Judge: Gregory Keosian, Case: 20STCV07826, Date: 2023-06-29 Tentative Ruling
Case Number: 20STCV07826 Hearing Date: December 14, 2023 Dept: 61
Cross-Defendants
RCMF 2018-FL2 Marathon Street LLC and ReadyCap Commercial, LLC’s Motion for Attorney
Fees is GRANTED in the amount of $1,401,691.61 against CIP Jardinette Holding,
LLC, and DENIED as to the other Cross-Complainants.
I.
MOTION FOR ATTORNEY FEES
“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.” (Code Civ. Proc.,
§ 1021.)
“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.” (Civ. Code, § 1717, subd. (a).) “[T]he party
prevailing on the contract shall be the party who recovered a greater relief in
the action on the contract.” (Civ. Code, § 1717, subd. (b)(1).)
In determining the proper amount of fees to award, courts use the
lodestar method. The lodestar figure is
calculated by multiplying the total number of reasonable hours expended by the
reasonable hourly rate. “Fundamental to
its determination . . . [is] a careful compilation of the time spent and
reasonable hourly compensation of each attorney . . . in the presentation of
the case.” (Serrano v. Priest (1977) 20 Cal.3d 25, 48 (Serrano III).) A reasonable
hourly rate must reflect the skill and experience of the attorney. (Id.
at p. 49.) “Prevailing parties are compensated for hours reasonably spent on
fee-related issues. A fee request that
appears unreasonably inflated is a special circumstance permitting the trial
court to reduce the award or deny one altogether.” (Serrano
v. Unruh (1982) 32 Cal.3d 621, 635 (Serrano
IV).) The Court in Serrano IV also stated that fees
associated with preparing the motion to recover attorneys’ fees are
recoverable. (See id. at p. 624.)
Cross-Defendants RCMF 2018-FL2 Marathon Street, LLC and Readycap
Commercial, LLC (Cross-Defendants), having prevailed on their motion for
summary judgment against the Cross-Complaint of CIP Jardinette Holding, LLC,
CIP Jardinette LLC, Ratel Hollywood LP, and Ratel Investments, LP
(Cross-Complainants), seek $1,401,691.61 in attorney fees under an
indemnification clause of the underlying loan agreement. Cross-Defendants point
to section 11.24, subd. (b) of the agreement, which states, in whole, as
follows:
Borrower
shall indemnify and hold the Indemnified Parties harmless against any and all
Losses, and reimburse them for any costs and expenses actually incurred, in
connection with, arising out of or as a result of (i) the negotiation,
preparation, execution and delivery of the Loan Documents and the documents and
instruments referred to therein, (ii) the creation, perfection or protection of
Lender’s Liens in the Property (including fees and expenses for title and lien
searches and filing and recording fees, intangibles taxes, personal property
taxes, mortgage recording taxes, due diligence expenses, travel expenses,
accounting firm fees, costs of the appraisal, environmental report(s) (and an
environmental consultant), surveys and the engineering report(s) obtained by or
delivered to Lender in connection with the Loan), (iii) the negotiation,
preparation, execution and delivery of any amendment, waiver or consent
relating to any of the Loan Documents, (iv) the exercise of any of Lender’s
or the Indemnified Parties’ remedies under any Loan Document, or (v) any
alleged obligations or undertakings to perform or discharge any obligation,
duty or liability with respect to the ownership, operation and/or maintenance
of the Property (including under any Lease, Contract or Permit), except to
the extent that it is finally judicially determined that any such Loss resulted
directly from the fraud, gross negligence or willful misconduct of such
Indemnified Party. If any Indemnified Party becomes involved in any action, proceeding
or investigation in connection with any matter described in clauses (i) through
(v) above, Borrower shall periodically reimburse any Indemnified Party upon
demand therefor in an amount equal to its reasonable legal and other expenses
(including the costs of any investigation and preparation) incurred in
connection therewith to the extent such legal or other expenses are the subject
of indemnification hereunder.
(Mersel Reply Decl. Exh. A,
emphasis added.)
The word, “Losses,” is defined
elsewhere in the agreement:
“Losses”
means any actual losses, actual damages, costs, fees, expenses, claims, suits,
judgments, awards, liabilities (including strict liabilities), obligations,
debts, diminutions in value, fines, penalties, charges, costs of Remediation (whether
or not performed voluntarily), amounts paid in settlement, foreseeable and
unforeseeable consequential damages, litigation costs, reasonable attorneys’
fees, engineers’ fees, environmental consultants’ fees, and investigation costs
(including costs for sampling, testing and analysis of soil, water, air,
building materials, and other materials and substances whether solid, liquid or
gas), of whatever kind or nature, and whether or not incurred in connection
with any judicial or administrative proceedings, actions, claims, suits,
judgments, or awards (but specifically excluding punitive damages).
(Mersel Reply Decl. Exh. A,
§ 1.1.)
Cross-Defendants rely on those
scenarios requiring indemnification for costs incurred in “the exercise of any
of Lender’s or the indemnified Parties’ remedies under any Loan Document” or from
“any alleged obligations or undertakings to perform or discharge any
obligation, duty or liability with respect to the ownership, operation and/or
maintenance of the Property.” (Ibid.) Cross-Defendants argue that
because the Cross-Complaint was filed in response to their initiating action
for specific performance and appointment of a receiver, the Cross-Complaint
arose out of and as a result of the exercise of Cross-Defendants’ remedies
under the Loan Agreement. (Motion at pp. 11–12.) They further argue that the
Cross-Complaint itself seeks enforcement of an alleged obligation or liability
with respect to the ownership, operation and maintenance of the Property.
(Motion at p. 12.)
Cross-Complainants in
opposition argue that the provision at issue here is a third-party
indemnification provision, not one for prevailing party attorney fees in
actions between the parties to the contract. (Opposition at pp. 2–6.) They
further argue that three parties who did not sign the Loan Agreement — CIP
Jardinette, LLC, Ratel Hollywood, L.P., and Ratel Investments, L.P. — cannot be
bound to indemnify Cross-Defendants under the agreement. (Opposition at pp.
7–9.) Cross-Complainants also argue that the fees sought are excessive, as the
case was overstaffed in relation to its complexity. (Opposition at pp. 9–10.)
A detailed explanation of the
standards applicable to analysis of an indemnity provision forming the basis
for a prevailing-party attorney fees claim is set out in Alki Partners, LP
v. DB Fund Services, LLC (2016) 4 Cal.App.5th 574:
Generally, an
indemnification provision allows one party to recover costs incurred defending
actions by third parties, not attorney fees incurred in an action between the
parties to the contract. Courts look to several indicators to distinguish third
party indemnification provisions from provisions for the award of attorney fees
incurred in litigation between the parties to the contract. The key indicator
is an express reference to indemnification. A clause that contains the words
“indemnify” and “hold harmless” generally obligates the indemnitor to reimburse
the indemnitee for any damages the indemnitee becomes obligated to pay third
persons—that is, it relates to third party claims, not attorney fees incurred
in a breach of contract action between the parties to the indemnity agreement
itself.
Courts also
examine the context in which the language appears. Generally, if the
surrounding provisions describe third party liability, the clause will be
construed as a standard third-party indemnification provision. The court will
not infer that the parties intended an indemnification provision to cover
attorney fees between the parties if the provision does not specifically
provide for attorney's fees in an action on the contract.
(Alki Partners, LP v. DB
Fund Services, LLC (2016) 4 Cal.App.5th 574, 600–601, internal citations
and quotation marks omitted.) Even broad and general indemnification clauses
requiring the indemnitor to hold the indemnitee harmless for attorney fees
“arising from any cause or for any reason whatsoever,” or from “any, all, and
every claim which arises out of the performance of the contract” are not
sufficient.
Cross-Complainants argue that
under the above standard, no attorney-fee provision was included in the Loan
Agreement here, as the clause that Cross-Defendants rely upon expressly for the
borrowers to “indemnify” and “hold harmless” the lender, as in a traditional
third-party indemnity clause. (Opposition at pp. 2–7.)
Cross-Complainants’ argument is
unpersuasive, as the context of the indemnity provision indicates that it
encompasses first-party contract claims. The provision at issue makes the
borrower liable for losses arising from “the exercise of any of Lender’s or the
Indemnified Parties’ remedies under any Loan Document.” (Mersel Reply Decl.
Exh. A, § 11.24.) The contract describes those remedies as being expressly
those “available to Lender against the Borrower under any Loan Document,” which
may be invoked “[u]pon the occurrence and during the continuance of an Event of
Default.” (Mersel Reply Decl. Exh. A, § 8.2.) Moreover, indemnification is
required not merely for the performance of Cross-Defendants’ duties under the
contract, but for Losses arising from “any alleged obligations . . . with
respect to the ownership, operation and/or maintenance of the Property
(including under any Lease, Contract or Permit),” indicating that the contract
contemplates indemnification for breaches of “alleged obligations” under “contract[s]”
related to the ownership, operation, or maintenance of the property, such as
Cross-Complainants brought in their Cross-Complaint. The indemnification
provision thus contemplates claims made by parties to the contract, and based
on the contract.
Cross-Complainants argue that the
non-signatory defendants cannot be made responsible for the fees sought by
Cross-Defendants because they are not parties to the contract containing the
fee provision. (Opposition at pp. 7–9.) They argue, “A party is entitled to
recover its attorney's fees pursuant to a contractual provision only when the
party would have been liable for the fees of the opposing party if the opposing
party had prevailed. Where a nonsignatory plaintiff sues a signatory defendant
in an action on a contract and the signatory defendant prevails, the signatory
defendant is entitled to attorney's fees only if the nonsignatory plaintiff
would have been entitled to its fees if the plaintiff had prevailed.” (Real
Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375,
382.) “[T]he party claiming a right to receive fees establish that the opposing
party actually would have been entitled to receive them if he or she
had been the prevailing party.” (Leach v. Home Savings & Loan Assn.
(1986) 185 Cal.App.3d 1295, 1307.)
Cross-Defendants have not shown that they are entitled to
attorney fees against the nonsignatory Cross-Complainants. Although these
nonsignatory cross-complainants alleged that they are third party beneficiaries
under the contract, and sought attorney fees in their cross-complaint (FAXC ¶¶
7, 9–10, Prayer), this is insufficient to show that they would have been
entitled to fees under the contract had they prevailed. (See Leach, supra,
185 Cal.App.3d at p. 1306.) Cross-Defendants make no argument as to whether
Cross-Complainants actually are third party beneficiaries who would have been
entitled to enforce the agreement, nor that the attorney fees provision in the
loan agreement would entitle them to do so. (Reply at pp. 7–8; see Cargill,
Inc. v. Souza (2011) 201 Cal.app.4th 962, 970 [holding that
language of attorney fees provision did not limit right to recover fees to the
signatory parties].) Indeed, under the provision at issue, the only party
expressly obligated to render fees is “Borrower” — CIP Jardinette Holding, LLC,
the signatory to the agreement. Accordingly, the motion is DENIED as to Ratel
Hollywood, L.P., CIP Jardinette, LLC, and Ratel Investments, L.P.
Cross-Complainants finally argue that the $1.4 million in
fees sought here is unreasonable, as the invoices presented in support of the
motion indicate that the fees sought are for twenty attorneys, five paralegals,
and seven other professionals. (Opposition at p. 9; Beehler Decl. ¶¶ 32–33.)
“Plainly, it is appropriate for a trial court to reduce a fee award based on
its reasonable determination that a routine, noncomplex case was overstaffed to
a degree that significant inefficiencies and inflated fees resulted.” (Morris
v. Hyundai Motor America (2019) 41 Cal.App.5th 24, 39.) Cross-Complainants
argue that the declaration submitted in support of the motion reveals the
hourly rate charged by only five of the 27 billers, and that the amount charged
to those whose rates have not been identified ought to be deducted —
$407,946.00, 30.5% of the total fees sought. (Opposition at pp. 9–10.)
Cross-Complainants’ arguments on this point are
unpersuasive, as Cross-Defendants in their motion justify the work performed by
reference to the expansive discovery propounded by Cross-Complainants, without
answer in the opposition. (Beehler Decl. ¶¶ 16–27.) This work included the
production of more than 38,000 documents in response to Cross-Complainants’
document requests, the production of more than 11,000 pages of documents with
respect to four subpoenas issued by Cross-Complainants (which account for $60,000
of the fees and costs sought by Cross-Defendants), Cross-Complainants’ noticing
and taking of 13 depositions, in addition to five depositions taken by
Cross-Defendants, and multiple hours meeting and conferring regarding the
temporal scope of discovery and the sufficiency of Cross-Defendants’ privilege
logs, which included entries for 1,200 documents. (Beehler Decl. ¶¶ 16–27.)
Cross-Defendants’ counsel states outright that they retained 15 e-discovery
attorneys with reviewing and producing the records sought. (Beehler Decl. ¶
19.) Cross-Defendants present the rates and experience of each time-keeper
involved, and state a reasonable basis for the fees incurred which
Cross-Complainants do not counter. (Beehler Decl. ¶¶ 32–33; Mersel Reply Decl.
¶ 4.)
The motion for attorney fees is therefore GRANTED in the
amount of $1,401,691.61 against CIP Jardinette Holding, LLC, and DENIED as to
the other Cross-Complainants.