Judge: H. Jay Ford, III, Case: SC124545, Date: 2022-10-10 Tentative Ruling

Case Number: SC124545    Hearing Date: October 10, 2022    Dept: O

Case Name:    Preservation, Finance, Rehabilitation & Development LP v. Associated Financial Corporation, et al.

SUBJECT:                MOTION FOR AN ORDER AWARDING ATTORNEYS’ FEES AS PREVAILING PARTIES  

MOVING PARTY:  Defendants/Cross-Complainants Associated Financial Corporation and Management Assistance Group, Inc. (collectively referred to as “AFC”)

RESP. PARTY:        Plaintiff/Cross-Defendant Preservation, Finance, Rehabilitation & Development LP (PFRD)

TENTATIVE RULING

            Defendants/Cross-Complainants Associated Financial Corporation and Management Assistance Group Inc.’s (“AFC Defendants” or “AFC”) Motion for an Order Awarding Attorneys’ Fees as Prevailing Parties is GRANTED in the amount of $1,371.017.

I.  Under §9.12 of the Option Agreement Defendant’s and are entitled to recover their reasonable attorney’s fees.

            Section 9.12 of the Option Agreement states, “In any action at law or in equity to enforce or construe any provisions or rights under this Agreement, the unsuccessful party or parties to such litigation, as determined by a court pursuant to a final order, judgment or decree, shall pay to the successful party or parties all costs, expenses and reasonable attorneys’ fees incurred by such successful party or parties…which costs, expenses and attorneys’ fees shall be included as part of any order, judgment or decree.” 

            Plaintiff’s complaint asserted causes of action to enforce 50/50 Deal, not the Option Agreement.  However, Plaintiff’s action to enforce the 50/50 deal necessarily required the Court to “construe” the Option Agreement, which would trigger §9.12.  Construction of the Option Agreement’s terms was essential in determining whether Plaintiff performed under the Option Agreement and whether Plaintiff exercised the option to acquire all the collateral.  See Dec. of R. Mangels, Ex. 4, pp. 8, 13-17.  As the Court stated, “A necessary condition to the formation of the 50/50 deal is that PFRD had acquired, prior to December 2002, AFC’s and PLA’s interests in all 76 properties. Without that ownership, PFRD could not have been able to ‘give back’ half of those interests as part of the 50/50 deal…As explained above, the Court finds PFRD had not acquired all those interests in all 76 properties.  Therefore, PFRD had nothing to ‘give back’ as consideration for the alleged 50/50 deal.”  Id. at 17:17-23. 

            Section 9.12 of the Option Agreement is broad enough to encompass any actions to enforce or construe any provisions or rights under the Option Agreement, including tort claims.  The contractual language of §9.12 is similar to that analyzed in Khan v. Shim (2016) 7 Cal.App.5^th 49:  “If at any time after the Close of Sale, any litigation or arbitration is commenced between the parties to this Contract of Sale ... concerning its terms, interpretation or enforcement or the rights and duties of any party in relation thereto, the party or parties prevailing in such litigation or arbitration shall be entitled, in addition to such other relief as may be granted to them, to a reasonable sum as and for their attorney fees incurred in such litigation or arbitration....”  Khan, supra, 7 Cal.App.5th at 59.  The language in Khan was deemed broad enough to cover tort claims, allowing the prevailing defendant to recover fees incurred in defense against plaintiff’s tort causes of action.  Under §9.12, Defendants are therefore allowed to recover their fees incurred defending against Plaintiff’s tort causes of action.  See Santisas v. Goodin (1998) 17 Cal.4^th 599, 608 (“[P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.”  Id. (quoting Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341)).  Section 9.12 is broad enough to cover Plaintiff’s contract claims without resort to CCP §1717.

II.  Defendant AFC is awarded 1,371,017 in reasonable attorney’s fees

“In challenging attorney fees as excessive because too many hours of work are claimed, it is the burden of the challenging party to point to the specific items challenged, with a sufficient argument and citations to the evidence. General arguments that fees claimed are excessive, duplicative, or unrelated do not suffice. Failure to raise specific challenges in the trial court forfeits the claim on appeal.”  Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564.

            A.  AFC’s fees in connection with its cross-complaint

            Plaintiff objects to AFC’s recovery of fees incurred in litigating AFC’s cross-complaint.  The objection is meritorious.  AFC does not establish its right to recover fees incurred in litigating its own cross-complaint. The mere fact that it was filed in response to Plaintiff’s cross-complaint does not establish that (1) AFC’s cross-complaint was an action to enforce or construe the Option Agreement or (2) that AFC was the prevailing party on its cross-complaint.  AFC’s brief is silent on both these issues as to its cross-complaint.  The Court agrees that the work performed on the cross-complaint and the complaint overlapped significantly. From the Court’s review of the billing statements, it appears that $43,731 was clearly incurred solely relating to AFC’s cross-complaint.  The requested fees are therefore reduced by $43,731 to exclude time spent exclusively on the AFC cross-complaint. 

            The Court agrees that further apportionment is inappropriate because all of Plaintiff’s causes of action were based on the same underlying facts and all required construction of the Option Agreement. 

            B.  Fees incurred in connection with expert discovery

            Plaintiff objects to the inclusion of fees incurred in connection with expert discovery.  Plaintiff fails to establish that these fees were unreasonably incurred.  The mere fact that AFC did not present the expert testimony at trial does not mean expert discovery was unreasonable or unnecessary to the litigation. 

            C.  Redactions

            Plaintiff argues the fees set forth in redacted invoices should be excluded from the fee award.  However, Plaintiff fails to cite any authority to support this proposition.  As AFC correctly points out on reply, invoices and detailed time tickets are not required to support a fee award.  “The declaration of an attorney as to the number of hours worked on a particular case may be sufficient evidence to support an award of attorney fees, even in the absence of detailed time records.  Indeed, sufficient evidence to support an attorney fee award may include declarations of counsel setting forth the reasonable hourly rate, the number of hours worked and the tasks performed.  There is no requirement that an attorney provide time records or billing statements.”  Cruz v. Fusion Buffet, Inc. (2020) 57 Cal.App.5^th 221, 237.  Redaction alone is not grounds to exclude fees from a fee award. 

            D.  Fees as set forth in the declaration of Mangels

            AFC seeks to recover fees charged by five attorneys—Robert Mangels, Andrew Shadoff, Jessica Newman, Lauren Babst and Justin Anderson.  In total, AFC’s counsel spent 2,328.1 hours litigating this action for a total of $1,414,748 in fees.  See Dec. of R. Mangels, ¶21. 

            The billable rates of each attorney increased over the course of this several years litigation.  Counsels’ rates were as follows:  (1) Mangels $875-$995 from 2015-2022; (2) Shadoff $395-$695 from 2015-2022; (3) Babst $325-$350 from 2017-2018; (4) Jessica Newman $415-$425 from 2019-2020; and (5) Justin Anderson $375-$455 from 2020-2022. 

            This litigation spanned six years.  Both the factual and legal issues involved were complex.  Applying the lodestar method, the Court finds $1,371,017 to be a reasonable fee for the work performed. 

Case
Name:   Preservation, Finance,
Rehabilitation & Development LP v. Associated Financial Corporation, et al.

SUBJECT:                 MOTION FOR COST OF PROOF
SANCTIONS

MOVING
PARTY:   Defendants/Cross-Complainants
Associated Financial Corporation and Management Assistance Group, Inc. (collectively
referred to as “AFC”)

RESP.
PARTY:         Plaintiff/Cross-Defendant Preservation, Finance, Rehabilitation &
Development LP

TENTATIVE
RULING

            Defendants/Cross-Complainants Associated Financial
Corporation and Management Assistance Group, Inc. (“AFC”)’s Motion for Cost of
Proof Sanctions is DENIED pursuant to CCP §2033.240(a). 

            Plaintiff’s Objections to the Declaration of Robert
Mangels are OVERRULED. 

REASONING

            The Court finds Plaintiff’s motion was filed timely. Plaintiff
argues the motion was subject to the deadline applied to a memorandum of costs
under CRC Rule 3.1700.  Plaintiff fails
to cite any authority that requires fees awardable under CCP 2033.420 must be
requested through a memorandum of costs.  To the contrary, a request for fees under CCP
§2033.420 requires a noticed motion. 

            Defendant AFC argues it is entitled to cost-of-proof
sanctions for Plaintiff’s wrongful denial of Request For Admission (RFA) Nos.
9-24 and 32-33 (denial of the non-existence of a novation or modification of
the “Loan Documents), RFA 34-35 (denial that AFC/MAGI repudiated Plaintiff’s
claim the Loan Documents had been modified) and RFA 45-51 (denial of non-existence
of a joint venture or partnership with AFC/MAGI).  Except for RFA nos. 34-35 (denial of
repudiation) AFC fails to establish that it proved the truth of each of RFAs in
dispute.  Defendant AFC only establishes
that it proved the repudiation of the alleged 50/50 deal, if it had been
formed. 

            RFA Nos. 9-33 all relate to the Plaintiff’s denial of the
existence of a modification or novation of the Loan Documents.  The Court did not make any finding the the
Loan Documents were modified by the 50/50 deal Plaintiff’s claimed was formed. Implicitly
the Court Nor did the Court find that 50/50 deal was a novation of the Loan Documents.
In discussing the conflicting evidence regarding the purported December meeting
with Dean Ross and Bruce Rozet, the Court did not find such a meeting never
occurred.  Rather, the Court simply found
Plaintiff failed to prove the parties agreed to the 50/50 deal Plaintiff
claimed was formed.

            RFA Nos. 45, 47, 49 and 51 regarding the existence (or
lack thereof) of a joint venture or partnership between the Plaintiff and AFC.  AFC argues it “proved” RFA Nos. 45,47, 49 and
51 when it proved that no 50/50 deal never existed.  However, these RFAs asked Plaintiff to admit
that it “never” had any joint venture or partnership with Defendants.  RFA Nos. 45-51 did not ask Plaintiff to admit
that Defendants did not enter into a joint venture or partnership with
Plaintiff under the terms of the 50/50 Deal, nor did they ask Plaintiff to
admit that the 50/50 Deal never existed. 
Defendants did not prove that they never agreed to any joint venture or
partnership with Plaintiff.  In fact, as
the Court observed in its SOD that “The [50/50] deal at issue in this case
appear to have been one of many joint projects that were discussed and
pursued between the parties.” 
See R. Mangels Dec., Ex. 4, 4:10-11.   

            RFA Nos. 34-35 related to Defendants’ repudiation of the
50/50 deal.  At trial, Defendants
established that the 50/50 Deal was repudiated. 
See R. Mangels Dec. ISO Cost of Proof Sanctions, Ex. 4, Statement
of Decision, 22:14-18.  However, Defendants
failed to segregate out those fees incurred to prove those specific RFAs on the
issue of repudiation.  Instead,
Defendants ask that the Court award it all of its fees from February 2017
through the present. There is no doubt the fees Defendant’s incurred were
related to issues well beyond the narrow issue of Defendant’s repudiation of
the 50/50 deal.  The Court cannot
determine what fees are attributable to proving RFA Nos. 34-35 based on the
evidence Defendants presented.

            Regardless, the Court agrees Plaintiff has made a
sufficient showing that it had a reasonable belief that it would prevail on the
repudiation issue. Defendants never denied the meeting occurred on 6-6-08.  Plaintiff failed to persuade the Court that Steven
Ross confirmed the 50/50 Deal was agreed to, and thereby retracted Mr. Perry’s clear
repudiation of that deal. However, based on the ambiguity of the email
correspondence between the parties after their meeting, followed by the
Defendants sharing of “net proceeds” that arguably was consistent with the
50/50 deal, is sufficient to show Plaintiff had a reasonable basis to believe
it could prevail on that issue. There was nothing in this evidence that persuasively
shows Plaintiffs knew that claim lacked merit.