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April 5, 2001

Farmers Insurance Exchange v. Law Offices of Conrado Joe Sayas, Jr. 250 F.3d 1234 (9th Cir. (Cal.) 2001)

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The Ninth Circuit has allowed concurrent counsel engaged in a fee dispute with their client to recover prevailing party attorneys’ fees when the attorneys represent each other in the fee dispute.  When a fee contract provides for recovery of attorneys’ fees by the prevailing party, attorneys may recover fees paid to their own counsel.  The fees must be incurred in the context of a valid attorney-client relationship where the interests of the attorney and the client are distinct.  The California Supreme Court holds a corporation may recover attorneys’ fees for the reasonable value of the services of in-house counsel.

The Law Offices of Conrado Joe Sayas, Jr. (“Sayas”) and Quisenberry & Kabateck, LLP (“Q&B”) jointly represented the Desais in an insurance bad faith action.  Sayas, Q&B and the Desais had entered into a contingency fee agreement that contained a prevailing party attorneys’ fees clause in the event of a dispute between the lawyers and the clients.  After their insurance bad faith case was settled, the Desais became dissatisfied with the representation of Sayas and Q&B and refused to honor the agreement.  Sayas and Q&B moved to recover attorney fees and costs under the contingency fee agreement.

Sayas and Q&B successfully moved for summary judgment on their fee dispute and were awarded $333,267 collectively in attorney fees and costs. Sayas and Q&B then moved for attorney fees under California Civil Code §1717 for fees they incurred in prosecuting the fee dispute.  The district court awarded Q&B $45,653, and Sayas $16,991.

The court allowed each attorney to recover its attorneys’ fees because Sayas and Q&B each retained the other.  The fees were actually incurred, which was evidenced by an obligation by each to pay attorneys’ fees to the other.  An attorney-client relationship existed with distinct interests between the attorney and the client.


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