Case Number: BC514710    Hearing Date: July 23, 2014    Dept: 34

Moving Party: Defendant Michel Harouche (“defendant”)

Resp. Party: Plaintiff Mani Investments LLC (“plaintiff”)

The Court awards defendant $50,000 in attorney’s fees for the instant action.

BACKGROUND:

Plaintiff commenced this action on 7/10/13 against defendants to set aside fraudulent conveyances. In the sole claim for fraudulent conveyance, plaintiff alleged that it was the holder of a claim against defendant which consisted of defendant’s wrongful withholding of his consent for plaintiff to sell his interest in HMS Air LLC. (Compl., ¶ 7.) In January 2013 an action was commenced by plaintiff against defendant based on the claim. (Id., ¶ 8.) Plaintiff alleged that defendant owned the subject property and, for no consideration, conveyed by grant deed his interest in the property to Kathy Harouche. (Id., ¶¶ 9-12.)

ANALYSIS:

Defendant seeks attorney’s fees in the amount of $177,866.25. Attorney’s fees may only be recovered where such recovery is authorized by statute or contract. (See Code Civ. Proc., § 1033.5(a)(10)(A).)

The Operating Agreement Allows for Recovery of Attorneys Fees in this Action

Defendant points to language in the operating agreement of HMS Air LLC which states:

In the event that any dispute between the Company and the Members or among the Members should result in litigation or arbitration, the prevailing party in such dispute shall be entitled to recover from the other party all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys’ fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorney fees and costs incurred in enforcing such judgment and an award of prejudgment interest from the date of the breach at the maximum rate allowed by law. For the purposes of this Section: (a) attorney fees shall include, without limitation, fees incurred in the following: (1) postjudgment motions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third party examinations; (4) discovery; and (5) bankruptcy litigation, and (b) prevailing party shall mean the party who is determined in the proceeding to have prevailed or who prevails by dismissal, default or otherwise.

(Cestero Decl., Exh. 1, § 18.8.)

California Civil Code § 1717(a) states:

[i]n 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.

(Civ. Code., § 1717(a).) However, defendant may not recover fees pursuant to section 1717 for the instant action because plaintiff did not bring a claim for breach of contract. (See Santisas v. Goodin (1998) 17 Cal.4th 599, 615 [“If an action asserts both contract and tort or other noncontract claims, section 1717 applies only to attorney fees incurred to litigate the contract claims.”].) Because section 1717 is inapplicable, its bar against the recovery of fees upon voluntary dismissal is also not applicable to the instant action.

Defendant argues that it may still recover the fees under the contract because the provision is broadly worded. Code of Civil Procedure section 1021 states: “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.” In Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, the plaintiffs filed an action against the defendants for assault, battery, and negligence, where the negligence action alleged that the property management company and property owner owed a duty of care to the plaintiffs to provide for their safety as tenants. (Id. at p. 180.) After the trial court granted a motion to strike the plaintiffs’ request for attorney’s fees, the plaintiffs filed a first amended complaint which no longer requested attorney’s fees. (Ibid.) The defendants made section 998 settlement offers, one of which was accepted by one of the plaintiffs (Chinn), who thereafter dismissed her action. (Id. at p. 181.) Chinn thereafter moved for an award of attorney’s fees based on section 1021 and her lease agreement. (Ibid.) The agreement provided: “If any legal action or proceeding be brought by either party to this agreement, the prevailing party shall be reimbursed for all reasonable attorney’s fees and costs in addition to other damages awarded.” (Ibid.) The defendants opposed the motion, arguing, among other things, that the operative complaint did not include a cause of action for breach of contract and the tort claims were unrelated to the lease agreement. (Ibid.) The trial court denied Chinn’s motion for attorney’s fees. (Id. at p. 182.)

On appeal, the court agreed with Chinn that the attorney’s fees provision in her lease agreement allowed the prevailing party to recover attorney’s fees in the tort action. (Chinn, 166 Cal.App.4th at p. 182.)

“[T]o determine whether an award of attorney fees is warranted under a contractual attorney fees provision, the reviewing court will examine the applicable statutes and provisions of the contract. Where extrinsic evidence has not been offered to interpret the lease, and the facts are not in dispute, such review is conducted de novo. [Citation.]” [Citation.] “As the case law makes clear, the test is not whether the cause of action sounds in tort or contract. Instead, the sole question is the intent of the parties: did they intend to authorize the prevailing party to recover its attorney fees for a tort cause of action. [Citations.]” [Citation.]

The attorney fees provision in Chinn’s lease agreement with CPLP was exceptionally broad, providing for attorney fees to the prevailing party in “any legal action or proceeding brought by either party to this agreement.” The attorney fees provision did not require that the action be related to or arise out of the lease agreement. Moreover, the negligence cause of action alleged in the complaint, based on CPLP’s duty to protect its tenant from foreseeable harm, clearly related to her tenancy. [Citation.] We conclude the attorney fee provision of the lease agreement encompassed an award of attorney fees to the prevailing party in the instant tort action.

(Id. at pp. 182-183.)

The attorney’s fees provision in the subject operating agreement plainly states that the prevailing party in “any dispute … among the Members” is entitled to recover all attorney’s fees. (See Cestero Decl., Exh. 1, § 18.8.) Plaintiff and the moving defendant are both listed as members in the agreement. (See id., Exh. 1, Exh. A.) The provision states that the prevailing party includes a party who prevails via a dismissal. (See id., § 18.8.) This provision is as broadly worded as the agreement in Chinn, where the provision provided: “If any legal action or proceeding be brought by either party to this agreement, the prevailing party shall be reimbursed for all reasonable attorney’s fees and costs in addition to other damages awarded.” (Chinn, 166 Cal.App.4th at p. 181.)

The Court rejects plaintiff’s argument that the provision should be narrowly construed to apply only to disputes regarding enforcement of the agreement. (See Opp., p. 4.) The language of the provision contains no such limiting language. The language that fees may be recovered for “enforcing any right of the prevailing party” means just that – in any dispute between the parties as to any of their respective rights, the prevailing party may recover attorney’s fees. The provision contains no language which suggests that it is limited only to claims exclusively between members or the company; therefore, the fact that K. Harouche was a party does not render the provision inapplicable. The Court notes that K. Harouche is not seeking fees. Finally, plaintiff fails to show than an absurd result could occur if defendant collects fees for the instant action. The provision contemplates that litigation could occur between members of the LLC, and that is exactly what happened in this action. (See Compl., ¶ 7.)

Therefore, defendant may recover fees for the instant action pursuant to the language in the operating agreement.

Defendant is not Entitled to Attorneys Fees for Mani I

Defendant’s request for fees is not limited to the instant action; instead, defendant seeks to recover the fees incurred in the underlying claim, BC500010, which was a claim solely for breach of contract and which was voluntarily dismissed. Because BC500010 was a breach of contract claim that was voluntarily dismissed, defendant could not recover fees in that action pursuant to Civil. Code section 1717.

In Santisas v. Goodin (1998) 17 Cal.4th 599, the California Supreme Court addressed the issue of whether a defendant may recover attorney’s fees where the plaintiff has voluntarily dismissed an action that alleged both tort and contract actions, all of which arose from a contract that contained a broadly-worded attorney’s fees clause. The court held that “in voluntary pretrial dismissal cases, Civil Code section 1717 bars recovery of attorney fees incurred in defending contract claims, but that neither Civil Code section 1717 nor [International Industries, Inc. v. Olen (1978) 21 Cal.3d 218], bars recovery of attorney fees incurred in defending tort or other noncontract claims. Whether attorney fees incurred in defending tort or other noncontract claims are recoverable after a pretrial dismissal depends upon the terms of the contractual attorney fee provision.” (Santisas, 17 Cal.4th at p. 602.)

Defendant cites to Akins v. Enterprise Rent-A-Car Co. of San Francisco (2000) 79 Cal.App.4th 1127, which was an action where the plaintiff brought tort and statutory claims. (Id. at p. 1130.) The defendant argued that the plaintiff was only entitled to recover attorney’s fees relating to the plaintiff’s statutory claims. (Id. at p. 1132.)

When a cause of action for which attorney fees are provided by statute is joined with other causes of action for which attorney fees are not permitted, the prevailing party may recover only on the statutory cause of action. However, the joinder of causes of action should not dilute the right to attorney fees. Such fees need not be apportioned when incurred for representation of an issue common to both a cause of action for which fees are permitted and one for which they are not. All expenses incurred on the common issues qualify for an award. [Citation.] When the liability issues are so interrelated that it would have been impossible to separate them into claims for which attorney fees are properly awarded and claims for which they are not, then allocation is not required.

(Id. at p. 1133.) “If there is a common legal issue-in this case, the application and interpretation of a statute on which there was no case law to guide counsel-that links a claim on which an attorney fees motion may properly be based with a claim for which no attorney fees may be recovered, that appears to us to be sufficient to link the legal work to the compensable attorney fees claim.” (Ibid. [italics in original].)

The instant action may be distinguished from Santisas and Akins because defendant here is attempting to recover fees for two separate actions. Defendant provides no authority where a court allowed such recovery. Defendant has not established that the legal issues in the claims in BC500010, which pertained to defendant’s alleged breach of the agreement, are common to the legal issues in the instant case, where it is alleged that defendant fraudulently conveyed his interests in real properties. Defendant does not clearly establish that a determination as to whether he breached the contract was necessary to a determination of whether he fraudulently conveyed the property. Indeed, the Court notes that defendant’s summary judgment motion was not based on an argument that plaintiff did not have a claim as to the contract. Instead, defendant argued that the conveyance of the property was not fraudulent. (See MSJ, filed 9/25/13.) Plaintiff disputes that the breach of contract claim was the sole basis for its claim in the subject property. (See Rohatiner Decl., ¶¶ 11-12, Exh. 5.) Therefore, defendant may recover fees only for the instant action.

Reasonableness of the Attorneys Fees

The trial court has broad authority to determine the amount of a reasonable fee. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095; Ghanooni v. Super Shuttle of Los Angeles (1993) 20 Cal.App.4th 256, 262.) In determining the reasonable value of the attorney services,

the court does not need separate evidence to establish the reasonable value of whatever should be justly awarded, the theory being that the trial judge is competent from his own knowledge of legal practice to fix the amount of the fees. [Citations.]

(Spencer v. Harmon Enterprises (1965) 234 Cal.App.2d 614, 621 [internal citations omitted].)

The attorney bears the burden of proof as to “reasonableness” of any fee claim. (Code Civ. Proc., § 1033.5(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.) “Testimony 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.” (Martino, 182 Cal.App.3d at 559.)

In determining whether the requested attorney’s fees are “reasonable,” the Court’s

‘first step involves the lodestar figure – a calculation based on the number of hours reasonably expended multiplied by the lawyer’s hourly rate. The lodestar figure may then be adjusted, based on consideration of facts specific to the case, in order to fix the fee at the fair market value for the legal services provided.’

(Gorman v. Tassajara Development Corp. (2008) 162 Cal.App.4th 770, 774 [internal citations omitted].) In determining whether to adjust the lodestar figure, the Court may consider the nature and difficulty of the litigation, the amount of money involved, the skill required and employed to handle the case, the attention given, the success or failure, and other circumstances in the case. (EnPalm LLC v. Teitler (2008) 162 Cal.App.4th 770, 774; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.)

The Court finds that the hourly rate requested by the attorneys involved in this matter is reasonable.

The Court is concerned, however, with the number of hours billed.

Defendant provides a declaration which describes the work performed in this action and discusses facts to support the requested billable rates for the attorneys. (See Collins Decl., ¶¶ 2-3, 5-15, Exh. 4.) Defense counsel declares that the amount of fees incurred for this action is $80,668.75. (Cestero Decl., ¶ 18.) This amount seems excessive. Prior to the instant motion, the only items submitted by defendant included:

· a 2-page form answer;
· a 8-page summary judgment that raised only one substantive argument (and was accompanied by a 7-page separate statement listing 20 undisputed facts);
· a brief motion for sanctions, and an opposition to an ex parte to continue the hearing on the summary judgment.

Defendant should not have incurred over $80,000.00 for this work.

The Court is also concerned about the apparent practice of defense counsel to bill in quarter-hour increments. (See, e.g., the billing records submitted as Exhs. 4 and 5 to Collins’ Declaration.)
That means that if an attorney spends 2 minutes on an action (e.g., having a brief telephone conversation, or preparing a one-sentence email) that attorney will bill for 0.25 hours. At $500/hour, this would be an entry of $125. This may well be an accepted billing practice, but the Court does not find it reasonable.

Because the Court finds that amount of attorneys fees requested to be unreasonable, the Court could simply deny the request for attorneys fees. “‘If . . . the Court were required to award a reasonable fee when an outrageously unreasonable one has been asked for, claimants would be encouraged to make unreasonable demands, knowing that the only unfavorable consequence of such misconduct would be reduction of their fee to what they should have asked in the first place. To discourage such greed, a severer reaction is needful . . . .’ (Serrano v. Unruh (1982) 32 Cal.3d 621, 635, quoting Brown v. Stackler (7th Cir. 1980) 612 F.2d 1057, 1059.) “A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether.” (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 990; Ketchum v. Moses (2001) 24 Cal.4th 1122, 1137; Serrano v. Unruh (1982) 32 Cal.3d 621, 635.)

However, in this case, the Court believes that an outright denial of all attorneys fees would not do justice between the parties.

The Court finds that the reasonable loadstar for defense counsel’s work prior to this motion is $40,000.

Defendant also seeks excessive fees for the instant motion. It appears that defendant is asserting that nearly $15,000.00 in fees were incurred in relation to the instant motion. (See Cestero Decl., ¶¶ 14-17.) The instant motion is not so complex as to support such a fees request. At most, defendant should have incurred $10,000.00 to prepare this motion and attend the hearing.

The Court rejects plaintiff’s arguments that the fees are unreasonable because defendant could have avoided this litigation by providing evidence establishing that the conveyance was not fraudulent. (See Opp., pp. 7-9.) This appears to be a case of “blaming the victim.” Plaintiff provides no authority to support its apparent assertion that a defendant may not recover fees where the defendant had evidence which established that the plaintiff’s claim was without merit. “We have little sympathy for the litigant who fires a big gun, and when the adversary returns fire, complains because he was only firing blanks.” (Brandt v. Schal Assoc., Inc. (7th Cir. Ill. 1992) 960 F.2d 640, 648.) In filing the instant action, plaintiff took the risk that defendant had evidence to defeat plaintiff’s claims and, if the claims were defeated, defendant would recover fees. “We have insisted that a party cannot foist its expenses off on its adversaries, especially when shallow claims may require costly replies.” (Classic Components Supply, Inc. v. Mitsubishi Electronics America, Inc., (7th Cir. 1988) 841 F.2d 163, 165 [internal citations omitted].)

The Court awards defendant $50,000.00 in attorney’s fees for this action.