Hernandez v. Restoration Hardware, Inc.

• Decision Date: 14 March 2016
• Docket Number: D067091
• Citation: 199 Cal.Rptr.3d 719,245 Cal. App. 4th 651
• Court: California Court of Appeals
• Parties: Mike HERNANDEZ et al., Plaintiffs and Respondents, Francesca Muller, Plaintiff and Appellant; v. RESTORATION HARDWARE, INC., Defendant and Respondent.

245 Cal.App.4th 651

199 Cal.Rptr.3d 719

Mike HERNANDEZ et al., Plaintiffs and Respondents, Francesca Muller, Plaintiff and Appellant;

v.RESTORATION HARDWARE, INC., Defendant and Respondent.

D067091

Court of Appeal, Fourth District, Division 1, California.

Filed March 14, 2016

Law Office of Lawrence W. Schonbrun and Lawrence W. Schonbrun for Plaintiff and Appellant.

Patterson Law Group, James R. Patterson, San Diego, Allison H. Goddard ; Stonebarger Law and Gene J. Stonebarger, Folsom, for Plaintiffs and Respondents.

No appearance for Defendant and Respondent.

McDONALD, J.

In this class action, the class representatives alleged defendantRestoration Hardware, Inc.(RHI), committed numerous violations of Civil Code section 1747.08, also known as the Song–Beverly Credit Card Act.After a bench trial, the trial court found RHI was liable for as many as 1,213,745 violations of that statute and set a penalty recovery in the amount of $30 per violation, subject to RHI's right to dispute any specific claim.Under that judgment, RHI faced a total maximum liability of $36,412,350.

In posttrial proceedings, class representatives requested the court order an award of attorney fees of $9,103,087.50 (25 percent of the total maximum fund of $36,412,350 created by the judgment) to be payable to class counsel from the fund.RHI agreed it would not contest that request.Francesca Muller, a class member and the person prosecuting the present appeal, requested the court order notice of the attorney fee motion be sent to all class members.The court denied Muller's request, granted the attorney fee motion, and entered judgment in the action.Muller then filed a notice of appeal from the judgment.

Muller asserts the court erred when it declined to order that notice be given to all class members of the hearing on the attorney fee award, and that the award was calculated in violation of applicable standards and procedures.Muller also claims the court's award was an abuse of its discretion.Class representative Hernandez asserts Muller does not have standing to appeal the judgment and that the appeal should therefore be dismissed.Hernandez alternatively argues (1) no notice to the class of the attorney fee hearing was mandated and (2) the amount awarded as fees, as well as the procedure employed by the trial court for determining the amount of the attorney fees award, was proper.

IFACTUAL AND PROCEDURAL BACKGROUND

A.The Class Action

Michael Hernandez filed this action in 2008 alleging defendant RHI violated Civil Code section 1747.08 by requesting and recording ZIP codes from consumers who used a credit card in purchase transactions in RHI's California retail stores.After years of litigation, the court ultimately certified the case as a class action, appointed Michael Hernandez and Amanda Georgino as class representatives (together Hernandez), and appointed Patterson Law Group and Stonebarger Law as counsel for the class.

The June 2013 notice to potential class members advised them of the pending class action and explained they had the option of (1) remaining as part of the class and being bound by the judgment, or (2) excluding themselves from the class and not being bound by any judgment.It also advised that, if they elected to remain in the class, they had the option of entering an appearance through counsel.Two weeks later, attorney Schonbrun entered an appearance in the action on behalf of Muller.However, Muller did not move to intervene in the action, or to join as an additional class representative, or to be substituted for Michael Hernandez and Amanda Georgino as class representative.

B.The Verdict and Common Fund Award

After a bench trial, the court issued its decision in favor of the class.The court found RHI committed "as many as" 1,213,745 violations of section 1747.08, subdivision (a)(2), for credit card transactions that occurred during the class period because RHI requested, obtained and recorded the customer's ZIP code as part of the credit card transaction.¹The court also concluded the appropriate penalty under section 1747.08, subdivision (e), for each violation would be $30, for a total recovery by the class of up to $36,412,350.

Because the court's decision ordered the parties to meet and confer regarding an appropriate claims process, the parties met and agreed on a claims process, and a process for distributing the total award (the claims procedures).The parties' stipulation proposed the final judgment award of $36,412,350 be "treated as a common fund inclusive of any attorneys' fees, costs, and class representative enhancements" subsequently ordered by the court, and also include administrative costs associated with administering the claims process.The parties proposed that, after deduction of attorney fees, costs, and class representative enhancements, the net remaining fund (the Net Fund) would be distributed to class members as (1) a prorated share of the Net Fund up to $30 per violation cash payment to persons submitting valid claims and who elected cash payments, and (2) the "coupon option" to persons submitting valid claims (if they did not elect the cash award) for 33 percent off of an up to $10,000 purchase of nonexcluded RHI merchandise valid for one year from issuance of the coupon.The parties' proposal also contained a provision that, at the end of coupon period, if the payouts from the Net Fund in cash or from coupon savings did not exhaust the Net Fund, an additional coupon would be issued with a dollar cap sufficient to exhaust the Net Fund.

C.The Attorney Fees Determination

Hernandez subsequently moved for an attorney fees award seeking an award of attorney fees equivalent to 25 percent of the total judgment recovered for the class.²The court, although acknowledging a percentage award might ultimately be the appropriate method to calculate the fee award, also directed class counsel to supplement the motion for fees with a filing that employed a traditional "lodestar" calculation.Hernandez subsequently submitted the lodestar calculation and analysis, which showed class counsel had spent over 3500 hours, totaling nearly $2.7 million in costs advanced and fees incurred, and detailed the attorneys involved, the tasks performed, and the reasonableness of the hourly rates for those attorneys.Hernandez's submission also articulated the reasons that supported application of a "multiplier" to the lodestar calculation.

Muller, who was served with the attorney fee motions, did not file any objection contesting the propriety of the amount sought by Hernandez as attorney fees.Instead, Muller filed an August 29, 2014, "Request for Clarification," asking for clarification on whether class members would receive notice of the fee application and the right to appear and comment on the application.³Prior to the hearing on the attorney fees, the court issued its tentative ruling determining (1) a percentage award in a "common fund" case was permitted by California law, (2) a 25 percent fee was a percentage courts use as a "starting benchmark," and (3) a fee at or above that benchmark was "particularly appropriate" considering the risks undertaken, and results obtained, by counsel in this action.

At the hearing on the attorney fee application, Muller objected that considering the attorney fees application without first giving class members notice of the fee application and the right to appear and comment on the application was a violation of class action procedures because this fee award was "a settlement as regards to the attorneys' fees ... [because][class]counsel and defendants negotiated a settlement on the question of attorneys' fees."Muller also argued, for the first time at the hearing, that a court must use the "lodestar multiplier approach"(rather than a percentage of the fund approach) when calculating the fee award, but did not argue the amountthe court's tentative ruling proposed to award was excessive.

D.The Judgment

The court's final judgment, which apparently tracked the parties' proposed claims procedures process, provided for awarding $36,412,350, to be "treated as a common fund inclusive of any attorneys' fees, costs, and class representative incentive enhancements ordered by the Court and any administrative costs associated with administering the claims process...."The court awarded attorney fees of $9,103,087.50, or 25 percent of the total maximum fund of $36,412,350 created by the judgment, as well as litigation costs and class representative incentive enhancements, and directed the remainder of the fund (less administrative costs of administering the claims process) be distributed as specified by the judgment.Muller filed her notice of appeal within the time specified by law.

IIANALYSIS

Muller raises numerous claims of alleged error in the judgment entered below.First, she claims the court could not adjudicate the attorney fee motion without first giving notice to the class of Hernandez's motion to set the appropriate attorney fee award, and giving all class members an opportunity to object to the motion, and the failure to do so in this case violated both due process protections and California's class action procedures.Second, Muller argues the court, by calculating the award based on a percentage of the common fund rather than by a properly rigorous lodestar multiplier approach, transgressed controlling California precedent.Finally, Muller argues class counsel breached its fiduciary duty to the class by "negotiating" with RHI over the amount of fees to be paid by the common fund.

Hernandez contests each of Muller's claims of error.However, Hernandez raises a jurisdictional challenge to this court's ability to entertain the appeal, arguing that because Muller was neither a "party" nor "aggrieved" by the judgment, she does not have standing to pursue this appeal and the appeal must therefore be dismissed.Because this claim is jurisdictional (Life v. County of Los Angeles(1990)218...