In the recent case of Gray1 CPB, LLC v. SCC Acquisitions, Inc., 225 Cal. App. 4th 401 (2014)(“Gray1“) $3 million of attorneys’ fees were left unrecovered because of the judgment creditor’s failure to timely seek payment of its attorneys’ fees before the defendant satisfied a $13 million judgment. Specifically, plaintiff Gray1 prevailed in its lawsuit against SCC and incurred $3 million in attorneys fees while attempting to enforce its judgment. At the end of three years of post-judgment litigation, the judgment debtor forwarded a check for the $13 million judgment to the plaintiff. Plaintiff, the judgment creditor, was caught unaware as it had not previously sought to increase the judgment by the amount of fees it incurred. This mistake proved costly.
In California, the enforcement of judgment has been codified, and the statutory scheme must be followed in order to increase the judgment by the amount of attorneys’ fees incurred in enforcement of the judgment. Judgment creditors may seek to increase the judgment by either of two methods; an order for post-judgment attorney fees as costs under CCP Section 685.070, subdivision (b) by claiming attorney fees in a Memorandum of Costs (when the original judgment includes an attorney fee award), or alternatively, by filing a Motion for Attorneys’ Fees as Costs under CCP Section 685.080, subdivision (a). The critical difference between the two methods is that when attorneys’ fees are claimed as costs in a Memorandum of Costs, the judgment debtor has only ten days to file a Motion to Tax the Costs or an order approving the fees must be entered. Conversely, the judgment debtor must timely oppose the Motions for Attorneys’ Fees as Costs, or the motion will be granted. Due to court congestion, many motions, including motions for attorneys’ fees as costs, are not timely heard and may be calendared more than a month in the future, which may give the judgment debtor substantial additional time in which to prepare an opposition to the motion. Therefore, judgment creditors would be wise to file a Memorandum of Costs seeking attorneys’ fees rather than filing a Motion for Attorneys’ Fees as Costs.
A judgment creditor who timely files either a Memorandum of Costs with attorneys’ fees or a Motion for Attorneys’ Fees as Costs is protected from a judgment debtor who satisfies a judgment before an order for fees is issued. Why? Because both statutory methods of increasing fees simply state that either the Memorandum of Costs or Motions for Attorneys’ Fees must be filed before the satisfaction of the judgment in order to be enforceable. Therefore, an order increasing the attorneys’ fees sought prior to satisfaction of the judgment is enforceable, and will increase the principal of the judgment.
Unfortunately, Gray1 had not previously sought to increase its attorneys’ fees. Therefore, in an untimely effort to remedy this defect, it simply held the cashier’s check until it filed a motion for attorneys’ fees, and then argued to the Court that the judgment hadn’t been satisfied until it cashed its check. In prosaic language, the appellate court disagreed, and found that the attorneys’ fees were lost due to the judgment creditor’s failure to timely seek the attorneys’ fees before receipt of the check:
You cross continents and spend years trying to collect a judgment for your client. Late one Friday afternoon, the debtor’s lawyer walks into your office and hands you a cashier’s check for almost $13 million, covering the entire judgment and all accumulated interest. Do you accept the check or say, “no thank you, I need to make a motion for attorney fees first?” Put another way, is a bird in the hand worth two in the bush?
Sadly, Gray1 lost the two birds in the bush because it had not timely sought additional attorneys’ fees! To achieve the maximum recovery on your judgments it is a good idea to have a full service business firm with experienced business attorneys that have real experience representing judgment creditors.