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Monday, October 14, 2013

Ellis v. Toshiba America: Court Affirms Sanctions In Class Action Attorney Fee Dispute

Ellis v. Toshiba America (8/7/13) --- Cal.App.4th --- is an unusual case (to say the least) dealing with class action attorney fees.

Two firms filed a consumer class action against Toshiba. The case settled in mediation, giving class members warranty extensions and repair vouchers. One firm, Sklar Law Office (SLO), objected to the form of the agreement and class notice, but after further negotiation, filed a motion for settlement approval stating its intent to seek fees of almost $25 million (25 percent of a settlement value placed at almost $99 million), to be apportioned between class counsel. Toshiba objected and sought discovery regarding the fee request.

The trial court approved the settlement, awarding over $1 million in fees to SLO's co-counsel. SLO continued to request the remainder of the $25 million, and a battle ensued. Toshiba sought Sklar's electronic billing records, and Sklar objected. The Court ordered Sklar to sit for deposition and to produce the billing records in native format. At deposition, Sklar testified that she had converted her files to .pdf format and deleted the original electronic files with a program called "Wipe and Delete." The trial court ordered SLO to allow a forensic inspection of its computers, and it refused. 

The trial court ultimately awarded SLO 176,900 in fees (for work during the merits phase of the class action by SLO staff), awarding nothing for Sklar's own work; and deducted $165,000 in sanctions awarded to Toshiba for Sklar's failure to comply with court discovery orders and her failure to meet and confer in good faith. 

The Court of Appeal affirmed. 

The Court first granted in part Toshiba's motion to strike portions of the appellant's appendix because it appeared that SLO had altered the record on appeal. The Court awarded monetary sanctions to Toshiba for bringing the motion to strike. Slip op. at 26-29. 

The Court next held that the trial court acted within its discretion in awarding monetary sanctions against SLO for misuse of the discovery process. Slip op. at 29-32. The Court found that SLO both refused to obey the trial court's orders and failed to meet and confer in good faith. 

The Court then held that the trial court did not exceed its jurisdiction in making the ordering inspection of SLO's computers: 
Sklar requested over $24 million in attorney fees. In support, she provided hard copies of her billing records purporting to show that she worked at a superhuman rate, followed by a CD with PDF copies of those time records (which she acknowledges had been redacted). Sklar later represented that she had deleted all the original electronic billing records that arguably might have cast doubt on the accuracy of her billing. We therefore reject Sklar‘s complaint that the court exceeded its jurisdiction when it authorized Toshiba‘s inspection of her hard drive to determine whether any of that electronically stored information survived her destruction of the files.
Slip op. at 33. 

Finally, the Court held that the trial court did not abuse its discretion in awarding only a fraction of the requested fees and denying any fees to Sklar herself. Slip op. at 33-44. Sklar was not credible, her records were not usable to calculate a lodestar figure, and the trial court had other good cause to award fees as it did. 

The Court did remand the matter for the trial court to rule on SLO's request for up to $115,000 in costs. The trial court had not ruled on the issue. 

Ellis v. Toshiba America is available here

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