Judge Edward B. Moreton, Jr., Case Number: 18SMCV00467, Date: 2023-08-23 Tentative Ruling

Judge: Edward B. Moreton, Jr., Case: 18SMCV00467, Date: 2023-08-23 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

ELENA MONDRAGON, individually and derivatively on behalf of Marina City Club Condominium Owners Association,

Plaintiff

NEIL KELLIHER, et al.,

Defendants

Case No.: 18SMCV00467

Hearing Date: January 10, 2024

[TENTATIVE] ORDER RE:

DEFENDANTS NEIL KELLIHER, LOUISE

PESCE, PETER BERGMANN, DONNA

BRYCE AND LAHDAN RAHMATI’S

MOTION FOR ATTORNEYS’ FEES

This shareholder derivative lawsuit stems from a dispute between Plaintiff Elena Mondragon and her homeowner’s association, Marina City Club Condominium Owners Association (“HOA”). Plaintiff has also sued former members of the HOA’s Board of Directors: Neil Kelliher, Peter Bergmann, Louise Pesce, Donna Bryce and Lahdan Rahmati (“Moving Defendants”).

Plaintiff asserts a derivative action against the Moving Defendants for breach of fiduciary duty, which is based on allegations that the Moving Defendants allowed for certain expenditures without first obtaining formal approval from the entire Board. (First Amended Complaint (“FAC”) ¶¶ 4, 33.) Plaintiff also alleges a cause of action for “Accounting” based on her allegation that she is entitled to “an accounting of the financial activities of Defendants with respect to the disbursements referenced herein.” (FAC ¶ 59.)

Moving Defendants moved to dismiss Plaintiff’s claims on the ground that Plaintiff is no longer a member of the HOA and therefore, she lacked standing to prosecute her action. Plaintiff did not file an opposition to the motion, but two days before the motion was set to be heard, she filed a voluntary dismissal of her claims against the Moving Defendants.

This hearing is on Moving Defendants’ motion for attorneys’ fees. Moving Defendants seek attorneys’ fees pursuant to Civ. Code § 5975 and Corp. Code § 7710. The Court previously awarded attorneys’ fees pursuant to these same statutes to other entity defendants who are represented by the same counsel as Moving Defendants.

Civ. Code §5975¿¿

“The Davis-Stirling Common Interest Development Act (Davis-Stirling Act or the Act) governs an action to enforce the recorded [covenants, conditions, and restrictions (“CC&R”)] of a common interest development.” (Champir, LLC v. Fairbanks Ranch Assn. (2021) 66 Cal.App.5th 583, 590 (“Champir”).)¿¿¿

“Section 5975 provides that CC&Rs may be enforced as equitable servitudes, unless unreasonable, and ‘[i]n an action to enforce the governing documents [of a common interest development], the prevailing party shall be awarded reasonable attorney[ ] fees and costs.’” (Champir, supra, 66 Cal.App.5th at p. 590, quoting Civ. Code, § 5975, subd. (c).)¿¿¿

In one case, the California Court of Appeal “conclud[ed] that the causes of action for breach of a contractual obligation alleged to have been created by the CC&R’s, and for declaratory relief affirming plaintiff’s interpretation of the CC&R’s, were actions brought to enforce the CC&R’s. The [trial] court therefore did not err in determining that pursuant to [former] Civil Code section 1354 [subsequently recodified in Section 5975] the prevailing party was entitled to fees incurred in defense of these causes of action.” (Chee v. Amanda Goldt Property Management (2006) 143 Cal.App.4th 1360, 1381.)¿¿

“The Act does not define ‘prevailing party.’ However, it is well established that ‘[t]he analysis of who is a prevailing party under the fee-shifting provisions of the Act focuses on who prevailed “on a practical level” by achieving its main litigation objectives.’ [Citations.]” (Champir, supra, 66 Cal.App.5th at p. 590.)¿

Corp. Code §7710¿¿

Courts have interpreted Corporations Code section 7710 to mean that “[a] member of a … corporation is prohibited from instituting or maintaining an action in the right of the corporation unless the action is a derivative suit.” (Gantman v. United Pacific Ins. Co. (1991) 232 Cal.App.3d 1560, 1567.) Subdivision (b) of the statute states: “No action may be instituted or maintained in the right of any corporation by any member of such corporation unless both of the following conditions exist:¿

The plaintiff alleges in the complaint that plaintiff was a member at the time of the transaction or any part thereof of which plaintiff complains, or that plaintiff's membership thereafter devolved upon plaintiff by operation of law from a holder who was a holder at the time of transaction or any part thereof complained of; and¿

The plaintiff alleges in the complaint with particularity plaintiff's efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort, and alleges further that plaintiff has either informed the corporation or the board in writing of the ultimate facts of each cause of action against each defendant or delivered to the corporation or the board a true copy of the complaint which plaintiff proposes to file.¿

(Corp. Code, § 7710, subd. (b).)¿¿

DISCUSSION

Moving Defendants move for an order awarding them attorneys’ fees, pursuant to Civ. Code § 5975 and Corp. Code § 7710.

The Court agrees that Plaintiff’s claims against the Moving Defendants fall under Civ. Code § 5975 because she brought this action to enforce the governing documents of an HOA. (FAC ¶¶ 1, 52, 53, 54, 55, 58.) All of Plaintiff’s claims are premised on her argument that Moving Defendants violated various governing documents in making financial decisions. Indeed, in the very first paragraph of her complaint, Plaintiff alleges she “seeks to hold Defendants accountable for their abject failure to comply with numerous documents that govern both the operation and maintenance of the Marina City Club Development”. (FAC ¶1.)

Plaintiff argues that § 5975 only allows an association to seek fees from the homeowner or the homeowner to seek fees from the association. Plaintiff cites no authority in support of her argument. Section 5975 expressly states that “[i]n an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorneys fees.” It does not limit the award of attorneys’ fees to a homeowner or association.

Plaintiff also argues that § 5975 does not apply to tort claims such as her claim for breach of fiduciary duty. Again, the argument is not supported by the language of § 5975 which applies to any “action to enforce the governing documents.” Plaintiff’s breach of fiduciary duty claim was an action seeking to enforce the governing documents. In paragraph 4, Plaintiff alleges that the Moving Defendants “breached their fiduciary duties … under the governing documents.” In paragraph 43, Plaintiff alleges that “DEFENDANTS are aware that they have not complied with the provisions in the governing documents …” In paragraph 46, Plaintiff alleges that the Moving Defendants “had a fiduciary duty to faithfully enforce the provisions of all documents governing the operation, management and control of the City Club.” And in paragraph 47, Plaintiff alleges that the Moving Defendants breach their fiduciary duties by “violating the [Association’s] governing documents.”

Plaintiff’s claims against the Moving Defendants also fall under Corp. Code § 7710 because it is a derivative action on behalf of the HOA, and the Court entered an order requiring Plaintiff to post a bond of $50,000 pursuant to Section 7710. (FAC, ¶¶ 1, 22; Minute Order dated October 17, 2019, pp. 1-2.) ¿¿

The Court further finds that Moving Defendants are the prevailing parties entitled to attorney’s fees under Civ. Code § 5975 and Corp. Code § 7710 because Plaintiff voluntarily dismissed her claims against Moving Defendants, while a motion to dismiss was pending. (Salehi v. Surfside III Condominium Owners’ Assn (2011) 200 Cal.App.4th 1146, 1150 (HOA was prevailing party in a case where homeowner voluntarily dismissed several causes of action because dismissal meant the HOA realized its “‘litigation objectives’ and was the prevailing party on a ‘practical level’”).)

Plaintiff argues Moving Defendants are not actually the prevailing parties because she voluntarily dismissed her lawsuit without prejudice and her dismissal was due to an extraneous fact that she sold her unit and therefore, lost standing to maintain her suit. Plaintiff cites no authority to support her argument. The test for determining a “prevailing party” is a pragmatic test that focuses on whether a party prevailed on a practical level by achieving its main litigation objectives. (See, e.g., Champir LLC v. Fairbanks Ranch Ass’n (2021) 66 Cal.App.5th 583, 590.) There can be no serious dispute that Moving Defendants achieved their main litigation objective when Plaintiff voluntarily dismissed her claims against them, regardless of the reason for her dismissal.

Because the Davis-Stirling Act requires a mandatory fee award to prevailing parties, the Court has no discretion to deny attorney fees to the Moving Defendants. (Rancho Mirage Country Club Homeowners Assn v. Hazelbaker (2016) 2 Cal.App.5th 252, 263 (“Once the court determined the Association to be the prevailing party in the action, it had no discretion to deny attorney fees.”).) Accordingly, the only issue is the amount of fees that should be awarded to Moving Defendants.

“[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. … 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, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 [internal citations omitted].) “[T]he court’s discretion in awarding attorney fees is … to be exercised so as to fully compensate counsel for the prevailing party for services reasonably provided to his or her client.” (Horsford v. Board of Trustees of California State University (2005) 132 Cal.App.4th 359, 395.) “[T]he verified time statements of the attorneys, as officers of the court, are entitled to credence in the absence of a clear indication the records are erroneous.” (Id. at p. 396.) The trial court may reduce the award where the fee request appears unreasonably inflated, such as where the attorneys’ efforts are unorganized or duplicative. (Serrano v. Unruh (1982) 32 Cal.3d 621, 635, fn. 21.)¿¿

Here, Moving Defendants seek $81,083.45 in attorney’s fees. (Turner Decl. ¶ 22.)¿¿¿

The requested attorney’s fees consist of time for two attorneys (Brittney Turner and Lyne A. Richardson (“Richardson”). (Id. ¶ 14.) Richardson has over 30 years experience as a litigator, and her standard hourly rate is $600 per hour but for this matter her hourly rate is $290. (Id.) Turner has over nine years experience as a litigator and her hourly rate is $234. (Id. ¶¶ 14, 16-17.) The Court has previously found these hourly rates to be reasonable.

The total fees incurred before this motion based on those billing rates was $78,743.45, and Turner has attached and verified a copy of the billing records to her declaration. (Turner Decl., ¶¶ 20-21; Exhibit A.)¿¿

Moving Defendants also seek an additional $2,340 for (a) 6 hours Turner spent on this motion and (b) 4 hours she anticipates spending reviewing Plaintiff’s opposition, preparing a reply, advising her clients regarding the motion, and appearing at the hearing, at her hourly rate of $234 (10 hours x 234 = $2,340). (Turner Decl. ¶22.)¿¿

Plaintiff argues that Moving Defendants’ fees are inflated because they include fees for the time period when Plaintiff was appealing the Court’s ruling on Moving Defendants’ anti-SLAPP motion. Moving Defendants lost on appeal after they brought a special motion to strike the operative first amended complaint. The appeal was not fully remitted to the trial court until July 29, 2022. The Court of Appeal reversed the trial court’s order on the anti-SLAPP motion and the related motions for attorney’s fees in their entirety.

But it is of no consequence that Plaintiff’s appeal of the anti-SLAPP ruling was successful. Defendants are still the prevailing parties for purposes of the entire litigation and are therefore entitled to recover all of their fees. Plaintiff has cited no authority that allows the Court to parse out fees for unsuccessful motions. The Court concludes that the requested fees of $81,083.45 are reasonable given that the fees were incurred over nearly five years and for five separate defendants.