California Court of Appeals, First District, Fourth Division
CERTIFIED FOR PARTIAL PUBLICATION[*]
San Francisco Superior Court County No. CGC-07-459600 Hon. Richard A. Kramer Judge.
Counsel for Appellants in Case No. A136275 and Respondent in Case No. A136395: Law Offices of George Donaldson, George DonaldsonDaniel Bennett Harris Carlson Calladine & Peterson, Guy D. Calladine
Counsel for Respondents in Case No. A136275 and Appellants in Case No. A136395: Gordon & Rees, Fletcher C. Alford Laura L. Geist, and Ryan B. Polk
RUVOLO, P. J.
In this consumer class action, the parties entered into a settlement agreement (Agreement) containing what is often termed a “clear sailing” provision. Such provisions allow counsel for the plaintiff class (class counsel) to seek an award of attorney fees from the trial court, with the assurance that the defendant will not oppose the fee application if the amount sought is less than or equal to a specified dollar amount. The issues raised on appeal in the present case arise from an additional clause in the Agreement, which required class counsel to accept, in full satisfaction of their right to attorney fees, either the maximum specified in the clear sailing provision, or the amount awarded by the trial court, whichever was less. A parallel provision permitted the named plaintiff and class representative (Ruiz) to seek an incentive payment of up to a certain amount without opposition, but required Ruiz to accept the lesser of the maximum specified in the agreement or the amount awarded by the court.
The trial court approved the Agreement, but entered an order (the fee order) awarding attorney fees and an incentive payment in amounts that were only a fraction of those requested by class counsel and Ruiz (collectively claimants). Claimants indicated that they intended to appeal the fee order. In response to a motion by the defendants (collectively CSAA) to enforce the settlement by precluding claimants from filing an appeal, the court interpreted the Agreement not to include a waiver of the right to appeal.
In the published portion of this opinion, we agree with the trial court that the language of the Agreement is not sufficiently clear and explicit to establish a waiver of claimants’ right to appeal the fee order. We also reject CSAA’s contention that claimants’ appeal was improperly taken from a consent judgment. We further hold that under the circumstances of this case, class counsel have standing to appeal the fee order in their own right.
In the unpublished portion of this opinion, we conclude based on the record before us that in determining the amount of attorney fees and incentive payment to award, the trial court appears to have applied legally incorrect standards, thereby abusing its discretion. We therefore reverse the fee order and remand for further proceedings.
Facts and Procedural Background Proceedings Prior to Settlement
Because the merits of this case were resolved by settlement, we discuss the underlying factual allegations only to the extent necessary to provide a background for the parties’ contentions on appeal. Ruiz’s initial complaint, filed on January 16, 2007, pleaded causes of action for unfair business practices (Bus. & Prof. Code, § 17200, et seq.), false advertising (Bus. & Prof. Code, § 17500 et seq.), breach of contract, fraud and deceit, negligent misrepresentation, and unjust enrichment. These causes of action were all based on the contention that CSAA falsely stated or suggested to its automobile and homeowners insurance customers who paid their premiums on an installment basis that credit was being extended to them, and improperly billed these customers for “disguised premiums falsely labeled as ‘finance charges.’ ”
On February 27, 2009, Ruiz amended his complaint to allege additional causes of action based on the federal Truth In Lending Act (TILA, 15 U.S.C. § 1601 et seq.); the Unruh Act (Civ. Code, § 1801 et seq.); various specified provisions of the California Insurance Code; and an alleged special duty owed by California insurers to their insureds. The amended complaint was based essentially on the same facts alleged in the initial complaint, though in more detail, and included the causes of action previously pleaded. The gravamen of the amended complaint was that when CSAA’s insurance customers chose to pay for their CSAA-issued insurance policies on a monthly installment basis, CSAA did not accurately inform them regarding the cost of doing so, and sent them billing statements that included false and misleading information regarding CSAA’s finance charges.
At the outset of the case, the parties performed substantial discovery. With the approval of the trial court, they then stipulated that the issue of class certification would be postponed, and identified specific claims and issues that would be submitted to the trial court to be resolved seriatim in phased non-jury trials. After the first such trial, held on July 30, 2008, the court ruled that neither TILA nor the Unruh Act applied to CSAA’s practice of charging interest on insurance premiums when paid in installments.
The parties then attempted mediation, but were not successful in resolving the case. A second bench trial was held on July 31, 2009, regarding whether various specific provisions of California law required CSAA to disclose to policyholders the dollar amount of the finance charges they would incur if they paid for their policies in installments, and/or to reimburse a portion of finance charges previously paid if the policy was cancelled. Once again, the trial court found in favor of CSAA on these issues.
After a second mediation also failed, the parties and the trial court set a date for a third and final bench trial on the remaining issues in the case. The issues to be resolved in this last phase included: (1) the legality of CSAA’s alleged practice of billing policyholders for only 50 percent of the remaining premium in the 12th month of their annual billing cycle, in order to impose a finance charge in the amount carried forward; (2) the accuracy of CSAA’s representations to its policyholders on its billing practices and interest charges, including whether CSAA’s billing plan explanation form was confusing and misleading with respect to policyholders’ right to cancel their policies; and (3) whether CSAA had misled policyholders regarding finance charges in other respects.
After preparing for the final trial phase, however, the parties agreed to undertake a third round of mediation. That round was successful, so the trial was taken off calendar pending trial court approval of the settlement embodied in the Agreement resulting from the mediation.
The Agreement provided that CSAA would make up to $6.5 million available to class members who submitted valid and timely claims. Each such class member would receive 84 cents per policy for each policy year during the class period when the class member paid finance charges to CSAA. Any settlement funds not claimed would remain the property of CSAA. In addition, the agreement provided CSAA’s insurance customers with various forms of nonmonetary relief. CSAA agreed to make available on its website, and publicize to policyholders, “an accurate payment estimator” that would enable policyholders to determine how much their monthly payments and finance charges would be if they chose to pay for their policies in installments. CSAA also agreed to modify its billing documents to address the alleged inadequacies identified in the lawsuit. The parties estimated the value of this nonmonetary relief to be at least $3 million. CSAA also agreed to pay the costs of giving notice to the class, administering the settlement, and distributing the settlement funds.
The Agreement included a provision giving class counsel the right to seek an award of attorney fees from the trial court, with the assurance that CSAA would not oppose the fee application if the amount sought did not exceed $2.32 million. The Agreement also required class counsel to accept, in full satisfaction of their right to attorney fees, either the maximum specified in the clear sailing provision, or the amount awarded by the trial court, whichever was less. A parallel provision permitted Ruiz to seek an incentive payment of up to $10, 000 without opposition, but required Ruiz to accept a lesser amount if so awarded by the court. The Agreement also provided that class counsel’s compensation would be derived entirely from the court-awarded fees and costs, and that neither defendants nor the plaintiff class members would have any obligation to pay class counsel any additional amounts.
Subsequent Proceedings in the Trial Court
After notice was given to the class members, the trial court approved the settlement terms incorporated into the Agreement. The court then held a hearing on claimants’ written requests for $2.32 million in attorney fees and costs, and an incentive payment of $10, 000. As contemplated by the Agreement, CSAA did not oppose these requests. Nonetheless, the trial court’s fee order awarded attorney fees and an incentive payment in amounts considerably less than class counsel and Ruiz requested: $350, 000 for attorney fees (plus $60, 670 for costs), and $1, 250 for the incentive payment.
After the entry of the fee order, claimants indicated informally that they intended to appeal the trial court’s attorney fee and incentive payment awards. CSAA then filed a motion to enforce the Agreement, requesting that the trial court interpret the Agreement to include a waiver of claimants’ right to appeal. The trial court declined to give the agreement the interpretation advocated by CSAA.
After judgment was entered based on the trial court’s approval of the Agreement, claimants timely appealed from the fee order. CSAA filed a timely separate appeal from the trial court’s order rejecting CSAA’s argument that claimants had waived their rights to appeal. The appeals were consolidated in this court.
Threshold Procedural ...