Case Number: KC067036 Hearing Date: February 27, 2018 Dept: J

Re: Nephrology Associates of Upland and Pomona, etc. v. Hla M. Maung, M.D., etc. (KC067036)

MOTION FOR ATTORNEYS’ FEES

Moving Parties: Plaintiff/Cross-Defendant Nephrology Associates of Upland and Pomona, and Cross-Defendants Jin Wang, M.D., Mary Bui, D.O., Minna F. Huang, M.D., Minna F. Huang, M.D., Inc., Chirag Vaidya, M.D. and Chirag Vaidya, M.D.

Respondent: Defendant/Cross-Complainant, Hla Myint Maung Hwang, M.D.

POS: Moving OK; Opposing OK; Reply OK

This action arises out of a partnership agreement between Plaintiff Nephrology Associates of Upland and Pomona (“NAUP”) and Defendant Hla Myint Maung Hwang, M.D. (“Maung”). NAUP is a general medical partnership, established pursuant to a partnership agreement dated November 2, 1986. Maung was accepted as a partner to NAUP in 2001. As part of Maung’s partnership agreement, he promised that if he left the partnership he would not practice medicine within 30 miles of the NAUP offices for a period of two years. The complaint alleges that Maung treated patients and billed his services under a separate tax identification number while he was a partner of NAUP, instructed patients to cease their relationship with NAUP, and is now practicing medicine within the geographical radius proscribed by the NAUP partnership agreement. The complaint was filed on 8/1/14.

On 9/5/14, Maung filed a cross-complaint alleging that the partners of NAUP agreed that his general partnership interest in NAUP would be purchased by the remaining parties, but that they have breached the purchase agreement by repudiating the existence of the agreement and failing and refusing to pay him for his NAUP partnership interest. Maung also alleges that Foothill Dialysis Access Center (“FDAC”) was established by NAUP in July 2006 to provide medical care related to dedicated care of access sites of end stage renal disease kidney dialysis patients, and that the partners of FDAC have breached the FDAC partnership agreement by repudiating the existence of the FDAC general partnership and denying Maung’s interest in the business. The cross-complaint asserts causes of action for:

Breach of NAUP Partnership Agreement
Breach of NAUP Fiduciary Duty
Breach of FDAC Partnership Agreement
Breach of FDAC Fiduciary Duty
Conversion
Actual Fraud
Constructive Fraud
Accounting
NAUP Declaratory Relief
FDAC Declaratory Relief
Injunctive Relief

On 3/30/16, plaintiff filed an amended complaint (“FAC”), asserting causes of action therein for:

Breach of Partnership Agreement
Breach of Fiduciary Duty
Conversion
Injunctive Relief
Declaratory Relief
Intentional Misrepresentation
Negligent Misrepresentation
Concealment

On 7/12/16, a Stipulation and Order for Separate Trials was filed. On 7/27/16, plaintiff dismissed its fourth cause of action, without prejudice. On 8/9/16, this matter proceeded to bench trial. On 10/17/16, Maung filed his Request for Jury Trial on Remaining Issues. On 10/18/16, the court adopted its proposed Statement of Decision filed 9/30/16 as its Statement of Decision.

On 6/7/17, cross-defendants’ motion for judgment on the pleadings as to the cross-complaint was granted. On 6/8/17, the “Order Granting Cross-Defendants’ Motion for Judgment on the Pleadings to the Cross-Complaint” was filed. On 6/15/17, cross-defendants filed their “Notice of Ruling.” On 8/9/17, the judgment was entered. On 8/15/17, Maung’s objections to the proposed judgment were filed. On 8/16/17, plaintiff/cross-defendant and cross-defendants filed their “Notice of Entry of Judgment” and served same by mail.

On 9/5/17, plaintiff filed its memorandum of costs and served same via mail. On 10/5/17, Maung’s motion to vacate the judgment and/or correct clerical error in judgment was denied. On 10/10/17, plaintiff/cross-defendant filed its “Notice of Entry of Order on Maung’s Motion to Vacate Judgment and Maung’s Motion to Correct Clerical Error in Judgment” and served same by mail. On 1/3/18, the court awarded plaintiff costs in the amount of $87,820.50.

Plaintiff/Cross-Defendant Nephrology Associates of Upland and Pomona (“NAUP”) and Cross-Defendants Jin Wang, M.D. (“Wang”), Mary Bui, D.O. (“Bui”), Minna F. Huang, M.D. (“Huang”), Minna F. Huang, M.D., Inc., Chirag Vaidya, M.D. (“Vaidya”) and Chirag Vaidya, M.D., P.C. (“Individual Cross-Defendants”) move the court, per CCP §§ 1032 and 1033.5 and Civil Code § 1717, for an order awarding attorneys’ fees and costs in the amount of $680,223.00.

The judgment filed 8/9/17 includes a determination that “Plaintiff and Cross-Defendants, as the prevailing parties, are entitled to recover from Defendant and Cross-Complainant Dr. Maung attorneys’ fees and costs. The fees must be the subject of a noticed motion…” Defendant/Cross-Complainant Hla Mying Maung Hwang, M.D. (“Maung”) does not dispute moving parties’ entitlement to attorney’s fees, but contends that the amount sought should be reduced by $393,643.38 to no more than $286,579.12.

“[T]rial courts have broad discretion in determining the amount of a reasonable attorney’s fee award.” Meister v. Regents of University of California (1998) 67 Cal.App.4th 437, 452. “A trial court’s attorney fee award will not be set aside ‘absent a showing that it is manifestly excessive in the circumstances.’ (Children’s Hospital & Medical Center v. Bonta (2002) 97 Cal.App.4th 740, 782).” Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1375.

“The determination of what constitutes a reasonable fee generally ‘begins with the “Lodestar,” i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate.’ (PLCM Group, Inc. [(2000)] 22 Cal.4th [1084 ,] at p. 1095). ‘[T]he lodestar is the basic fee for comparable legal services in the community; it may be adjusted by the court based on factors including, as relevant herein, (1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award. [Citation.] The purpose of such adjustment is to fix a fee at the fair market value for the particular action. In effect, the court determines, retrospectively, whether the litigation involved a contingent risk or required extraordinary legal skill justifying augmentation of the unadorned lodestar in order to approximate the fair market rate for such services.’ (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132, citing Serrano v. Priest (1977) 20 Cal.3d 25, 49…).” Graciano v. Robinson Ford Sales, Inc. (2006) 144 Cal.App.4th 140, 154.

“In California, an attorney need not submit contemporaneous time records in order to recover attorney fees…[t]estimony of an attorney as to the number of hours worked on a particular case is sufficient evidence to support an award of attorney fees, even in the absence of detailed time records. (Glendora Community Redevelopment Agency v. Demeter (1984) 155 Cal.App.3d 465, 470-471; Margolin v. Regional Planning Com. (1982) 134 Cal.App.3d 999, 1006).” Martino v. Denevi (1996) 182 Cal.App.3d 553, 559.

The $680,223.00 in fees and costs sought by NAUP and the Individual Cross-Defendants consists of $206,626.00 in fees charged by initial counsel Lester & Cantrell LLP (“L&C”) and $473,596.50 by Gresham Savage Nolan & Tilden (“GSN&T”).

Eugene Kim (“Kim”), lead counsel from GSN&T, provides a detailed explanation of the work performed in ¶ 5 of his declaration. Kim explains that “[i]n order to show that Dr. Maung’s buyout was governed by the Maung Amendment, NAUP…researched whether a totally integrated agreement could be modified by an oral agreement, whether Dr. Maung could violate the parol evidence rule and thereby introduce extrinsic evidence, whether Dr. Maung tendered any consideration to modify the Maung Amendment, and whether NAUP waived any rights by way of subsequent contract.” (Kim Decl., ¶ 6). Kim further explains that “[i]n order to show that FDAC is owned by NAUP, NAUP had to delve into and review numerous corporate and financial records including, but not limited to, commercial leases, vendor agreements, and management contracts it executed on behalf of FDAC. NAUP also reviewed financial records such as tax returns, bank statements, and checks to show that FDAC was not a separate entity.” (Id., ¶ 7). Kim attests that “this case involved complex valuation issues and required a thorough understanding of NAUP and FDAC, their financial affairs, and the healthcare industry. Experts were required to examine the anticipated value of NAUP and FDAC in the event that the Court found that Dr. Maung’s buyout was governed by the Charter Agreement or that NAUP and FDAC were separate entities. (Id., ¶ 8).

Kim has summarized the Lodestar calculation from both L&C and GSN&T in ¶ 13. This summary reflects that, while GSN&T and L&C attorneys and paralegals actually expended a total of 2,458.1 hours on this matter, they only billed for 2,301.4 hours. The requested $680,223.00 divided by 2,458.1 hours would amount to an average hourly rate of $276.73.

Kim’s summary provides a breakdown of hours billed and hourly rates of GSN&T attorneys and paralegals as follows: (1) Kim: 56.8 hours at $375.00/hour, 424.6 hours at $395.00/hour and 97.6 hours at $405.00/hour, (2) shareholder Mario Alfaro (“Alfaro”): 209.9 hours at $295.00/hour and 56.1 hours at $350.00/hour, (3) senior counsel Todd Kinnear (“Kinnear”): 93.8 hours at $395.00/hour, (4) senior counsel Stefanie Field (“Field”): 62.7 hours at $395.00/hour, (5) associate Jason Fair (“Fair”): 18.1 hours at $250.00/hour, (6) associate Jennifer Barlock: 31.2 hours at $220.00/hour and 10 hours at $240.00/hour, (7) associate Jeffrey Smetana (“Smetana”): $232.3 hours at $240.00/hour, (8) associate Donna DiCarlantonio (“DiCarlantonio”): 157.8 hours at $230.00/hour, (9) paralegal Cathy Brandt: 16.6 hours at $190.00/hour, 102.4 hours at $195.00/hour and 11.7 hours at $205.00/hour, and (10) paralegal Mary Stracke: 0.2 hours at $210.00/hour.

Kim’s summary also provides a breakdown of hours billed and hourly rates of L&C as follows: (1) managing partner David Cantrell (“Cantrell”): 212 hours at $350.00/hour, (2) partner Matthew Kraus: 131 hours at $265.00/hour, (3) associate Colin Northcutt (“Northcutt”) 359.5 hours at $265.00/hour and (4) associate Nickolaus Buchholz: 14.4 hours at $120.00/hour and 2.7 hours at $265.00/hour.

Kim has also provided information relative to Alfaro’s, Kinnear’s, Field’s, Fair’s, Smetana’s and DiCarlantonio’s respective educational and professional backgrounds, and has attached itemized billing statements from GSN&T. (Kim Decl., ¶¶ 2 and 14-19, Exhibit “A”). Cantrell separately confirms his and Northcutt’s respective hourly rates and attaches L&C’s invoices as Exhibit “A” to his declaration.

Attorney Joseph Ortiz of Best-Best & Krieger attests that the hourly rates charged by GSN&T and L&C attorneys generally those charged by Kim, Alfaro, Kinnear, Field, Smetana, DiCarlantonio, Cantrell and Northcutt specifically are each reasonable and consistent with rates charged by attorneys of similar experience at reputable law firms in the Riverside area.

NAUP and the Individual Cross-Defendants represent that the $680,223.00 in fees and costs sought is broken down into the following categories: (1) pleadings and pre-trial motions–$63,799.94; (2) written discovery–$49,004.00; (3) depositions–$82,687.00; (4) court hearings–$6,944.00; (5) client status and strategy meetings–$3,157.50; (6) expert discovery–$29,764.00; (7) trial preparation and trial cost–$210,178.50; (8) post-trial: $64,339.00 and (9) miscellaneous–$140,296.00.[1]

Maung contends that NAUP is not entitled to attorney’s fees related to the first through fourth (i.e., for Breach of Partnership Agreement, Breach of Fiduciary Duty, Conversion and Injunctive Relief, respectively) and sixth through eighth (i.e., Intentional Misrepresentation, Negligent Misrepresentation and Concealment) causes of action because NAUP dismissed them with prejudice after Phase I of the trial. On 7/12/16, a Stipulation and Order for Separate Trials was filed, wherein NAUP and Maung agreed to (1) bifurcate Maung’s and NAUP’s claims in equity for a judicial determination of whether the value of Maung’s partnership interest in NAUP was to be determined in accordance with the provisions of Section 6.4 of the original partnership agreement of NAUP (“Charter Agreement”), as contended by Maung, or in accordance with the provisions of paragraph 10 of the amendment to the original partnership agreement by which Maung was admitted as a partner of NAUP (“Maung Amendment”); (2) bifurcate Maung’s and NAUP’s claims in equity for a judicial determination of whether Foothill Dialysis Access Center (“FDAC”) is a legal entity separate and distinct from NAUP owned by Maung, Dr. Jin Wang, Dr. Mary Bui and Dr. Minna Huang, as contended by Maung, or that FDAC is wholly owned and operated as a dba of NAUP, as contended by NAUP; and (3) that such bifurcated claims in equity be tried separately preceding any trial on legal causes of action set forth in the First Amended Complaint (“FAC”) and cross-complaint. Phase I of the trial was limited to the fifth cause of action for Declaratory Relief, which sought a judicial determination of (1) whether Maung’s buyout provision was controlled by the 11/3/98 Charter Agreement or the August 2001 Maung Amendment and (2) whether the covenant not to compete contained in paragraph 14 of the Maung Amendment was enforceable.

However, “[a]ttorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed.” Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129, 130. The first and second causes of action allege that Maung breached the Charter Agreement by, inter alia, “demanding a buyout of his partnership interest based on an appraisal process that does not apply to him.” (FAC, ¶¶ 33(d), 38(c)). The first, second, third and eighth causes of action also further identify how Maung breached the non-compete provision: (1) “treating patients and billing services under a separate tax identification number allowing Maung to profit from services without sharing the profits with the partnership” (FAC, ¶¶ 33(a), 38(a); see also, ¶ 86); (2) “competing with the practice while still a partner by treating patients at the facility of nephrologist Abid Khan, M.D., in Ontario, and by practicing internal medicine and/or nephrology in the Redlands area” (Id., ¶ 33(b); see also ¶ 45(a)&(b)); (3) “attempting to cover up wrongdoing by retrieving files from third party billing services” (Id., ¶¶ 33(c), 38(b); see also, ¶86); (4) “[a]fter disassociating, in violation of the Amendment and Partnership Agreement, performing internal medicine and/or nephrology services at San Antonio Community Hospital in Upland, California” (Id., ¶ 33(f)) and (5) ““[a]fter disassociating, in violation of the Amendment and Partnership Agreement, performing internal medicine and/or nephrology services at Pomona Valley Hospital in Pomona, California” (Id., ¶ 33(g); see also ¶ 45(c)&(d)). The sixth and seventh causes of action, moreover, are alternative legal theories it alleged to enforce the buyout provision in the Maung Amendment over the Charter Agreement. Maung’s apportionment argument, then, is rejected.

Maung further complains that “NAUP seeks fees for attorney efforts devoted exclusively to claims on which they did not prevail,” specifically pertaining to post-disassociation covenant not to compete claims and NAUP’s motion. (Opposition, 2:23-24; 6:27-7:4). However, “Section 1717 as amended in 1987, makes it clear that the party who obtains greater relief on the contract action is the prevailing party entitled to attorney fees under section 1717, regardless of whether another party also obtained lesser relief on the contract or greater relief on noncontractual claims.” Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 530. “A party who ultimately prevails on a contract action is entitled to all of its fees, including fees incurred during the lawsuit in proceedings where it did not prevail.” Id. at 546.

Maung also contends that NAUP is not entitled to attorney’s fees attributable to attorney efforts expended for mediation. Not so. Maung confuses a cost bill with an attorney’s fees award and argues that the court should deny attorney’s fees incurred for mediation because the court did not allow mediation costs under CCP § 1033.5. As NAUP points out, a cost bill is more restrictive than an attorney’s fees award because § 1033.5 only authorizes sixteen categories of recoverable costs, whereas the court can award attorney fees so long as it is reasonable. Maung claims that NAUP should not recover attorney’s fees associated with settlement discussions because NAUP acted in bad faith; however, Maung has not identified any facts to support a finding of bad faith. The court recalls that NAUP made a statutory settlement offer that turned out to be far in excess of what the court determined that Maung was entitled to after the trial.

Maung claims that NAUP is not entitled to $11,904.50 in fees based on redacted billing statements. Billing records can be redacted for purposes of assessing whether counsel’s bills are reasonable, however, if said entries contain privileged information. Hartford Cas. Ins. Co. v. J.R. Marketing, L.L.C. (2015) 61 Cal.4th 988, 1005-1006. Since the description surrounding the redacted portions provides sufficient information to assess whether counsels’ bills are reasonable, said fees are recoverable.

Maung’s claim that $49,507.50 in fees are not “directly related to nor reasonably necessary to achieve NAUP’s primary litigation goals in this case” is legally and factually unsupported and thus disregarded.

Finally, Maung’s request for a 25% reduction in fees is inappropriate and rejected. “An across-the-board reduction in hours claimed based on the percentage of total time entries that were flawed, without respect to the number of hours that were actually included in the flawed entries, is not a legitimate basis for determining a reasonable attorney fee award.” Mountjoy v. Bank of America, N.A. (2016) 245 Cal.App.4th 266, 282 (emphasis theirs).

The motion is granted as prayed.

[1] Moving parties represent that this category “includes all fees and costs that do not fit into any of the categories above. Approximately $100,000 of these fees were incurred by…[L&C], in furtherance of settlement before and after the commencement of this action.”