NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 5 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
INDEPENDENT LIVING CENTER OF No. 20-55193 SOUTHERN CALIFORNIA, INC., a nonprofit corporation; GRAY PANTHERS D.C. No. OF SACRAMENTO, a nonprofit 2:08-cv-03315-CAS-MAN corporation; GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; GERALD SHAPIRO, DBA Uptown MEMORANDUM* Pharmacy and Gift Shoppe, Pharm. D.; SHARON STEEN, DBA Central Pharmacy; TRAN PHARMACY, INC.; MARK BECKWITH; MARGARET DOWLING,
Petitioners-Appellants,
v.
RICHARD FIGUEROA, Jr., Acting Director of Department of Health Care Services of the State of California,
Respondent-Appellee.
Appeal from the United States District Court for the Central District of California Christina A. Snyder, District Judge, Presiding
Argued and Submitted March 25, 2021 Pasadena, California
Before: W. FLETCHER, M. SMITH, and CHRISTEN, Circuit Judges.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Litigation in this case spanned twelve years and included argument at every
level of the federal courts. The case culminated in a fight over attorney’s fees.
Plaintiffs’ counsel, the Friedman Firm, appeals the district court’s finding that the
settlement agreement between the parties barred counsel from recovering their fees
from third-party beneficiaries through a common fund. Counsel also contends that
the district court abused its discretion in calculating the fees that the Department of
Health Care Services (DHCS) owed them pursuant to California’s Private Attorneys
General Act (PAGA), California Code of Civil Procedure § 1021.5. We affirm in
part and reverse in part. Because the parties are familiar with the facts, we do not
repeat them here, except where necessary to provide context for our ruling.
1. The district court’s interpretation of the settlement agreement to preclude
common fund attorney’s fees is a legal question that we review de novo. Miller v.
Safeco Title Ins. Co., 758 F.2d 364, 367 (9th Cir. 1985) (“When the district court’s
decision is based on an analysis of the contractual language and an application of the
principles of contract interpretation, that decision is a matter of law and reviewable
de novo.”).
“An agreement to settle a legal dispute is a contract and its enforceability is
governed by familiar principles of contract law.” Jeff D. v. Andrus, 899 F.2d 753,
759–60 (9th Cir. 1989). To interpret the settlement agreement at issue here, we
apply California contract law. See id. at 760. In California, “the interpretation of a
2 contract must give effect to the ‘mutual intention’ of the parties.” Waller v. Truck
Ins. Exchange, Inc., 900 P.2d 619, 627 (Cal. 1995) (quoting Cal. Civ. Code § 1636).
“Such intent is to be inferred, if possible, solely from the written provisions of the
contract. The clear and explicit meaning of these provisions, interpreted in their
ordinary and popular sense . . . controls judicial interpretation.” Id. (internal citations
and quotation marks omitted).
The agreement allowed Petitioners and Intervenors to seek an award of
attorney’s fees from the court under any common benefit theory—including a
common fund—provided that they did not “assert any argument that would require
DHCS or any other state agency to utilize its resources or modify its internal
practices to assist plaintiffs’ counsel in collecting any fee award that the court may
grant.” (emphasis added). The Friedman Firm was precluded from recovering fees
from a common fund because any effort to do so would have required the State to
utilize its resources to some extent. We affirm the district court’s holding on this
issue.
2. The Friedman Firm also argues that the district court erred when it reduced
counsel’s claimed hours and billing rate in calculating the fees that counsel could
recover from DHCS pursuant to § 1021.5. “On review of an award of attorney fees
after trial, the normal standard of review is abuse of discretion.” Conservatorship
of Whitley, 241 P.3d 840, 845 (Cal. 2010) (internal quotation marks omitted). “A
3 district court abuses its discretion when it makes an error of law, when it rests its
decision on clearly erroneous findings of fact, or when we are left with a definite
and firm conviction that the district court committed a clear error of judgment.”
United States v. Hinkson, 585 F.3d 1247, 1260 (9th Cir. 2009) (internal quotation
marks omitted).
In reducing the Friedman Firm’s rate, the district court weighed the evidence
in the record, including the historical rate the Friedman Firm charged clients, and
the rate that the district court awarded to counsel representing Intervenors. The
district court’s reduction of the Friedman Firm’s fees to $566 per hour between 2008
and 2016, and $628 per hour from 2017 to present, was not an abuse of discretion.
See Highland Springs Conference & Training Ctr. v. City of Banning, 255 Cal. Rptr.
3d 331, 342 (Ct. App. 2019); Morris v. Hyundai Motor Amer., 253 Cal. Rptr. 3d 592,
605 (Ct. App. 2019).
As to the number of hours the Friedman Firm billed, the district court abused
its discretion in reducing the hours by fifty percent. California courts have
recognized that “[w]hen a voluminous fee application is made,” a court is permitted
to “make across-the board percentage cuts either in the number of hours claimed or
in the final lodestar figure.” Kerkeles v. City of San Jose, 196 Cal. Rptr. 3d 252, 263
(Ct. App. 2015) (internal quotation marks omitted). However, percentage-based cuts
are “subject to heightened scrutiny,” and the district court still must “set forth a
4 concise but clear explanation of its reasons for choosing a given percentage
reduction,” and “independently review the applicant’s fee request.” Id. (internal
quotation marks omitted). Here, the district court inadequately justified awarding
Friedman only fifty percent of his requested hours, while awarding Intervenors’
counsel one hundred percent of theirs.
3. Finally, Friedman contends that the district court erred in declining to add
a multiplier to Friedman’s requested lodestar fees. “In most contingency cases,
courts may [ ] increase the lodestar amount by applying a multiplier,” designed to
account for “the importance and difficulty of the litigation; the novelty of the issues
involved; the risk of nonpayment for the attorney’s services (the contingency factor);
the skill of the attorney in presenting the case; and the magnitude of the results
obtained.” Caldera v. Dep’t of Corrections and Rehabilitation, 261 Cal. Rptr. 3d
835, 839–40 (Ct. App. 2020). “The district court must apply a risk multiplier to the
lodestar when (1) attorneys take a case with the expectation they will receive a risk
enhancement if they prevail, (2) their hourly rate does not reflect that risk, and (3)
there is evidence the case was risky.
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NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS APR 5 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT
INDEPENDENT LIVING CENTER OF No. 20-55193 SOUTHERN CALIFORNIA, INC., a nonprofit corporation; GRAY PANTHERS D.C. No. OF SACRAMENTO, a nonprofit 2:08-cv-03315-CAS-MAN corporation; GRAY PANTHERS OF SAN FRANCISCO, a nonprofit corporation; GERALD SHAPIRO, DBA Uptown MEMORANDUM* Pharmacy and Gift Shoppe, Pharm. D.; SHARON STEEN, DBA Central Pharmacy; TRAN PHARMACY, INC.; MARK BECKWITH; MARGARET DOWLING,
Petitioners-Appellants,
v.
RICHARD FIGUEROA, Jr., Acting Director of Department of Health Care Services of the State of California,
Respondent-Appellee.
Appeal from the United States District Court for the Central District of California Christina A. Snyder, District Judge, Presiding
Argued and Submitted March 25, 2021 Pasadena, California
Before: W. FLETCHER, M. SMITH, and CHRISTEN, Circuit Judges.
* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Litigation in this case spanned twelve years and included argument at every
level of the federal courts. The case culminated in a fight over attorney’s fees.
Plaintiffs’ counsel, the Friedman Firm, appeals the district court’s finding that the
settlement agreement between the parties barred counsel from recovering their fees
from third-party beneficiaries through a common fund. Counsel also contends that
the district court abused its discretion in calculating the fees that the Department of
Health Care Services (DHCS) owed them pursuant to California’s Private Attorneys
General Act (PAGA), California Code of Civil Procedure § 1021.5. We affirm in
part and reverse in part. Because the parties are familiar with the facts, we do not
repeat them here, except where necessary to provide context for our ruling.
1. The district court’s interpretation of the settlement agreement to preclude
common fund attorney’s fees is a legal question that we review de novo. Miller v.
Safeco Title Ins. Co., 758 F.2d 364, 367 (9th Cir. 1985) (“When the district court’s
decision is based on an analysis of the contractual language and an application of the
principles of contract interpretation, that decision is a matter of law and reviewable
de novo.”).
“An agreement to settle a legal dispute is a contract and its enforceability is
governed by familiar principles of contract law.” Jeff D. v. Andrus, 899 F.2d 753,
759–60 (9th Cir. 1989). To interpret the settlement agreement at issue here, we
apply California contract law. See id. at 760. In California, “the interpretation of a
2 contract must give effect to the ‘mutual intention’ of the parties.” Waller v. Truck
Ins. Exchange, Inc., 900 P.2d 619, 627 (Cal. 1995) (quoting Cal. Civ. Code § 1636).
“Such intent is to be inferred, if possible, solely from the written provisions of the
contract. The clear and explicit meaning of these provisions, interpreted in their
ordinary and popular sense . . . controls judicial interpretation.” Id. (internal citations
and quotation marks omitted).
The agreement allowed Petitioners and Intervenors to seek an award of
attorney’s fees from the court under any common benefit theory—including a
common fund—provided that they did not “assert any argument that would require
DHCS or any other state agency to utilize its resources or modify its internal
practices to assist plaintiffs’ counsel in collecting any fee award that the court may
grant.” (emphasis added). The Friedman Firm was precluded from recovering fees
from a common fund because any effort to do so would have required the State to
utilize its resources to some extent. We affirm the district court’s holding on this
issue.
2. The Friedman Firm also argues that the district court erred when it reduced
counsel’s claimed hours and billing rate in calculating the fees that counsel could
recover from DHCS pursuant to § 1021.5. “On review of an award of attorney fees
after trial, the normal standard of review is abuse of discretion.” Conservatorship
of Whitley, 241 P.3d 840, 845 (Cal. 2010) (internal quotation marks omitted). “A
3 district court abuses its discretion when it makes an error of law, when it rests its
decision on clearly erroneous findings of fact, or when we are left with a definite
and firm conviction that the district court committed a clear error of judgment.”
United States v. Hinkson, 585 F.3d 1247, 1260 (9th Cir. 2009) (internal quotation
marks omitted).
In reducing the Friedman Firm’s rate, the district court weighed the evidence
in the record, including the historical rate the Friedman Firm charged clients, and
the rate that the district court awarded to counsel representing Intervenors. The
district court’s reduction of the Friedman Firm’s fees to $566 per hour between 2008
and 2016, and $628 per hour from 2017 to present, was not an abuse of discretion.
See Highland Springs Conference & Training Ctr. v. City of Banning, 255 Cal. Rptr.
3d 331, 342 (Ct. App. 2019); Morris v. Hyundai Motor Amer., 253 Cal. Rptr. 3d 592,
605 (Ct. App. 2019).
As to the number of hours the Friedman Firm billed, the district court abused
its discretion in reducing the hours by fifty percent. California courts have
recognized that “[w]hen a voluminous fee application is made,” a court is permitted
to “make across-the board percentage cuts either in the number of hours claimed or
in the final lodestar figure.” Kerkeles v. City of San Jose, 196 Cal. Rptr. 3d 252, 263
(Ct. App. 2015) (internal quotation marks omitted). However, percentage-based cuts
are “subject to heightened scrutiny,” and the district court still must “set forth a
4 concise but clear explanation of its reasons for choosing a given percentage
reduction,” and “independently review the applicant’s fee request.” Id. (internal
quotation marks omitted). Here, the district court inadequately justified awarding
Friedman only fifty percent of his requested hours, while awarding Intervenors’
counsel one hundred percent of theirs.
3. Finally, Friedman contends that the district court erred in declining to add
a multiplier to Friedman’s requested lodestar fees. “In most contingency cases,
courts may [ ] increase the lodestar amount by applying a multiplier,” designed to
account for “the importance and difficulty of the litigation; the novelty of the issues
involved; the risk of nonpayment for the attorney’s services (the contingency factor);
the skill of the attorney in presenting the case; and the magnitude of the results
obtained.” Caldera v. Dep’t of Corrections and Rehabilitation, 261 Cal. Rptr. 3d
835, 839–40 (Ct. App. 2020). “The district court must apply a risk multiplier to the
lodestar when (1) attorneys take a case with the expectation they will receive a risk
enhancement if they prevail, (2) their hourly rate does not reflect that risk, and (3)
there is evidence the case was risky. Failure to apply a risk multiplier in cases that
meet these criteria is an abuse of discretion.” Stetson v. Grissom, 821 F.3d 1157,
1166 (9th Cir. 2016) (internal quotation marks omitted). We hold that these criteria
counsel in favor of applying a multiplier, as does the delay and the need to ensure
that, in the future, lawyers are not dissuaded from taking up claims that will benefit
5 the public interest. The district court erred by failing to apply a multiplier.
Because of the district court’s thorough fact-finding, we are able to modify
the attorney’s fees award on appeal, conserving judicial resources by avoiding the
need to remand for further proceedings. Pursuant to the foregoing, we hold that the
Friedman Firm is entitled to payment for seventy-five percent of its billed hours, at
the rates set forth by the district court. We further hold that the Friedman Firm is
entitled to a multiplier of 2. The Friedman Firm billed 8,699 hours. Seventy-five
percent of this amount, multiplied by the hourly rate of $628, yields an award of
$4,097,229.00.1 With a multiplier of 2, the Friedman Firm is entitled to
$8,194,458.00 pursuant to California Code of Civil Procedure § 1021.5. The
judgment of the district court is AFFIRMED in part and REVERSED in part. The
case is REMANDED and the district court is ordered to enter judgment in favor of
the Friedman Firm in the amount of $8,194,458.00.
1 The district court used the higher hourly rate of $628 for all of the hours it awarded the Friedman Firm, reasoning that its reduction in the number of hours was based primarily on pre-2017 flaws in the Friedman Firm’s time records. Following suit, we do the same here.