Attorney fees are costs in trial court but not on appeal

As lawyers, we worry about the unknown, of being on the wrong page, of being hit with the exception to the exception. Our clients depend on us, expecting us to be expert navigators of all things statutory. It's a scary way to make a living. So when a recent decision holds that an appellate court's denial of "costs" does not preclude an award of attorney fees -- a holding that might seem counterintuitive -- this may be a good time to review the opinion and bone-up on the reasoning.

The default proposition is that attorney fees are recoverable only if a statute or contract provides for such an award (the "American Rule"). See Code of Civil Procedure Section 1021; Session Payroll Management, Inc. v. Noble Construction Co., Inc., 84 Cal. App. 4th 671, 677 (2000). So the starting point for fee recovery should always be an inquiry into whether a statutory or contractual fee provision applies in a given case. If one applies, the default is that it also applies on appeal. See, e.g., Morcos v. Board of Retirement, 51 Cal. 3d 924, 927 (1990) ("statutes authorizing attorney fee awards in lower tribunals include attorney fees incurred on appeals of decisions from those lower tribunals").

That brings us to Stratton v. Beck, 2019 DJDAR 53 (2d Dist., Div. 4) (Stratton 2). There, a dispute over $300 in unpaid wages "transmogrified into a dispute concerning attorney fees totaling nearly 200 times that amount." As background: The Labor Code provides for attorney fees related to any unsuccessful challenge to a Labor Commissioner's award; Stratton obtained an award; Beck sought a trial de novo and lost; the trial court awarded Stratton attorney fees; and Beck appealed. The Court of Appeal affirmed the lower court's fee award, but ended its opinion with "In the interest of justice, the parties are to bear their own costs of appeal." Beck v. Stratton, 9 Cal. App. 5th 483, 487, 498 (2017) (Stratton 1). The remittitur following Stratton 1 also stated "The parties are to bear their own costs of appeal." End of story, right?

Nope. Once the remittitur issued, Stratton moved for an award of appeal fees related to Stratton 1. After multiple hearings, the trial court awarded fees to the tune of $57,420. Beck appealed, arguing that since attorney fees are an item of costs (in cases where fees are available) and the Court of Appeal's disposition denied "costs," then Stratton must have been precluded from obtaining attorney fees.

The appellate court disagreed. First, Stratton 2 rejected the argument that because Labor Code Section 98.2(c) referred to fees incurred "in an appeal to the Superior Court," it impliedly excluded fees incurred at the Court of Appeal level. As Stratton 2 explains, in order to preclude appeal fees, a statute must "specifically" exclude them.

Next, Stratton 2 addressed the concept of attorney fees as "costs." The Court of Appeal began by pointing out that by their express terms, Code of Civil Procedure Sections 1032 (entitlement to costs) and 1033.5 (items of costs including attorney fees), apply only to costs incurred in the Superior Court. By contrast, Code of Civil Procedure Section 1034, subdivision (b) "tells us specifically what law governs costs on appeal." Section 1034 states that the Judicial Council "shall establish by rule allowable costs on appeal and the procedure for claiming those costs."

The Judicial Council rule for costs on appeal is 8.278. As Stratton 2 put it, "As section 1033.5 does for trial-related costs, rule 8.278 enumerates 'recoverable costs,' which it expressly provides are the only costs that may be recovered on appeal." But, appeal fees are not among the listed items.

So, if the list of recoverable appeal costs under Rule 8.278 does not include attorney fees, and Section 1033.5's reference to attorney fees as costs does not apply to appeal fees, how did Stratton 2 affirm an award of fees for the appeal? As Stratton 2 elaborated, "Rule 8.278(d)(2) states that 'Unless the [appellate] court orders otherwise, an award of costs neither includes attorney's fees on appeal nor precludes a party from seeking them under rule 3.1702.' The plain meaning of rule 8.278(d)(2) is that an award of costs in the court of appeal generally has no bearing on a party's ability to seek appellate attorney fees in the trial court." (Emphasis added.)

So what, if anything, does have bearing? At its core, Stratton 2 explains that there is no linkage between costs on appeal, and attorney fees on appeal. Absent an express directive that each side is to bear its own fees on appeal, an appellate court disposition of costs -- whatever it is -- does not implicate appeal fees. This is true irrespective of whether the basis for fees is statutory or contractual.

Thus, in any case involving attorney fees at the trial court level, it looks like only three things can preclude attorney fees on appeal: (1) statutory or contractual language specifically excluding them; (2) case law interpreting statutes as precluding fee awards to certain parties on policy grounds; and (3) a Court of Appeal disposition stating that each side shall bear its own attorney fees on appeal. Absent one of these limiting conditions, the default rule for appeal fees appears to be driven by case law -- if a matter includes recovery of fees at the trial court level, fees are available on appeal. See, e.g., Morcos, 51 Cal. 3d at 927 (statutory fee provisions).

So in the end, attorney fees are costs (in the trial court), but are not costs (at the appellate level). Was the inclusion of attorney fees as costs in Section 1033.5 even necessary? Does the Legislature engage in idle acts? Will there be a Stratton 3 over fees incurred in Stratton 2? So many questions. But one thing is certain -- if there is another appeal, it won't be based on Stratton 2's disposition of "costs." Costs have nothing to do with attorney fees. In the Court of Appeal, that is.