Process servers are now required to show proof of due diligence when serving parties in California. AB 747, the bill known as the SPARE (“Service of Process Accountability, Reform, and Equity”) Act was signed into law by California Governor Gavin Newsom and is set to take effect on January 1, 2027. The act introduces significant reforms on service of process procedures and addresses concerns about fraudulent service of process (i.e., “sewer service”), particularly in eviction cases, by implementing stricter standards and enhanced documentation requirements.

What is “Sewer Service”?

“Sewer service” refers to instances in which a process server fails to properly notify someone they are being sued, often intentionally, and sometimes by literally discarding the court summons in the trash. This practice allows a lawsuit to proceed without the party’s knowledge and often leads to people losing cases by default. The party often ends up with their wages garnished or bank accounts drained years later, along with an inflated balanced on the original debt. The goal of the SPARE Act is to protect Californians who have been subject to lawsuits without ever knowing about it or being able to defend themselves from it. Ensuring the service is proper and timely means the process will be fairer for all people involved.

Changes under the SPARE Act

Under the new law, county clerks will be required to make registers of process servers publicly available beginning in 2027. This is done to increase transparency and accountability in the process serving industry. The new law establishes a clear definition of what constitutes “reasonable diligence” for service of process in specified civil cases. The standard of reasonable diligence means at least three good-faith attempts must be made at personal delivery of the service of summons and complaint, and these three good-faith efforts must be made at three different times, on three different days before alternative service methods (e.g., substituted service or posting) can be used.

Process servers will also be required to provide more documentation for their proofs of service. When a summons is served personally, by substituted service, or by posting in unlawful detainer actions, the proof of service must now include at least one photograph of the service location, along with a readable stamp and GPS coordinates indicating the date, time, and location of service. If GPS or cellular signal is unavailable at the time and place of service, the process server must provide a detailed statement explaining this on the proof of service.

For defendants in civil actions, the law strengthens protections against improper service by allowing parties who did not receive proper service to bring motions to set aside defaults or default judgments. The bill shifts the burden of proof, requiring the party seeking the default or default judgment to prove service was lawful, rather than placing the burden on the defendant to prove improper service. Courts will be required to conduct hearings and receive oral testimony if requested by either party in these proceedings.

For unlawful detainer cases specifically, the bill adds a requirement that complaints must include information describing the date, time, and location of service of the termination notice. The problem of sewer service and the high rate of debt collection default judgments have meant that many Californians have experienced the hardship and upheaval of surprise garnishments or evictions, making this reform critically needed. The bill’s implementation date of January 1, 2027, was chosen to give courts sufficient time to develop new forms and procedures and for plaintiffs and process servers to adapt their processes.

Key Takeaways

Beginning in 2027, your firm and process servers will need to adapt to significantly stricter documentation and attempt requirements. While the details of these requirements remain murky in some cases (e.g., the content of photographic evidence for proof of a failed service is not strictly defined). As we await clarification on photographic requirements, firms should still begin to implement the procedures that have a clear path to compliance.

The key point to remember here is that the burden of proof is now shifting from one side to the other: the party serving the documents is now required to prove that proper service was completed or attempted. Litigators now bear this burden by proving by a preponderance of the evidence that service was lawful, and so meticulous documentation is essential to protect against further challenges of default judgments.

In preparation, firms may consider conducting training sessions for staff on the new requirements well in advance of the January 1, 2027, effective date. Any existing vendors who provide process services should be reviewed to ensure they comply with the new requirements. Finally, updating case management systems to track enhanced documentation requirements should be established and standardized. Taking these precautions can help firms ensure they do not find their judgments set aside unexpectedly due to improper service.

The recent decision in Chong v. Mardirossian Akaragian LLP, B341157 (Cal. Ct. App. Jan. 8, 2026) takes up the issue of how to determine contingency fee arrangements when an attorney is fired before the end of a case. This case concerns a settlement agreement negotiated by the attorney but unratified by the client until after the termination of the attorney-client relationship. The precedent established by the case of Fracasse v. Brent (1972) 6 Cal.3d 784 governs attorney fee disputes when a client terminates before the conclusion of a case, but the court offered additional clarification in its recent decision. Collectively, Fracasse and Chong protect attorneys from clients seeking to terminate counsel to avoid payment of a contingency fee.

The Fracasse Precedent

In Fracasse, attorney George Fracasse had a contingency fee agreement with his client Ray Raka Brent to handle a personal injury case. The agreement provided for a 33% fee if settled early, or 40% if resolved later through settlement or judgment. Before any recovery was obtained, Brent discharged Fracasse and retained new counsel. In response, Fracasse sued, claiming he was entitled to the full contingency fee percentage of the recovery. The California Supreme Court rejected this argument, holding that a client retains the right to fire their attorney at any time and an attorney discharged, whether with cause or without, is not entitled to the contingency fee as outlined in the original retainer agreement. Instead, the attorney is entitled to the reasonable value of the services rendered up to the point at which they were fired. The measure of this value was established as the quantum meruit basis.

In Fracasse, the court held that allowing full contingency fee recovery would hinder a client from exercising their right to discharge an attorney at any time. Clients must be free to change counsel without facing a disastrous financial consequence from doing so. The Fracasse decision states that, in the event “the discharge of an attorney occurs ‘on the courthouse steps,’ in an action in which the client executes a settlement obtained after much work by the attorney,” (Fracasse v. Brent, 6 Cal. 3d 784 at 789), the reasonable value is the “entire fee contracted for” (Id. at 789) in the contingency agreement. With this caveat, the quantum meruit basis allows for a payment of the value of the work performed instead of the ultimate recovery, and for fifty years, California attorney fee disputes have been determined on this basis.

The Ratification Exception

Chong presented a situation not provided for in Fracasse: what happens when the attorney negotiates a settlement without the authorization of a client, the client then fires the attorney, but the client accepts that “unauthorized” settlement after termination? In the underlying case, Christopher Chong suffered injuries in a freeway accident and retained the Mardirossian firm under a 40-45% contingency fee agreement. The retainer agreement allowed for Chong to discharge the attorney at any time, providing the firm would be in that case entitled only to the “reasonable value” of its services (i.e., the Fracasse quantum meruit measure). After several years of work, the case had changed significantly, and there were over $2 million in medical liens threatening the hoped-for recovery. After attempting to mediate, the firm negotiated a settlement for just over $6 million (the policy limit). The firm did not get the client’s authorization for this settlement.

Chong’s family learned of the settlement and brought in new counsel, who advised against proceeding with the settlement. Chong fired the Mardirossian firm. Under Fracasse, the firm would be limited to quantum meruit recovery. However, just before trial, the defendant filed to enforce the settlement agreement. The client’s new attorney advised that there would be no point in trying to argue over the agreement, and Chong signed the settlement agreement, feeling he had no choice.

The Mardirossian firm claimed its full contingency fee (the 45% of settlement plus costs), arguing that their former client’s acceptance of the settlement constituted a ratification that related back to the time immediately before Chong discharged the client. The client had, in this view, discharged the attorney “on the courthouse steps,” when most of the work had already taken place.

The Court of Appeal sided with the Mardirossian firm on this matter, though the court’s decision also makes some clarifications. Explaining that the attorney-client relationship is governed by agency law, the court argued a principal can ratify an agent’s unauthorized act by adopting it after the fact. When a ratification like this takes place, it relates back to the time of the original act. This ratification makes it as if the act had been authorized all along. This ratification must be truly voluntary, though, which means it cannot be adopted due to duress or misrepresentation.

Chong argued the ratification was not voluntary because on the eve of trial, he was “left with no choice” or “reasonable alternative” to approving the settlement. The court disagreed, finding no economic duress in the case because economic duress requires wrongful threats or coercion. The firm’s conduct did not constitute duress under these standards. Chong had legal remedies, including the option to rescind the unauthorized settlement and go to trial. Instead, Chong made the “business” decision to secure the settlement rather than risking trial. Additionally, the unauthorized settlement did not cause a loss that would need to be minimized. Instead, it conferred a multimillion-dollar gain. Finally, Chong was represented by new counsel and knew he could oppose the defendant’s motion to enforce the settlement and rescind it. He chose not to and therefore was not under duress.

Key Takeaways

Chong presents an exception to the rule established by Fracasse. For law firms, this includes the fact that ratification of a settlement agreement can restore contingency fees. If an attorney is discharged on the courtroom steps, if the client later ratifies a settlement negotiated by the original attorney, that attorney is possibly entitled to full contingency fees and not quantum meruit only. Attorneys dealing with similar situations must document the timeline and determining whether the settlement was negotiated before or after settlement, and the ratification must be voluntary.

Rescission Is an Option: If your former attorney negotiated a settlement without authorization, you have the legal right to rescind that settlement—don’t feel compelled to accept it just because the other side files a motion to enforce.

Chong v. Mardirossian refines our understanding of attorney fee recovery in complex termination scenarios. It confirms that Fracasse remains the general rule: discharged attorneys get quantum meruit, not contingency fees. But it creates a meaningful exception: when clients voluntarily ratify unauthorized settlements negotiated before discharge, the retroactive effect of ratification entitles the attorney to the contractual fee.

Litigators should obtain proper authorization before negotiating settlements, document their communications, and understand that clients retain significant power to rescind unauthorized agreements. Failure to do so might result in the loss of a contingent fee.

The California legislature has passed several laws expanding employees’ rights that are set to go into effect in early 2026. Several employment-related laws are set to go into effect in 2026.

Minimum wage Increase and New Exempt Employee Thresholds

Beginning January 1, 2026, California’s minimum wage increases to $16.90 per hour (this is increased from the current level of $16.50 per hour). This adjustment will also have ripple effects on salary thresholds for exempt employees and other wage and hour obligations. With this increase in minimum wage, the salary threshold for employees to be considered exempt from overtime rises. Beginning on January 1, 2026, an employee must make $70,304 per year (up from $68,640 in 2025). The other requirements for exemption from overtime still apply in the same way (i.e., generally, work must meet detailed requirements and involve some level of independent decision-making). There are also some jobs that have specific conditions. As of January 1, 2026, the minimum hourly rate for computer software employees to meet the exempt category will be $58.85 (i.e., a minimum annual salary of $122,573.13). For licensed physicians and surgeons, the minimum hourly rate will be $107.17 to meet the exemption category.

Please note that some cities and counties have higher minimum wages than the State of California. For a list of City and County minimum wages in California, please consult this list.

Protected Leave for Court and Protected Leave for Crime Victims

AB 406 significantly expands employee leave rights by amending multiple sections of the Government and Labor Codes. Effective immediately, employees can now use paid sick leave for jury duty and court appearances under subpoena, activities previously considered unpaid leave. Starting January 1, 2026, victims of serious crimes (including domestic violence, stalking, and sexual assault) and their family members can take unpaid leave to attend related judicial proceedings, with protections against employer discrimination or retaliation. The law also prohibits employers from taking adverse action against employees who serve on juries, appear as witnesses, obtain protective orders, or take time off for safety-related activities such as seeking medical attention, accessing victim services, or relocating. Employers with 25 or more employees must maintain confidentiality, allow use of accrued paid leave for these purposes, provide written notice of these rights using the Labor Commissioner’s form, and offer reasonable accommodations, with employees required to provide advance notice when feasible or documentation after unscheduled absences.

Employment Contracts and Worker Mobility

Effective January 1, 2026, AB 692 bars common arrangements that require an employee to reimburse employers for costs such as relocation expenses and work-related training programs when the employment ends before a certain time. There are carve outs for tuition and discretionary bonus repayments, provided employees follow the restrictions prescribed by the new law. Under this law, employers are not allowed to require a worker to sign any agreements that:

1. Requires debt repayment if employment ends;
2. Allows debt collection or end forbearance on a debt if employment ends; or
3. Imposes any penalty if employment ends.

This law is not retroactive, so employers will not need to amend previously signed agreements under AB 692. This only applies to agreements entered on or after January 1, 2026.

Tip Theft Enforcement

Beginning in 2026, the Labor Commissioner will have increased authority to investigate and enforce tip theft. SB 648 expands authority by expressly authorizing enforcement of tip and gratuity protections through civil actions and citation issuance. These violations are to be enforced in similar ways to how other wage and hour violations

Independent Contractors and Vehicle Business Expenses

SB 809 addresses construction trucking classification and creates an amnesty program for certain employers while clarifying existing law regarding vehicle expense reimbursement. Among its major provisions are establishing a Construction Trucking Employer Amnesty Program through January 1, 2029, and allowing construction contractors to avoid penalties for previous misclassifications through settlement agreements. The legislation clarifies that vehicle ownership alone does not make someone an independent contractor and that employers must reimburse employees for vehicle-related expenses under Labor Code Section 2802.

SB 642: The Pay Equity Enforcement Act

This legislation strengthens California’s Equal Pay Act and pay disclosure requirements in several ways. The bill refines the definition of “pay scale” to mean “a good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.” This language aims to prevent overly broad, meaningless salary ranges in job postings. Employers must provide narrow ranges that give applicants reasonable estimates of actual expected pay.

SB 642 also extends the statute of limitations for pay equity claims, which can now be filed within three years (up from two years). The law clarifies that a cause of action occurs when an employer adopts a discriminatory compensation decision, an individual becomes subject to such a decision, or an individual is affected by its application, including each time wages are paid. Additionally, the expanded recovery period allows employees to obtain relief for the entire period of discrimination, up to six years. This significantly increases potential employer liability compared to the typical 3–4-year lookback period. Employers must maintain pay scale and pay equity records for at least six years.

Finally, the bill provides a broader definition of “wages” that now includes salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, allowances, hotel accommodations, travel expense reimbursement, and benefits. Employers must ensure pay equity across all these forms of compensation.

SB 464: Enhanced Pay Data Reporting Requirements
Effective January 1, 2026

Private employers with more than 100 employees who must submit annual pay data reports to the California Civil Rights Department must store their demographic information separately from personnel records. Failure to do so will result in civil penalties.

SB 294: The Workplace Know Your Rights Act

This significant new law creates comprehensive notice requirements for all California employers.

Required by February 1, 2026

Employers must provide each current employee and new hire with a standalone notice covering workers compensation and Division of Workers’ Compensation contact information, rights regarding immigration agency inspections, protection against unfair immigration-related practices, right to organize and engage in concerted activity, constitutional rights when interacting with law envorcement at the workplace, and material legal developments identified by the Department of Industrial Relations.

The notice must be provided to new employees upon hire, to current employees annually, sent to collective bargaining representatives (if any) annually, provided in the manner the employer normally uses for employment-related information, and provided in the employee’s preferred language (if template is available).

There are also requirements regarding emergency contact notification. Employers must give all current employees the opportunity to designate an emergency contact by March 30, 2026. Employers must collect emergency contact information at hire for new employees. Upon employee request, employers must notify designated emergency contact if the employee is arrested or detained at the worksite.

The Department of Industrial Relations will create a template notice by January 1, 2026

Penalties for violating these rules include $500 per employee, per violation for notice requirement failures and $500 per day of violation (up to $10,000 per employee) for emergency contact notification failures

SB 513: Training Records as Personnel Records
Effective January 1, 2026

This legislation states that employee education and training records are now explicitly included in “personnel records” that employees have the right to inspect and receive copies of. The requirement information in training records includes:

• Employee’s name
• Name of training provider
• Duration and date of training
• Core competencies covered (including equipment or software skills)
• Any certification or qualification resulting from the training

AB 963: Public Works Project Recordkeeping

For projects subject to California’s prevailing wage requirements under the Public Works Law, AB 963 creates extensive new recordkeeping and disclosure obligations for owners and developers.

• Records that must be maintained and disclosed upon request:
• Request for bids on the project
• Lists of bids received and total bid amounts
• Final construction contracts demonstrating Public Works Law compliance
• Names and license numbers of contractors and subcontractors
• Certified copies of all payroll records in possession, custody, or control
• Monthly reports regarding skilled and trained workforce commitments

SB 590: Paid Family Leave for “Designated Persons”
Effective July 1, 2028

Beginning July 1, 2028, California’s Paid Family Leave (PFL) program expands significantly to include care for a “designated person.”

Key details:

“Designated person” means any individual related by blood OR whose association with the worker is equivalent to a family relationship

Employees can receive wage replacement benefits for up to eight weeks when caring for a seriously ill designated person

Employee must identify their designated person when first filing a claim for these benefits

Must attest under penalty of perjury to the relationship

AB 858: Extension of COVID-19 Layoff Rehire Rights

California’s rehire protections for hospitality workers laid off for COVID-19-related reasons were set to expire December 31, 2025. AB 858 extends these rights through January 1, 2027, requiring covered employers to offer available positions to qualified laid-off employees based on preference systems.

SB 617: Cal-WARN Notice Enhancements

For employers subject to the California Worker Adjustment and Retraining Notification Act (Cal-WARN), written notices must now include additional specified information and indicate whether the employer plans to coordinate services through the local workforce development board. If coordination is planned, employers must arrange for those services within 30 days of the written notice.

Takeaways

California’s 2026 employment law landscape represents one of the most significant regulatory shifts in recent years. The new laws touch nearly every aspect of the employment relationship.

Given the volume and complexity of these changes, employers should work closely with legal counsel to audit policies, update procedures, train managers, and implement compliant practices. The financial and reputational risks of non-compliance have never been higher, but with proper preparation, California employers can successfully navigate these new requirements.

Employers should also stay alert for additional guidance from state agencies, particularly the Department of Industrial Relations, Labor Commissioner, and Civil Rights Department, which will be issuing templates, regulations, and enforcement guidelines throughout 2026.

This information is for general informational purposes only and does not constitute legal advice. If you have additional questions about newly enacted employment laws in California, please contact Patrick Maloney at The Maloney Firm at your earliest convenience.

Recently, the Maloney Firm’s Greg Smith secured a significant victory for our client Andy Cruz, the Olympic gold medal-winning boxer and undefeated lightweight contender. Judge Orrick of the Northern District of California ruled a 2023 promotional agreement between Cruz and New Champion promotions was invalid and unenforceable. Cruz is now able to continue advancing his career under the sole direction of Matchroom Boxing, his current promoter, without interference from New Champion Promotions.

The Facts

After winning a gold medal at the Tokyo Olympics, Cruz left Cuba and engaged New Champion Promotions to help connect him to a major boxing promoter that could showcase his talents on the biggest stage possible. 

Jesse Rodriguez, the president of New Champion Promotions, connected Cruz with Matchroom Boxing and the parties signed an agreement that designated New Champion as Cruz’ co-promoter with Matchroom and required Matchroom to pay Cru a lucrative signing bonus and fight purses.  However, because Cruz did not have a U.S. Visa and bank account, the contract called for Matchroom to initially pay Cruz’ money to New Champion, which would then distribute the funds.   Problems arose when New Champions Promotions began withholding portions of Cruz’s winnings, claiming it was entitled to 25 percent of all payments under an alleged oral agreement that was not reflected in the documents.

Greg Smith secured the win for Cruz by demonstrating critical facts. First, that no valid oral contract existed between Cruz and new Champion Promotions because the alleged agreement did not specify essential terms and lacked proper consideration. These oversights mean any alleged oral agreement, if it occurred, was legally invalid. The Court ruled that what was agreed upon between Cruz and New Champion Promotions was that Rodriguez would serve as a go-between to find a major promoter, not that Rodriguez was engaged to be that promoter himself. Furthermore, New Champion Promotions had only promoted one fight in its history, which had operated at a loss, which makes it unlikely Cruz would have thought of New Champion Promotions as a promoter.

The court recognized that enforcing New Champion Promotion’s interpretation of the agreement would have been exploitative dive into Cruz’ pockets without any legitimate contractual basis.

The Victory

The Maloney Firm protected Cruz from New Champion Promotions’ theft of his hard-earned purses.

The court’s ruling dismissed NCP’s claims to percentage-based compensation, confirming that Cruz owes nothing to NCP as a promoter. The case once again underscores the importance of clear contractual terms and the need to protect athletes from overreaching business partners.

For athletes, entertainers, and other professionals entering complex business relationships, this case underscores the critical importance of experienced legal counsel who can identify problematic terms, protect your interests, and take decisive action when disputes arise.

Update February 20, 2026

Since we first published this post, the stakes surrounding AI in the legal profession have increased. Alongside cases emerging nationwide involving issues with artificial intelligence-induced citation hallucinations, there are increasing instances of attorneys using heretofore trustworthy sources for research that have been found to be laden with errors. We have become aware of several instances in which attorneys conduct good-faith research on seemingly trustworthy legal research sources only to find out the cases cited for an issue do not match the citation. Some of these attorneys now find themselves ensnared by State Bar investigations, facing assertions of incompetence or making misrepresentations to the court.

Attorneys receiving citations from individual courts for incorrect information or citations are sometimes required to report themselves to the State Bar, and we know of instances in which this led to the initiation of a State Bar investigation. Furthermore, these cases are approached by the bar as issues of moral turpitude, which can have serious consequences up to and including disbarment. The California State Senate has introduced a bill that would require lawyers to safeguard confidential information and prevent it from being entered into AI systems, as well as to personally review any AI-generated work and prohibit decision making to machines. These updates further underscore the need for extreme caution when considering the use of AI in anything to do with the practice of law.

Attorneys are submitting briefs to courts containing fabricated case citations, fabricated quotations, and entirely invented legal authorities. These are not just careless mistakes or isolated incidents. They are the predictable result of delegating critical legal work to artificial intelligence systems that their vendors claim are reliable but demonstrably are not.

In Noland v. Land of the Free, L.P., 2025 WL 2374381 (Cal. Ct. App. Sept. 12, 2025), the California Court of Appeal confronted a recent example of this in which counsel submitted an opening brief in which 21 of 23 legal quotations were entirely fabricated. The attorney had used generative AI tools to draft the briefs, then used additional AI tools to verify the citations—a practice equivalent to fact-checking rumors by asking about other rumors. He never consulted the cases themselves. The court’s response was surgical: a $10,000 sanction, a referral to the State Bar of California, and notification to the client.

But the damage extends far beyond one attorney’s misconduct.

What Are AI Hallucinations?

When generative AI systems encounter a request they cannot answer from their training data, they are less likely to say they don’t know the answer. Instead, they will make one up. These made-up sources tend to appear entirely authentic (complete with case names, citations, court designations, etc.). The systems do this out a desire to be helpful to the user (uncertainty is very unhelpful!).

Large Language Models (AI systems) are pattern-matching systems. They are not capable of reasoning. Instead, they take input data, compare it to patterns in the data they already have in their system, and produce a guess at the correct answer. Sometimes their guesses are really good, but they do not understand law, logic, or arguments. In fact, they cannot think like a lawyer. They cannot think at all.

Still, vendors (often recent undergraduates or college dropouts) market these tools as reliable legal research platforms. They explicitly claim the tools are “hallucination-free” and these claims are easily disproven. Research has shown disturbingly high levels of hallucinations across all of the readily available AI legal research tools, including both the more general tools (e.g., Chat-GPT or Claude) and the specialized ones marketed to lawyers specifically (e.g., Lexis Nexis and Thomson Reuters). The marketing is incorrect.

The Scope of the Legal Hallucination Trend

A comprehensive study of 114 federal court cases involving AI hallucinations in attorney filings reveals a troubling pattern. Small law firms account for the vast majority of incidents, but this is likely only because larger firms have more resources to catch errors (i.e., multiple attorneys reviewing each document before submission). The legal profession is experiencing economic strain across the board, and it’s likely that AI tools will grow in popularity as more and more firms struggle to manage large workloads and growing price sensitivity. AI tools offer the illusion of sophistication and efficiency while delivering a new way of making the same mistakes.

A Profession-Wide Problem Requiring a Profession-Wide Response

The American Bar Association issued formal guidance on AI use in July 2024. State bars have begun developing continuing legal education requirements. Yet incidents continue at an accelerating pace. Dozens of new cases have been added to hallucination databases since the ABA’s guidance was published.

Individual attorney vigilance is necessary but often insufficient. The legal profession must treat AI hallucinations as a systemic threat requiring coordinated action: mandatory, rigorous CLE on AI risks; clear ethical guidelines prohibiting delegation of citation verification to machines; bar association monitoring of AI tool performance; and heightened scrutiny of filings incorporating AI research.

But the most essential rule remains unchanged and cannot be automated. Read your briefs. Check your citations against primary sources. Verify everything yourself. Understand that the tools you are relying on are fundamentally less reliable than their marketing claims suggest.

AI can assist with legal work. Verification, however, cannot be delegated to machines. The profession must treat that distinction as non-negotiable, or it will continue paying the price in sanctions, bar discipline, and lost public confidence.

Attorneys looking to transition their career into private mediation or arbitration will still need to maintain their active State Bar licenses, according to a recent ruling by the California Court of Appeal. Getzels v. State Bar of California, 2025 No. B338089 (Cal. Ct. App., 2d Dist., Div. 4, June 26, 2025) reinforces California’s regulatory approach to keeping attorney-arbitrators and mediators under the full scope of State Bar oversight. The unanimous three-judge appellate panel’s decision settles significant constitutional questions while establishing clear boundaries for attorneys seeking flexible arrangements that combine retirement with specialized practice in private dispute resolution. The case makes it clear that inactive attorneys cannot serve as private dispute resolution professionals.

The case creates another problem. Inactive attorneys in good standing with the State Bar are prohibited from serving as private dispute resolution professionals unless they make their license active.  Non-attorneys, however, including disbarred attorneys, attorneys who resigned under discipline, and unbarred law school graduates can not only practice as neutrals.

The Facts

The underlying case concerns Morris S. Getzels, a 72-year-old attorney who retired from traditional legal practice in 2022 but wanted to continue his 25-year career in arbitration and mediation. Getzels hoped to transfer to inactive status to avoid the higher licensing fees (currently $515 annually for active members versus reduced fees for inactive status) and mandatory continuing legal education requirements while maintaining his ADR work.

California State Bar Rule 2.30 prevented this arrangement. The rule prohibits inactive licensees from “occupying a position wherein he or she is called upon in any capacity to give legal advice or counsel or examine the law or pass upon the legal effect of any act, document or law.” This language effectively requires attorneys working as private arbitrators and mediators to maintain active licensure.

Getzels mounted a comprehensive constitutional challenge to Rule 2.30, raising two primary arguments that the Court of Appeal ultimately rejected: 1) a strict scrutiny argument, and 2) a rational basis challenge. Getzels first argued that Rule 2.30 violated the Equal Protection Clauses of both the federal and California Constitutions by treating inactive licensees differently from “everyone else in the entire world.” He claimed the rule impinged on a fundamental liberty interest in “freedom of contract,” specifically the “freedom of contract liberty rights of disputants and litigants to choose whomever they want to arbitrate or mediate their disputes.” The appellate court firmly rejected this argument, relying on established Supreme Court precedent, particularly West Coast Hotel Co. v. Parrish, 300 U.S. 379, 392 (1937), which held that “freedom of contract” is not a fundamental right under the Fourteenth Amendment. Consequently, the court applied rational basis review rather than the strict scrutiny standard Getzels sought.

Getzels alternatively argued that even under rational basis review, Rule 2.30 lacked any rational relationship to a legitimate state interest. The court disagreed, finding multiple rational justifications for the rule’s distinctions. The State Bar has a legitimate interest in maintaining a competent bar and ensuring professional conduct of all licensees who engage in law-related activities. The court also found it rational for the State Bar to conclude that inactive licensees working as arbitrators and mediators would burden the regulatory system because the State Bar would still receive complaints about their conduct and be required to investigate and respond to them, despite these attorneys only paying reduced fees.

The court also found that there was a rational basis for Rule 2.30’s disparate treatment of inactive attorney licensees and non-licensed neutrals, reasoning that non-licensed arbitrators and mediators fall outside the State Bar’s jurisdiction entirely and therefore do not place a burden on its regulatory system. The rule’s structure reflects the State Bar’s position that attorneys serving as private arbitrators and mediators remain closely connected to legal practice, generate ongoing regulatory oversight demands, and should therefore contribute to the full cost of that oversight.

Key Takeaways

Attorneys who wish to serve as private arbitrators or mediators must maintain active State Bar membership even after retiring from the practice of law. This means payment of annual active licensing fees, completion of mandatory continuing legal education requirements, and full regulatory oversight and disciplinary jurisdiction. The “inactive” status option with the State Bar is not available for private dispute resolution work.

When advising clients on dispute resolution clauses, attorneys should consider whether requiring active attorney-arbitrators provides additional oversight benefits worth potential cost increases. Parties will need to be more cognizant of the status of the mediator they choose: non-licensed mediators and arbitrators cannot be disciplined or regulated through the State Bar of California. Similarly, parties must determine if the mediators and arbitrators they consider were ever attorneys and if so, if their licenses are maintained.

For now, the Getzels case means inactive attorney cannot practice as an arbitrator, but a disbarred attorney, or an attorney who resigned from the bar, or a J.D. who never passed the bar, can. In the short term, there is likely to be some confusion among consumers of private dispute resolution when choosing their private dispute resolution professionals. For now, consumers are left to navigate a system where professional qualifications and regulatory oversight do not necessarily reflect who can actually serve as a private mediator or arbitrator.

Even experienced trial courts can err when calculating attorney’s fees. The Court of Appeal’s reversal in Tidrick v. FCA US LLC, 2025 WL 1234567 (Cal. Ct. App. [4th Dist., Div. 3]) underscores that proper attorney fee calculations protect the integrity of fee-shifting statutes and the rights of prevailing parties to recover reasonable compensation. Moreover, fee motions should be treated with the same rigor as merits briefing.

Tidrick v. FCA US LLC involves a claim made under the Song-Beverly Consumer Warranty Act for vehicle defects, its settlement and a request for attorney’s fees. The original attorney fees and costs calculation of $82,719.33 used reasonable rates for attorneys in Orange County, where the case was filed and decided (and where FCA US, a subsidiary of an international company, is headquartered). However, the trial court awarded only $15,000 total (without specifying how much was for fees and how much was for costs), representing an 82.9% fee reduction. The Court of Appeal went on to reverse this award entirely, citing several errors in the trial court’s analysis, including:

1. Venue, Not Plaintiff’s Residence, Determines Applicable Attorney Rates

The trial court chose to apply attorney’s fees based upon the going rates in Fresno County, where the automobile was purchased and where plaintiff resides. The rates in Fresno County are much lower than the requested rates, but the case was filed, heard, and decided in Orange County. Additionally, defendant FCA maintains its principal place of business within the United States in Orange County. When multiple venue options exist, plaintiffs may choose where they file their cases. The Court of Appeal emphasized that the “reasonable hourly rate is that prevailing in the community for similar work.” The meaning: where the court is located, not where the plaintiff resides. Given this, attorney’s venue strategy should be crafted around the impact on potential fee awards and not just convenience.

2. Courts Must Apply Lodestar Method with Precision

The trial court’s recalculation was sloppy and imprecise. The court failed to specify how many of the claimed 173 hours were “reasonably incurred” or what hourly rate applied to allowable hours. Instead, the court awarded a lump sum representing a dramatic decrease in the award and absent any explanation for how the award was calculated. Courts must follow the lodestar method in calculating their fees and fee reductions (i.e., reasonably expended hours x reasonable hourly rate). Not only did the court fail to demonstrate the method through which the fee reduction was calculated, the court also presented a lump sum for fees and costs without specifying how funds were allocated. To compound this error, defendant FCA never challenged the $8,444.33 cost request in the first place. Costs and attorney fees are distinct and require separate analysis.

Attorneys moving for a reduction in the amount of fees awarded should present a clear calculation, including documentation of actual hours with detailed billing records, an inventory of prevailing rates with market surveys and comparable awards, and a request for specific findings on both components. Leaving a recalculation up to the trial court might end in erroneous fee awards. Similarly, if the opposing party does not object to the cost award, a note of this waiver should be made in the reply.

3. Lack of Justification for a Substantial Fee Reduction

The trial court criticized the underlying case as being “simple” and suggested it should have been “resolved quickly,” without any case-specific analysis of which claimed attorney’s fees were unreasonable or an explanation for why they were unreasonable. At 82.9% reduction in attorney’s fees is enough to meet the “shock the conscience” standard set by Mikhaeilpoor v. BMW of North America, LLC (2020) 48 Cal.App.5^th 246. The Court of Appeal stated, “when a trial court applies a substantial negative multiplier to a presumptively accurate lodestar attorney fee amount, the court must clearly explain its case-specific reasons for the percentage reduction.” Therefore, when opposing fee motions, attorneys must provide detailed, hour-by-hour analysis of the allegedly excessive time. Submitting a general criticism of the amount of fees awarded is not enough without examples of inefficiencies or unnecessary work.

4. Improper Use of Procedural Missteps to Justify Fee Reduction

The Court of Appeal ruled the parties’ failure to provide a copy of their confidential settlement agreement did not justify a reduction in attorney’s fees. Courts cannot penalize parties for procedural issues unrelated to the reasonableness of fees incurred. Settlement confidentiality is legitimate and cannot justify fee reductions. Should a court request documents that cannot be provided due to privilege or confidentiality, the limitation should be formally addressed, and an offer of alternative supportive evidence for the fee request can be offered.

This decision reminds us that attorney fee motions should be treated with care. Proper application of the lodestar method for fee award calculation is crucial, and when seeking or opposing fee awards, success depends upon careful attention to legal standards, factual documentation, and strategic presentation. The Tidrick reversal demonstrates that even experienced trial courts can err when attorney fees are at stake. By understanding these key principles and avoiding the pitfalls identified by the Court of Appeal, practitioners can better serve their clients and ensure that fee awards are determined through proper legal analysis rather than rough approximation.

A recent California Court of Appeal decision potentially undermines the motion reservation systems of local courts. In CFP BDA, LLC v. Superior Court (Cal. Ct. App. July 10, 2025) the Fourth Appellate District ruled that local court rules for timely filing after motion reservation cannot prevent a timely filed summary judgment motion from being heard, even when those local rules about filing deadlines have been violated.

California’s larger counties struggle with calendar management. To prevent judges from being overwhelmed with too many motions on one day or having empty calendars on others, most major counties implemented online reservation systems. Litigants must reserve a hearing date first, then file their motion within a specified timeframe, typically three to ten days after reservation. Litigants who miss that deadline lose their hearing date. This system was designed to prevent parties from reserving multiple dates without an intention to use them. Though the system has problems, it has successfully provided structure to court calendars.

Unfortunately, the system has also resulted in parties not being able to get the dates they want and sometimes facing delays of months before hearing dates are available. This results in motions being heard far later than appropriate, resulting in delays.

The Underlying Case and The Court of Appeal’s Ruling

A lawsuit involving Bermuda Dunes Airport involved adjacent landowners seeking to impose an easement on airport property. On November 14, 2024, the defendant reserved an April 1, 2025, hearing date for their motion for summary judgment. Under Riverside County’s local rules, they had ten days to file the underlying motion to preserve that date. The defendant did not file by the November 24 deadline to meet Riverside’s rules, and instead waited until January 10, 2025, to file their motion for summary judgment. This timing satisfied the requirement of Code of Civil Procedure Section 437(c) (81 days’ notice before the hearing and the hearing occurring 30 days before trial). However, it violated the (local) ten-day rule by about two months. As a result, the court cancelled the hearing date and rejected the filing. The trial court also denied all requests to specially set the motion for hearing, leaving the defendant without an opportunity to present their summary judgment motion before trial.

Then the Court of Appeal got involved. The court’s opinion makes clear that, while local rules should be obeyed, the statutory requirements trump local rules when it comes to summary judgment motions. Since the defendant’s motion complied with 437(c), the trial court was obligated to hear it, regardless of the local court’s rule violation.

The decision establishes that when a summary judgment motion meets statutory deadlines, courts cannot refuse to hear it based solely on local rule violations. Administrative convenience cannot prevent consideration of timely filed motions on their merits. Furthermore, when local rules conflict with statutory rights, trial courts must find ways to accommodate both, whether through trial continuances or expedited hearing schedules.

The Court of Appeal acknowledged the difficulty trial courts face in managing unwieldy calendars and explicitly stated the decision should not be construed as challenging the validity of local reservation rules. However, the court’s reasoning clearly creates tension with those provisions by establishing that statutory compliance alone creates an obligation for courts to hear summary judgment motions.

What You Should Know

The decision carries immediate strategic implications that extend beyond summary judgment motions. If statutory compliance trumps local rules for motions under CCP Section 437c, similar logic could apply to other motions filed on regular notice. The underlying statutory language for regular motions is virtually identical to that governing summary judgment motions, suggesting the Court of Appeal’s reasoning could render local reservation rules essentially meaningless across all motion practice.

While the Court of Appeal’s decision may provide a safety net for missed local deadlines, it’s not a license to ignore reservation requirements. Courts retain discretion in how they accommodate conflicting demands, and sanctions remain a risk for attorneys who flagrantly disregard local rules.

Attorneys should pay careful attention to the impact the CFP BDA, LLC v. Superior Court (Cal. Ct. App. July 10, 2025) decision has on local court calendars, as well as any reflexive changes to local rules. Rules requiring prompt filing of motions were intended to dissuade attorneys from preemptively booking hearing dates they might not use. However, the process of advance booking arose out of necessity when attorneys discovered that, without reserving dates for motion for summary judgment hearings well ahead of time, they risked not being able to secure a hearing date or not being able to secure a date that complied with the deadlines before trial. Until a solution to the underlying problem is found (chronic underfunding of California’s court system and an insufficient number of judges to handle the state’s litigation demands), local rules are not likely to be successful in managing the scarcity through administrative controls, and lawyers may need to continue to create ad hoc solutions. The problem requires a legislative solution that addresses judicial resources, rather than piecemeal fixes that create conflicts between the procedural requirements of different authorities.

A recent California Court of Appeal decision has deepened a split among state appellate courts regarding how trial courts must justify substantial percentage reductions to attorney fee awards. The May 2025 ruling in Michael Cash v. County of Los Angeles, _Cal. App. 5th ___ (2025) [WL 1540542; Case No. B336980], underscores issues that may impact business litigation cases in which attorney’s fees are recoverable. 

The dispute centers on what level of scrutiny appellate courts should apply when reviewing a trial court’s decision to impose an “across-the-board” percentage reduction to attorney fees. This issue affects a variety of business litigation cases (e.g., employment disputes, consumer protection cases, and civil rights claims) where prevailing parties are entitled to recover attorney fees. While some courts continue to apply the “abuse of discretion” standard (i.e., requiring only that the trial courts articulate a general justification for fee reductions), others have adopted “heightened scrutiny” (i.e., demanding the trial courts provide specific, case-by-case explanations for their chosen percentage reduction. 

The Cash Decision: Affirming Traditional Deference 

In Cash, the trial court reduced the plaintiff’s attorney fee request from $735,310 to $455,546, which was a 30% across-the-board cut. The court justified this substantial reduction based on findings of “unreasonable padding,” “duplicative” work, and unnecessary prolonging of trial proceedings. The California Court of Appeal affirmed the reduction of the trial court. In their opinion, they explicitly rejected the heightened scrutiny approach adopted by courts in cases like Warren v. Kia Motors America 30 Cal. App. 4^th 37 (2018) and Snoeck v. ExakTime Innovations 96 Cal. App. 5^th 908 (2023). The majority held that importing federal civil rights law standards into California fee determinations was inappropriate and inconsistent with the state’s longstanding policy of deferring to experienced trial judges. Justice Baker’s partial dissent argued that when courts apply “meat cleaver” reductions rather than precise line-item cuts, they should provide more detailed justifications to enable meaningful appellate review. The dissent criticized the trial court’s minimal explanation for the 30% reduction, noting that the court’s primary concrete example (inefficient trial questioning) could account for only about 15 hours of unnecessary time, hardly justifying a reduction equivalent to over 400 hours of work. The Cash court noted that this split in authority makes the case “a good candidate for a grant of Supreme Court review.” Until the California Supreme Court provides guidance, practitioners must navigate this uncertain landscape carefully. 

What You Need to Know 

The Cash decision suggests a handful of best practices for litigants. Parties seeking fees should continue to document everything and present comprehensive and thorough fee applications. With courts potentially applying broad percentage cuts, meticulous time records and detailed billing descriptions are critical. Be prepared to justify every hour billed, especially when multiple attorneys work on similar tasks. For litigants opposing fee requests, focus on patterns to identify systematic issues such as duplicative work or excessive hours for routine tasks. Referring to percentage reductions approved in similar cases can support your proposed reductions. The larger the fee reduction requested, the more compelling and detailed your justification will likely need to be. 

Other Considerations for Fee Applications 

• Real-Time Documentation: Record not just time spent but the necessity and results of each task 

• Regular Case Assessment: Periodically evaluate whether case staffing and strategies remain cost-effective 

• Strategic Presentation: Organize fee requests to highlight efficiency and necessity rather than just hours worked 

As this area of law continues to evolve, staying informed about developments in different appellate districts will be crucial for effectively advocating for clients’ interests in fee-shifting litigation. 

In Escamilla v. Vannucci 2025 Cal. LEXIS 439 (Cal. Mar. 20, 2025), the California Supreme Court weighed in on the question of how long non-clients have to sue attorneys for professional misconduct (e.g., malicious prosecution). This decision has implications for businesses who have been targeted by frivolous lawsuits, as well as attorneys who might find themselves on the receiving end of a claim from a previous case.

In the underlying case, Daniel Escamilla, working as a fugitive recovery agent, searched the home of Lan Ting Wu and Andy Yu Feng Yang, looking for Yang’s brother, who was wanted on felony drug trafficking charges.

Yang and Wu sued Escamilla for assault, battery, trespass, false imprisonment, and emotional distress. They hired an attorney (Vannucci) to represent them in the case in which Escamilla claimed the search was supported by probable cause and cross-complained for abuse of process. The jury found in favor of Escamilla and was awarded $20,000 in damages.

Additionally, Escamilla filed a malicious prosecution action against Yang, Wu, and their attorney, John Vannucci. Vannucci moved to strike Escamilla’s complaint as a strategic lawsuit against public participation (SLAPP), and the trial court granted Vannucci’s motion, agreeing that the one-year statute of limitations for claims against attorneys (Cal. Civ. Proc. Code § 340.6) applied. The California Court of Appeal affirmed this decision.

The Supreme Court’s Intervention

The California Supreme Court reviewed the case to determine whether the one-year statute of limitations for claims arising from a lawyer’s professional services also applied to a claim for malicious prosecution. The key statute under discussion, Section 340.6, reads:

An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.

The crux of the matter was whether the one-year statute applied when a non-client sued a lawyer for alleged professional misconduct, such as malicious prosecution. The Supreme Court acknowledged that the statute was ambiguous in this specific context and because of this ambiguity, the court considered legislative history, policy, and purpose in rendering its opinion. Although some justices argued the text of the statute was clear and should be followed according to its letter, the court ultimately held that the two-year statute applies in malicious prosecution lawsuits brought by a non-client.

Key Takeaways

This ruling has implications for businesses who have been targeted by malicious prosecution. If your business has faced frivolous litigation or questionable legal tactics from opposing counsel, this ruling provides additional time to consider your options. However, it’s still advisable to consult with your legal team promptly to preserve evidence and evaluate potential claims.

The Escamilla decision reflects the court’s commitment to fairness in the legal system, ensuring businesses and other non-clients have reasonable time to pursue legitimate claims against attorneys who may have abused the litigation process.