Faris v. Cingular Wireless
Filed 2/27/13 Faris v. Cingular Wireless CA4/3
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opinion has not been certified for publication or ordered published for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
RAMSEY FARIS,
Cross-complainant and Respondent,
v.
CINGULAR WIRELESS LLC,
Cross-defendant and Appellant.
G045602, G045895, G046131
(Super. Ct. No. 04CC12638)
O P I
N I O N
Appeals from a judgment
and orders of the Superior Court
of
County, Thierry Patrick Colaw, Judge. Appeal Nos. G045602 and G045895
dismissed. Appeal No. G046131 affirmed
in part, reversed in part, and remanded.
Reed Smith, Margaret M.
Grignon and Brandon W. Corbridge for Cross-defendant and Appellant.
Waldron & Bragg,
Gary A. Waldron, Sherry S. Bragg; Duarte & Associates and James M. Duarte
for Cross-complainant and Respondent.
* * *
Respondent
Ramsey Faris filed a cross-complaint against appellant Cingular Wireless LLC,
now known as AT&T Mobility LLC (Cingular), for failing to defend him in the
suit brought against him by The Consulting Group, Inc. (TCG) and Michael Flynn
(collectively, plaintiffs) and to indemnify him. The trial court found in Faris’s favor and
awarded him damages, including attorney fees, costs, and expenses of his
original attorney, James M. Duarte. The
parties stipulated the court could determine the amount of attorney fees,
costs, and expenses (further damages in this case) accrued by another of
Faris’s attorneys in a posttrial proceeding.
The court filed what purported to be a judgment awarding Faris damages
and stating Faris was entitled to recover the additional attorney fees, costs,
and expenses, and left the amount to be awarded blank. Cingular filed a
The
court then heard the reserved issue and awarded Faris additional attorney fees,
costs, and expenses as damages. Cingular
filed another notice of appeal (No. G045895).
The court then entered its final judgment and Cingular filed its third
appeal (No. G046131).
We
granted the parties’ joint request to consolidate the appeals. Cingular contends, inter alia, the trial
court erred in finding it breached a duty to defend and indemnify Faris, Faris
failed to mitigate his damages, Faris was not entitled to be indemnified for
his time spent in litigation, Duarte’s interest charges were excessive as a
matter of law, and the court was without jurisdiction to award Faris the
attorney fees, costs, and expenses of his second attorney because the court had
previously issued its judgment and Cingular appealed prior to that award. We affirm the judgment except with regard to
the award of $65,743 to Faris for his
own time and effort in connection with the lawsuit and reverse the award. We therefore remand the matter to the trial
court to recalculate the prejudgment interest based on the reversal of the
award for Faris’s time and effort.
I
FACTS AND
PROCEDURAL BACKGROUND
We
set forth the facts consistent with the judgment. (Tyler
v. Children’s Home Society (1994) 29 Cal.App.4th 511, 522, fn. 3.)
A.
Faris
worked for a company that brokered the sale of businesses, V.R. Business
Brokers. He started brokering the sale
of small businesses for V.R. Business Brokers and then began brokering
businesses on his own. Faris’s company,
The Faris Company, provided the brokerage services. Faris would find companies interested in
selling, and then would look for buyers.
He had one client, H.I.G. Group (H.I.G.). H.I.G. paid Faris a $1,000 a month retainer
and was interested in purchasing architectural and engineering design
companies.
Faris
would go to the library and scan reference books looking for potential
businesses to sell. He would then call
the businesses and inquire whether the owner was interested in selling. If H.I.G. bought the business, H.I.G. would
pay Faris a finder’s fee based on the purchase price. Faris ran his company brokering the sale of
businesses while he worked his other job at Bechtel as a regional site
acquisition manager. He continued to run
his brokerage business after being hired by Cingular.
B.
Wanting
to return to Southern California, Faris applied to
Cingular for a job as a project manager in January 2002. As a project manager, he would manage the
vendors doing the work: “a build plant
for some cell sites.†He had been
informed Cingular was looking to replace an employee who left the company. He interviewed with Charlie Vranek and Mark
Rivera of Cingular, believing he would be an employee if hired. Vranek was a vice-president at Cingular. Vranek and Rivera told Faris the former
employee left to work at TCG and they were looking to fill the position with an
independent contractor.
On
January 18, 2002, Cingular
offered Faris a position as project manager in its real estate and network
deployment department. Faris reported to
Cingular for work at the beginning of February 2002, and was assigned a cubicle
in its office housing over 100 employees, provided a computer mapped into Cingular’s
network, a desk, chair, and telephone.
Cingular also provided Faris with a Cingular identification badge/key
card and Cingular business cards stating Faris was a project manager. The business cards contained the Cingular
address, telephone numbers, fax number, and a Cingular business e-mail
address. Cingular also provided Faris
with a cell phone. Faris was not free to
work as and when he pleased; he was required to keep standard office hours. His work hours were “like everyone else in
the office.†He had to request vacation
time off and it had to be approved before he could take time off. If he were going to be late or take a long
lunch, he called his supervisor, Vranek.
Faris
said Cingular was not sure how he was to be paid. Vranek suggested Faris could be brought in
through a company owned by a former Cingular employee, Sandra Jacobs. Faris informed Vranek that Jacobs’ company
did not have health insurance, something he needed for his family. Varnek suggested Faris could be paid through
another company, Manpower Professional Services, Inc. (Manpower). Faris filled out an application for Manpower,
but does not recall ever meeting with anyone from Manpower. Manpower hired Faris and assigned him to work
for Cingular as a project manager. Faris
never reported to any supervisor at Manpower while working at Cingular.
Faris
worked with a number of people at Cingular.
He supervised people working in the field. Vranek decided what work Faris would perform
and who he would work with. Vranek’s
office was a few yards from Faris’s cubicle and Faris saw Vranek several times
a day. During the first year, as Faris
neared completion of the project on which he was working, Vranek asked Faris to
work with a new team and review invoices submitted by TCG, a vendor of
Cingular’s. Faris was told there was a
“history of issues†with TCG’s invoices and was asked to review the invoices to
see if it “made sense†to pay them.
Faris worked with a new team on the accounting project and reported to
Elizabeth Martinez and Rivera. Martinez,
the head of accounting, had overall responsibility for this project and Rivera
had a working relationship with TCG for years.
Faris continued to report to Vranek as well. Faris did not have project manager
responsibilities while working on the audit.
This
was completely different work than the job he had been performing as project
manager, but Faris felt he had no choice because he needed the job. He checked TCG invoices from as far back as
January or February 2001 because the invoices were in progress or were being
questioned by Cingular. Before Faris
sent any materials to TCG, the materials were reviewed by his supervisors. Faris was also asked to review TCG’s proposal
to do additional work for Cingular.
Another
member of the team found duplicate billings after sifting through thousands of
pages of billings. Faris developed a
spreadsheet to track the billings.
Because billings had been submitted on the project Faris had supervised,
his knowledge of the project gave him the ability to substantiate whether certain
bills were valid.
TCG
representatives came to Cingular once a week during the audit period and Martinez
reviewed the status of the invoices with them.
Faris did not attend the meetings absent a request to attend. Cingular ultimately put a hold on TCG
performing further work for it. In late
2002, Cingular decided it would not renew any contracts with TCG. Faris had no say in the decision and was not
asked whether he felt Cingular should continue to use TCG as a vendor.
Vranek
also asked Faris to work with Vic Allen from Cingular’s Atlanta
office and provide Allen with information about vendors, those who desired to
be vendors, and those vendors Cingular would be interested in keeping. According to Faris, Cingular wanted to
formulate a single database containing its vendors to streamline contracts.
Faris
continued to run his brokerage business on the side while working at
Cingular. He used his personal fax,
e-mail and equipment, not Cingular’s, when he conducted any brokerage business. While working at Cingular, Faris arranged the
sale of a candy company in Puerto Rico. He also contacted the owner of Delta Group
Engineering (Delta) after finding information on the company at the
library. Delta is located in Irvine
and did site acquisition work and construction management. Faris asked Albert Teng, the owner of the
Delta, if Teng was interested in selling.
Teng replied that he was not actively looking to sell, but would be
willing to listen to an offer. H.I.G.
met with Teng but no sale was made.
Faris
then took the information about Delta and placed a teaser, containing minimal
information about the company, on the Merger Network on the Internet. If more information were revealed, a
potential buyer could discover the name of the company and negotiate the sale
directly with the company, depriving Faris of a finder’s fee. Darin Anderson, the owner of Bridge Equity
and a former officer of TCG, contacted Faris about the Delta teaser, but upon
learning Delta was located in Southern California, Anderson
withdrew due to a non-compete agreement.
Faris did not know Anderson
had been at TCG and did not learn of Anderson
while working at Cingular.
The
day after Anderson e-mailed Faris
informing him of the non-compete agreement, Faris received an e-mail from
Cingular stating Delta should be added to the list of companies Cingular would
be interested in using as a vendor.
In
March 2003, Faris terminated his working relationship with Cingular through
Manpower. Faris’s company then became a
vendor for Cingular. At some point in
time, Faris asked that his company be considered as a site development vendor
for Cingular, a position TCG had held through the end of 2002. Faris’s company received some work, but that
ended when Allen found out about Faris’s brokerage work.
C.
Indemnification Agreement
TCG
filed suit against Cingular in February 2003, for Cingular’s alleged failure to
pay for services rendered. Faris’s
deposition was taken on two occasions by TCG’s attorney. Prior to the first deposition, Faris
expressed concern about whether he was protected in the litigation. Al Jimenez, Cingular’s in-house counsel, told
Faris Cingular would provide him with an attorney. Faris prepared for the first deposition with
Attorney Robert Cocchia, an attorney for Cingular. Cocchia told Faris he was Faris’s “assigned
attorney.â€
Faris
was asked at the first deposition if he was represented by counsel. He said he was, and named Cocchia, who was
present at the deposition, as his attorney.
Cocchia did not correct Faris and at the conclusion of the day told
Faris he had done fine. Cocchia did not
advise Faris of any possible conflict of interest.
Prior
to the second deposition, Faris spoke with Cocchia about having an agreement in
place to protect himself. Faris e-mailed
Cocchia a blank indemnity agreement he had received and asked if it was
acceptable. Cocchia responded that he
did not receive the attachment to the e-mail, but that it appeared the
agreement was one Cingular was considering for third party vendors “who were
threatened by TCG/Flynn,†and he would look into the issue. Faris, who did not know what an indemnity
agreement was prior to 2004, wanted one because Sandra Jacobs worked next to
him at Cingular and she was being sued by Flynn, the owner of TCG. Faris was worried he could be next.
Cingular
subsequently provided Faris with an indemnity agreement before the second
deposition. Cingular and Faris entered
into the agreement prepared by Cingular.
Paragraph 2 of the indemnification agreement provides: “CINGULAR hereby agrees to indemnify, defend,
and hold FARIS harmless from and against, and in respect to,
costs, expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorney fees, that FARIS may
suffer or incur which arise or result
from any action or claim brought by The Consulting Group, Inc. (aka,
‘TCG’), Michael Flynn, and/or any entity owned or controlled by Michael Flynn
Consulting Group, Inc. v. Cingular Wireless, LLC, Case No. SACV 03-109 DOC
(MLGX).†(Italics added.)
Also
before the second deposition, Cocchia asked Faris if he had a brokerage
business. Faris said he did. Cocchia did not ask any follow-up questions
about it, but told Faris the subject may come up during the second
deposition. Cocchia did not advise Faris
how to respond if the subject came up during the deposition. Cocchia did not express any concern about the
matter and did not advise Faris to obtain independent counsel.
The
second deposition was held on August 3, 2004.
Faris was questioned about the indemnity agreement by TCG’s
attorney. TCG’s counsel made a point of
the fact that at the time Cingular terminated Faris’s services, Faris was
performing the same job TCG had previously performed and that Faris reviewed
TCG’s invoices to determine whether they should be rejected. TCG’s attorney asked Faris the name of the
company Faris attempted to have Anderson buy.
Faris said it was Delta. Faris
denied he actively solicited Delta as a possible replacement company for TCG.
TCG
and Cingular settled their lawsuit. As
part of the November 30, 2004 settlement agreement, and upon full payment of the
negotiated consideration, TCG agreed to “release and discharge Cingular and its
managers, officers, directors, shareholders, employees, independent contractors
while acting on behalf of Cingular, . . . from any claims, demands, causes of
action, . . . including losses and liabilities of whatever kind or nature . . .
.â€
D.
A
month after the signing of the settlement in the TCG/Cingular lawsuit, TCG sued
Faris, Anderson, a former CFO and treasurer of TCG, Charles O’Neal, a former
part owner of TCG, and Brian Bloss. The
complaint alleged Faris conspired with Anderson and O’Neal to “take business
opportunities developed by TCG with Cingular and to use them for his own personal
gain and to harm TCG’s business relationship with Cingular.†In furtherance of TCG’s cause of action for
intentional interference with contractual relations, the complaint alleged
Faris worked as a business broker while working for Cingular, serving his own
interest, and worked to intentionally damage TCG’s relationship with Cingular.
Faris
tendered his defense to Cingular and to Manpower. Cingular turned Faris down, as did Manpower
initially. Manpower changed its mind and
offered to defend Faris with a reservation of its right on the issue of
indemnification with the added requirement that its counsel would take over
Faris’s defense. Faris rejected
Manpower’s offer to defend because Manpower’s reservation of rights on the
issue of indemnification would place Manpower in an adverse position, which
would be exacerbated by the fact Manpower would be in control of Faris’s
defense. Duarte informed Manpower he
could not permit Manpower to control Faris’s defense while reserving its right
on the issue of indemnification
In
April 2005, Faris retained Attorney James M. Duarte to represent him, with an
initial retainer of $1,000. The retainer
set forth Duarte’s hourly rate ($350) and informed Faris he would be
responsible for payment of attorney fees as well as costs and expenses. Faris testified he understood Duarte’s fees
would be paid by a third party.
Apparently to that end, a provision in the retainer agreement provided
for a contingency fee agreement in the amount of 50 percent of any gross
recovery from any action filed against any insurer. Almost two years later, Duarte increased his
hourly rate to $500.
Duarte
filed a cross-complaint in intervention against Manpower and Cingular, alleging
breach of contract, breach of contract to defend, and seeking indemnity. He also filed an action against TCG.
In
May 2009, TCG and Faris settled their lawsuit, agreeing judgment would be
entered in favor of Faris. Flynn and TCG
agreed to cooperate with Faris in his prosecution of the action against
Manpower and Cingular, with the understanding TCG and Flynn did not warrant
that any information they supplied Faris would be beneficial to his cause of
action. In exchange, Faris agreed to pay
15 percent of the gross amount received from Manpower and Cingular.
The
stipulated judgment stated facts contradicting allegations TCG made in its
three complaints and stated Faris’s actions were in furtherance of his
employment for Cingular. Almost two
years later, Manpower settled with Faris, agreeing to pay him $655,000. TCG was paid $92,500 out of the settlement
with Manpower.
E.
Judgment, and Appeals
The
cross-complaint against Cingular was tried to the court without a jury. On July 5, 2011, the court issued its
statement of decision. The court found
Faris had been an employee of Cingular, was sued for his conduct in the course
and scope of his employment, and Cingular breached its duty to indemnify Faris
under Labor Code section 2802. The court
further found Cingular breached its duty to defend and indemnify Faris pursuant
to its limited liabililty company bylaws and the indemnification agreement
between Faris and Cingular.
Additionally, the court found Faris incurred reimbursable damages and
did not fail to mitigate his damages, but that Cingular failed to mitigate its
damages.
The
court awarded Faris just over $1.2 million in attorney fees, costs, and
expenses related to his defense of the TCG lawsuit and $613,555.96 in attorney
fees related to Faris’s efforts to enforce his indemnity rights under Labor
Code section 2802. It further awarded
over $65,000 as compensation for time expended by Faris in the defense of the
TCG lawsuit. The award for Faris’s
damages based on his time spent defending the TCG lawsuit was reduced by
$25,000, a sum Faris received from the Manpower settlement.
Finally,
the court found fees and costs incurred by Waldron & Bragg, the law firm
that represented Faris at trial against Cingular, were incurred in an effort to
obtain indemnification from Cingular, and accepted the parties’ stipulation
that the amount of the fees, costs, and expenses would be determined in a
posttrial proceeding.
What
purported to be a judgment reflected the amounts set forth in the statement of
decision. The amount designated for the
costs of suit, the attorney fees, costs and expenses accrued by Waldron &
Bragg were left blank. Cingular filed a
notice of appeal (No. G045602) prior to the hearing on the reserved issues.
At
the hearing on attorney fees, costs, and expenses accrued by Waldron &
Bragg, Cingular argued the court lacked jurisdiction to determine the amounts
once it issued its judgment and a notice of appeal had been filed. Nonetheless, the court awarded Faris further
attorney fees, costs, and expenses. The
court found it had erred in awarding Cingular a $25,000 credit for the Manpower
settlement. It found such a credit was
duplicative because the court had also awarded Cingular a $655,000 credit for
the Manpower settlement. Cingular then
filed a second notice of appeal (No. G045893) purporting to be from an order
after judgment affecting the substantial rights of the parties. (See Code Civ. Proc., § 904.1, subd. (a)(1).)
On
November 3, 2011, the court amended and corrected the judgment reflecting
elimination of the $25,000 credit to Cingular, and insertion of the attorney
fees, costs, and expenses accrued by Waldron & Bragg, additional attorney
fees accrued by Duarte in seeking indemnification from Cingular, and interest
awarded Faris. Cingular then filed its
third notice of appeal (No. G046131),
this one being from the final judgment.
We ordered all three appeals consolidated.
II
DISCUSSION
A.
1. Labor
Code Section 2802
Labor Code
section 2802 requires an employer to “indemnify his or her employee for all
necessary expenditures or losses incurred by the employee in direct consequence
of the discharge of his or her duties, or of his or her obedience to the
directions of the employer, even though unlawful, unless the employee, at the
time of obeying the directions, believed them to be unlawful.†(Lab. Code, § 2802, subd. (a).) Cingular argues the trial court erred in
awarding Faris damages under Labor Code section 2802, contending Faris was sued
for conduct outside the course and scope of his employment with Cingular. According to Cingular, Faris was sued for his
side business’s brokerage activities which were entirely separate from his work
at Cingular. We review for substantial
evidence the trial court’s decision finding Faris suffered losses incurred in
direct consequence of his discharge of his duties while working for
Cingular. (Markley v. Beagle (1967) 66 Cal.2d 951, 962.) “‘The gist of the “substantial evidence†rule
is: [¶] “When a trial court’s factual
determination is attacked on the ground that there is no substantial evidence
to sustain it, the power of an appellate court begins and ends with the
determination as to whether, on the entire record, there is substantial
evidence, contradicted or uncontradicted, which will support the determination
. . . .†[Citations].’†(Rupf
v. Yan (2000) 85 Cal.App.4th 411, 429, fn. 5.)
TCG’s complaint
against O’Neal, Anderson, Brian Bloss, and Faris alleged a number of causes of
action. Faris was not named in every
cause of action. In those causes of
action naming Faris as a defendant, including intentional interference with
contractual relations, intentional interference with prospective advantage, and
conspiracy, the complaint alleged Faris was an independent contractor with
Cingular at all relevant times, he operated his brokerage business while
working for Cingular, and during that time “he wrongfully alleged to Cingular
headquarters that TCG was too expensive and submitted fraudulent billings, all
the while promoting Delta Engineering, a TCG competitor . . . .†TCG further alleged Faris’s actions were
performed in furtherance of his brokerage business, not in his capacity as a
Cingular contractor or representative.
According to the complaint, Faris’s communications to Cingular caused
TCG to lose future opportunities. We
note it would seem TCG thought it necessary to characterize Faris’s conduct as
arising from his brokerage business given that under the settlement between TCG
and Cingular, TCG agreed to “release and discharge Cingular and its managers,
officers, directors, shareholders, employees, independent contractors while acting on behalf of Cingular . . .
from any claims, demands, causes of action, . . . including losses and
liabilities of whatever kind or nature . . . .†(Italics added.)
Substantial
evidence supports the trial court finding “Faris was required to defend himself
against the allegations raised by TCG because of acts that Faris performed
within the course and scope of his employment with Cingular, i.e., the audit of
TCG’s invoices, the analysis of TCG’s proposed new contract, and the
interaction with Michael Flynn, all of which Cingular expressly tasked Faris to
do.†As the trial court found, Faris was
assigned the job of reviewing TCG’s invoices.
All of Faris’s contact with TCG and Flynn occurred because he worked as
a project manager for Cingular and was assigned to the audit. Although the complaint alleged Faris was
acting as a broker and for his own benefit, the act TCG deemed actionable was Faris’s representation to Cingular
that TCG was too expensive and had submitted fraudulent billings. Additionally, “[t]he allegations of the
complaint are not determinative of whether the employee is deemed to be in the
scope of his or her employment.†(
(2011) 199 Cal.App.4th 1240, 1248, fn.2.)
Whatever
Faris’s intent in providing Cingular the information it requested, his
representations were made in the course and scope of his work for
Cingular. Cingular assigned him to the
audit. It sought his input on TCG’s
billings as part of his employment.
Faris gave Cingular what it wanted — his input on TCG’s billings — and
was sued because of it. This substantial
evidence supports the trial court’s finding.
TCG and Flynn settled their lawsuit against Faris, agreeing judgment
would be entered in Faris’s favor. The
judgment stated that after making the allegations alleged in the latest amended
complaint, additional allegations arose, including the fact that Cingular
assigned Faris to an audit of TCG’s billings to Cingular, Cingular instructed
Faris to review TCG’s proposed new contract, to advise Cingular, and Faris had
contact with TCG and Flynn in Faris’s employment by Cingular as a project
manager. The stipulated judgment further
provides: “Most of the acts alleged by
TCG against Faris are acts that he allegedly undertook or committed between
February and October 2002, while acting within the course and scope of his
employment for Cingular. TCG
acknowledges that one of the reasons that Faris was named as a Defendant in
this action was Faris’s testimony in the TCG v. Cingular action.†Finally TCG acknowledged it uncovered
evidence during the action which led it to conclude Faris was acting in the
scope and course of his employment at all time relevant to the action.
Cingular
contends the stipulated judgment between TCG and Faris was the result of
collusion and should not have been admitted into evidence. The trial court rejected the same argument
and admitted the stipulated judgment into evidence, finding the stipulated
judgment was “reasonable and valid, and should be given its full evidentiary
effect.†A trial court has wide
discretion in admitting evidence and we will not disturb its ruling on appeal
absent a clear abuse of discretion. (
749, 762.)
In an analogous
situation, when an insured is sued and the insurance company rejects the tender
of the defense, the insured is “free to negotiate the best possible settlement
consistent with his or her interests, including a stipulated judgment
accompanied by a covenant not to execute.
Such a settlement will raise an evidentiary presumption in favor of the
insured (or the insured’s assignee) with respect to the existence and amount of
the insured’s liability. The effect of
such presumption is to shift the burden of proof to the insurer to prove that
the settlement was unreasonable or the product of fraud or collusion. If the insurer is unable to meet that burden
of proof then the stipulated judgment will be binding on the insurer and the
policy provision proscribing a direct action against an insurer except upon a
judgment against the insured after an ‘actual trial’ will not bar enforcement
of the judgment.†(Pruyn v. Agricultural Ins. Co. (1995) 36 Cal.App.4th 500, 509.)
Cingular has
not demonstrated an abuse of discretion.
Although Cingular alleged the stipulated judgment between TCG and Faris
was the result of collusion, as the trial court recognized, there was no proof
in support of the allegation. Although
Cingular contends the stipulated judgment was “collusive as a matter of law,â€
it did not set forth any facts precluding a determination the stipulated
judgment was reached in good faith.
Again, although TCG’s complaints alleged Faris was acting outside the
scope and course of his employment with Cingular, it was Faris’s act of
providing Cingular with his analysis of TCG’s billings — the very task Faris
was charged with performing by Cingular — that TCG deemed actionable. Faris was irrefutably acting within the scope
and course of his employment with Cingular when he gave Cingular his analysis
of the material he was tasked with reviewing.
Cingular’s
reliance on Peter Culley & Associates
v. Superior Court (1992) 10 Cal.App.4th 1484, is misplaced. The present matter does not fit within
evidence the stipulated judgment between TCG and Faris was reached through
collusion. TCG and Faris did not
stipulate to a large settlement in TCG’s favor, a settlement Cingular would
have to pay to TCG if Faris established Cingular was obligated to indemnify
him. Instead, judgment was found in
Faris’s favor. The trial court did not
err in considering the stipulated judgment.
Neither did the
court use a strict liability test in finding Faris was sued for work performed
in the scope and course of his employment with Cingular. “‘In determining whether for purposes of
indemnification an employee’s acts were performed within the course and scope
of employment, the courts have looked to the doctrine of respondeat
superior. [Citations.] [¶] Under that doctrine, an employer is
vicariously liable for risks broadly incidental to the enterprise undertaken by
the employer—that is, for an employee’s conduct that, in the context of the
employer’s enterprise, is “not so unusual or startling that it would seem
unfair to include the loss resulting from it among other costs of the
employer’s business. [Citations.]†[Citations.]’
[Citations.] An employee’s
conduct may fall within the scope of his or her employment ‘even though the act
does not benefit the employer, even though the act is willful or malicious, and
even though the act may violate the employer’s direct orders or policies.’ [Citation.]â€
(Cassady v. Morgan, Lewis &
Bockius LLP (2006) 145 Cal.App.4th 220, 231.)
Although
Faris’s brokerage business was not for Cingular’s benefit and the TCG’s
complaints alleged Faris was acting out of his own self-interest, the conduct
that allegedly damaged TCG occurred when Faris gave Cingular his analysis of
TCG’s billings, the task Cingular had Faris perform for its benefit. Based on the record before us the trial court
did not err in concluding Faris did not deviate from his employment duty, much
less substantially deviate from that
duty, in providing Cingular with his analysis of TCG’s billings. (Farmers
Ins. Group v. County of Santa Clara (1995) 11 Cal.4th 992, 1004-1005.)
2. The
Indemnity Agreement
Prior to TCG
taking Faris’s deposition a second time, Faris requested and obtained an indemnity
agreement from Cingular. Pursuant to the
agreement, Cingular agreed “to indemnify, defend, and hold FARIS harmless from
and against, and in respect to, any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorney fees, that FARIS may
suffer or incur which arise or result from any action or claim brought by The
Consulting Group, Inc. (aka, ‘TCG’) . . . as
a result of FARIS’s testimony in The Consulting Group, Inc. v. Cingular
Wireless, LLC, Case No. SACV 03-109 DOC (MLGX).†(Italics added.) “Where, as here, the parties have expressly
contracted with respect to the duty to indemnify, the extent of that duty must
be determined from the contract and not by reliance on the independent doctrine
of equitable indemnity.
[Citation.]†(
(1975) 13 Cal.3d 622, 628.)
Cingular agreed
to defend Faris in any lawsuit brought by TCG or Flynn as a result of Faris’s testimony
in TCG’s lawsuit against Cingular.
According to Cingular, it was only required to indemnify Faris for a
lawsuit brought by TCG or Flynn based on Faris’s “act of providing
‘testimony.’†We do not accept
Cingular’s stilted interpretation of the agreement. Faris approached Cingular to obtain
protection from a possible lawsuit by TCG or Flynn prior to testifying a second
time in a deposition. There is no reason
to believe Cingular’s response was to offer to defend Faris
activity, i.e., the mere act of testifying.
(See Civ. Code, § 47, subds. (a), (b).)
Faris sought real protection from Cingular. He did not intend Cingular would defend him
only if TCG were to sue him on a ground that could not survive a demurrer.
The agreement
was to defend and indemnify Faris in any lawsuit by TCG or Flynn resulting from
Faris’s testimony. TCG discovered during
Faris’s testimony that he had attempted to broker the sale of Delta. TCG then used this information to create a
cause of action against Faris it would not otherwise have had. In such a case, the resulting lawsuit may be
fairly said to have resulted from Faris’s testimony. Having found Cingular was required to defend
and indemnify Faris for his necessary expenditures and losses incurred in the
discharge of his duties to Cingular (Lab. Code, § 2802, subd. (a)) and Cingular
was obligated to defend and indemnify Faris pursuant to their indemnity
agreement, there is no need to determine whether Cingular also had the duty to
defend or indemnify Faris under its limited liability company bylaws.
B. Mitigation
of Damages
Faris tendered
his defense to Cingular and to Manpower.
Cingular turned Faris down, as did Manpower initially. Manpower then stated its intent to defend
Faris with a reservation of its right on the issue of indemnification and to
retain its own counsel to take over Faris’s defense. Faris cited Labor Code section 2802, its
indemnification requirement, and refused Manpower’s offer, keeping his retained
counsel to defend the TCG lawsuit.
Cingular now maintains Faris was obligated to accept Manpower’s offer
due to his duty to mitigate damages and as a result, the judgment should be
reduced to $20,480, the amount Faris owed his attorney, Duarte at the time Manpower
offered to defend Faris.
Notwithstanding
the fact that Faris obtained a $655,000 judgment on his cross-complaint against
Manpower, which may itself speak to the merits of Cingular’s mitigation
argument, Manpower’s acceptance of the duty to defend was conditional in two
respects. First, Manpower reserved its
right to contest indemnity and to withdraw from the defense. Second, it required Faris to turn control of
the defense in the TCG lawsuit to Manpower’s attorney. Faris was not, however, required to turn the
defense over to Manpower. Civil Code
section 2778, subdivision 4 provides:
“The person indemnifying is bound, on request of the person indemnified,
to defend actions or proceedings brought against the latter in respect to the
matters embraced by the indemnity, but
the person indemnified has the right to conduct such defense, if he so
chooses[.]†(Italics added.) Because Faris had the right to conduct his
defense in the TCG lawsuit filed against him (Civ. Code, § 2778, subd. 4) and
wanted his attorney to conduct his defense, he was not required to accept
Manpower’s offer to defend on the condition its attorney would conduct any
defense. Accordingly, we deny Cingular’s
request to reduce the judgment to $20,480.
C.
the Litigation
The
trial court awarded Faris $65,743 for his time and effort spent in litigating
this matter. The court found Faris’s
time to have been a reasonable, necessary expense and properly compensated
pursuant to Labor Code section 2802. The
court calculated this amount by multiplying the 438 hours Faris purportedly
devoted to the defense of the lawsuit by TCG and in attempting to obtain
indemnification by Faris’s “customary†billing rate of $150. Cingular argues that just as those
individuals who represent themselves are not entitled to attorney fees, Faris
is not entitled to be compensated for his time in connection with the lawsuit.
Cingular
contends there are three fatal problems with the court’s conclusion Faris
should be compensated for his time in litigating this matter. First, a party is not entitled to
compensation for time devoted to litigation.
Second, Faris did not testify to putting in 438 hours in litigating this
matter. Rather, he testified he prepared
exhibit 41 so he could be “compensated for something†and that the exhibit
reflects the time he spent reviewing “documents and so forth.†The exhibit, however, was not admitted into
evidence. Third, there is no evidence
$150 was Faris’s customary billing rate.
His rate working for Cingular was, at its highest, $120 an hour.
“The
‘costs’ of a civil action consist of the expenses of litigation, usually
excluding attorney fees. Under the
common law rule, parties to litigation must bear their own costs. The right to recover any of such costs is
determined entirely by statute. ‘It is
axiomatic that the right to recover costs is purely statutory, and, in the
absence of an authorizing statute, no costs can be recovered by either
party.’ [Citations.]†(Davis v.
KGO-T.V., Inc. (1998) 17 Cal.4th 436, 439.)
Labor Code section 2802 requires an employer to “indemnify his or her
employee for all necessary expenditures or losses incurred by the employee in
direct consequence of the discharge of his or her duties.†(Lab. Code, § 2802, subd. (a).) Included within the phrase
“all reasonable costs, including, but not limited to, attorney’s fees incurred
by the employee enforcing the rights granted by this section.†(Lab Code, § 2802, subd. (c).)
“Our
primary task in interpreting [Labor Code section 2802] is to ascertain the
Legislature’s intent and to adopt an interpretation that best gives effect to
that intent. [Citation.] We examine the entire substance of a statute
and the scheme of law of which it is a part to determine its scope and purpose,
construe its words in context and harmonize its various parts. [Citation.]
We begin by examining the statutory language because that is the most
reliable indicator of legislative intent.
[Citation.]†(
Appeals Bd. (2012) 204
Cal.App.4th 1403, 1413.)
Section
2802 makes no mention of compensating a party for his or her time devoted to
litigating the indemnity matter. There
is nothing in the language of section 2802, indicating the Legislature intended
“necessary expenditures and losses†to include time the employee spends
advising his or her attorney or otherwise taking part in the litigation. We will not read what would amount to a
unique exception, and a drastic change in the law, into the statute absent some
indication the Legislature intended such result.
Traditionally
the time and effort a party spends litigating a matter is not compensated as
costs or attorney fees. A case in point
is Trope v. Katz (1995) 11 Cal.4th
274. There the issue was whether an
attorney who was a prevailing party on a contract action could be awarded
attorney fees to compensate him for the time he devoted to the lawsuit acting
in persona propria. (
to award attorney fees on a contract action when the contract permits awarding
the prevailing party attorney fees. (
himself in a lawsuit cannot be said to “incur†or become liable for services he
himself provided, a prerequisite an award of attorney fees. (Ibid.)
Although
the present issue is one of costs, not attorney fees, Trope v. Katz, supra, 11
Cal.4th 274 is still relevant to the issue presented. In denying the in propria persona
party/attorney attorney fees, the court observed nonattorney litigants are not
entitled to reimbursement for their time spent in litigating a case. “The time that a doctor, for example, spends
litigating a case on his own behalf also has value, both to the doctor himself
and to society generally, for that time could otherwise be spent treating the
sick or pursuing medical research for the benefit of all; an architect’s time
could otherwise be spent designing or building houses; a painter’s time could
be spent creating works of art for future generations to enjoy. However, it is clear that when it enacted
[Civil Code] section 1717 the Legislature did not intend to allow doctors,
architects, painters, or any other nonattorneys to receive compensation for the
valuable time they spend litigating a
contract matter on their own behalf.†(
The
Legislature was aware of the Supreme Court’s observations in
section 2802 in 2000. (
[“the Legislature is presumed to know about existing case law when it enacts or
amends a statuteâ€]; see Stats. 2000, ch. 990, § 1.) There is nothing in the language “the term
‘necessary expenditures or losses’ shall include all reasonable costs,
including, but not limited to, attorney’s fees incurred by the employee
enforcing the rights granted by this sectionâ€
(Lab. Code, § 2802, subd. (c)) to lead us to believe the Legislature
decided to make an abrupt change in the law and for the first time to
compensate a party for the time he or she spent litigating. “[A] court is without the power to saddle on
the vanquished party in such cases costs which are not thus strictly
authorized.†(Naylor v. Adams (1911) 15 Cal.App. 353, 356.)
Unlike
attorney fees, where each party ordinarily
is responsible for paying his or her own attorney’s fees (Trope v. Katz, supra, 11
Cal.4th at p. 278), the Legislature has generally provided prevailing parties
be awarded their costs as set forth in the Code of Civil Procedure. (See Code Civ. Proc., § 1021.) Indeed, section 1033.5 of the Code of Civil
procedure sets forth a laundry list of items that may be compensated as
costs. Although Code of Civil Procedure
section 1033.5 states the items listed in subdivision (a) of that section are
deemed costs for purposes of section 1032 of the same code, it is useful in
this instance as it provides a list of items the Legislature has classified as
compensable costs in at least one context.
The time a party devotes to pursuing the litigation is
expressly listing those items that may be considered costs and a list of items
that cannot be considered costs absent an express provision of law, it is
reasonable to assume that when and if the Legislature intends to expand the
items that may be considered costs, it would do so expressly, rather than
merely stating necessary expenditures or losses are “all reasonable costs,
including, but not limited to, attorney’s fees incurred by the employee
enforcing the rights granted by this section.â€
(Lab. Code, § 2802, subd. (c).)
We
conclude Labor Code section 2802 does not authorize a trial court to award as
costs, compensation to a party for the time the party spent in litigation. Accordingly, we find the trial court erred in
awarding Faris $65,743 as costs for his time attending to the present
litigation.
D.
The
court awarded Faris $613, 555.96 in damages under Labor Code section 2802 for
enforcing his indemnity rights, $325,818.42 in attorney fees accrued by Waldron
& Bragg, additional attorney fees for Duarte in the amount of $57,154.24,
and $8,493.25 in prejudgment interest.
Subdivision (b) of Labor Code section 2802 requires all orders for
reimbursement of necessary expenditures “carry interest at the same rate as
judgments in civil actions. Interest
shall accrue from the date on which the employee incurred the necessary
expenditure or loss.†The statutory
interest rate is “10 percent per annum on the principal amount of a money
judgment remaining unsatisfied.†(Code
Civil Proc., § 685.010, subd. (a).)
Cingular
urges us to reduce the award of Duarte’s attorney fees because Faris’s retainer
agreement with Duarte purported to set the interest at one percent a
month. We presume the trial court’s
judgment is correct, we also indulge in all intendments and presumptions in
favor of correctness, and Cingular has the burden of providing an adequate
record affirmatively proving error. (
(2007) 150 Cal.App.4th 42, 58.) Cingular
has not carried its burden here. The
only references in the section of Cingular’s opening brief dealing with the
issue of interest, are to the retainer agreement between Attorney Duarte and
Faris, wherein the interest amount is set at one percent a month, and Duarte’s
billing record admitted into evidence below.
According to Duarte’s billing, he accrued $2,430,636.60 in attorney fees
and interest. The court, however,
awarded Faris substantially
less. Based on Cingular’s limited
citations to the record in connection with this issue, we cannot find the court
committed legal error in its award.
As
a practical matter, the trial court will have to reconsider its award of
interest given we have found Faris was not entitled to reimbursement for his
time and effort put into this litigation.
Any interest awarded Faris based on his award of $65,743 will need to be
omitted on remand.
E.
At
trial, the parties stipulated the court could determine the attorney fees,
costs, and expenses accrued by Waldron & Bragg in posttrial
proceedings. However, prior to the court
issuing its original judgment in this matter and the court determining Waldron
& Bragg’s fees, costs, and expenses, Cingular argued the court should
determine the issue before it issues a judgment because it would not have
jurisdiction to do so thereafter. Cingular
maintains the trial court was without jurisdiction to determine and award Faris
attorney fees, costs, and expenses accrued by Waldron & Bragg once the
court issued its original judgment and Cingular filed its notice of appeal. We note that while a court retains
jurisdiction to award costs, including attorney fees, after issuance of a
judgment (Code Civ. Proc., § 1032; Cal. Rules of Court, rule 3.1700(a)), the
award in this case was not pursuant to Code of Civil Procedure section 1032. The award was made as part of Faris’s damages
under Labor Code section 2802, subdivision (c).
“For purposes of this section, the term ‘necessary expenditures or
losses’ shall include all reasonable costs, including, but not limited to,
attorney’s fees incurred by the employee enforcing the rights granted by this
section.†(Lab. Code, § 2802, subd.
(c).)
In
issuing its original judgment, the court expressly stated it “retains
“jurisdiction over this case to address and resolve as a part of this
proceeding the issues relating to the appropriate amount of additional
attorneys’ fees, costs, and expenses to be awarded [Faris], and award such
fees, costs, and expenses in the amount of .†The court also left blank the amount of
“costs of suit†to be awarded Faris.
Rather
than finding the trial court lacked jurisdiction to make these awards based on
a conclusion there is but one final judgment and the filing of a notice of
appeal deprived the court of jurisdiction to alter the judgment, we find the
initial judgment was not a final judgment.
“A judgment is the final determination of the rights of the parties in
an action or proceeding.†(Code Civ.
Proc., § 577.) The terms contained in
the initial judgment reserving jurisdiction to award costs and further attorney
fees as damages demonstrates the
court did not view the purported judgment as a final determination of the
rights of the parties; issues remained to be decided.
“There
is only one final judgment, the last or ultimate judgment that determines the
rights of the parties.†(7 Witkin, Cal.
Procedure (5th ed. 2008) Judgment, § 7, p. 551.) In this case, the final judgment was entered
on November 3, 2011, after the trial court resolved all the issues, including
Waldron & Bragg’s fees, costs, and expenses. Cingular’s appeal from the first purported
judgment did not deny the trial court jurisdiction to resolve the remaining
issues because the appeal was premature.
The appeal in No. G045602 taken from the initial judgment is thus
dismissed.
The
appeal in No. G045895 is dismissed as well.
It purports to be taken from an order after judgment affecting the
substantial rights of the parties (Code Civ. Proc., § 904.1, subd. (a)(2)), but
as the initial judgment was not a final judgment, the order setting the amount
of attorney fees, expenses, and costs accrued by Waldron & Bragg as
appealable judgment. We have addressed
the issues raised herein because Cingular’s notice of appeal from the
subsequent final judgment (No.
G046131) was timely.
III
DISPOSITION
The
appeals in Nos. G045602 and G045895 are dismissed. In appeal No. G046131, the judgment provision
awarding Faris $65,743 for his time and energy in litigating the underlying
matter is reversed. The matter is
remanded to the superior court to recalculate the prejudgment interest award to
the extent the award reflects consideration of the $65,743 award we
reversed. In all other respects the
judgment is affirmed. Faris is entitled
to his costs on appeal.
MOORE,
J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
IKOLA, J.
