Hernandez v. Siegel

Filed 9/30/14
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

NIMACHIA HERNANDEZ,
Plaintiff, Cross-defendant and
Appellant,
A139653
v.
DAN SIEGEL et al., (Alameda County
Super. Ct. No. RG11586724)
Defendants, Cross-Complainants
and Respondents.

Attorneys Dan Siegel and Ann Weills represented Nimachia Hernandez in a
successful employment discrimination lawsuit in which attorney fees and costs were
awarded, pursuant to Government Code section 12965.1 The total amount of the fee
award, plus accrued interest, was paid directly to Siegel’s law firm by the defendant in
the litigation. When the interest was not disbursed to her, Hernandez sued Siegel, Weills,
and their law firm, Siegel & Yee (collectively respondents), alleging causes of action for
breach of fiduciary duty and intentional tort. The trial court was ultimately asked to
determine whether Hernandez or her attorneys were entitled to the interest paid on the
attorney fees, as well as the costs awarded. The trial court concluded respondents, rather
than Hernandez, were entitled to both. Hernandez appeals. We affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In September 2005, Hernandez retained respondents to represent her in an
employment discrimination suit, brought under the California Fair Employment and

1 Government Code section 12965, subdivision (b), provides in relevant part: “In
civil actions brought under this section, the court, in its discretion, may award to the
prevailing party . . . reasonable attorney’s fees and costs, including expert witness fees.”

1
Housing Act (FEHA; Gov. Code, § 12900 et seq.), against the Regents of the University
of California (Regents). Hernandez and Weills signed a fee agreement (Fee Agreement),
which provides in relevant part:
“2. Attorneys’ fees. Except as indicated below in paragraphs 4 and 5, we agree
that you will not pay us anything for our time unless we are successful in this matter,
either at trial or through settlement. . . . If you are successful in this matter through
litigation or settlement, we will be paid attorney’s fees as follows: The greater of:
(1) Attorneys’ fees specifically awarded by the court or through settlement; or
(2) 40 percent of the net recovery (including attorneys’ fees awarded by the court or
through settlement), after payment of the amounts described in paragraph 3 below.
Please note that these terms are not established by law but are subject to negotiation
between you and us.
“3. Costs. Our firm will advance all out of pocket costs in this litigation, such as
filing fees, deposition costs, witness fees, expert consultant fees, jury fees, travel costs,
etc. If this matter is ultimately settled, our firm will be reimbursed from the settlement
proceeds for all costs incurred prior to the calculations described in paragraph 2.
“4. Discharge of counsel. You may discharge us as your counsel at any time.
However, in the event you do so prior to the resolution of your case, this Agreement shall
be transformed from a contingent fee agreement into an hourly fee agreement and you
will be liable to us for our work on the case at our regular hourly rates. . . .
“5. Lien for Attorney’s Fees and Costs. You further agree that our firm will have
a lien for our attorney’s fees and litigation costs against the ultimate settlement or
judgment in your lawsuit . . . . This means that you authorize and agree that our
outstanding bill for fees and costs must and will be paid from the settlement or judgment
in your case, whether or not we are your counsel at the time the matter is finally resolved.
[¶] . . . [¶]
“7. Execution of Documents. You agree that we have the authority to execute any
and all pleadings, claims, settlements, drafts, checks, compromises, releases, dismissals,
deposits, orders, and other papers which you could properly execute, and to receive on

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your behalf any monies or other things of value to which you may be entitled because of
any judgment recovered or any settlement reached in connection with the claims covered
by this Agreement.”
The Regents served Hernandez with an offer to compromise, pursuant to Code of
Civil Procedure section 998,2 in the amount of $300,000 plus reasonable attorney fees,
costs, and expenses. Hernandez did not accept the offer, and the matter proceeded to a
jury trial.
The jury awarded Hernandez $266,347 in damages. Hernandez filed a motion for
injunctive relief, seeking reinstatement or front pay in lieu of reinstatement, which was
denied. Judgment was entered. Motions to tax costs and a motion for attorney fees were
filed.3 In an order dated September 2, 2010 (Order Granting Costs and Fees), the trial
court awarded “[p]laintiff” $623,908.12 in attorney fees and $26,932.84 in costs.
Because the jury awarded Hernandez less than what the Regents had previously offered,
the Regents were also awarded $83,414.25 in costs and expert witness fees, pursuant to
section 998, subdivision (c).
Hernandez, represented by new counsel, filed appeals from both the judgment and
the Order Granting Costs and Fees, but only challenged the trial court’s denial of
reinstatement or front pay in lieu of reinstatement, the amount of attorney fees awarded,
and the costs granted to the Regents pursuant to section 998. Division Four of this court
affirmed both the judgment and the Order Granting Costs and Fees. (Hernandez v.
Regents of the University of California (Dec. 12, 2011, A129427, A130063) [nonpub.
opn.].)
While the appeals were pending, Siegel received a check from the Regents made
out to both Hernandez and Siegel & Yee, in the total amount of $658,606.91. Although
initially there was some disagreement regarding whether the check included costs, it is

2 Undesignated statutory references are to the Code of Civil Procedure.
3
The moving papers are not included in the record. However, the motion for
attorney fees was apparently filed by respondents on Hernandez’s behalf.

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now undisputed that the check represented approximately $623,908 in attorney fees and
approximately $34,699 in postjudgment interest on those fees. Siegel endorsed the
check, by signing Hernandez’s name in addition to his own, and deposited the funds in
the firm’s client trust account. The Regents also issued a check to Hernandez directly for
$194,458, which represented the amount of the jury verdict plus interest, minus the
Regents’ recoverable expert fees and costs. The Regents have yet to pay the costs portion
of the judgment.
When respondents refused Hernandez’s request to disburse the fees and interest to
her, she filed suit against respondents, alleging causes of action for breach of fiduciary
duty and intentional tort. Specifically, she alleged, “[Siegel] has signed her name without
her consent and has obtained funds awarded to her through court judgment and failed to
comply with appropriate legal requirements regarding disclosure and accounting of said
funds . . . .” Hernandez initially contended she was entitled to the entire fee award.
However, she eventually narrowed her claim to an assertion that she was entitled to the
costs yet to be paid by the Regents, as well as any interest on the attorney fees.
Respondents filed a cross-complaint alleging that Hernandez had breached the Fee
Agreement.
After briefing and a bench trial, the trial court entered judgment for respondents.
The court’s statement of decision provides: “The terms of the [Fee Agreement] are not
ambiguous. The [Fee Agreement] included the term that [respondents] advance all out of
pocket costs subject to reimbursement. That term was an important part of the contract.
. . . [Hernandez] argued that her obligation to reimburse [respondents’] advance of costs
under the [Fee Agreement] would only be triggered if her case settled and would not be
triggered if the case went to judgment. [Hernandez’s] interpretation of her obligation to
reimburse [respondents] for the costs advanced by [respondents] is inconsistent with the
plain reading of the [Fee Agreement] and unreasonable. Pursuant to the clear terms of
the agreement [respondents] were and are entitled to be reimbursed for all of the costs
[respondents] advanced on behalf of [Hernandez]. [¶] . . . [¶] The court finds that
[Hernandez] is not entitled to any interest attributable to any delay in the payment of

4
costs or any delay in the payment of attorney’s fees. Both the costs and the fees are owed
to [respondents] therefore any interest payable because of delay are payable to
[respondents].” Hernandez filed a timely notice of appeal.
II. DISCUSSION
Hernandez contends that the trial court erred in concluding both costs and interest
on attorney fees belong to respondents. She raises questions of contract and statutory
interpretation, which are generally subject to de novo review. (Lindelli v. Town of San
Anselmo (2006) 139 Cal.App.4th 1499, 1505; People ex rel. Lockyer v. R.J. Reynolds
Tobacco Co. (2003) 107 Cal.App.4th 516, 520 [“ ‘interpretation of a contract is subject to
de novo review where the interpretation does not turn on the credibility of extrinsic
evidence’ ”].) She has shown no error.
A. Interest on Attorney Fees
Who owns the postjudgment interest accruing on an attorney fee award in a civil
action—the client or her attorneys? That question has not previously been addressed by a
California court in any published decision. In claiming she is entitled to interest on
attorney fees, Hernandez relies on the language of the Fee Agreement and the Order
Granting Costs and Fees. First, Hernandez maintains that the Fee Agreement “controls
the case” and that the interest belongs to her because she did not agree, therein, to give
interest on fees to respondents. She also contends, “The proper logical analysis in this
case is as follows: [¶] 1. Siegel limited himself to an amount AWARDED by the Court.
. . . [¶] 2. The Court has never AWARDED interest to Siegel. . . . [¶] 3. Therefore, Siegel
is not entitled to the interest on the judgment.” She is correct that both the Fee
Agreement and the Order Granting Costs and Fees are silent regarding interest.
However, we disagree that either document is dispositive.
Absent from Hernandez’s briefing is any discussion of the legal basis for
postjudgment interest.4 In Lucky United Properties Investment, Inc. v. Lee (2010)

4 In advance of oral argument we asked the parties to be prepared to discuss
application of the Enforcement of Judgments Law (§ 680.010 et seq.), particularly
sections 680.230, 680.240, and 685.010.

5
185 Cal.App.4th 125 (Lucky United I), we provided an overview of judgments, costs, and
interest, which is helpful to our analysis. We begin with that overview.
“ ‘A judgment is the final determination of the rights of the parties in an action or
proceeding.’ (§ 577.) There may be, in some circumstances, judgments for or against
one or more of several plaintiffs or defendants in a single case (§ 578), but there is always
one judgment that determines the rights of any one particular party or parties . . . vis-à-vis
another party on the other side of the pleadings . . . . [¶] . . . [¶]
“The principal amount of a judgment is the amount of any damages awarded, plus
any costs (including attorney fees) to which the prevailing party may be entitled, less any
amounts paid by the judgment debtor. (§ 680.300.) Postjudgment interest accrues on the
principal amount of the judgment at the rate of 10 percent per annum. (§ 685.010.) How
the costs are added to the judgment, and how interest is calculated, turns on the manner in
which those costs were imposed or the purpose for which the costs were incurred.
“ . . . As a general rule, the prevailing party may recover certain statutory costs
incurred in the litigation up to and including entry of judgment. (§§ 1032, 1033.5.)
These costs may include attorney fees, if authorized by contract, statute . . . or law.
(§ 1033.5, subd. (a)(10).) Most costs are obtained by filing a cost memorandum,
although attorney fees require a separate noticed motion. (§ 1033.5, subd. (c); Cal. Rules
of Court, rule 3.1702.) Where costs are established by the judgment, but the amount of
the award is ascertained at a later time, the court clerk enters the costs on the judgment
after the amount is determined. (Cal. Rules of Court, rule 3.1700(b)(4); Bankes v. Lucas
(1992) 9 Cal.App.4th 365, 369.) In other words, the amount of the cost award is
incorporated into the judgment.
“Interest at the rate of 10 percent per annum accrues on the unpaid principal
amount of the judgment (§ 685.010), including the amount of the cost award and attorney
fees award (§ 680.300), as of the date of judgment entry (§ 685.020, subd. (a)).” (Lucky
United I, supra, 185 Cal.App.4th at pp. 136–138, italics added & parallel citation
omitted.)

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 It is no surprise that the Order Granting Costs and Fees is silent on the subject of
interest. A money judgment automatically accrues interest “by force of law,” regardless
of whether it explicitly declares as much. (Cal. Const., art. XV, § 1; §§ 685.010,
subd. (a), 685.020, subd. (a); Koszdin v. State Comp. Ins. Fund (2010) 186 Cal.App.4th
480, 491, 495; County of Los Angeles v. Salas (1995) 38 Cal.App.4th 510, 515–516;
Pinecrest Productions, Inc. v. RKO Teleradio Pictures, Inc. (1970) 14 Cal.App.3d 6, 11.)
Postjudgment interest also automatically accrues on any unpaid costs and attorney fee
awards. (§§ 680.300 [“ ‘Principal amount of the judgment’ means the total amount of the
judgment as entered . . . together with the costs thereafter added to the judgment pursuant
to Section 685.090”], 685.090, 1033.5, subd. (a)(10) [costs include attorney fees if
authorized by contract, statute, or law]; Gregory v. State Bd. of Control (1999)
73 Cal.App.4th 584, 599.) In their appellate briefs, neither Hernandez nor respondents
point to any language in the governing statutes that address ownership of interest on fees.
Section 685.010, subdivision (a), provides only, “Interest accrues at the rate of 10 percent
per annum on the principal amount of a money judgment remaining unsatisfied.”
Instead, Hernandez points to the Fee Agreement. She suggests that it is not
unreasonable to require an attorney to secure a fee agreement with his or her client that
explicitly provides the attorney’s entitlement to interest on a fee award. Hernandez
contends that California State Bar Committee Formal Opinion, No. 1980-53, is
“instructive” on this point. Therein, the Standing Committee on Professional
Responsibility and Conduct concluded that an attorney may ethically charge a client
interest on past due receivables, provided the client gives informed consent in advance of
the charge. This conclusion, which is expressly “not binding upon the courts” (State Bar
Formal Opn, No. 1980-53, supra, p. 4), has no application in this case where the Regents,
not Hernandez, have incurred interest on a judgment by force of law, not as a matter of
contractual agreement.
The parties agreed at oral argument that, to resolve this appeal, we must determine
the judgment creditor of the fee award. Section 685.010, subdivision (a), provides:
“Interest accrues at the rate of 10 percent per annum on the principal amount of a money

7
judgment remaining unsatisfied.” (Italics added.) Section 680.230 provides,
“ ‘Judgment’ means a judgment, order, or decree entered in a court of this state.” Section
680.240 provides, “ ‘Judgment creditor’ means the person in whose favor a judgment is
rendered or, if there is an assignee of record, means the assignee of record. Unless the
context otherwise requires, the term also includes the guardian or conservator of the
estate, personal representative, or other successor in interest of the judgment creditor or
assignee of record.” The Order Awarding Costs and Fees was a judgment rendered in
favor of “[p]laintiff.” (§ 680.230) Hernandez implicitly asserts that the client, not
counsel, is the “plaintiff.”
However, in Flannery v. Prentice (2001) 26 Cal.4th 572 (Flannery), our Supreme
Court considered the question of whether attorney fees awarded under Government Code
section 12965 belong to the client or attorney when no contractual agreement provides
for their disposition. (Flannery, at p. 575.) The court began by analyzing the statutory
language. The court observed, “While it is true that section 12965 authorizes fee awards
‘to the prevailing party’ (§ 12965, subd. (b) . . . ), that language does not unambiguously
favor plaintiff. ‘The word “part[y]” is reasonably susceptible to more than one
interpretation.’ [Citation.] ‘In the countless procedural statutes in which the term “party”
is used, it is commonly understood to refer to either the actual litigant or the litigant’s
attorney of record. [Citations.] Since that is the ordinary import of the term, that is the
meaning we must ascribe to it when used in [a statute], unless the Legislature has clearly
indicated a contrary intent . . . .’ [Citations.]” (Flannery, at p. 578, italics omitted.)
To resolve the statutory ambiguity, the Flannery court relied on the intent of the
Legislature in enacting FEHA, as well as policy concerns. (Flannery, supra, 26 Cal.4th
at pp. 579, 583–584.) The court explained: “Attorneys considering whether to undertake
cases that vindicate fundamental public policies may require statutory assurance that, if
they obtain a favorable result for their client, they will actually receive the reasonable
attorney fees provided for by the Legislature and computed by the court. . . . [¶] Because
contracts are not always obtainable or obtained and always may be disputed, were we to
interpret section 12965 as plaintiff urges, vesting ownership of fees awarded thereunder

8
and not disposed of by contract in the litigant, rather than in counsel, we would diminish
the certainty that attorneys who undertake FEHA cases will be fully compensated, and to
that extent we would dilute section 12965’s effectiveness at encouraging counsel to
undertake FEHA litigation. . . . [¶] . . . [¶] Construing section 12965 as vesting ownership
of unassigned attorney fees awarded thereunder in counsel rather than the litigant (to the
extent fees are not otherwise paid) will, moreover, advance important public policies.
Specifically, such a construction will: [¶] a. Encourage representation of legitimate
FEHA claimants and discourage nonmeritorious suits [¶] . . . [¶] b. Avoid unjust
enrichment [¶] . . . [¶] c. Ensure fairness [¶] d. Address ethical concerns.” (Flannery, at
pp. 583–586, italics omitted.) On the latter point, our Supreme Court agreed that vesting
ownership of unassigned fees in the litigant “would implicate in some measure the policy
our fee-splitting prohibition is designed to advance.”5 (Id. at p. 587.) Accordingly, the
court held that, “absent proof . . . of an enforceable agreement to the contrary, the
attorney fees awarded . . . belong to the attorneys who labored to earn them.” (Id. at
p. 575.)
Flannery did not address postjudgment interest on attorney fees. Nonetheless, its
holding is critical. If attorney fees belong to the attorney by default and only belong to
the client if an agreement so specifies (Flannery, supra, 26 Cal.4th at p. 590), then the
trial court’s Order Granting Costs and Fees to “[p]laintiff” cannot be read to vest
ownership of fees in Hernandez. Furthermore, the Fee Agreement in this case is not
silent on the ownership of attorney fees. It specifically makes clear that attorney fees
belong to respondents. Flannery compels us to conclude that respondents, not
Hernandez, are the judgment creditors with respect to the attorney fee award. (Flannery,
at p. 590; see also Lindelli v. Town of San Anselmo, supra, 139 Cal.App.4th at pp. 1509–
1510 [following Flannery and holding “[a]ttorney fees awarded pursuant to section
1021.5 belong, absent an enforceable agreement to the contrary, to the attorneys”].) By

5California attorneys and law firms are prohibited from “directly or indirectly
shar[ing] legal fees with a person who is not a lawyer.” (Rules Prof. Conduct, rule 1-
320(A).)

9
logical extension, interest on the attorney fee award belongs to respondents. (§§ 680.230,
680.240, 685.010; see also Koszdin v. State Comp. Ins. Fund, supra, 186 Cal.App.4th at
p. 490 [“when a WCAB award specifically provides that attorney fees are to be paid
directly to the attorney, any postaward interest that accrues on the attorney fees must also
be paid directly to that attorney”].)
Hernandez’s reliance on Hollingsworth v. Lewis (1928) 93 Cal.App. 526
(Hollingsworth) does not convince us to reach a contrary conclusion. In Hollingsworth,
the plaintiff, who was an attorney, agreed to represent the defendants before the Interstate
Commerce Commission (ICC) and secure “refunds” of money collected by railroad
companies on certain freight shipments. (Id. at pp. 526–527.) In turn, the defendants
agreed to pay the plaintiff “ ‘50% of the refunds so secured.’ ” (Id. at p. 528.)
Ultimately, the plaintiff sued to recover compensation for the legal services he rendered
and obtained 50 percent of both principal—the “money . . . illegally collected from the
defendants” by the railroad companies—and money the ICC ordered the railroad
companies to pay to the defendants as interest. (Id. at pp. 526–527.)
On appeal, the defendants argued that the plaintiff was not entitled to share in the
interest under the terms of his contract. (Hollingsworth, supra, 93 Cal.App. at p. 527.)
The reviewing court construed the word “refunds,” as used in the contract executed by
the parties, to determine whether that word included both principal and interest, or merely
principal. (Id. at p. 528.) The court observed, “As the contract was made between an
attorney and his client, the ambiguity should be resolved against the attorney and in favor
of the client. [Citation.]” (Ibid.) “As the defendants never paid any interest to any
railroad company, in no proper sense can it be said that any railroad company, by virtue
of the [ICC] order . . . , repaid, that is refunded, any interest money.” (Ibid., italics
omitted.) The judgment was modified to strike the award of interest to the plaintiff.
(Ibid.)
Hollingsworth did not involve statutory postjudgment interest accruing on an
award of attorney fees. And, here, it is of little import that contractual ambiguity should

10
be resolved in favor of the client. As discussed ante, accrual of postjudgment interest is
controlled by statute, not by contract.
Simply put, nothing in the statutory scheme, case law, or the Fee Agreement
directly supports Hernandez’s claim that interest on attorney fees belongs to the client,
rather than the attorney. Nor does Hernandez explain how the purposes of the
postjudgment interest statutes would necessarily be better served by her interpretation.
The purpose of awarding postjudgment interest is to compensate the judgment creditor
for the time value of the money until the judgment is paid. (Lucky United Properties
Investment, Inc. v. Lee (2013) 213 Cal.App.4th 635, 658; Westbrook v. Fairchild (1992)
7 Cal.App.4th 889, 893.) Hernandez has offered no reason, other than her general
dissatisfaction with the result of the prior litigation, that she should receive a windfall, at
the expense of the attorneys who labored on her behalf. (Cf. Flannery, supra, 26 Cal.4th.
at pp. 585–586; Lindelli v. Town of San Anselmo, supra, 139 Cal.App.4th at pp. 1512–
1513.) It would make little sense to award interest on a fee award to anyone other than
the attorney whose labor remains uncompensated. Adopting Hernandez’s interpretation
would make it more challenging for a FEHA plaintiff to find competent counsel.
In the absence of an agreement establishing the client’s entitlement to an attorney
fee award, or to any accrued interest, we hold that interest belongs to the attorney who
owns the fee judgment upon which interest is accruing.
B. Costs
Next, Hernandez claims that the trial court erred in concluding respondents were
entitled to the costs awarded by the Order Granting Costs and Fees. According to
Hernandez, respondents agreed in the Fee Agreement to bear Hernandez’s litigation costs
in the event that the case was litigated successfully. Hernandez points out—albeit in
another section of her brief—that the paragraph entitled “Costs” in the Fee Agreement
provides only that, if the matter is settled, respondents will be reimbursed for advanced
costs from the settlement proceeds. Hernandez asserts that, if the case is litigated, “[the
Fee Agreement] does not allow costs if there is a fee award.”

11
 Hernandez relies solely on paragraph Nos. 2 and 3 of the Fee Agreement. But
paragraph No. 2 begins with “[e]xcept as indicated below in paragraphs 4 and 5 . . . .”
And, in paragraph No. 5, the Fee Agreement provides, “You further agree that our firm
will have a lien for our attorney’s fees and litigation costs against the ultimate settlement
or judgment in your lawsuit . . . . This means that you authorize and agree that our
outstanding bill for fees and costs must and will be paid from the settlement or judgment
in your case, whether or not we are your counsel at the time the matter is finally
resolved.” (Italics added.)
Hernandez’s interpretation of the Fee Agreement cannot be squared with the
language italicized above. Furthermore, Hernandez’s interpretation of the Fee
Agreement would conflict with rule 4-210 of the Rules of Professional Conduct, which
provides that an attorney “shall not directly or indirectly pay, guarantee, represent, or
sanction a representation that the [attorney] or [attorney’s] law firm will pay the personal
or business expenses of a prospective or existing client . . . .” (Italics added.) The rule
does go on to provide, “[T]his rule shall not prohibit [an attorney]: [¶] . . . [¶] (3) From
advancing the costs of prosecuting . . . a claim or action . . . , the repayment of which
may be contingent on the outcome of the matter.” (Italics added.) Contrary to
Hernandez’s suggestion, the rule’s exception does not make it “entirely permissible for a
plaintiff’s lawyer to bear the cost of [successful] litigation in a contingency agreement.”
“Advance,” in this context, means “to supply or furnish in expectation of repayment.”
(Merriam-Webster Online Dict.
[as of Sept. 5, 2014].)
Hernandez has not met her burden to show that the trial court’s ruling on costs was
in error. (Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649–650 [“an
appealed judgment is presumed correct, and appellant bears the burden of overcoming the
presumption of correctness”].)
III. DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.

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 _________________________
Bruiniers, J.

We concur:

_________________________
Simons, Acting P. J.

_________________________
Needham, J.

A139653

13
Superior Court of Alameda County, No. RG11586724, George C. Hernandez, Jr., Judge.

Eisenberg Law Office and Neil D. Eisenberg for Plaintiff, Cross-defendant and
Appellant.

Siegel & Yee and Dan Siegel for Defendants, Cross-complainants and Respondents.

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