SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

MERIDIAN FINANCIAL SERVICES, INC., ET AL.,

Plaintiffs,

vs.

LANANH PHAN aka LAN ANH PHAN,
ET AL.,

Defendants.

Case No. 2013-1-CV-254980

TENTATIVE RULING RE: MOTION FOR CONTRACTUAL COSTS, EXPENSES, AND ATTORNEYS’ FEES; AMENDED JUDGMENT

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on May 10, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
According to the allegations of the Third Amended Complaint (“TAC”), filed on July 24, 2015, this case arises out of a fraudulent investment scheme. The TAC sets forth the following causes of action: (1) Breach of Contract; (2) Fraud; (3) Fraud in the Inducement; (4) Negligent Misrepresentation; (5) Violation of Unfair Business Practices Act; (6) Escrow Negligence; (7) Negligent Supervision; (8) Breach of Fiduciary Duty; (9) Breach of Written Contract; (10) Violation of Uniform Fraudulent Transfers Act; and (11) Aiding and Abetting in the Commission of a Tort.

On December 17, 2018, the Court granted defendant Chicago Title Company’s (“Chicago Title”) motion for summary judgment. Judgment was entered on January 3, 2019, in favor of Chicago Title. Chicago Title now moves for attorneys’ fees and costs.

III. OBJECTIONS TO EVIDENCE
IV.
A. Plaintiffs’ Objections
B.
Plaintiffs Meridian Financial Services, Inc. and Mark Yazdani (together, “Plaintiffs”) object to a portion of the declaration of David Owen (pp. 4:24-5:2) in which he states he reviewed a spreadsheet of time spent by attorneys Thomas Trapani and Howard Brody. Owen’s testimony regarding time spent by other attorneys is hearsay. Plaintiffs’ objection is SUSTAINED.

C. Chicago Title’s Objections
D.
Chicago Title objects to portions of the declaration of James P. Schratz and attached exhibits. Objections nos. 1-3, 9, 14-15, and 17 are SUSTAINED. Objections nos. 4-8, 10-13, 16, and 18-29 are OVERRULED.

V. MOTION FOR FEES AND COSTS
VI.
Chicago Title moves for attorneys’ fees in the amount of $1,851,575 and costs in the amount of $125,158.

A. Basis for Recovering Attorneys’ Fees and Costs
B.
Chicago Title’s claims in part were based on a breach of escrow instructions. Chicago Title states paragraph 14 of the escrow instructions contains an attorneys’ fees provision. (Declaration of David B. Owen Filed in Support of Defendant Chicago Title Company’s Motion for Contractual Attorney’s Fees, ¶ 2 and Ex. B.) Where a contract “provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717.)

Chicago Title was defended in court by in-house counsel, not outside counsel. Fees incurred by in-house counsel are recoverable:

We discern no basis for discriminating between counsel working for a corporation in-house and private counsel engaged with respect to a specific matter or on retainer. Both are bound by the same fiduciary and ethical duties to their clients. (See General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1190 [32 Cal.Rptr.2d 1, 876 P.2d 487].) Both are qualified to provide, and do provide, equivalent legal services. And both incur attorney fees and costs within the meaning of Civil Code section 1717 in enforcing the contract on behalf of their client.

(PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1094.)

Therefore, Chicago Title is entitled to recover reasonable attorneys’ fees and costs.

C. Costs
D.
The Court notes there is no opposition to the requested costs. Accordingly, Chicago Title is awarded $125,158 in costs. This is in addition to costs of $83,106.46 which were set forth in a Memorandum of Costs that was filed on January 17, 2019, to which Plaintiffs did not object.

E. Chicago Title’s Records of Attorneys’ Fees
F.
With regard to attorneys’ fees:

[T]he fee setting inquiry in California ordinarily begins with the “lodestar,” i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. “California courts have consistently held that a computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys’ fee award.” The reasonable hourly rate is that prevailing in the community for similar work. The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided.

(PLCM Group v. Drexler, supra, 22 Cal.4th at p. 1095, citations omitted.)

Chicago Title states that, because its attorneys are in-house, they do not keep detailed time records. Chicago Title asserts, however, that with the exception of supervising attorney Joseph Tucker, a record of the daily time spent by the other three primary attorneys who worked on this case was maintained and is provided as an attachment. Chicago Title contends the following time was spent on this matter: 670.4 hours by Thomas Trapani; 1,636.6 hours by Howard Brody; and 609.6 hours by David Owen. (Declaration of Thomas Trapani Filed in Support of Defendant Chicago Title Company’s Motion for Contractual Attorney’s Fees (“Trapani Decl.”), ¶ 4; Declaration of Howard P. Brody Filed in Support of Defendant Chicago Title Company’s Motion for Contractual Attorney’s Fees (“Brody Decl.”), ¶ 4; Declaration of David B. Owen Filed in Support of Defendant Chicago Title Company’s Motion for Contractual Attorney’s Fees (“Owen Decl.”), ¶ 6.) Chicago Title also states it reasonably and conservatively estimated supervising attorney Joseph Tucker spent no less than 450 hours in this matter. (See Declaration of Joseph P. Tucker Filed in Support of Defendant Chicago Title Company’s Motion for Contractual Attorney’s Fees (“Tucker Decl.”), ¶ 3.) In total, Chicago Title seeks fees based on a total of 3,366.5 hours at a rate of $550, resulting in a lodestar of $1,851,575 as follows:
Chicago Title’s Claimed Attorneys’ Fees
Attorney Start End Rate Hours Total
Tripani 11/13 11/14 $550 670.4 $368,720
Brody 11/14 6/18 $550 1636.5 $900,075
Tucker Not stated Not stated $550 450.0 $247,500
Owen 6/18 present $550 609.6 $335,280
3366.5
$1,851,575

G. Expert Declarations
H.
In support of the request, Chicago Title also submits the declaration of Brand Cooper, an attorney and an expert on fees. Cooper states he reviewed the declarations of Chicago Title’s counsel and the hours appear to be reasonable, with no significant overlap of services or duplication of efforts. (Declaration of Brand Cooper Filed in Support of Defendant Chicago Title Company’s Motion for Contractual Attorney’s Fees, ¶ 16.) Plaintiffs, on the other hand, argue Chicago Title has not met its burden of supporting its motion with reliable documents, such as time records. Plaintiffs argue further that the fee request is grossly inflated. Plaintiffs contend these are grounds to deny the fee request altogether.

Plaintiffs challenge the declaration of Brand Cooper, asserting his declaration shows he did not read any depositions or review any of the documents in the case. Plaintiffs state Cooper’s declaration boils down to a conclusion that because Chicago Title’s attorneys say they did the work and Chicago Title hired him, he believes them.

The Court finds the Cooper Declaration is unhelpful in making a reasonableness determination. Not only are there credibility problems with the declaration, given Cooper’s inconsistent testimony in past cases depending on the identity of his client, Cooper has reviewed nothing more than the attorneys’ declarations. This is a task the Court is well qualified to do and for which expert testimony is not needed.

Plaintiffs provide their own expert declaration, from James P. Schratz, to counter Cooper’s declaration and the request for fees. Schratz states the lack of time records makes it impossible to conduct a fee audit for red flags such as block billing, vague entries, billing for clerical work, billing in excessive minimum billing increments, excessive staffing, and excessive intra-firm conferencing. (Declaration of James P. Schratz in Support of Plaintiffs’ Opposition to Defendant Chicago Title Company’s Motion for Attorneys[’] Fees, ¶¶ 39-45.) Schratz also states that in his more than 25 years as a legal fees auditor, he has never been asked to review a multi-million dollar fee request that was so poorly supported and so poorly documented. (Id. at ¶ 107.) He concludes no fees should be awarded in this case in light of the lack of time records. (Id. at ¶ 105.)

I. The Court’s Calculation of Reasonable Attorneys’ Fees
J.
“A trial court may award fees solely on the basis of the experience and knowledge of the trial judge.” (East West Bank v. Rio School Dist. (2015) 235 Cal.App.4th 742, 750.) Furthermore, an award of attorneys’ fees may be based on counsel’s declarations, without production of detailed time records. (Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1375.) Here, the Court has reviewed Chicago Title’s attorneys’ declarations and supporting documents. In addition, the Court is familiar with this case and has reviewed the case file in connection with this motion. The Court has experience and knowledge in determining reasonable attorneys’ fees in actions like this and conducted the analysis below.

1. Hourly Rate
2.
The starting point in reviewing Chicago Title’s fee request is the hourly rate. The attorneys serve as in-house counsel. They do not charge their client, or anyone else, a particular hourly fee. Each asserts, however, that a reasonable hourly rate for his work is $550 an hour. Based on this Court’s experience, charging $550 an hour is acceptable as a general matter. The rate, however, is reasonable only for “higher end” tasks such as developing a litigation strategy, finalizing motions, preparing for and taking depositions, attending hearings, and communicating with clients. It is not a reasonable rate for drafting discovery requests, reviewing documents produced in the case, conducting legal research, drafting motions, preparing written discovery, or preparing electronic mail messages and other routine correspondence to other counsel. It is also not reasonable for administrative tasks.

3. Number of Hours
4.
Thomas A. Trapani states that his law firm’s litigation management software shows he spent 670.4 hours working on this matter. However, he admits he was “unable to recreate all of the time that [he] spent on this case.” (Trapani Decl., ¶ 5.) His declaration sets forth specific amounts of time he spent on various categories of case tasks. Those estimates total 315 hours. Based on Mr. Trapani’s declaration, the Court finds that the reasonable rate for 170 of those hours is $550/hour. The Court finds that a $300/hour rate should be charged for the 145 hours that were spent on more routine tasks. The Court concludes that reasonable hours and attorneys’ fees for Mr. Trapani’s work are 170 hours x $550/hour ($93,500) + 145 hours x $300/hour ($43,500) = $137,000.

Howard P. Brody states that his law firm’s litigation management software shows he spent 1636.6 hours working on this matter. He states, however, that he “would not enter any of the specific tasks” or “assign any time to any specific tasks.” (Brody Decl., ¶ 3.). His declaration sets forth specific amounts of time he spent on various categories of case tasks. Those estimates total 1,395 hours. Based on Mr. Brody’s declaration, the Court finds that the reasonable rate for 375 of those hours is $550/hour. The Court finds that a $300/hour rate should be charged for 720 hours that were spent on more routine tasks. Mr. Brody also states he “reviewed all of the documents that were received via subpoena” which totaled “approximately 30,000 pages.” (Id. ¶ 4(e).) He also states that “over the course of the litigation I spent well over 300 hours reviewing all of the documents in this case” and that he spent time “accumulating, organizing, reviewing, and having Bates stamped the documents requested by Plaintiffs….” (Id. ¶¶ 4(e) & (i)) This work merits an hourly rate of $200/hour. The Court concludes that reasonable hours and attorneys’ fees for Mr. Brody’s work are 375 hours x $550/hour (206,250) + 720 hours x $300/hour ($216,000) + 300 hours x $200/hour ($60,000) = $482,250.

Joseph P. Tucker states that he did not “formally record any of my litigation time. However, I spent a great deal of time on this case and can reasonably estimate the hours I spent on various tasks.” (Tucker Decl., ¶ 2.) His declaration then summarizes the amount of time he recalls spending on various aspects of the case. Those time estimates total 438 hours. Mr. Tucker supervised the work of the other attorneys. This resulted in substantial duplicative efforts. His declaration states, for example, that he reviewed “all of the pleadings” and like Mr. Brody, he reviewed “a majority of the approximately thirty thousand pages of documents produced in the litigation including voluminous bank and escrow records.” (Id. ¶ 3(b).) He also “reviewed all of the deposition and trial transcripts and exhibits in the related matter that proceeded to trial in Orange County. (Ibid.) In addition he reviewed criminal court records and Santa Clara District Attorney’s investigative materials. (Ibid.) He also reviewed and drafted “hundreds of emails with other counsel” and attended depositions telephonically. (Id. ¶¶ 3(d) & (e).) Mr. Tucker also traveled between San Jose and New York on many occasions. Another problem is credibility – the Court does not find it credible that Mr. Tucker can recall spending a total of 73 hours on eight different broad task categories over the course of five years. The Court concludes that reasonable hours and attorneys’ fees for Mr. Tucker’s work are 90 hours x $550/hour ($49,500) + 45 hours x $300/hour ($13,500) = $63,000. The Court finds that time spent on administrative, duplicative or unnecessary tasks cannot be recovered at all.

David B. Owen states that his law firm’s litigation management software shows he spent 609.6 hours working on this matter. (Owen Decl., ¶ 6.) His declaration sets forth specific amounts of time he spent on various categories of case tasks. Those estimates total 605 hours. Based on Mr. Owen’s declaration, the Court finds the reasonable rate for 330 of those hours is $550/hour. The Court finds that a lower rate should be charged for the 265 hours that was spent on more routine tasks, and that time spent on administrative, duplicative or unnecessary tasks cannot be recovered at all. The Court concludes that reasonable hours and attorneys’ fees for Mr. Owen’s work are 330 hours x $550/hour ($181,500) + 265 hours x $300/hour ($79,500) = $261,000.

VII. DISPOSITION
VIII.
Accordingly, the motion is GRANTED IN PART. Plaintiffs are awarded attorneys’ fees in the amount of $943,250. Plaintiffs are awarded costs in the amount of $125,158.

IX. AMENDED JUDGMENT
X.
IT IS ORDERED, ADJUDGED, AND DECREED THAT:

This action is dismissed with prejudice as to defendant Chicago Title Company. Plaintiffs Meridian Financial Services, Inc. and Mark Yazdani shall take nothing from Chicago Title Company. Chicago Title Company shall recover from Meridian Financial Services, Inc. and Mark Yazdani attorneys’ fees in the amount of $943,250 and costs in the amount of $208,264.46.

The Court will prepare the final order if this tentative ruling is not contested.