Santiago v. Kia Motors

Filed 6/15/07 Santiago v. Kia Motors CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Ronald L. Bauer, Judge. Appeal dismissed.

Lieff, Cabraser, Heimann & Bernstein, Robert J. Nelson and Daniel M. Hutchinson for Objector and Appellant.

Gordon & Rees, Kevin Alexander, Tom Stoddard and Stephanie Alexander for Defendant and Respondent.

* * *

I. BACKGROUND

Eight state court class actions were filed against Kia Motors based on an allegedly defective front braking system in its 1997 through 2000 Sephia models: California, Pennsylvania, New Jersey, Tennessee, North Carolina, Florida, Illinois and Alabama. Additionally, a federal court class action was filed in Florida. The law firm of Lieff, Cabraser, Heimann & Berstein, hereinafter Lieff & Cabraser, is counsel of record for the putative class only in the federal Florida action.

A 47-state settlement -- not including Florida -- was tentatively reached in this California action, Maria Santiago et al. v. Kia Motors (Super Ct. Orange County, 2005. No. 01CC01438) in May 2005. (Pennsylvania and New Jersey were also not part of the settlement.[1]) The proposed settlement provided a potential payout of $8 million to the 47-state class, with payments to each consumer capped at $275. In June 2005, counsel from the state actions in Illinois, Tennessee, and North Carolina, plus Lieff & Cabraser, filed objections to the proposed settlement.[2]

Over the course of the next few months the proposed settlement was modified: The overall cap was increased to $14 million with a $600 maximum payout per consumer, and Kia undertook the costs of administration. On the attorney fee issue, Kia agreed to provide $2.1 million in attorneys fees, exclusive of the $14 million total liability already included in the enhanced settlement, to counsel on the Illinois, Tennessee, North Carolina, and California cases, i.e., to counsel representing plaintiffs within the 47-state area covered by the settlement. However, Kia did not want to fund any fees for Lieff & Cabraser. The notice of the settlement provided to consumers alerted them to the fact that Lieff & Cabraser were seeking up to another $500,000, but there was no fund established by Kia from which any fee claim by Lieff & Cabraser might be paid.

Lieff & Cabrasers claim for attorney fees was heard in late January 2006, with the counsel on the Illinois, Tennessee, North Carolina, and California cases weighing in on their side. Lieff & Cabraser was with them shoulder to shoulder all the way.[3] A mainstay of the argument was that Lieff & Cabraser could have supported an inferior settlement in the federal Florida action,[4] but supported Californias jurisdiction in order to obtain a better settlement for the class.

Although the court did not include any written justification for its order, it denied Lieff & Cabrasers application for fees and costs in its entirety.[5]

Lieff & Cabraser then filed this appeal from the order of denial. Kia has filed a motion to dismiss the appeal arguing Lieff & Cabraser lacks standing to appeal. We note that the firm has filed with this court a certificate of interested entities or persons and includes the names of five non-party class members as their clients, as well as non-party law firms (apparently co-counsel in Florida).

III. DISCUSSION

A. Non-Party Status

To appeal, you must be a party, even in a class action. (E.g., Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2006), 2:272. p. 2-135 [A person who never was a party of record in the trial court lacks standing to appeal an appealable judgment or order rendered in that proceeding.].) Even being an attorney for a party of record does not confer standing on the attorney to appeal. (Ibid. [For example, attorneys of record for the parties are not themselves parties to the action and thus cannot appeal from a judgment or order in the action.].) As the court said in In re Marriage of Tushinsky (1988) 203 Cal.App.3d 136, 143, [A]n attorney is not a party aggrieved within the meaning of section 902 of the Code of Civil Procedure with regard to a judgment purporting to rule on the attorneys [fees]. . . . The [judgment] has no legal import with respect to adjudication of the attorneys claim for fees and costs from his client, who is a party to that action.

A Supreme Court decision requiring dismissal of an appeal by non-parties to a class action, Eggert v. Pac. States S. & L. Co. (1942) 20 Cal.2d 199 (Eggert), applies a fortiori to this case. In Eggert, a state class action was brought by the holder of a savings certificate, Eggert, against a savings and loan and the state guaranty corporation on behalf of the certificate holder himself and 1,500 other certificate holders. The trial court judgment resulted in a payout of some $1.9 million to the class, and attorney fees were to be deducted from that amount. Two individuals, Kelley and Given, were listed on an exhibit to the judgment as certificate holders. The attorney for Kelley and Given appeared at hearing on attorney fees, and objected to a petition to fix fees at 15 percent. The trial court granted the petition, and Kelley and Given filed a notice of appeal for themselves and all other holders of certificates not otherwise represented by counsel. (Id. at p. 200.) Eggert responded by a motion to dismiss the appeal, but limited the motion to dismiss to all certificate holders other than Kelley and Given.

On its own, our Supreme Court dismissed the appeal as to all appellants, not just Kelley and Given. (Eggert, supra, 20 Cal.2d at p. 201.) The motion to dismiss the appeal is properly made, said the court, for it is a settled rule of practice in this state that only a party to the record can appeal. (Id. at pp. 200-201.) The motion to dismiss was granted because the appellants -- including Kelley and Given -- were not named as parties to the action nor did they take any appropriate steps to become parties to the record. (Id. at p. 201.) The fact that their names and the extent of their interest in the action appeared in an exhibit attached to the complaint and the judgment did not make them parties to the record. (Ibid.) Moreover, Although their attorney appeared at the hearing on the petition for the payment of the money to plaintiffs attorneys and objected to such payment, he did not ask that appellants be made parties, nor did the court order them brought into the action. (Ibid.) And since appellants have no standing to appeal, it was also unnecessary to consider their right to appeal in a representative capacity on behalf of other certificate holders. (Ibid.) Thus, even though the motion to dismiss the appeal was made only as to certificate holders other than Jessie C. Kelley and Dorothy C. Given, the Supreme Court said this court may dismiss an improper appeal on its own motion, and promptly did so. (Ibid.)

To the degree that there are any differences between Eggert and the present case, those differences run even more in the direction of dismissal here. In Eggert, the appeal was brought on behalf of real consumers, who were actually affected by the judgment (the certificate holders listed in the judgment). Here, there is no evidence that Lieff & Cabraser represent any consumers who are actually affected by the 47-state settlement. There is nothing on the certificate of interested parties to indicate the residence of those parties, and the natural presumption is that the five non-party members are represented by Lieff & Cabraser in the federal Florida action. (However, even if the list includes one or more residents of the 47 states covered by the settlement, it would make no difference, as happened in Eggert.) In Eggert, the consumers who objected to the attorney fee award (on behalf of attorneys for a properly appearing plaintiff) had a palpable interest in the attorney fee petition -- the larger the plaintiffs attorney fee award, the smaller the recovery due the rest of the class. Here, none of the class members represented by Lieff & Cabraser would be affected by any fee award paid, or not paid, by Kia to Lieff & Cabraser. If, in Eggert, the Supreme Court still dismissed, for lack of standing, the appeal of real consumers who were actually named in and affected by the judgment, how much more should we dismiss, for lack of standing, the appeal of attorneys who do not represent real consumers in the case.

On the other hand, the similarities in the two cases are dispositive. Here, like Eggert, we have appellants who are not parties, and never became parties. (There is no hint that Lieff & Cabraser ever sought to formally intervene in Maria Santiagos action.) The clients they represent as evidenced on the certificate of interested parties form all have Non-party checked. And while the five Class Member/Client names have an asterisk asserting that they were each a non-party objector, that differs in no way from Kelley and Given in Eggert, who were also non-party objectors, except that, as noted above, Kelley and Given had more at stake in the judgment from which the appeal was taken than anyone now represented by Lieff & Cabraser.

The case before us substantively differs from Consumer Cause, Inc. v. Mrs. Goochs Natural Food Markets, Inc. (2005) 127 Cal.App.4th 387. Mrs. Goochs involved a class member who appeared on his own behalf (though represented by an attorney) at a fairness hearing and argued for things other than just naked attorney fees. The appellate court rejected the contention that the class member lacked standing to appeal, simply citing to a rule developed in the Court of Appeal that a class member who appears at a fairness hearing and objects to a settlement affecting that class member has standing even if that member did not formally intervene in the action. (Id. at p. 395.) The Mrs. Goochs court found the substantive aggrievement in the denial of the clients request that the defendant pay his attorney fees. (Id. at p. 396.)

To the degree, of course, that the rule relied on by the Mrs. Gooch court might arguably be read to contradict Eggert, the latter case controls. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)[6]Mrs. Goochs did cite Eggert to recognize that aggrievement is necessary for standing, but did not discuss its implications concerning non-party objectors. For the moment, though, it is enough for us to realize that a class member who appears in a class action fairness hearing and objects to the merits of a settlement that affects the class member in his role as a class member is different from lawyers appearing on their own behalf arguing for their own fees. (See Wong v. Superior Court (1966) 246 Cal.App.2d 541, 545 [Although attorney fees allowed may in the discretion of the court be made payable to the attorney, they are granted for the benefit of the party concerned. An attorneys right thereto is indirect and is derived from his client.].)

B. Substitution

Anticipating a standing problem, Lieff & Cabraser requests that this court grant leave to substitute the objecting class members it represents if the court decides it lacks standing to appeal.

No less than four independent reasons require denial of the request. First off, no proper motion to substitute has been made. (See Cal. Rules of Court, rule 8.768(a) [substitution shall be made by proper proceedings instituted for that purpose in the trial court].)

Second, more substantively, the effort runs afoul of the Eggert case. In Eggert, non-party objecting class members had no standing because they never became parties at the trial level. All the substitution request would do here is to replace non-party attorneys with non-party class members. Those non-party class members would still have no standing under Eggert, either in their own right, or as representatives of other class members. (Eggert, supra, 20 Cal.2d at p. 201.)

Third, under the American rule, each party must bear their own attorneys fees accrued during litigation unless such an award is authorized by statute or agreement. (Essex Ins. Co. v. Five Star Dye House, Inc. (2006) 38 Cal.4th 1252, 1257.) In following with the American rule, Objectors are not ordinarily entitled to an attorney fees award. (Weil & Brown, Cal. Prac. Guide: Civil Procedure Before Trial (The Rutter Group 2006) 14:146.5, p. 14-85.)

There are two exceptions. (See Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2006) 14:146.5 -14.146.9, pp. 14-85-14-86.)

The first exception is the common fund or substantial benefit doctrine. But this theory would be futile here, because common fund fee awards are not assessed directly against the losing party (fee shifting), but come out of the fund established by the litigation, so that the beneficiaries of the litigation, not the defendant, bear this cost (fee spreading). (Lealao v. Beneficial California, Inc. (2000) 82 Cal.App.4th 19, 27, italics added.) In this appeal, however, the appellants seeks fees to be paid by Kia directly, not fees from a common fund established on behalf of Kia buyers. (The fact that this is not a common fund or substantial benefit case may be illustrated by comparing this case with Lealao. There, while the settlement did not require counsel fees to be deducted from funds received by members of the class or otherwise specify the amount of fees counsel were to receive, it did provide that the defendant would pay class counsel such reasonable attorneys fees and costs as determined by the Court. (Id. at p. 23.) Here, by contrast, Kia has never agreed to pay any fees to Lieff & Cabraser. Kia has only acknowledged, in the notice, the fact that Lieff & Cabraser would unilaterally be making a claim for fees.)

Second, there is the private attorney general theory (see section 1021.5 of the Code of Civil Procedure), where the class member may have taken action that enforced an important right affecting the public interest. However, the attorney general theory, as this court explained in detail in Hammond v. Agran (2002) 99 Cal.App.4th 115, 121-128, requires a party seeking attorney fees to transcend his or her own narrow personal interests (both financial and non-financial). As we explained in Hammond: The claimants objective in the litigation must go beyond -- transcend -- those things that concretely, specifically and significantly affect the litigant . . . to affect the broader world or general public as the statute puts it. (Id. at p. 127.) But this is a class action. By definition it only affects the concrete financial interests of the substituted class members whose concern is repair of their own allegedly faulty brake systems, not a right affecting the public (like the right of all political candidates to express their own views on issues, as was the case in Hammond).

Finally, substitution would only be a sham anyway. It would only mean that attorneys who now represent themselves as appellants arguing that the trial court abused its discretion in not awarding them fees, would, instead, represent five straw plaintiffs as appellants, and would still be arguing that the trial court abused its discretion in not awarding the attorneys fees. Substitution would only mean more distance between the ostensible appellants and anyone who was actually aggrieved by the challenged order, since the five straw plaintiffs would have nothing to gain by remanding the case to provide for an award of fees to Lieff & Cabraser.[7]

III. DISPOSITION

The appeal brought by Lieff & Cabraser is dismissed. The request to substitute non-party class members represented by Lieff & Cabraser in their stead is denied.

Respondent shall recover its costs on appeal.

SILLS, P. J.

WE CONCUR:

RYLAARSDAM, J.

OLEARY, J.

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Analysis and review provided by Chula Vista Property line attorney.

[1] A Pennsylvania state court had just rejected as inadequate a proposed settlement in which Kias overall obligation would be capped at $16 million nationwide, and payments to each consumer would be capped at $275 for break repair, and ordered the matter proceed to trial. At trial, the Pennsylvania jury awarded a statewide class $5,641,200 and each consumer was to receive a maximum of $600.

[2] Lieff & Cabraser filed a seven-page objection to this proposed settlement, claiming the agreement affected the rights of the putative nationwide class it sought to represent in the Florida federal action, and also argued the settlement was too small given that a Pennsylvania state court had rejected a larger one as too small. Lieff & Cabraser urged the court to take the more prudent course of allowing the parties a chance to attempt a single global [nationwide] resolution of the case.

[3] Since this is not a common fund case, the Lieff & Cabrasers fellow class attorneys had nothing to lose by siding with them. Those counsel had been assured their $2.1 million in the settlement; any recovery by Lieff & Cabraser against Kia was not going to come out of any fund in which they had an interest.

[4] Things werent going all that well in Florida. On January 4, 2006, the Florida district court had ruled it should abstain from exercising jurisdiction because the matter would be duplicative given the Pennsylvania verdict and the pending California settlement.

[5] Here are the trial courts reasons for the denial as gleaned from the record of the January 23 hearing:

(1) There was no basis in the law for an award of fees from the defendant based on the facts of the case.

(2) There was a willful lack of supporting evidence about the hours and the efforts expended on the case, and certain supplemental declarations filed in mid-January were untimely.

(3) Lieff & Cabraser was largely unsuccessful in achieving its goal of obtaining a 50-state settlement.

(4) Lieff & Cabraser grossly overstated its fee claim, by including work done by co-counsel in the Florida federal action who had virtually nothing to do with the 47-state settlement. In that regard, court cited language from Serrano v. Unruh (1982) 32 Cal.3d 621, 635 that supported denial of a fee application in its entirety when a request is overreaching. (See Serrano v. Unruh (1982) 32 Cal.3d 621, 635 [a fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether].)

[6] We found nothing to cast any doubt on the continued vitality of the Eggert case, which was cited with approval in Rice v. Alcoholic Bev. etc. Appeals Bd. (1978) 21 Cal.3d 431, 436, fn. 4 for the black-letter proposition that a person who is not a party of record to the proceeding below has no standing to appeal.

[7] Indeed, the five straw plaintiffs might have something to lose: To the degree that Kia has committed x dollars to settle the various brake claims on a 50-state basis, any extra funds spent by Kia on attorneys in the 47-state California settlement would make Kia less willing to pay money to consumers in any remaining actions.