Judge: Edward B. Moreton, Jr., Case: 23SMCV00517, Date: 2023-11-02 Tentative Ruling

Case Number: 23SMCV00517    Hearing Date: April 10, 2024    Dept: 205

County of Los Angeles

Beverly Hills Courthouse | Department 205

Background

Plaintiff Network Experts, Inc. (“Plaintiff”) provides computer sales, consulting, and IT services to clients throughout southern California. (Complaint, ¶ 14.) On February 23, 2023, Plaintiff filed a Complaint against Defendants Beverly Hills IT Services, Beverly Hills IT, and Mostafa Karabalei Ahmad Baboli aka Stephan Parsa (“Baboli”) (collectively “Defendants”) and DOES 1 through 50, alleging causes of action for: (1) misappropriation of trade secrets; (2) breach of promissory note; (3) breach of fiduciary duty; (4) breach of duty of loyalty; (5) unfair competition; (6) intentional interference with prospective economic relations; (7) negligent interference with prospective economic relations; (8) conversion, and (9) trespass to chattel.

The Complaint alleges the following: Defendant Baboli used to be an employee of Plaintiff and is the principal of Defendants Beverly Hills IT Services and Beverly Hills IT (collectively the “Entity Defendants”) who served as an independent contractor for Plaintiff. (Complaint, ¶ 23.) Defendant Baboli was hired by Plaintiff as a field employee. (Complaint, ¶ 18.) In or about late 2021, Defendant Baboli informed Plaintiff that he consulted with his accountant and decided to form the Entity Defendants for tax purposes. (Complaint, ¶ 19.) Defendant Baboli insisted that Plaintiff no longer employ him but instead contract with the Entity Defendants and make all payments to the Entity Defendants. (Complaint, ¶ 19.) Defendant Baboli informed Plaintiff that the Entity Defendants would contract with Plaintiff as an independent contractor, servicing Plaintiff’s clients, while also servicing clients of the Entity Defendants as well. (Complaint, ¶ 19.) Plaintiff acquiesced to appease Defendant Baboli and the Entity Defendants. (Complaint, ¶ 20.) Plaintiff alleges that, in or around December 2022, it learned that Defendants secretly engaged in unlawful conduct to poach Plaintiff’s clients for their competitive business, while purporting to service those clients on Plaintiff’s behalf as Plaintiff’s contractors. (Complaint, ¶ 24.) Plaintiff alleges that Defendant Baboli borrowed $9,540 pursuant to a promissory note (the “Promissory Note”), which he has failed to repay. (Complaint, ¶¶ 34-38.) Plaintiff alleges that Defendants unlawfully used and continue to use Plaintiff’s trade secrets and confidential information. (Complaint, ¶ 42.)

On April 27, 2023, default was entered against the Entity Defendants.

On May 2, 2023, default was entered against Defendant Baboli.

On August 28, 2023, Plaintiff filed a Request for Entry of Default Judgment against Defendants.

On September 20, 2023, Defendants filed a motion to vacate the default entered against them.

On November 3, 2023, after hearing oral argument and taking the matter under submission, the Court granted Defendants’ motion to vacate default in part. (11/03/23 Minute Order.) The Court vacated the default as to Defendant Baboli only but denied the motion to vacate as to the Entity Defendants. (11/03/23 Minute Order.)

On November 8, 2023, Defendant Baboli filed an Answer to the Complaint.

On November 17, 2023, the Entity Defendants filed a Motion for Reconsideration as to the Court’s November 3, 2023 order.

On December 26, 2023, Plaintiff filed a Request for Default Judgment as to the Entity Defendants.

On February 20, 2024, after hearing, the Court denied the Entity Defendants’ motion for reconsideration. Also, on such date, the Court held a Status Conference re: Default Judgment. The Court reviewed Plaintiff’s default judgment application concerning the Entity Defendants and the Court granted in part and denied in part Plaintiff’s request for default judgment as to the Entity Defendants. (02/20/24 Minute Order at p. 10.) The Court awarded Plaintiff judgment in the sum of $90,000.00 and granted injunctive relief. (Id.) The Court indicated that Plaintiff could not seek damages pursuant to its claim for unfair competition; however, the Court found that Plaintiff specified $90,000.00 in damages as to its other claims. (Id. at p. 8.) The Court also stated that the attorneys’ fees provision in the Promissory Note was not enforceable against the Entity Defendants. (02/20/24 Minute Order at p. 10.)

On March 4, 2024, the Court entered judgment in favor of Plaintiff and against the Entity Defendants consistent with its February 20, 2024 order. The Court’s judgment states that “[a]ny request for attorney fees will be subject to a filed and noticed motion in this matter.” (Judgment at p. 2:5.)

On March 7, 2024, Plaintiff filed and served the instant Motion for Attorneys’ Fees in which Plaintiff seeks attorneys’ fees against the Entity Defendants in the amount of $137,666.56. On March 27, 2024, Defendants filed an opposition to the motion, to which Plaintiff replied on April 3, 2024.

Request for Judicial Notice

            The Court GRANTS Defendants’ request for judicial notice pursuant to California Evidence Code sections 452 and 453.

Motion for Attorneys’ Fees Standard

            “In general, a prevailing party may recover attorney’s fees only when a statute or agreement of the parties provides for fee shifting.” (Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4^th 1244, 1248.) “It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court, whose decision cannot be reversed in the absence of an abuse of discretion.” (Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623.) The fee setting inquiry in California ordinarily “begins with the ‘lodestar’ [method], i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate.” (Graciano v. Robinson Ford Sales, Inc. (2006) 144 Cal.App.4^th 140, 154.) “The reasonable hourly rate is that prevailing in the community for similar work.” (Margolin v. Regional Planning Com. (1982) 134 Cal.App.3d 999, 1004.) 

            “[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.” (Margolin v. Regional Planning Com., supra, 134 Cal.App.3d 999, 1004.) 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. (See Serrano v. Priest (1977) 20 Cal.3d 25, 49 [discussing factors relevant to proper attorneys’ fees award].) Such an approach anchors the trial court’s analysis to an objective determination of the value of the attorney’s services, ensuring that the amount awarded is not arbitrary. (Id. at p. 48, fn. 23.) The factors considered in determining the modification of the lodestar include “(1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, [and] (4) the contingent nature of the fee award.” (Mountjoy v. Bank of Am. (2016) 245 Cal.App.4^th 266, 271.) “[T]he burden is on the party seeking attorney fees to prove that the fees it seeks are reasonable.” (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4^th 44, 98.) “[A]n award of attorney fees may be based on counsel’s declarations, without production of detailed time records.” (Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4^th 1363, 1365.)

            Where a party is challenging the reasonableness of attorney’s fees as excessive that party must attack itemized billing with evidence that the fees claimed were not appropriate or obtain the declaration of an attorney with expertise in the procedural and substantive law to demonstrate that the fees claimed were unreasonable. (Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4^th 550, 563-564.) “[I]t is the burden of the challenging party to point to the specific items challenged, with a sufficient argument and citations to the evidence and arguments that fees claimed are excessive, duplicative, or unrelated do not suffice.” (Id. at p. 564.) It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court. (PLCM Group v. Drexler (2000) 22 Cal.4^th 1084, 1096.) 

            A “court should defer to the winning lawyer’s professional judgment as to the tasks completed in an action because he won, and might not have, had he been more of a slacker.” (Moreno v. City of Sacramento (9th Cir. 2008) 534 F.3d 1106, 1111.) A losing party cannot litigate tenaciously then be heard to complain about the time spent or tasks performed by the prevailing party in response. (City of Riverside v. Rivera (1986) 477 U.S. 561, 580, fn.11.)  Where a defendant does not produce evidence contradicting the reasonableness of counsel’s hourly rates, the Court will deem an attorney’s hourly rate as reasonable. (Goglin v. BMW of North America, LLC (2016) 4 Cal.App.5^th 462, 473.)

Analysis

The Lack of a Notice of Motion

            “A notice of motion must state in the opening paragraph the nature of the order being sought and the grounds for the issuance of the order.” (Cal. Rules of Court, Rule 3.1110(a).)

            Here, the Court finds that Plaintiff did not file a notice of motion setting forth the nature of the order being sought and the grounds for the issuance of the order. Plaintiff merely filed a caption page which sets forth the date, time, and department of the hearing on the motion for attorneys’ fees, which is followed by a memorandum of points and authorities in support of the motion. Plaintiff failed to comply with California Rules of Court, Rule 3.1110(a). Defendants, however, do not indicate any prejudice or even address the lack of a properly noticed motion.

            As such, the Court will consider the motion on its merits. However, Plaintiff is reminded to comply with the requirements of the California Rules of Court.

The Defendants’ Lack of Standing to Oppose the Motion

            On reply, Plaintiff argues that the Entity Defendants may not oppose the motion because they have been defaulted. The Court agrees with Plaintiff.

            “The entry of default terminates a defendant’s rights to take any further affirmative steps in the litigation until either its default is set aside or a default judgment is entered.” (Devlin v. Kearny Mesa AMC/Jeep/Renault, Inc. (1984) 155 Cal.App.3d 381, 385.) “A defendant against whom a default has been entered is out of court and is not entitled to take any further steps in the cause affecting plaintiff’s right of action; he cannot thereafter, until such default is set aside in a proper proceeding, file pleadings or move for a new trial or demand notice of subsequent proceedings.” (Id. at p. 385-386.)

            Here, default and default judgment have been entered against the Entity Defendants. As such, the Entity Defendants lack grounds to contest Plaintiff’s motion and have no standing to contest such motion.

            As to Defendant Baboli, Plaintiff alleges that he lacks standing to oppose the motion because the motion does not even request attorneys’ fees against him. The Court is unsure as to why Defendant Baboli is opposing the motion for attorneys’ fees given that Plaintiff is not requesting attorneys’ fees against Defendant Baboli at this time. However, the Court will still consider the arguments raised in the opposition as Defendant Baboli is entitled to file pleadings in this action given that his default was set aside. The Court will treat the arguments raised in the opposition as only being set forth by Defendant Baboli.

Plaintiff’s Entitlement to Attorneys’ Fees Under Section 3426.4 of CUTSA

            Plaintiff contends that it is entitled to attorneys’ fees pursuant to Civ. Code § 3426.4. Defendant Baboli contends that there is no finding of willful and malicious misappropriation of trade secrets pursuant to Civ. Code § 3426.4 to warrant an award of attorneys’ fees. As will be explained below, the Court agrees with Defendant Baboli.

            “If a claim of misappropriation is made in bath faith . . . or willful and malicious misappropriation exists, the court may award reasonable attorney’s fees and costs to the prevailing party.” (Civ. Code § 3426.4.) “In order to justify fees under Civil Code section 3426.4, the court must find that a willful and malicious misappropriation occurred.” (Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4^th 34, 54.) “That requirement is satisfied . . . by the jury’s determination, upon clear and convincing evidence, that defendants’ acts of misappropriation were done with malice.” (Ibid.) “[M]alice may be proven either expressly by direct evidence probative of the existence of hatred or ill-will, or by implication from indirect evidence from which the jury may draw inferences.” (Ajaxo Inc. v. E*Trade Group Inc. (2005) 135 Cal.App.4^th 21, 66-67.)

            Defendant Baboli argues that the Court’s February 20, 2024 ruling does not reflect any judicial finding of willful and malicious misappropriation to warrant an award of attorneys’ fees. (Opp’n at p. 5:20-26.) The Court fails to see the relevance of Plaintiff’s argument on reply that a separate action filed by Defendant Baboli in Mostafa Baboli aka Stephan Parsa vs. Network Experts, Inc., et al., LASC Case No. 23STCV31366 (the “Employment Action”), which was filed by Defendant Baboli against Plaintiff (Baboli Decl., Exh. B.), shows willfulness or maliciousness in this action. (Reply at p. 3:1-7.)

            The Court notes its February 20, 2024 ruling concerning Plaintiff’s default judgment application against the Entity Defendants does not reflect a judicial finding of willful and malicious appropriation. In its moving papers, Plaintiff cites to Vacco, supra, 5 Cal.App.4th 34, 54, which was issued by the Second District Court of Appeal and is binding on this Court. Vacco, supra, 5 Cal.App.4^th 34, 54 explicitly states that fees under Civ. Code § 3426.4 will be justified only where the Court makes a finding that willful and malicious misappropriation occurred. Here, on reply, Plaintiff does not dispute the argument of Defendant Baboli that there was no judicial finding of willful and malicious misappropriation. There has been no determination by a jury or this Court that the Entity Defendants willfully or maliciously misappropriated trade secrets. Also, fees under Civ. Code § 3426.4 are permissive and not mandatory.

            The Court therefore finds that Plaintiff is not entitled to attorneys’ fees under Civ. Code § 3426.4.

Plaintiff’s Entitlement to Attorneys’ Fees Under CCP § 1021.5

            Plaintiff argues that it is entitled to attorneys’ fees pursuant to CCP § 1021.5. Defendant Baboli argues that Plaintiff is not entitled to attorneys’ fees pursuant to such section of the Code of Civil Procedure.

“Under Code of Civil Procedure section 1021.5, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest.” (Davis v. Farmers Ins. Exchange (2016) 245 Cal.App.4^th 1302, 1328.) CCP § 1021.5 “provides explicit statutory authorization for a private attorney general award where the litigant vindicates a public policy resting on Constitution or statute.” (Ibid., internal quotations omitted.) “[E]ligibility for a section 1021.5 attorney fees is established when (1) plaintiffs’ action has resulted in the enforcement of an important right affecting the public interest, (2) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, and (3) the necessity and financial burden of private enforcement are such as to make the award appropriate.” (Id. at p. 1328-1329.) An award of attorneys’ fees pursuant to CCP § 1021.5 “is to encourage suits that enforce common interests of significant importance, but which do not involve any individual’s financial interests to the extent necessary to encourage private litigation to enforce the right.” (Id. at p. 1329, citation omitted.) “[A] party need not prevail on every claim presented in an action in order to be considered a successful party” within the meaning of CCP § 1021.5. (Sweetwater Union High School Dist. v. Julian Union Elementary School Dist. (2019) 36 Cal.App.5^th 970, 982.)

            The Court finds that Plaintiff has not shown entitlement to attorneys’ fees pursuant to CCP § 1021.5. It is the responsibility of this Court to “determine the significance and benefit and the size of the class receiving that benefit by realistically assessing the gains that have resulted in a particular case.” (Baxter v. Salutary Sportsclubs, Inc. (2004) 122 Cal.App.4^th 941, 946.) The Court fails to see how this action confers a significant benefit on members of the public or a large class of persons. The Complaint only seeks to enforce the rights of Plaintiff and not any third parties. Plaintiff presents no legal authority to support its contention that it is entitled to attorneys’ fees under CCP § 1021.5 because the Court’s February 20, 2024 order conferred a significant benefit on the general public. (Motion at p. 5:19-20.) The Court’s judgment as to the Entity Defendants only concerns relief awarded to Plaintiff and not to the public generally or to a large class of persons.

            Accordingly, the Court also finds that Plaintiff is not entitled to attorneys’ fees pursuant to CCP § 1021.5. Plaintiff has failed to establish any of the factors articulated in Davis v. Farmers Ins. Exchange, supra, 245 Cal.App.4^th 1302, 1328-1329.

Conclusion

Based on the foregoing, the Court DENIES Plaintiff’s Motion for Attorneys’ Fees.

Dated: April 10, 2024

__________________________________________

Edward B. Moreton, Jr.

Judge of the Superior Court