Case Number: BC710478 Hearing Date: December 10, 2019 Dept: 34

SUBJECT: Motion for Attorneys’ Fees

Moving Party: BCP, Inc.

Resp. Party: Ji Li

BCP, Inc.’s motion for attorneys’ fees is DENIED.

BACKGROUND:

Plaintiff Kai Hou Liang brought suit on June 15, 2018. Pursuant to the operative first amended complaint, filed June 26, 2018, Plaintiff asserted causes of action for: (1) Fraud; (2) Negligent Misrepresentations; (3) Violation of Bus. & Prof. Code § 17200; (4) Breach of Operating Agreement; (5) Breach of Covenant of Good Faith and Fair Dealing; (6) Breach of Fiduciary Duty. Liang alleges Li induced Liang to invest $5.4 million into Hollywood Garden, LLC, for the purpose of purchasing property located at 6140 Hollywood Boulevard, but defrauded Liang with respect to the identity of, and amount put forward by, other investors. Liang also alleges that Li forged Liang’s name to obtain a $4 million deed of trust on the property, which is now being foreclosed upon.

On December 11, 2018, Ji Li, on behalf of Hollywood Garden, LLC (as a derivative claim), filed a cross-complaint against Kai Hou Liang, Hollywood Garden, LLC, and BCP, Inc., asserting causes of action for (1) Breach of Contract—Specific Performance; (2) Unfair Trade Practices; (3) Breach of Fiduciary Duty; and (4) Declaratory Relief. Li alleges Liang and his entity, BCP, Inc., have wrongfully interfered with the management of Hollywood Garden, LLC, including by failing to permit the refinancing of certain loans. (Li also raises various complaints against another manager of the LLC, Yong Bai, but does not name him as a cross-defendant.)

On August 22, 2019, the Court granted Cross-Defendant BCP, Inc.’s oral motion for judgment, or in the alternative, motion for non-suit on Ji Li’s Cross-Complaint. (08/22/19 Minute Order, p. 1.)

On August 23, 2019, the Court granted Plaintiff’s motion for judgment and motion for leave to add performance remedy. (08/23/19 Minute Order, p. 1.)

On August 23, 2019, the Court found in favor of Cross-Defendant Kai Hou Liang and against Cross-Complainant Ji Li as to the Cross-Complainant’s causes of action for breach of contract, breach of fiduciary duty, Unfair Trade Practices, and denied Cross-Complainant’s cause of action for declaratory relief. (Ibid.)

On August 23, 2019, the jury found in favor of Plaintiff Kai Hou Liang against Ji Li for the following causes of action: intentional misrepresentation; breach of fiduciary duty; and breach of contract. (Id. at p. 2.) The jury found that Kai Hou Liang’s damages are $2,000,000.00 and found by clear and convincing evidence that Ji Li acted with malice, oppression, or fraud. (Id. at p. 3.) In phase two of trial, the jury awarded Plaintiff Kai Hou Liang punitive damages against Ji Li in the amount of $200,000.00. (Id. at p. 5.)

On November 7, 2019, Cross-Defendant BCP, Inc. (“BCP”) filed the instant motion for attorneys’ fees against Cross-Complainant Ji Li in the amount of $230,215.00. (Notice of Motion, p. 2:4-6.) Cross-Defendant BCP, Inc. brings this motion “on the ground that BCP is the prevailing party in its defense against Li’s baseless Cross-Complaint and that, by purporting to bring this action against BCP on behalf of Hollywood Garden, LLC (‘HG’), Li is bound by the attorneys’ provision contained within the Promissory Note (‘Note’) at issue in this action.” (Id. at p. 2:6-10.)

ANALYSIS:

A. Relevant Law

Code of Civil Procedure section 1033.5, subdivisions (a)(10)(A),(B) and (C) makes attorney fees allowable as recoverable costs for prevailing parties when authorized by contract, statute or law. Civil Code section 1717, subdivision (a) provides, in pertinent part, as follows:

“In any action on a contract, where the contract specifically 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.

. . .

Reasonable attorney’s fees shall be fixed by the court, and shall be an element of the costs of suit.”

The attorney bears the burden of proof as to “reasonableness” of any fee claim. (Code Civ. Proc., § 1033.5, subd. (c)(5).) This burden requires competent evidence as to the nature and value of the services rendered. (Martino v. Denevi (1986) 182 Cal.App.3d 553, 559.)

A party’s verified billing invoices are prima facie evidence that the costs, expenses, and services listed were necessarily incurred. (See Hadley v. Krepel (1985) 167 Cal.App.3d 677, 682.) “In challenging attorney fees as excessive because too many hours of work are claimed, it is the burden of the challenging party to point to the specific items challenged, with a sufficient argument and citations to the evidence. General arguments that fees claimed are excessive, duplicative, or unrelated to not suffice.” (Lunada Biomedical v. Nunez (2014) 230 Cal.App.4th 459, 488, quoting Premier Med. Mgmt. Sys., Inc. v. California Ins. Guarantee Ass’n (2008) 163 Cal.App.4th 550, 564.)

B. Discussion

BCP seeks the recovery of attorneys’ fees of $230,215.00. (Motion, p. 2:1-2.)

1. Prevailing Party and Attorneys’ Fees Authorized by Contract

As a preliminary matter, because the Court granted BCP’s oral motion for judgment or in the alternative, motion for non-suit on Li’s Cross-Complaint, BCP is the prevailing party. (08/22/19 Minute Order, p. 1.)

BCP argues that the Note contains terms and conditions that govern the loan, and authorize BCP’s recovery of attorneys’ fees. (Motion, p. 3:7.) Section 1.15 of the Note states:

“Enforcement / Attorneys’ Fees and Costs. Borrower shall immediately reimburse Holder for all fees and costs, including reasonable attorneys’ fees and experts’ fees and costs, incurred by Holder for: (a) enforcement of this Note or any of its terms, or the exercise of any rights or remedies hereunder and/or at law, in equity or otherwise, whether or not any action or proceeding is filed; (b) representation of Holder in any bankruptcy, insolvency, reorganization or other debtor-relief or similar proceeding of or relating to Borrower or Borrower’s transferees or assigns, to any person liable (by way of guaranty, assumption, endorsement or otherwise) upon any of the obligations of this Note, or to the Property; or (c) representation of Holder in any action or proceeding relating to the Property, including, but not limited to, foreclosure, receivership, lien or stop-notice enforcement, bankruptcy, eminent- domain and probate actions or proceedings, whether commenced by Holder or any other person, and whether commenced prior or subsequent to payment of all obligations under this Note. All such fees and costs shall bear interest until paid at the rate applicable from time to time under this Note. This section shall survive payment of all obligations under this Note and reconveyance of the deed of trust securing this Note.” (Huang Decl., Ex. A, pp. 3-4.)

The Note identifies the “Borrower” as Hollywood Garden LLC, the “Lender” as Lone Oak Fund, LLC, and the Lender and/or its transferees or assigns as the “Holder” of this Note. (Huang Decl., Ex. A, p. 1.) BCP purchased the Note from Lone Oak in 2018. (Huang Decl., ¶ 2.) The Note is signed by Ji Li, Managing Member of Hollywood Garden LLC. (Huang Decl., Ex. A, p. 5.)

BCP argues that because “Li brought his meritless action on behalf of HG . . . [,] he stepped into the shoes of HG for purposes of the Note’s attorney’s fees provision, which provides that BCP is entitled to recover its fees for ‘any action . . . related to the Property.’” (Motion, p. 1:25-27.) BCP asserts that Li also “testified – repeatedly – that he, and not HG, was responsible for the obligations imposed by the Note[,]” thus, Li is “also responsible for the attorneys’ fees incurred by BCP . . . .” (Id. at pp. 1:27-2:1.)

Specifically, BCP argues that although HG is the signatory of the Note, the attorneys’ fees provision can be enforced against Li because (1) Li brought is Cross-Complaint on behalf of HG to “enforce” HG’s rights with respect to the note and thus expressly undertook HG’s rights and obligations under the Note; and (2) the Note was secured not for HG’s benefit, but for Li’s benefit, individually because (a) “the Cross-Complaint states that ‘[his] investment in Hollywood Garden would be financed through a trust deed secured loan against the Hollywood Real Property’” and “without the loan, Li would not have had the money to invest in the Property” and (b) Li testified that he personally guaranteed everything. (Id. at p. 6:3-8, 6:18-23, 6:24-7:2 [citing Cross-Complaint, ¶ 19; Huang Decl., Ex. C (8/20 Tr. 43:12-17)].)

BCP also maintains that Li’s cross-complaint is an action related to the Property because “Li’s Cross-Complaint alleged, among other things, that BCP was attempting to divest HG of its principal asset – the Property – and that Cross-Defendants were taking actions intended to deprive Li of his interest in the Property.” (Id. at pp. 4:23-5:1 [citing Cross-Complaint, ¶¶22, 24, 29, 32].) BCP also argues that “Li sought a judicial declaration that BCP and Liang were obligated to turn over their interests in the Note to Li,” thus, the “entire case was centered around the parties’ rights and interests in the Property.” (Id. at p. 5:1-7.)

In opposition, Li asserts that “the agreement to be litigated under the terms of the [Cross-Complaint] was an oral agreement between Liang, Li and Bai” and “not the ‘Note.’” (Opp., p. 5:12-13.) Li maintains that “the oral agreement sought to be enforced by the Cross-Complaint carries no attorney’s fee agreement” and therefore “BCP, Inc.’s reliance on [Civil Code section] 1717 is misplaced.” (Id. at pp. 3:22-4:6.)

Further, Li argues that even if the Note applied to the Cross-Complaint, “the cited provision of the Note is an indemnification agreement, [and] it is not an attorney’s fee provision which ‘specifically provides that attorney’s fees and costs, which are incurred to enforce the contract, shall be awarded either to one of the parties or to the prevailing party . . .’ as is required by [Civil Code section] 1717[, subdivision] (a).” (Id. at p. 5:14-17 [fn. omitted].) Li contends that “the provision at issue does not provide for an ‘award’ of attorney’s fees in any manner or even show contemplation of an ‘award’ process.” (Id. at pp. 5:22-6:1.) Li maintains that this indemnity provision also “does not address the concept of ‘prevailing party’ and is meant to be applied to any representation of the ‘Holder’ regardless of who may originate the action and regardless of who is the winner or loser.” (Id. at p. 6:7-11.)

Li also maintains that “even if the Note contained an ‘attorney’s fees’ provision, that provision cannot be extended to gather attorney’s fees from Li as a non signatory.” (Id. at p. 6:16-19.) Li argues that “BCP, Inc. has provided this Court no meaningful authority with which to extend the provisions of the Note to Li, assuming it was the contract sued upon, to enable a finding that he is responsible for the alleged attorney’s fees under the Note.” (Id. at p. 8:6-8.) Li asserts that “each of BCP, Inc.’s cases cite the rule that “where a non signatory plaintiff sues a signatory defendant, and the defendant is the prevailing party, defendant is only entitled to attorney’s fees if the non signatory plaintiff would have been entitled if he prevailed.’” (Id. at p. 8:9-15 [citing Apex LLC v. Korusfood.com (2013) 222 Cal. App. 4th 1010, 1014 (internal citations omitted)].) Li argues that “in this action if Li had prevailed on the [Cross-Complaint,] he would not have been entitled to attorney’s fees” because “the [Cross-Complaint] is based on an agreement which did not have an attorney’s fee provision and the [Cross-Complaint] does not seek them.” (Id. at p. 8:15-17.) Li maintains that he “could not have been entitled to attorney’s fees had he been successful” thus BCP’s attorney’s fees must be denied. (Id. at p. 8:17-18.)

First, as stated above in more detail, the Note has a broad provision that provides for “all fees and costs, including reasonable attorneys’ fees and experts’ fees and costs incurred by the Holder for . . . (c) representation of Holder in any action or proceeding relating to the Property . . . .” (Huang Decl., Ex. A, pp. 3-4.) “The attorney fees clause in a contract ‘may be broad enough to cover tort as well as contract causes of action.’” (Maynard v. BTI Group, Inc. (2013) 216 Cal.App.4th 984, 991-992 [citing Hasler v. Howard (2005) 130 Cal.App.4th 1168, 1171; Childers v. Edwards (1996) 48 Cal.App. 4th 1544, 1549]; Calvo Fisher & Jacob LLP v. Lujan (2015) 234 Cal.App.4th 608, 621-622.) Here, the Note’s broad provision applies to attorney’s fees and costs BCP incurred in its representation in this action, as long as the action or proceeding relates to the Property.

The Cross-Complaint alleges the following:

· “Cross-Complainant has discovered that in or around April of 2018, Lone Oak Fund, LLC sold and assigned the Loan and relevant loan documents and the deed of trust recorded against the Hollywood Real Property to BCP, INC. BCP, INC. recorded a notice of default of the Loan on May 18, 2018. The notice of default claims that the sum of approximately $4.94 million is due and owing to BCP, INC. More recently Cross-Complainant LI has discovered that BCP, INC. is a front company, which was organized on behalf of, is A controlled by, and beneficially owned by LIANG. The Hollywood Garden Real Property is now in danger of being foreclosed upon by LIANG’s straw man company. Thus allowing LIANG to appropriate the HOLLYWOOD GARDEN’s principal asset to himself, and to the exclusion of HOLLYWOOD GARDEN, and its other members.” (Cross-Complaint, ¶ 16.)

· “Cross-Defendant LIANG orally agreed that Cross-Complainant’s investment in HOLLYWOOD GARDEN would be financed through a trust deed secured loan against the Hollywood Real Property, and that such loan would be refinanced or renewed as necessary.” (Id. at ¶ 19.)

· “In the absence of an order or decree of this court requiring LIANG to permit, consent to, and cooperate with the refinancing of the Loan, and ordering LIANG and BCP, and anyone acting in concert with them, not to foreclose upon the Hollywood Real Property, HOLLYWOOD GARDEN will lose its principal asset, the Hollywood Real Property, as well as its investment therein. In the absence of such relief, HOLLYWOOD GARDEN and its members will be irreparably damaged.” (Id. at ¶ 30.)

· “A judicial declaration is necessary and appropriate at this time under these circumstances in order that LI, HOLLYWOOD, LIANG, AND BCP may ascertain their rights and duties with respect to the Loan.” (Id. at ¶ 34.)

· Prayer for Relief for:

o “[T]emporary, preliminary, and permanent injunctive relief against the fraudulent and unfair business practices of Defendants LIANG and BCP, including but not limited to enjoining them from preventing the refinancing of the Loan, and enjoining the foreclosure of the Hollywood Real property;

o [A] declaration of the rights and duties of the parties, including but not limited to, a declaration that Defendants LIANG and BCP hold their interests in the Note for the benefit of HOLLYWOOD GARDEN, and are obligated to transfer that interest to HOLLYWOOD GARDEN.” (Id. at pp. 9:16-10:1.)

The Cross-Complaint’s allegations against BCP are based on BCP’s rights and obligations under the Note in regard to the Property, thus the Court finds that the Cross-Complaint relates to the Note and triggers the Note’s provision on attorneys’ fees.

The law is clear that Li, even though he is a non-signatory to the Note, is be bound by the Note’s attorney’s fees provision. “A nonsignatory will be bound by an attorney fees provision in a contract when the nonsignatory party ‘ “stands in the shoes of a party to the contract.” ’ ” (Apex LLC v. Korusfood.com (2013) 222 Cal.App.4th 1010, 1017-1018 [citing Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 952, 966 (quoting Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 897)].) “In that situation, the nonsignatory party is liable for attorney fees if it would have been entitled to fees if it prevailed.” (Id. at p. 1018 [citing Blickman Turkus, LP, 162 Cal.App.4th at 897].)

In Apex LLC, the court found that although the defendant “Korusfood was not a signatory to the credit applications, substantial evidence supported a finding that Korusfood stood in the shoes of [the signatory to the credit applications,] Felix and Sons, Inc., and Sharing World, Inc.” (Id. at p. 1018.) Such evidence included verified answers to the first amended complaint (1) “by Sharing World, Inc., doing business as Felix and Sons, Inc., and Korusfood, formerly known as Felix and Sons, Inc. [;]” (2) alleging “ ‘Answering Defendants admit that KorusFood.com is a California corporation with its principal place of business in Irvine, California, and further admit that KorusFood.com was formerly known as Felix and Sons, Inc.[;]’” and (3) “Kyung Seo verified the answer in his capacity as an officer of ‘Sharing World, Inc., dba Felix and Sons, Inc.’ and of ‘KorusFood.com, fka Felix and Sons, Inc.’” (Ibid.) The held that the non-signatory “Korusfood therefore was the same entity as Felix and Sons, Inc., which was a party to one credit application and the name under which Sharing World, Inc.—a party to the other credit application—did business” and that “Korusfood would have been entitled to recover attorney fees under the credit applications if it had prevailed on appeal and did recover attorney fees after prevailing at trial.” (Ibid.)

Here, Li was not a signatory to the Note, but rather signed the Note as Managing Member of HG. (Huang Decl., Ex. A, p. 5.) However, Li is bound by the attorney fees provision in the Note because there is evidence that Li stands in the shoes of HG, as Li testified, “I personally guarantee everything” under the Note. (Huang Decl., Ex. C, 8/20 Tr. 43:12-17.) Further, Li alleges that his investment in HG would be financed through the loan against the Property. (Cross-Complaint, ¶ 19.) Had Li prevailed at trial, he would have been entitled to recover attorney’s fees, even if he was not the party specified in the contract, thus Li as a non-signatory to the Note, is bound to the attorney’s fees provision in the Note, pursuant to Civil Code section 1717, subdivision (a).

2. Hourly Rate

“The reasonable hourly rate is that prevailing in the community for similar work.” (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.) “The experienced trial judge is the best judge of the value of professional services rendered in his court.” (Id.)

BCP seeks to recover attorneys’ fees for its counsel and legal support team, Geoffrey T. Sover, partner of Steinbrecher & Span LLP, at $450.00 per hour; Andrew Huang, associate of Steinbrecher & Span LLP, at $350.00 per hour; and Carolina Echeverria, paralegal of Steinbrecher & Span LLP, at $150.00 per hour. (Huang Decl., ¶ 22.) BCP’s counsel asserts that their hourly rate is reasonable, “given the level of experience of each of the attorneys and the complexity of the issues involved.” (Id. at ¶ 24.) BCP’s counsel declares that “based on [his] experience with and reviewing of other firms’ billable rates in fee applications, [the hourly rates] are reasonable and comparable to rates charged by similar firms in Los Angeles.” (Ibid.)

Li does not argue that BCP’s counsel’s hourly rates are unreasonable.

The Court finds that the hourly rates of $450.00 for Mr. Sover, $350.00 for Mr. Huang, and $150.00 for Ms. Echeverria are reasonable and commensurate with rates charged by attorneys and legal staff with comparable skill and expertise.

3. Reasonable Hours Incurred

“A trial court assessing attorney fees begins with a touchstone or lodestar figure, based on the ‘careful compilation of the time spent and reasonable hourly compensation of each attorney … involved in the presentation of the case.” (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1321.) “The reasonableness of attorney fees is within the discretion of the trial court, to be determined from a consideration of such factors as the nature of the litigation, the complexity of the issues, the experience and expertise of counsel and the amount of time involved. The court may also consider whether the amount requested is based upon unnecessary or duplicative work.” (Wilkerson v. Sullivan (2002) 99 Cal.App.4th 443, 448.)

While not per se objectionable, block billing can exacerbate the vagueness of an attorney fee request and support a court’s finding that time entries were inflated and non-compensable. (Christian Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1325-1326.)

BCP attaches copies of its counsel’s billing records and its counsel explains that they are “redacted for attorney-client privilege” and “reflect[] BCP’s reasonable billing in this case.” (Huang Decl., ¶ 23, Ex. O.) BCP’s counsel declares that:

“Mr. Stover spent approximately 369 hours in preparation of BCP’s defense, including preparing for and defending BCP at trial – the total amount of attorneys’ fees for Mr. Stover was $165,982.50. Mr. Huang spent approximately 176 hours in preparation of BCP’s defense – the total amount of attorneys’ fees for Mr. Huang was $61,547.50. Ms. Echeverria spent approximately 18 hours in preparation of BCP’s defense – the total amount of fees for Ms. Echeverria was $2,685.00. In total, BCP incurred a total of $230,215.00 in attorneys’ fees.” (Id. at ¶ 23.)

BCP’s counsel attests that “the tasks performed BCP’s counsel in connection in BCP’s defense include: (1) reviewing the entirety of the history of this action prior to Li’s belated filing of a Cross-Complaint against Liang and BCP; (2) drafting of the Discovery Requests, the subsequent correspondence and meet-and-confer efforts regarding the Discovery Requests, and the previously-noted Motions to Compel; (3) preparation for and attendance of third-party depositions, the deposition of Plaintiff Liang, the deposition of Defendant Li in his individual capacity, and the deposition of Defendant Li as the designated person most knowledgeable of Hollywood Garden, LLC; and (4) preparation for and attendance at trial.” (Id. at ¶ 21; Motion, p. 7:20-25.)

In opposition, Li argues that “the billings themselves are completely redacted and the explanation of the $230,215.00 is done in the most cursory manner.” (Opp., p. 10:9-10.) Li asserts “that BCP, Inc. has failed to display that the fees required are in fact ‘reasonable’ or even relate to a claim which may properly be considered within a field such as ‘on the contract’ (Civil Code section 1717, subdivision (a)) for which compensation may be awarded.” (Id. at p. 10:10-13.)

BCP’s billing invoices have been provided as Exhibit O to the Huang Declaration. Every description of every entry has been completely redacted. The only information provided are dates, the number of hours that correspond with the dates, and the rate upon which the hours for the dates are charged. (Huang Decl., Ex. O.) As there are no descriptions whatsoever, the Court is unable to determine if the amount of time allegedly spent on any given task is reasonable. The Court is also unable to determine if the tasks were duplicative, unnecessary, or inflated as no descriptions are included. Even though BCP’s counsel describes generally which tasks were completed in the defense of this matter, this information is insufficient enable the Court to determine the reasonableness of hours spent on each task.

As indicated above, the moving party bears the burden of proof as to “reasonableness” of any fee claim. (Code Civ. Proc., § 1033.5, subd. (c)(5).) This burden requires competent evidence as to the nature and value of the services rendered. (Martino v. Denevi (1986) 182 Cal.App.3d 553, 559.)

BCP has not met its burden to show the reasonableness of its claim for attorney’s fees. T motion for attorneys’ fees is DENIED.