Judge: Daniel S. Murphy, Case: 21STCV16002, Date: 2024-07-05 Tentative Ruling

Case Number: 21STCV16002    Hearing Date: July 5, 2024    Dept: 32

BACKGROUND

            On April 28, 2021, Plaintiffs Ignite International, Ltd. and Ignite International Brands, Ltd. filed this action for breach of contract against Defendant 10979 Chalon, LLC. Plaintiffs sued to recover amounts due under a settlement agreement between the parties.

            On January 9, 2023, Defendant made a section 998 offer to pay $2.5 million secured by a deed of trust. Plaintiffs rejected the offer. After a bench trial from March 5 to 7, 2024, the Court found for Plaintiffs. On April 11, 2024, the Court granted judgment for Plaintiffs in the amount of $2.5 million. 

            On June 6, 2024, Plaintiffs filed the instant motion for attorney’s fees. Defendant filed its opposition on June 20, 2024. Plaintiffs filed their reply on June 26, 2024.

LEGAL STANDARD

            Code of Civil Procedure section 1032 “establishes this general rule: ‘Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.’” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1112, quoting Code Civ. Proc., § 1032(b).) Section 1033.5 specifies the items allowable as costs under section 1032. (Id. at p. 1108.) One such allowable cost is attorney’s fees, when authorized by statute, contract, or law. (Ibid.)

Furthermore, “[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).) Section 1717 makes contractual attorney’s fees provisions mutual and allows the party who successfully defends against a contract claim to recover attorney’s fees even if the contract, on its face, only allows recovery by the party who successfully enforces the contract. (Hom v. Petrou (2021) 67 Cal.App.5th 459, 465.)

“Section 998 modifies the general rule of section 1032 that only the prevailing party recovers its costs.” (Scott, supra, 20 Cal.4th at p. 1112.) Specifically, section 998 provides that “[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.” (Code Civ. Proc., § 998(c)(1).) However, “[a] plaintiff who rejects a settlement offer that is greater than the recovery it ultimately obtains may nonetheless recover its preoffer costs to which it would otherwise be entitled, including preoffer attorney fees.” (Scott, supra, 20 Cal.4th at p. 1112.)

DISCUSSION

I. Contractual Attorney’s Fees Provision

Here, the parties’ settlement agreement provided the following:

“[i]n the event any action, suit or other proceeding is initiated to remedy,

prevent or obtain relief from a breach of this Agreement, arising out of a

breach of this Agreement, involving claims within the scope of the

releases contained in this Agreement, or pertaining to a declaration of

rights under this Agreement, the prevailing party shall recover all of such

party’s reasonable attorney’s fees, expert witness fees, and costs incurred

in each and every such action, suit or other proceeding, including any and

all appeals or petitions therefrom.”

(Settlement Agreement, § 19.) Thus, Plaintiffs are “entitled to recover its attorney fees, in addition to its other costs, by virtue of the combined operation of the contractual attorney fees provision, section 1717, section 1032, and section 1033.5.” (Scott, supra, 20 Cal.4th at p. 1009.)

II. Section 998

            Section 998 cuts off a plaintiff’s entitlement to postoffer costs if the plaintiff has rejected an offer and fails to obtain a more favorable result at trial. (Code Civ. Proc., § 998(a), (c)(1).) On January 9, 2023, Defendant tendered the following offer under section 998:

“In exchange for . . . dismissal of the Complaint in this action with prejudice, Defendant 10979 Chalon, LLC will execute and deliver to Plaintiffs a Promissory Note and second Deed of Trust for $2,500,000, at 3.5% interest, the terms of which will require repayment on the sale of the property, and Defendant 10979 Chalon, LLC will also pay Plaintiffs the total sum to ten dollars ($10.00), and each party shall bear its own attorneys’ fees and costs.”   

(Berokim Decl., Ex. 2.) Plaintiffs did not accept this offer. (Id., ¶ 10.) At trial, Plaintiffs recovered $2.5 million. (Id., Ex. 3.)          

Defendant argues that the offer provided for $2.5 million secured by a deed of trust, which made it more favorable than the trial award of $2.5 million unsecured. Plaintiffs argue that because the offer did not provide for $2.5 million until the property at issue was sold at some unspecified time, the offer was speculative and not more favorable than an enforceable money judgment of $2.5 million.

“An offer to compromise under Code of Civil Procedure section 998 must be sufficiently specific to allow the recipient to evaluate the worth of the offer and make a reasoned decision whether to accept the offer.” (Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 764.) “Any nonmonetary terms or conditions must be sufficiently certain and capable of valuation to allow the court to determine whether the judgment is more favorable than the offer.” (Ibid.) Additionally, “the offer must be unconditional to be enforceable.” (Elite Show Services, Inc. v. Staffpro, Inc. (2004) 119 Cal.App.4th 263, 268.)

Here, Defendant’s offer was not certain nor unconditional. Instead of making an unequivocal offer to pay $2.5 million, Defendant conditioned Plaintiffs’ receipt of $2.5 million on sale of the property at issue. Plaintiffs would not have been able to reasonably evaluate the value of this offer because it is unclear from the terms of the offer when, if at all, Defendant would be required to sell the property. For this reason, it is also unclear how the offer could be more favorable than a cash judgment of $2.5 million. Because Defendant’s settlement offer was insufficiently certain for Plaintiffs to evaluate its worth or for the Court to determine its value compared to the judgment, the offer was invalid and does not serve to cut off Plaintiffs’ costs.      

II. Fees for Associate Counsel

            Attorney Kimberly Stein was associated as co-counsel for Plaintiffs on October 24, 2023. (Berokim Decl., Ex. 4.) Defendant argues that Plaintiffs cannot recover fees for work performed by Ms. Stein before that date. However, Defendant cites no authority for its proposition that recoverable attorney’s fees are limited to those incurred by an attorney of record. The law is in fact the opposite.

“If an attorney is in fact retained by the . . . litigant and renders legal services assisting in the lawsuit, the attorney need not be an attorney of record in order for the reasonable fees of the attorney to be awarded to a prevailing party.” (Mix v. Tumanjan Development Corp. (2002) 102 Cal.App.4th 1318, 1324.) A litigant may also recover fees for two attorneys working on the same case “provided the legal services are not unnecessarily duplicative.” (Ibid.) Defendant does not dispute that Ms. Stein was in fact retained by Plaintiffs before October 24, 2023, or that Ms. Stein performed work reasonably necessary to the litigation. Nor does Defendant argue that the work performed by Ms. Stein was duplicative. Therefore, Plaintiffs are entitled to recover attorney’s fees for Ms. Stein, including fees incurred before October 24, 2023.

III. Amount

The lodestar method for calculating attorney fees applies to any statutory attorney fees award, unless the statute authorizing the award provides for another method of calculation. (Glaviano v. Sacramento City Unified School Dist. (2018) 22 Cal.App.5th 744, 750-751.) “Under the lodestar method, the trial court must first determine the lodestar figure—the reasonable hours spent multiplied by the reasonable hourly rate—based on a careful compilation of the time spent and reasonable hourly compensation of each attorney involved in the presentation of the case.” (Id. at p. 751.) 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.)      

Beyond the issues addressed above, Defendant does not otherwise challenge the reasonableness of Plaintiff’s claimed fees. The Court finds that the hourly rate and hours claimed are reasonable. (See Stein Decl., Ex. A; Ellis Decl., Ex. A.) Therefore, the total award is $206,104.90.

CONCLUSION

            Plaintiffs’ motion for attorney’s fees is GRANTED in the amount of $206,104.90.