached its duty to [plaintiff.]” (Jordache, supra, 18 Cal.4th at p. 753.) Nor could the outcome of that litigation determine the consequences of Brobeck’s error. Thus, the insurance coverage litigation “could not determine the existence or effect of Brobeck’s alleged negligence.” (Ibid.)
Finally, the Court of Appeal erroneously assumed that the plaintiff’s damages were speculative until the insurance litigation was resolved. It reasoned that (1) if the plaintiff had prevailed in that case, Brobeck’s omissions would have caused no injury and (2) if a court found that there was no insurance coverage then Brobeck’s alleged failure to tender the defense would have had no effect of the plaintiff’s policy rights. (Jordache, supra, 18 Cal.4th at p 753.) However, as the Jordache opinion explained, the injuries the plaintiff suffered as a consequence of Brobeck’s error occurred before the insurance action was resolved and would not disappear regardless of the outcome of that case. Thus, the outcome of the insurance litigation might have reduced the plaintiff’s damages against Brobeck, but “that action could neither necessarily exonerate Brobeck, nor extinguish [plaintiff’s] action against Brobeck for failure to render timely advice on insurance issues.” (Ibid.)
3. Analysis
In the present case,Beck Inc. contends that the trial court violated three principles announced in Jordache: (1) there is no bright line rule requiring a litigated outcome in a related action; (2) the diminishment of a legal right constitutes actual injury as a matter of law; and (3) actual injury occurs when the attorney’s alleged error causes the client to incur monetary expenses.
a. The trial court did not apply a bright line rule
As noted above, the trial court found that Beck Inc. did not suffer actual injury until Judge Huber issued his decision in the Wheeler action. Beck Inc. contends this finding was error because the court applied a bright line rule that a litigated outcome was required. We are perplexed by this argument in light of the court’s very clear and well reasoned statement of decision.
Citing Jordache, the trial court expressly declined to apply a bright line rule and focused instead on the particular facts of this case. In considering those facts, the court identified important distinctions between this case and Jordache. As the trial court explained, in Jordache “the injury was not an alleged missed [statute of limitations] or a failure to reject by the alleged requirements of the contract, the meaning and legal effect of which were always in dispute, but the attorney’s failure to tender to the client’s insurer in a timely fashion, allowing the insurer to avoid paying pre-tender fees amounting to millions of dollars. The Jordache damages were clearly incurred and did not depend on litigation to determine if there was an injury, and thus were not speculative or contingent. The only question in Jordache was the extent of the injury.”
Ignoring the trial court’s substantive analysis, Beck Inc. contends that the court essentially admitted it was applying a bright line rule by relying on Baltins v. James (1995) 36 Cal.App.4th 1193, 1196 (Baltins), a case that Beck Inc. characterizes as bad law.
Baltins was a malpractice case against an attorney who advised the plaintiff that an order that had been entered in the plaintiff’s marital dissolution action was not binding during the period that it was on appeal. (Baltins, supra, 36 Cal.App.4th 1193.) Relying on that advice, plaintiff engaged in property transfers and other conduct which resulted in adverse rulings made in connection with a final judgment of dissolution that was entered nine years later. The Baltins court reversed a trial court ruling that the plaintiff’s malpractice claim was barred by the statute of limitations, finding that “any error in [the attorney’s] advice was not determinable, and had no effect, until following his advice resulted in the adverse judgment in the dissolution action. [Citation.]” (Id. at p. 1208.) To reach this conclusion, the Baltins court applied a “bright line rule” developed in prior case law that “[i]f the existence or effect of a professional’s error depends on a litigated or negotiated determination’s outcome... actual injury occurs only when that determination is made.” (Id. at p. 1196.)
The Jordache court disapproved language in Baltins that “can be read as implying that ‘actual injury’ is determined by any bright line rule....” (Jordache, supra, 18 Cal.4th at p. 761, fn. 9.) However, the court also expressly approved the outcome of Baltins by three times using it as an example of a situation in which adjudication of the related action was necessary to establish actual injury. (Jordache at pp. 755, 759, 761.) By approving Baltins, the Jordache court recognized that, although there is no bright line rule requiring a litigated outcome in every malpractice case involving related litigation, such a requirement does arise in cases in which the particular factual circumstances show that “the existence or effect of a professional’s error depends on a litigated or negotiated determination’s outcome....” (Baltins, supra, 36 Cal.App.4th at p. 1196.)
Beck Inc. is correct that the trial court relied on Baltins. However, the court did not use Baltins as authority for applying any bright line rule. Rather, following Jordache, the court expressly declined to apply such a rule and focused instead on the factual circumstances before it. Then, in considering those facts, the court found that the circumstances of this case were similar to the facts of Baltins, where the resolution of the related action was necessary to establish the existence of a professional error. This analogy to Baltins was appropriate in light of the fact that the Jordache court itself used that case as an example of a situation in which actual injury did not occur until related litigation concluded.
At times, it appears that Beck Inc. may be arguing that Jordache precludes a court from ever finding that a litigated outcome is necessary to establish actual injury. If so, it is very much mistaken. As the Jordache court explained, the actual injury determination is a factual inquiry and “[t]he resolution of litigation related to alleged malpractice may or may not mark the point at which a plaintiff first sustains actual injury under section 340.6. The statutory scheme cannot accommodate a peremptory rule that declares otherwise.” (Jordache, supra, 18 Cal.4th at p. 763.)
b. Impairment of a legal right may cause actual injury
Beck Inc. contends that the Jordache court announced a rule of law that actual injury arises when the plaintiff suffers an impairment or diminution of a legal right. Beck Inc. further contends that undisputed evidence ignored by the trial court establishes that Towery’s alleged error caused an immediate injury because it impaired or diminished Beck Inc.’s absolute right under the Silvertree partnership agreement to revoke its November 2000 buy out option and reject the April 2001 appraisal. In this sense, Beck Inc. contends, the present case is factually indistinguishable from Jordache.
Beck Inc. misunderstands Jordache. First, the Jordache court did not hold nor intimate that the impairment of a legal right automatically and necessarily constitutes actual injury. Indeed, a fundamental point of that court’s decision was to reject any such bright line rule in favor of a factual analysis of the particular circumstances of the case. (Jordache, supra, 18 Cal.4th at p. 763-764.)
Second, although the Jordache court found that one consequence of Brobeck’s error was that the plaintiff’s insurance contract rights were diminished, it did not hold that the plaintiff suffered actual injury at the moment those rights were impaired. Rather, the court found that the impairment of plaintiff’s rights resulted in actual injury when the plaintiff incurred the expense of litigating the late tender defense and when the value of its insurance claim was reduced as a result of that defense. (Jordache, supra, 18 Cal.4th at p. 753.) This conclusion was consistent with the principle that “[t]he mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm-not yet realized-does not suffice to create a cause of action for negligence.” (Id. at p. 750.)
Thus, Beck Inc. cannot fix the point of actual injury at the close of the 14-day revocation period simply by asserting that its contract right was impaired at that time. Even if we assume there was such an impairment, Beck Inc. did not suffer an actual injury until the alleged impairment caused it to incur cognizable and compensable damage. Beck Inc. fails to identify any such damage. It also ignores substantial evidence that Beck Inc. did not suffer actual injury when the 14-day revocation period expired. Although Wheeler’s attorney initially claimed that the partnership agreement required a written revocation notice within 14 days of the appraisal, he quickly abandoned that theory when faced with proof that actual notice was communicated within the relevant time frame. Thereafter, the parties proceeded under the assumption that the buy out option was properly revoked.
c. Monetary expenses may constitute actual injury
Beck Inc. contends that the trial court violated Jordache by failing to recognize that Beck Inc. suffered actual injury when it incurred monetary expenses as a consequence of Towery’s alleged error. Jordache does confirm that monetary expense, such as fees incurred in collateral litigation, can constitute actual injury under section 340.6. However, the circumstances must show that such costs would be recoverable as damages in the malpractice action. (Jordache, supra, 18 Cal.4th at p 749-751.)
Beck Inc. contends that it incurred monetary expenses attributable to Towery’s alleged error throughout 2001 and 2002 when it negotiated and executed the April 2002 buy-out of Wheeler’s partnership interest. According to Beck Inc., the only reason that it participated in that process was to attempt to correct Towery’s error. Indeed, Beck Inc. is adamant that “but for Towery’s Error,” monetary damages incurred to buy out Wheeler’s interest in 2002 “could have been completely avoided.”
Beck Inc.’s factual premise that it bought out Wheeler’s interest in the office building in April 2002 in an attempt to fix Towery’s alleged error is not compelled nor even supported by the record citations that Beck Inc. provides. Further, and more to the point, Beck Inc. simply ignores other evidence which supports the conclusion that, by the fall of 2000, Don Beck’s primary goal was to terminate the Silvertree partnership without having to move Beck Inc. out of the Silvertree office building and that this goal was the primary motivation that drove the April 2002 agreement.
Beck Inc. next contends that it suffered actual injury when the Wheeler action was filed and it began to incur the expense of that litigation. According to Beck Inc., “[o]ne thing, and one thing only, fueled Mr. Wheeler’s lawsuit against Beck Inc. that led to his $843,000 judgment: Towery’s Error.” However, the evidence before us belies Beck Inc.’s claim that Towery’s alleged error caused the Wheeler action. For example, when Don Beck prepared a pre-litigation summary of the history of Beck Inc.’s disputes with Wheeler for SVLG, he did not even mention the revocation notice. Nor did Wheeler raise that issue in his original complaint. Indeed, the evidence is overwhelming that problems having nothing to do with the April 2001 appraisal drove the Silvertree partners to litigation.
Alternatively, Beck Inc. contends that it suffered actual injury in August 2003, when it incurred litigation expenses to defend against Wheeler’s new third cause of action alleging breach of the partnership agreement for failing to timely revoke the 2000 buy out option. Beck Inc. contends that, at that point in the litigation, it was spending money to litigate a claim that Wheeler could not have asserted if not for Towery’s alleged error. There are two problems with this argument.
First, construing the evidence to support this judgment, we find that Beck Inc. did not incur expenses to defend against a claim premised on Towery’s alleged error until April 2005, the same month that Beck Inc. filed its malpractice case against Hoge. There is substantial evidence that Wheeler’s third cause of action was not originally premised on any conduct attributable to Towery. The second amended complaint does not contain any allegation based on the absence of a timely written notice. Indeed, at the time that amended claim was filed, Wheeler’s theory appeared to be that the April 2001 revocation had been ineffectual because, although Towery gave Wheeler notice of revocation, Don Beck’s accountant delivered a contrary message to Wheeler. There is also substantial evidence that Wheeler first developed his theory that Beck Inc. breached the partnership agreement by giving oral as opposed to written notice of revocation after Don Beck testified during his April 2005 deposition that Towery admitted to him that failing to send the revocation letter earlier constituted malpractice.
Second, even if Towery’s alleged error became an issue in the Wheeler action as early as August 2003, that fact would not establish that Beck Inc. suffered actual injury at that point in time. As the trial court explained, under the circumstances of this case, Judge Huber’s decision was essential to establish that Towery committed an error. Before that time, attributing any damages to a problem with the revocation notice was speculative and contingent because Judge Huber could well have determined that Towery’s actual notice was effectual, either because the agreement did not require a written notice within the 14-day period or because, as Beck Inc. argued at the Wheeler trial, Wheeler accepted the actual notice and/or waived his right to a written notice within the 14-day revocation period.
As the trial court recognized, the factual circumstances relevant to the actual injury determination in the present case are materially different from the facts of Jordache. In particular, the Wheeler action, unlike the insurance coverage action in Jordache, was not a consequence of the attorney’s alleged negligence. Rather, during the lengthy pre-trial period in the Wheeler action, the question of Towery’s alleged negligence became an actual issue in the case. Thus, unlike Jordache, this was a case in which the outcome of the related action was necessary to establish the fact of injury.
After these appeals were fully briefed, Beck Inc. filed a letter directing this court’s attention to Truong v. Glasser (2009) 181Cal.App.4th 102 (Truong), a case it characterizes as “directly relevant to the present appeal.” Truong is relevant to the extent it reinforces the legal principles we apply here including that “ ‘actual injury issues require examination of the particular facts of each case in light of the alleged wrongful act or omission.’ [Citation.]” (Id. at p. 111.) As a factual matter, however, Truong is inapposite.
For all of these reasons, we hold that Beck Inc. has failed to substantiate its claim that the trial court violated Jordache by finding that the statute of limitations on the malpractice claim against Hoge did not expire.
B. The Third Cause of Action
1. Background
Pursuant to its third cause of action, which was titled “tort of another,” Beck Inc. attempted to hold SVLG liable for costs incurred to litigate its claim against Hoge before it settled that malpractice case. Beck Inc. alleged that as a “direct, natural, and proximate result” of SVLG’s negligence, Beck Inc. was forced to bring an action against Hoge for malpractice and to incur the expense of litigating Hoge’s statute of limitations defense.
The trial court acknowledged that the tort of another doctrine can apply in a case in which the plaintiff incurs fees litigating an action by or against a third party when the third party action is a direct result of legal malpractice. (Citing Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1059-1060.) The trial court also correctly observed that this doctrine is an element of tort damages and not itself a cause of action. Therefore, the court treated Beck Inc.’s third cause of action as a separate claim for attorney malpractice based on an alternative theory of liability.
The tort of another doctrine is an established exception to the general rule in California that attorney fees are to be paid by the party who employs the attorney. (Prentice v. North American Title Guaranty Corp. (1963) 59 Cal.2d 618, 620-621.) The doctrine applies in cases in which the defendant has wrongfully made it necessary for a plaintiff to sue a third person. It provides that a person “who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred. [Citations.]” (Id. at p. 620.)
The theory Beck Inc. pursued at trial was that, even if the statute of limitations on the Hoge malpractice claim did not expire, SVLG had a duty to advise Beck Inc. to file a its claim against Hoge sooner than it did and, if SVLG had fulfilled its duty, Hoge would not have had a viable statute of limitations defense and would have conceded liability immediately. Beck Inc. claimed that, if not for SVLG’s negligence, it would not have incurred the expense of litigating against Hoge or had to pay an attorney a 50 percent contingency fee to represent it in the case against Hoge.
The trial court found that Beck Inc. failed to establish the causation element of this malpractice claim. On appeal, Beck Inc. contends that the trial court applied “incorrect legal standards” to reach its conclusion that Beck Inc. failed to prove causation.
2. Legal Standards for Proving Causation
“The elements of a cause of action in tort for professional negligence are: (1) the duty of the professional to use such skill, prudence, and diligence as other members of his profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional’s negligence. [Citations.]” (Budd v. Nixen (1971) 6 Cal.3d 195, 200.)
To establish causation in a legal malpractice action, the plaintiff “must show that but for the alleged malpractice, it is more likely than not that the plaintiff would have obtained a more favorable result.” (Viner v. Sweet (2003) 30 Cal.4th 1232, 1244 (Viner).) In litigation malpractice cases, a better result means “a more favorable judgment or settlement in the action in which the malpractice allegedly occurred. The purpose of this [but for] requirement, which has been in use for more than 120 years, is to safeguard against speculative and conjectural claims. [Citation.] It serves the essential purpose of ensuring that damages awarded for the attorney’s malpractice actually have been caused by the malpractice.” (Id. at p. 1241.)
“In the legal malpractice context, the elements of causation and damage are particularly closely linked.... The plaintiff has to show both that the loss of a valid claim was proximately caused by defendant attorney’s negligence, and that such a loss was measurable in damages.” (Hecht, Solberg, Robinson, Goldberg & Bagley LLP v. Superior Court (2006) 137 Cal.App.4th 579, 591.) “ ‘[T]he mere probability that a certain event would have happened, upon which a claim for damages is predicted, will not support the claim or furnish the foundation of an action for such damages.’ ” (Marshak v. Ballesteros (1999) 72 Cal.App.4th 1514, 1518.) “Unless a party suffers damage, i.e., appreciable and actual harm, as a consequence of his attorney’s negligence, he cannot establish a cause of action for malpractice.” (Thompson v. Halvonik (1995) 36 Cal.App.4th 657, 661.)
3. The Trial Court’s Rulings
Applying the “but for” test to Beck Inc.’s theory, the trial court observed that, in order to establish a proximate causal connection between SVLG’s allegedly negligent advice and Beck Inc.’s claimed injury of having to litigate its malpractice claim against Hoge, Beck Inc. had to establish that, if Hoge had had no viable statute of limitations defense, Beck Inc. would have obtained a more favorable result than the Hoge settlement.
Beck Inc. attempted to make this required “but for” showing by establishing that its malpractice claim against Hoge was an open and shut case. According to Beck Inc., Hoge would not have contested liability at all if not for the statute of limitations defense because Towery admitted to Don Beck that he was responsible for sending the revocation letter and essentially confessed that he committed malpractice.
The trial court rejected this argument and found, among other things, that: (1) there was conflicting evidence as to who was responsible for sending the revocation letter, (2) Hoge defended its handling of the matter at the time, and (3) Don Beck’s trial testimony and his e-mail to Thede did not establish that Towery confessed to malpractice. With regard to this third conclusion, the court credited other evidence which showed that Towery had simply put Beck on notice of a potential claim and that Don Beck’s e-mail to Thede “ was clearly an overstatement.” The court also found that Hoge did not admit fault with respect to the revocation issue until the eve of trial in this action and did so then for unknown reasons. Thus, the court found, Towery did not confess to malpractice and, if the case against Hoge had gone to trial, there would have been a serious factual issue as to whether Towery was responsible for sending the written revocation notice.
Another essential premise of Beck Inc.’s malpractice claim against Hoge was that Towery’s alleged error caused Beck Inc. to suffer the adverse judgment in the Wheeler litigation. The trial court found that Beck Inc. failed to rebut SVLG’s evidence that the Wheeler judgment was the result of judicial error. In this regard, the trial court found that Beck Inc. had two strong defenses to Wheeler’s third cause of action, both of which would have exonerated Towery of malpractice. The court also found that the Wheeler court made legal errors in its analysis of those defenses and that the likelihood of a successful appeal was very high. However, Beck Inc. elected to dismiss its appeal of the Wheeler judgment. Therefore, it could not establish that the Wheeler judgment was the result of Towery’s error and not the result of judicial error.
Ultimately, the court concluded that Beck Inc. failed to substantiate its claim that SVLG’s allegedly negligent advice regarding when to file a claim against Hoge caused it any injury at all. Beck Inc.’s contentions that it would not have had to incur the expense of litigating it’s claim against Hoge and paying a contingency attorney fee were purely speculative and not supported by the evidence.
4. Analysis
Beck Inc. contends that the trial court committed legal error because it failed to expressly decide whether Towery actually committed malpractice. According to Beck Inc., the question whether it would have obtained a more favorable result against Hoge “triggered the classic case-within-a-case or trial-within-a-trial scenario, in which the court in the malpractice suit determines the impact of the malpractice by deciding what should have happened in the underlying case had the malpractice not occurred.” Beck Inc. further contends that this case-within-a-case inquiry required the trial court to actually decide the question whether Hoge committed malpractice.
Beck Inc. mischaracterizes the case-within-a case inquiry as a rule of law. “The requirement that the plaintiff prove causation should not be confused with the method or means of doing so. Phrases such as ‘trial within a trial,’ ‘case within a case,’ ‘no deal’ scenario, and ‘better deal’ scenario describe methods of proving causation, not the causation requirement itself or the test for determining whether causation has been established.” (Viner, supra, 30 Cal.4th at p. 1240, fn. 4.)
Here, there was no dispute at trial that Beck Inc.’s novel causation theory was premised on a case (Beck Inc. v. SVLG)-within-a-case (Beck Inc. v. Hoge)-within-a-case (Wheeler v. Beck Inc.) inquiry because the malpractice claim against SVLG required a consideration of the case against Hoge and the malpractice case against Hoge required consideration of the Wheeler action. However, Beck Inc. fails to explain how or why its decision to pursue this particular factual theory imposed some special burden on the trial court to make an ultimate finding as to whether Hoge committed malpractice.
As discussed above, the correct legal standard for proving causation in a malpractice case, the “but for” test, imposed the burden on Beck Inc. to establish that it was more likely than not that it would have obtained a more favorable result against Hoge if not for SVLG’s alleged malpractice. (Viner, supra, 30 Cal.4th at p. 1241.) Beck Inc. attempted to make that showing by establishing that Hoge committed malpractice. The court’s conclusion that Beck Inc. failed to make that showing was sufficient to establish that Beck Inc. failed to carry its burden of proof.
Beck Inc. separately contends that the trial court applied an incorrect legal standard to evaluate the “impact” of Beck Inc’s decision to settle the Wheeler action by requiring Beck Inc. to prove that an appeal would have been futile. Conceding that there is no California case establishing such a standard, Beck Inc. spends considerable time enunciating policy arguments as to why it should not have been required to show that an appeal of the Wheeler judgment would have been futile.
We will not address these policy arguments for two reasons. First, the trial court’s conclusion that Beck Inc. failed to establish that the Wheeler judgment was not the result of judicial error was an additional, alternative ground for its conclusion that Beck Inc. failed to establish “but for” causation. Second, Beck Inc.’s policy arguments are inextricably intertwined with its very subjective version of the relevant facts and events. Indeed, it appears to us that Beck Inc. is attempting to avoid a substantial evidence standard of review by mischaracterizing a factual determination as an issue of law.
As the trial court explained in its statement of decision, when a plaintiff attempts to prove causation with a “ ‘case-within-a-case or trial-within-a-trial approach, where the underlying proceeding was decided by a trial court’s ruling, that ruling will come under scrutiny in the malpractice case when the issue of what should have been the result of the underling proceeding is addressed.’ ” (Quoting Church v. Jamison (2006) 143 Cal.App.4th 1568.) In other words, Beck Inc.’s proximate cause theory, which was based on a case-within-a-case-within-a-case theory, put at issue the question whether the Wheeler judgment was the result of Towery’s alleged error or of judicial error. Indeed, during its opening statement to the trial court in this case, Beck Inc.’s attorney remarked that “ ‘you have to try in your own mind to predict what a court of appeal would have done with this mess.’ ” Having asked the court to decide this issue, Beck Inc. cannot reasonably complain now simply because it does not like the trial court’s answer.
In its appellant’s reply brief, Beck Inc. states that it made an error in its opening brief to this court by conceding that there was no California case law supporting its objection to the trial court’s evaluation of Judge Huber’s decision in Wheeler. Beck Inc. then contends, for the first time, that “undisputed” California Supreme Court authority establishes that the trial court committed legal error by requiring Beck Inc. to prove that an appeal of the Wheeler judgment would have been futile, referring us to Laird v. Blacker (1992) 2 Cal.4th 606 (Laird). Beck Inc. asks that we address this argument, even though it was not made to the trial court or included in appellant’s 57-page opening brief, because it pertains to a purely legal issue and it is so important. Indeed, Beck Inc. contends that Laird compels a reversal of this judgment. In our opinion, however, this new argument is very close to frivolous.
Laird was a malpractice case in which the plaintiff alleged that the defendant negligently represented her in prior litigation. (Laird, supra, 2 Cal.4th 606.) The question before the Laird court was whether the actual injury tolling provision of section 340.6 extended the limitations period on the malpractice claim until the resolution of the plaintiff’s appeal of the adverse judgment in the related action. The Laird court found that the plaintiff “sustained actual injury when the trial court dismissed her underlying action and she was compelled to incur legal costs and expenditures in pursuing an appeal” and her case lost considerable settlement value. (Id. at p. 615.) The court reasoned that the focus of the malpractice claim was the attorney’s conduct in the underlying case and any injury resulting from such conduct would not have disappeared or become suspended simply because a more final adjudication of the result was sought. (Ibid.)
The issue in Laird was when the plaintiff suffered injury sufficient to plead a cause of action for malpractice, not whether she had or could establish the causation element of her substantive claim. Further, as we have already thoroughly discussed, the actual injury determination is a finding of fact and thus cannot support the legal standard that Beck Inc. would have us adopt in this very different context. Finally, no sound factual analogy can be drawn between this case and Laird. In Laird, the alleged malpractice occurred while the attorney represented plaintiff in the related litigation and, therefore, to the extent the alleged error caused the adverse judgment in the trial court, that damage did not disappear regardless of the outcome of the appeal. Here, by contrast, the alleged malpractice did not occur during the course of the related litigation. Rather, this is a case in which the existence and effect of the alleged malpractice depended on the outcome of the related litigation. That is why the trial court found that Beck Inc. did not suffer actual injury until Judge Huber decided that the revocation notice was invalid. That is also why Beck Inc.’s decision to dismiss the appeal of Judge Huber’s decision was factually relevant to the question whether Beck Inc. could have established that Hoge’s alleged error caused it damage.
In a final effort to obtain a reversal of the judgment, Beck Inc. spends dozens of pages attempting to convince us that it did prove at trial that Towery committed malpractice and that an appeal of the Wheeler action would have been futile. Beck Inc. simply is not entitled to re-litigate these issues in this court. Nor can it properly ignore the substantial evidence which supports the trial court’s conclusion that Beck Inc. failed to establish the causation element of its malpractice claim against SVLG.
To summarize our conclusions regarding Beck Inc.’s appeal, we find that Beck Inc. has failed to substantiate its claims of legal error in connection with the rulings on its two causes of action against SVLG for legal malpractice. Further, the factual findings with which Beck Inc. takes issue are all supported by substantial evidence. Therefore we affirm the part of the judgment dismissing Beck Inc.’s malpractice claims against SVLG.
IV. DON BECK’S APPEAL
A. Background
The trial court ruled in favor of SVLG on its cross-claims against Beck Inc. and Don Beck for unpaid fees and litigation expenses arising out of the Wheeler action (the Wheeler fees). The court found that both Beck parties breached their contract with SVLG by failing to pay the Wheeler fees. The court also found that SVLG’s fees were reasonable and that both Beck parties were liable for the full amount of the unpaid fees. Further, the court concluded, even if there had been no valid fee agreement, SVLG was entitled to recover the reasonable value of its services pursuant to its common count claims of account stated and quantum meruit.
Don Beck appeals the judgment on the sole ground that he is not personally liable for the Wheeler fees. Although Don Beck gives several “reasons” why the court allegedly erred by holding him personally liable, he repeatedly fails to tie his arguments to the record on appeal. In light of this approach, we make the following observations as a preface to our substantive analysis.
First, we limit our discussion to issues that were properly raised in the trial court. “It is a firmly entrenched principle of appellate practice that litigants must adhere to the theory on which a case was tried. Stated otherwise, a litigant may not change his or her position on appeal and assert a new theory. To permit this change in strategy would be unfair to the trial court and the opposing litigant.” (Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316.) Therefore, “an issue or theory of the case that was not asserted in the trial court may not be raised for the first time on appeal. [Citation.]” (Parker v. City of Fountain Valley (1981) 127 Cal.App.3d 99, 117.)
Second, we reject Don Beck’s remarkable contention that he is entitled to de novo review of the judgment against him. We review the trial court’s factual findings under the substantial evidence standard of review. In accordance with that standard, we defer to the factual determinations of the trial court when the evidence is in conflict, even though a contrary finding could have been made. (Shamblin v. Brattain (1988) 44 Cal.3d 474, 479.) Furthermore, we review the evidence in the light most favorable to respondent, giving SVLG the benefit of every reasonable inference, and resolving all conflicts in its favor. (In re Marriage of Mix (1975) 14 Cal.3d 604, 614.)
B. Additional Facts in Evidence
As noted in our factual summary, SVLG attorney Myron Brody met with Don Beck in June 2002, to discuss Beck’s request that SVLG represent him and Beck Inc. in the Wheeler action.
SVLG presented evidence at trial that, during that first meeting, Brody told Don Beck that his personal signature was required on the SVLG retainer agreement and that he would be personally liable for fees incurred to represent him and his closely held corporation, Beck Inc. Indeed, Brody told Beck that SVLG would not represent the Beck parties unless Don Beck personally guaranteed the fees. Further, Don Beck conceded at trial that he did not tell Brody or anyone else at SVLG that he would not assume personal liability for the fees.
At trial, Don Beck denied that Brody told him that SVLG required that he sign the agreement individually. He also testified that he never promised to sign the agreement in his personal capacity and that he never intended to do so.
After his first meeting with Don Beck, Brody drafted an engagement agreement in the form of a letter addressed to both “Mr. Don L. Beck, President” and “Don L. Beck Associates, Inc.” The letter began: “Dear Mr. Beck: [¶] We are pleased to welcome you personally and Don L. Beck Associates, Inc. as clients of Silicon Valley Law Group (the ‘Firm’).” This SVLG retainer agreement required the signatures of two clients, “Don L. Beck Associates, Inc.” and “Don L. Beck.”
Don Beck signed the SVLG agreement on June 29, 2002, and mailed the document to SVLG. On the signature line for Don L. Beck, Associates, Don Beck signed the name “Don L Beck.” On the signature line for Don L. Beck, Don Beck printed the name “PRESIDENT.” Don Beck testified at trial that he made the deliberate decision to sign the agreement this way with the intention of shielding himself from personal liability for SVLG’s attorney’s fees.
Brody did not see the SVLG agreement after Don Beck signed it, but assumed that it had been properly executed. At the time, Brody’s policy was to have his legal assistant monitor the signing process and to inform him if a client failed to return an executed agreement. Brody’s assistant did not notice that Don Beck had used the name “PRESIDENT” as his signature on the agreement and did not report that fact to Brody.
C. The Trial Court’s Rulings
At trial, Don Beck argued that he was not a party to the SVLG retainer agreement because he did not sign it in his personal capacity and because SVLG failed to obtain a written fee agreement with him as required by section 6148, subdivision (a) of the Business and Professions Code.
The trial court concluded that Don Beck was a party to the SVLG agreement. The court rejected Don Beck’s contention that he never intended to sign the agreement in his personal capacity finding, among other things, that Don Beck personally was a client of SVLG, that he was personally sued by Wheeler and that he personally funded some of the Wheeler litigation expenses.
The court also found that: (1) the form of the SVLG agreement evidenced a clear intent that both clients, Don Beck and Beck Inc., would sign it; (2) SVLG attorney Brody expressly told Don Beck that his personal signature was required on the agreement; (3) Don Beck knew his personal signature was required, (4) Don Beck “signed the agreement and dated it in both places, knowing that the document was intended to bind him personally;” (5) SVLG proceeded to represent both Beck parties “believing the fee agreement had been properly signed by both.”
Consistent with these findings, the trial court concluded that “SVLG substantially complied with the Business & Professions Code’s requirements by asking [Don] Beck to sign the fee agreement personally, and disclosing in writing the terms of this personal engagement....”
Finally, the trial court found that Don Beck was estopped from denying the existence of his contract with SVLG. As the court explained: “There is not only the necessary writing and substantial compliance with the Business & Professions Code, but also a promissory estoppel, and an estoppel to assert the absence of a writing under Civil Code § 1623 and Evid. Code, § 623. See also Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 29-31. Mr. Beck and his closely held corporation, Beck Inc. are thus jointly and severally liable under the terms of the fee agreement. Civil Code §§ 1431, 1659, and 1660.”
Although unnecessary to its decision, the trial court also found that the Beck parties were liable for the unpaid Wheeler fees pursuant to SVLG’s common count theories of account stated and quantum meruit. On appeal, Don Beck contends that he has no personal liability under these theories. Our resolution of the contract liability issues makes it unnecessary for us to address these alternative grounds for holding the Beck parties liable for the unpaid Wheeler fees.
D. Analysis
Don Beck argues that he was not a party to the SVLG retainer agreement because he “unambiguously communicated his intent not to be individually bound for the Company’s fees” by signing the word “PRESIDENT” instead of his name on the signature line of the written agreement.
To the extent that Don Beck is suggesting that his unorthodox signature somehow precluded a finding that he had the requisite intent to enter into a contract with SVLG, he provides no legal authority to support such a proposition.
“The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties.” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264, italics added.) Questions of intent are questions of fact. (Byrne v. Laura (1997) 52 Cal.App.4th 1054, 1066.) Here, the trial court found that Don Beck did manifest his intent to be personally bound by the agreement. That finding is supported by substantial evidence including Brody’s testimony, the form of the agreement itself and Don Beck’s trial admission that he never told anybody that he would not assume personal liability for SVLG’s fees.
Don Beck next contends that, even if he had personally signed the SVLG retainer agreement, the agreement is void under Business and Professions Code section 6148 subdivision (a)(3), which requires that a contract for legal services contain a written explanation of “ ‘the respective responsibilities of the attorney and the client as to the performance of the contract.’ ” Specifically, Don Beck complains that the written agreement did not clearly state that he was personally liable for fees that SVLG generated to represent Beck Inc. Don Beck further contends that the trial court refused to make a ruling as to whether SVLG complied with this statute and thus a finding favorable to SVLG cannot be inferred.
Don Beck’s argument in the trial court was that he was not personally liable for the Wheeler fees because SVLG had no written fee agreement with him as required by section 6148. The trial court ruled against him on this issue by expressly finding “the necessary writing and substantial compliance with the Business & Professions Code.” Don Beck’s argument on appeal that the SVLG agreement was ambiguous on the subject of the scope of his personal liability is a new argument that was not raised at trial and thus is not properly raised here. We note, though, that the trial court did implicitly find that the written agreement was sufficiently clear as to Don Beck’s personal liability, a finding amply supported by the evidence. Indeed Don Beck himself essentially conceded that the agreement was clear on this point by employing a deceptive tactic in an effort to avoid personal liability for the Wheeler fees.
At oral argument before this court, Don Beck’s counsel insisted that this issue was properly raised in the lower court. However, as best we can determine from the record before us, the issue was raised for the first time after both (a) the proposed statement of decision was filed on October 31, 2007, and (b) Don Beck retained new counsel on November 12, 2007. That counsel, who continues to separately represent Don Beck on appeal, filed a second set of objections to the court’s proposed statement of decision pursuant to which Don Beck attempted to raise a panoply of new issues and/or defenses that had never been mentioned at trial.
Don Beck spends considerable time arguing that SVLG violated various other ethical duties which required it to disclose in writing that it was holding Don Beck personally liable for Beck Inc.’s fees and that such an arrangement created a conflict of interest. These issues were not raised in the pleadings in the trial court below or litigated at trial and Don Beck cannot raise them now. The trial court found that the written fee agreement was adequate under the circumstances and the record supports that conclusion.
Finally, Don Beck contends that he is not personally liable for the SVLG fees by virtue of any estoppel theory. He intimates that the trial court’s estoppel analysis was legally flawed because the court referenced Civil Code section 1623, which states that “[w]here a contract, which is required by law to be in writing, is prevented from being put into writing by the fraud of a party thereto, any other party who is by such fraud led to believe that it is in writing, and acts upon such belief to his prejudice, may enforce it against the fraudulent party.” Don Beck reasons that this statute applies only in cases involving the statute of frauds, where a party to an oral agreement seeks to avoid liability on the ground that a writing was required. Here, Mr. Beck contends, there is no evidence that he entered into any agreement, oral or written, with SVLG and thus Civil Code section 1623 does not apply. Don Beck posits a similar complaint about the trial court’s finding of a “promissory estoppel,” arguing there is no evidence of a promise by him to assume personal liability for the Wheeler fees.
These arguments will not shield Don Beck from the substantial evidence standard of review that applies to this appeal. There is substantial evidence that Don Beck agreed to assume personal liability for the SVLG fees. Executing the written fee agreement was an important component but not the only evidence of his assent. Thus, to the extent that Don Beck’s unorthodox signature created an issue as to the validity of the written agreement itself, his promise was nevertheless manifest. Furthermore, there is also substantial evidence that Don Beck intentionally led SVLG to believe that he was assuming personal liability for all of the Wheeler fees and that he also accepted the benefits conferred on him by virtue of the SVLG retainer agreement. Therefore, the trial court’s alternative finding that Don Beck is equitably estopped from denying his contract with SVLG is also affirmed.
To summarize our conclusions with respect to Don Beck’s appeal, we find that he has failed to establish that the trial court erred by finding that he breached a contract with SVLG and that he is personally liable for the unpaid Wheeler fees.
V. SVLG’S APPEAL
SVLG appeals the post-judgment attorney fee order, pursuant to which the trial court awarded SVLG reasonable attorney fees incurred in these consolidated cases pursuant to an attorney fee provision in the SVLG retainer agreement. SVLG contends that the trial court applied incorrect legal standards and/or abused its discretion by refusing to (1) award SVLG the full amount of its lodestar fee request, and (2) hold both Beck parties jointly and severally liable for the full amount of the fee award.
A. Background
Pursuant to its attorney fee motion, SVLG sought to hold Don Beck and Beck Inc. jointly and severally liable for attorney fees totaling $1,779,795, which included a lodestar fee of $1,474,434 and an enhancement of $305,361.
On appeal, SVLG does not challenge the trial court’s ruling that it was not entitled to an enhancement.
SVLG’s request for attorney fees was based on the following provision of the SVLG retainer agreement: “Collection Actions. In the unlikely event of any dispute, claim, arbitration or other proceeding between us arising out of this agreement or the fees incurred for legal services, the successful or prevailing party will be entitled to reasonable attorneys’ fees and costs, in addition to any other relief granted.”
1. The Lodestar Fee Award
As noted in our factual summary, SVLG calculated its $1,474,434 lodestar fee request from time records generated by three law firms, SVLG, Lerch, and McManis.
The first and largest component of the lodestar fee request was $610,721.50 for work performed by SVLG attorney Robert Vantress and his paralegal. In his declaration in support of the attorney fee motion, Vantress identified himself as a founding shareholder, Co-Chair of the Litigation Department, Secretary, and General Counsel of SVLG. According to Vantress, although several SVLG attorneys acted as legal counsel for SVLG in these cases, this component of the SVLG fee request was solely for work performed by Vantress himself and his paralegal. Vantress stated that he made an arrangement with SVLG that he would be paid for his work on this case only as awarded by the court and would not otherwise bill SVLG for his time. He also stated that “[a]t all times during this case, I was acting as General Counsel and under an attorney-client relationship with SVLG with all of the duties that such a relationship requires, even though I was also a member of the firm.”
According to Vantress, all SVLG attorneys and staff who worked on these cases kept daily time records as if SVLG was a fee paying client, although no bills were generated and SVLG was not actually charged for the work.
The trial court rejected SVLG’s claim for payment of legal services provided to it by Vantress and his paralegal. Applying the rule precluding an attorney from recovering contractual attorney fees for representing himself, the court found that SVLG was not entitled to fees for work performed by members of its own firm. (Citing Trope v. Katz (1995) 11 Cal.4th 274 (Trope) and Witte v. Kaufman (2006) 141 Cal.App.4th 1201 (Witte).)
The second component of the SVLG fee request was $508,539 for work performed by the Lerch firm, who was retained by SVLG’s insurance carrier to defend the malpractice case. In his declaration, Vantress conceded that SVLG only paid Lerch a total of $50,000, which was the amount of its deductible. Vantress also conceded that SVLG’s insurance carrier had agreed not to seek reimbursement from SVLG. Nevertheless, SVLG sought payment of all of the Lerch fees with the intention of using the balance of the funds to defray the costs of anticipated increases in its insurance premiums, and to cover other fees and costs that the court might not reimburse.
The trial court approved the claim for full reimbursement of the Lerch fees. The court rejected the Beck parties’ argument that this fee request was unreasonable. The court also found that SVLG’s arrangement with its insurance carrier with respect to the payment of the Lerch fees was not a reason for denying SVLG full reimbursement for the Lerch firm’s work on these cases.
The final component of the SVLG lodestar fee calculation consisted of $354,650 for work performed by the McManis firm. McManis was retained and paid directly by SVLG to represent it in all aspects of these cases. James McManis submitted a declaration in support of this fee request in which he stated that the number of hours that his firm spent on this case was significantly reduced because of the assistance of Robert Vantress who essentially acted as his second chair at trial.
The trial court approved the McManis fee claim. The court found that the amount of this request was reasonable, that the fees were appropriately earned and that SVLG could recover the entire amount requested.
2. Apportionment
As reflected in our factual summary, three actions were consolidated in the trial court, Don Beck’s malpractice case against Hoge (which was settled before trial), Beck Inc.’s malpractice case against Hoge and SVLG (which included SVLG’s cross-claim for breach of contract), and SVLG’s breach of contract case against Don Beck. Notwithstanding the fact that SVLG and Don Beck were both parties in only one case, and one cause of action that was litigated at trial (the breach of contract claim), SVLG sought to hold Don Beck jointly and severally liable for its entire attorney fee award. SVLG advanced four arguments in support of this request.
First, SVLG argued that Don Beck was “functionally equivalent” to Beck Inc. The court rejected this theory based on the facts that Beck Inc. was the sole plaintiff in the malpractice cases against SVLG and that there had been no finding that Don Beck was the alter ego of Beck Inc.
SVLG also argued that apportionment was precluded by the attorney fee provision of the SVLG retainer agreement. Noting that the parties had not discussed this provision when the agreement was executed, the court concluded that it was ambiguous on the question of apportionment. The court also found that interpreting this provision as holding both Beck parties jointly and severally liable not just for fees generated in the attorney fees case (in which both were parties) but also for fees in the “unmentioned tort claim for legal malpractice, would likely run afoul of California State Bar Rules of Professional Conduct, 3-300 and 3-310.”
SVLG also argued that the fees could not be apportioned as a practical matter because all attorney work was inextricably related to both Don Beck and Beck Inc. The trial court rejected this argument as to the Lerch fees because, as discussed above, Lerch was specifically retained only to defend the malpractice claims and Don Beck was not a party to those claims. Thus, the work performed by the Lerch firm pertained only to Beck Inc.
By contrast, the court found, the McManis firm was retained to work on both the contract case and the malpractice case and the billing records for that work could not be apportioned between the two except by speculation. However, the court also found that Don Beck was not joined as a party in SVLG’s breach of contract case until June 6, 2007. The court credited evidence submitted by Don Beck which showed that, prior to that date, McManis incurred fees in the amount of $117,200. Thus, the court concluded that that portion of the McManis fee request should not be charged to Don Beck.
SVLG filed its complaint against Don Beck on May 18, 2007, and Don Beck made his first appearance in the case when he filed his answer on June 6, 2007.
SVLG’s final contention was that any apportionment of fees between the two Beck parties would be inequitable. The trial court disagreed. It noted, among other things, that Beck Inc.’s malpractice case involved damage claims of several million dollars and consumed a substantial portion of the trial time. The breach of contract case, by contrast, involved damages of $197,200 and “constituted a relatively small portion of the trial of these joined cases.” Furthermore, the court reasoned, “[a]s of the present, Beck, Inc. and [Don] Beck are separate entities.” Under these circumstances, the court found that requiring Don Beck to pay Beck, Inc.’s legal malpractice fees would be inequitable.
Ultimately, the trial court ruled that: (1) Beck Inc. and Don Beck were jointly and severally liable for a portion of the McManis fees, in the amount of $237,450; (2) Beck Inc. was severally liable for the balance of the McManis fees, in the amount of $117,200; and (3) Beck, Inc. was severally liable for all of the Lerch fees, totaling $508,539.
B. Discussion
1. The Lodestar Fee Award
SVLG contends that the trial court failed to apply “proper legal standards” which required it to award SVLG the full amount of its lodestar fee request of close to $1.5 million. This argument rests on the following set of propositions: As the prevailing party, SVLG was entitled to full compensation for all reasonable fees. The trial court expressly found that (1) the number of hours included in SVLG’s lodestar calculation was reasonable, and (2) the market rate information provided by SVLG was reasonable. In light of these findings, “[t]he Lodestar amount found by the Trial Court to be reasonable was almost $1.5 Million.” Furthermore, the court did not articulate any “recognized” factor to justify a downward adjustment of this lodestar calculation. Therefore, the failure to award the full amount was error.
SVLG consumes pages summarizing legal authority that supports these propositions. But, as a factual matter, this argument stretches our notion of reasonable advocacy. SVLG simply ignores the fact that its attorney fee motion was comprised of three distinct requests for attorney fees and that the court separately ruled on each request. Thus the trial court did not find that the total number of hours that SVLG used to calculate its lodestar fee request was reasonable. Nor did it intimate in any way that the $1.5 million lodestar request was reasonable. Indeed, the court expressly rejected that figure because it found that SVLG could not recover any fees (regardless of their reasonableness) for its self-representation in these cases.
SVLG separately contends that the trial court committed legal error by refusing to reimburse SVLG for fees generated by SVLG attorney Vantress and his paralegal. We disagree.
“California follows what is commonly referred to as the American rule, which provides that each party to a lawsuit must ordinarily pay his own attorney fees. [Citations.]” (Trope, supra, 11 Cal.4th at p. 278.) One of several exceptions to this rule arises when there is an “ ‘agreement, express or implied, of the parties,’ ” that allocates the attorney fees. (Id. at p. 279, quoting Code Civ. Proc., § 1021.) “Although Code of Civil Procedure section 1021 gives individuals a rather broad right to ‘contract out’ of the American rule by executing such an agreement, these arrangements are subject to the restrictions and conditions of [Civil Code] section 1717 in cases to which that provision applies.” (Ibid; see also Gilbert v. Master Washer & Stamping Co. (2001) 87 Cal.App.4th 212, 217 (Gilbert); Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 93-97.)
Civil Code section 1717 (section 1717) states, in part: “(a) In any action on a contract, where the contract specifically provides that attorneys’ fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”
One restriction imposed by section 1717 pertains to attorneys who elect to represent themselves. (Trope, supra, 11 Cal.4th 274.) In Trope, a law firm sued a former client for unpaid fees, represented itself at trial, and obtained a favorable judgment but was denied contractual attorney fees pursuant to section 1717. (Trope, supra, 11 Cal.4th at p. 278.) The Trope court held that “an attorney who chooses to litigate in propria persona rather than retain another attorney to represent him in an action to enforce a contract... cannot recover [attorney] fees under section 1717.” (Id. at p. 277.) As the court explained, several considerations compelled this conclusion.
First, an attorney litigating in propria persona does not “incur” compensation for his time and his lost business opportunities. (Trope, supra, 11 Cal.4th at p. 280.) Second, the words “attorney’s fees” mean compensation a litigant actually pays or becomes liable to pay in exchange for legal representation and an attorney litigating in propria persona pays no compensation. (Ibid.) Third, permitting a self-representing attorney to recover compensation for his time and work when a party who is not an attorney cannot recover compensation for his time or work on the case would conflict with the legislative purpose of section 1717 which is to prevent disparate treatment and the oppressive use of one-sided attorney fee provisions. (Id. at p. 286.) Finally, there are valid policy reasons for discouraging attorneys from electing to appear in propria persona “because such self-representation may often conflict with the general public and legislative policy favoring the effective and successful prosecution of meritorious claims.” (Id. at p. 292.)
SVLG attempts to escape the rule announced in Trope by contending that it did not represent itself in these cases but rather was represented by attorney Robert Vantress. To support this argument, SVLG points out that there was “never any dispute that Mr. Vantress was not himself a target of the malpractice claims or that his legal fees were being sought in the Counter-Claim.” We strongly disagree. The record establishes that Vantress is a member, indeed a founding shareholder, of SVLG. As such, he absolutely was a target of the malpractice action and his fees were at issue in the attorney’s fees case. Saying otherwise simply does not make it so.
SVLG also contends that the Trope rule does not apply here because SVLG’s motion for attorney fees was not based solely on Civil Code section 1717, but on other statutory provisions including Code of Civil Procedure section 1021. However, SVLG fails to adequately explain the significance of this fact. If SVLG is suggesting that it can avoid section 1717 simply by relying on other statutes, we disagree. As the Trope court explained, while Code of Civil Procedure section 1021 permits parties to “contract out” of the American rule, such agreements are subject to the restrictions and conditions of section 1717 to the extent they apply. (Id. at p. 278.) SVLG does not and indeed cannot dispute that it is subject to the limitations of section 1717.
SVLG also contends that the Supreme Court “limited Trope” in PLCM Group Inc. v. Drexler (2000) 22 Cal.4th 1084 (PLCM). In PLCM, the court held that a corporate party could recover contractual attorney fees pursuant to section 1717 for work performed by in-house counsel. As the court explained, the considerations underpinning the Trope holding do not apply to the case of in-house counsel: “There is no problem of disparate treatment; in-house attorneys, like private counsel but unlike pro se litigants, do not represent their own personal interests and are not seeking remuneration simply for lost opportunity costs that could not be recouped by a nonlawyer. A corporation represented by in-house counsel is in an agency relationship, i.e., it has hired an attorney to provide professional legal services on its behalf. Nor is there any impediment to the effective and successful prosecution of meritorious claims because of possible ethical conflict or emotional investment in the outcome. The fact that in-house counsel is employed by the corporation does not alter the fact of representation by an independent third party. Instead, the payment of a salary to in-house attorneys is analogous to hiring a private firm on a retainer.” (Id. at p. 1093)
SVLG insists that PLCM’s “holding and reasoning were not limited to corporations which are not law firms....” However, it identifies nothing in the language or reasoning of PLCM which applies to this situation. Vantress does not stand in the position of an in-house counsel to a corporation. He is not comparable to an independent third party with no personal stake or interest in the outcome of this litigation, but rather is a senior member of the party that was sued in the malpractice case and that sued the Beck parties in the attorney fees case. Therefore, we reject the notion that PLCM limits Trope in any way that might assist SVLG.
SVLG mistakenly relies on Gilbert, supra, 87 Cal.App.4th 212. In Gilbert an attorney was personally named as a defendant in a lawsuit and retained other members of his law firm to represent him. At the conclusion of the litigation, the trial court denied the defendant’s motion for contractual attorney fees, relying on Trope. The Court of Appeal reversed. The Gilbert court reasoned that the considerations outlined in both Trope and PLCM dictated that the defendant in the case before it was not a propria persona litigant and thus was not barred from recovering reasonable attorney fees under section 1717. Crucial to the court’s analysis was the fact that there was an attorney-client relationship between the defendant and the members of his law firm who he retained to represent him in the action. Defense counsel, like the in-house counsel in PLCM but unlike the Trope attorneys, “represented not their personal interests or even those of their law firm, but the separate and distinct interests of [the defendant] himself.” They were the defendant’s “agents, and he was the recipient of legal services performed by them on his behalf.” (Id. at p. 222.) Indeed, the court ultimately concluded that, while the defendant-attorney’s situation was “somewhat similar” to the corporation in PLCM, it was “even more analogous to that of any litigant who retains private counsel to represent him or her in a lawsuit.” (Id. at p. 222, fn. 44.)
Gilbert does not assist SVLG in this case. SVLG is not an individual person, but rather a law firm comprised of its members. Furthermore, SVLG did not retain a co-worker who was a stranger to the proceedings to represent it in this case. Instead, it was represented by one if its own founding shareholders. Any member of SVLG who represented it in this litigation necessarily represented his or her own interests and thus was not in any way analogous to an independent third party. In other words, SVLG represented itself in these cases. Witte, supra, 141 Cal.App.4th 1201, a case upon which the trial court expressly relied, illustrates our point.
In Witte, an attorney filed an action against a former client for breach of contract and against two law firms for interfering with that contract. Defendant law firm “KLA” filed a special motion to strike the cause of action against it pursuant to the anti-SLAPP statute and, after that motion was granted, moved for attorney fees pursuant to section 425.16 of the Code of Civil Procedure, which authorizes such an award to the prevailing defendant on an anti-SLAPP motion to strike. The trial court awarded fees but the Court of Appeal reversed. The Witte court found that the considerations announced in Trope applied equally to motions for attorney fees under the anti-SLAPP statute and that KLA could not recover attorney fees for representing itself. (Witte, supra, 141 Cal.App.4th at pp. 1208-1211.)
The Witte court rejected KLA’s contention that it had not represented itself, but rather was represented by individual members of its firm. (Witte, supra, 141 Cal.App.4th at p. 1210.) The court observed that “[t]he only way KLA could possibly appear in this action is through one or more of its attorneys, or through outside counsel,” and that “[b]y KLA’s theory, it could never represent itself in litigation.” The court also pointed out that, in Trope, “the party that was denied attorney fees under Civil Code section 1717 was a law firm that appeared through one of its attorneys.” (Witte at p. 1210.)
The Witte court also rejected the notion that a law firm can have an attorney-client relationship with its individual attorneys: “[T]here is no attorney-client relationship between KLA and its individual attorneys. The individual KLA attorneys are not comparable to in-house counsel for a corporation, hired solely for the purpose of representing the corporation. The attorneys of KLA are the law firm’s product. When they represent the law firm, they are representing their own interests. As such, they are comparable to a sole practitioner representing himself or herself. Where, as in Gilbert, an attorney is sued in his or her individual capacity and he obtains representation from other members of his or her law firm, those other members have no personal stake in the matter and may in fact charge for their work. Not so with a law firm that is sued in its own right and appears through various members. [¶] Here, KLA incurred no attorney fees in bringing its motion to strike, because all the work was done by members of the firm on their own behalf. Thus, KLA is not entitled to attorney fees.” (Witte, supra, 141 Cal.App.4th at p. 1211.)
We agree with the trial court that the Witte analysis is sound and that it applies in this case and confirms the trial court’s conclusion that SVLG is not entitled to recover fees for work performed in these cases by SVLG attorney Vantress and his paralegal.
2. Apportionment
SVLG contends that, under the circumstances of this case, the trial court did not have any discretion to apportion costs among the Beck parties. However, it fails to cite any case which addresses this situation. For example, SVLG cites Smock v. State ofCalifornia (2006) 138 Cal.App.4th 883, 888-889, for the proposition that “[a]pportionment of costs is authorized, at the court’s discretion, only under those comparatively unusual circumstances when the court must determine which party prevailed.” However, Smock did not involve a contractual attorney fees award or consolidated actions. In this case, SVLG was the prevailing party against Don Beck only with respect to its contract case because Don Beck was not a party in the malpractice case. SVLG also relies on several cases holding that a trial court did not abuse it discretion by failing to apportion an attorney fee award among multiple defendants according to their fault. (See, e.g., Friends of the Trails v. Blasius (2000) 78 Cal.App.4th 810, 837-838.) This authority has no application here. The trial court did not apportion SVLG’s fee award among multiple defendants in the same case. Rather, to the extent possible, the trial court allocated the fees among the consolidated cases in order to reflect the fact that Don Beck was not a party to the malpractice case and, therefore, that SVLG was not a prevailing party with respect to Don Beck as to that malpractice case.
SVLG intimates that the trial court was constrained by its earlier finding that Don Beck was jointly and severally liable for the unpaid Wheeler fees. SVLG provides neither reason nor authority to support this proposition. The question of Don Beck’s liability for the Wheeler fees was litigated at trial and answered by findings of fact and law. The trier of fact found, among other things, that Beck expressly agreed to assume personal liability for all of the Wheeler fees and that he was estopped from denying his agreement. Those findings did not extend to the post-judgment motion to recover attorney fees which was based on a different provision in the SVLG retainer agreement.
As discussed above, in deciding the attorney fees motion, the trial court found that (1) the attorney fee provision in the SVLG retention agreement was ambiguous on the subject of apportionment, (2) the parties never discussed Don Beck’s potential liability for fees SVLG might incur in litigation solely against Beck Inc., and (3) holding Don Beck personally liable for such fees under these circumstances could violate applicable State Bar Rules. SVLG fails to show that these trial court rulings were error.
SVLG spends considerable time arguing that the language of the attorney fee provision in the SVLG retention agreement was broad enough to cover both the contract case and the malpractice case. We are perplexed by this argument in light of the fact that the trial court did award SVLG its fees incurred in both the malpractice case and the contract case.
Finally, SVLG contends that issues common to the contract and malpractice cases rendered all of the fees that were generated inextricably intertwined. Again, however, SVLG simply ignores the trial court’s rather straightforward analysis which establishes otherwise. SVLG fails to identify any flaw in that analysis. It does not dispute that the Lerch firm was retained solely to defend the malpractice case, that Don Beck was not a party in the malpractice case, or that Don Beck made his first appearance in SVLG’s contract action in June 2007. These facts, established for purposes of appeal, enabled the court to allocate most of SVLG’s fees to the cases in which they were incurred.
3. The Trial Court’s Discretion
SVLG contends that the trial court abused its discretion by failing to award it adequate compensation.
“[T]he trial court has broad authority to determine the amount of a reasonable fee. [Citations.]... ‘The experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong’.... [¶]... “[T]he fee setting inquiry in California ordinarily begins with the ‘lodestar,’ i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. ‘California courts have consistently held that a computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys’ fee award.’ [Citation.] The reasonable hourly rate is that prevailing in the community for similar work. [Citations.] The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. [Citation.] Such an approach anchors the trial court’s analysis to an objective determination of the value of the attorney’s services, ensuring that the amount awarded is not arbitrary. [Citation.]” (PLCM, supra, 22 Cal.4th at p. 1095.)
In this case, the trial court’s analysis was anchored to an objective determination of the value of the attorneys’ services. However, contrary to the very premise of SVLG’s appeal, those services did not include the time and work that SVLG expended to represent itself in these actions. Therefore, the lodestar fee request of close to $1.5 million, which included fees for services SVLG rendered to itself, was not reasonable as a matter of law. Furthermore, SVLG fails to acknowledge that, once the unrecoverable fees were stricken, the court did award SVLG the full amount of its lodestar fee request. Thus, SVLG has failed to substantiate its charge that the trial court abused its discretion.
VI. DISPOSITION
The judgment and post-judgment attorney fees order are affirmed. In the interests of justice, all parties are to bear their own costs on appeal.
We concur: Kline, P.J., Lambden, J.
The Truong court affirmed summary judgment in favor of a malpractice defendant because undisputed evidence established that the statute of limitations expired. The Truong appellant argued that it did not suffer actual injury until a related action was resolved. However, that related action was filed by appellant in an attempt to avoid the consequences of it’s former attorney’s malpractice. Therefore, it suffered actual injury when it paid new counsel to file and prosecute the related action. (Truong, supra, 181 Cal.App.4th at pp. 114-115.) Here, by contrast, substantial evidence establishes that the Wheeler action was not a consequence of Towery’s alleged malpractice and that the outcome of that litigation was necessary to establish the fact of injury.