Judge John J. Kralik, Case Number: 21BBCV00748, Date: 2023-08-04 Tentative Ruling

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Superior Court of California

County of Los Angeles

Department B

Plaintiff 7230 Coldwater, LLC (“Plaintiff”) filed the action 7230 Coldwater, LLC v. DVD Factory, Inc. et al. (Case No. 21BBCV00748) on August 23, 2021. Plaintiff filed the first amended complaint (“FAC”) on November 22, 2021, which alleges causes of action for: (1) unpaid rent and attorney’s fees under written lease; (2) unpaid utility bills and attorney’s fees under written lease; (3) breach of written lease re wrongful removal of utility installations; (4) conversion; and (5) waste and physical damages to leasehold premises and treble damages. Plaintiff is the owner of the property located at 7230 Coldwater Canyon Avenue, North Hollywood, CA 91605. Defendant DVD Factory, Inc., Daniel J. Quinn, and James S. Kohls (“Defendants”) entered into a written lease with Plaintiff for property on November 19, 2018, which was amended on February 1, 2020. Plaintiff alleged that Defendants failed to pay the base rent, the late charges, the first press debt, their property tax obligations, and their contribution towards premiums due on the insurance policies.

This case is related to 7230 Coldwater, LLC v. Combat Zone, LLC et al. (Case No. 21VEUD00563). Plaintiff 7230 Coldwater, LLC (“Plaintiff”) filed this unlawful detainer action on August 25, 2021. Plaintiff is the owner of the property located at 7230 Coldwater Canyon Avenue, North Hollywood, CA 91605. Defendant Combat Zone, LLC and Daniel J. Quinn (“Defendants”) entered into an oral lease with Plaintiff for a month-to-month tenancy of the property for rent at $3,000 per month. Plaintiff alleged that on April 1, 2021, Defendants modified the agreement so that they paid $2,000 a month for rent from January 1, 2021 and thereafter. Plaintiff alleged that it served Defendants a 3-day notice to pay rent or quit.

The Court issued its Statement of Decision on November 22, 2022 and entered the Final Statement of Decision on January 6, 2023.

1. Judgment on Plaintiff’s Complaint in Lead Case No. 21BBCV00748 is hereby given in favor of Plaintiff 7230 COLDWATER, LLC and against Defendant DVD FACTORY, INC. in the net amount of $47,170.82, with interest thereon at the rate of ten percent (10%) per annum from the date of the entry of this Judgment until paid.

2. Plaintiff 7230 COLDWATER, LLC in Lead Case No. 21BBCV00748 may have and recover it[s] attorney fees from Defendant DVD FACTORY, INC. in an amount to be determined by the Court as may be determined by motion to be filed.

3. Judgment on Plaintiff’s Complaint in Related/Consolidated Case No. 21VEUD00563 is hereby given in favor of Plaintiff 7230 COLDWATER, LLC and against Defendant COMBAT ZONE, LLC in the amount of $6,000.00 with interest thereon at the rate of ten percent (10%) per annum from the date of the entry of this Judgment until paid.

4. Plaintiff 7230 COLDWATER, LLC in Lead Case No. 21BBCV00748 shall have and recover its costs of suit from Defendant DVD FACTORY, INC. in an amount to be determined by the Court pursuant to a Memorandum of Costs.

5. Plaintiff 7230 COLDWATER, LLC in Related/Consolidated Case No. 21VEUD00563 shall have and recover its costs of suit from Defendant COMBAT ZONE, LLC in an amount to be determined by the Court pursuant to a Memorandum of Costs.

6. Defendant DANIEL QUINN in Lead Case No. 21BBCV00748 shall have and recover his costs of suit from Plaintiff 7230 COLDWATER, LLC in an amount to be determined by the Court pursuant to a Memorandum of Costs.

7. Defendant JAMES S. KOHLS in Lead Case No. 21BBCV00748 shall have and recover his costs of suit from Plaintiff 7230 COLDWATER, LLC in an amount to be determined by the Court pursuant to a Memorandum of Costs.

8. Cross-Defendant GEROLD POOL in Lead Case No. 21BBCV00748 shall have and recover its costs of suit from Cross-Complainant DVD FACTORY, INC. in an amount to be determined by the Court pursuant to a Memorandum of Costs.

9. Cross-Defendant STEVE KALSON in Lead Case No. 21BBCV00748 shall have and recover his costs of suit from Cross-Complainant DVD FACTORY, INC. in an amount to be determined by the Court pursuant to a Memorandum of Costs.

10. Cross-Defendant 6480 CORPORATION in Lead Case No. 21BBCV00748 shall have and recover its costs of suit from Cross-Complainant DVD FACTORY, INC. in an amount to be determined by the Court pursuant to a Memorandum of Costs.

11. Cross-Defendant M. MORRIS, INC. in Lead Case No. 21BBCV00748 shall have and recover its costs of suit from Cross-Complainant DVD FACTORY, INC. in an amount to be determined by the Court pursuant to a Memorandum of Costs.

On June 14, 2023, Plaintiff/Cross-Defendant 7230 Coldwater LLC (“Coldwater”) filed a motion for award of attorney’s fees in the amount of $377,806.50, plus anticipated additional fees in the amount of $10,500 against Defendant DVD Factory, Inc. (“DVD Factory”). On June 14, 2023, Plaintiff filed a Notice of Modification of Bankruptcy Stay to Allow Litigation to Proceed with: (1) Plaintiff’s Motion for Attorney’s Fees; and (2) Memorandum of Costs.

Coldwater argues that it is entitled to attorney’s fees based on the attorney’s fees provision in the operative lease agreement. The lease agreement states in relevant part:

31. Attorneys' Fees. If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as here after defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorney fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or Judgment. The term, "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, Judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. In addition, lessor shall be entitled to attorneys' fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonable minimum per occurrence for such services and consultation).

While the Court finds that the prevailing party’s right to attorney’s fees arises from the Agreement, a question remains as to whether Plaintiff is the prevailing party in this action. Starting with the statutory definition, a prevailing party includes “includes the party with a net monetary recovery.” (CCP § 1032(4).) Civil Code, § 1717(b)(1) states:

The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section.

In determining whether a party is a prevailing party, “[t]he case law directs courts to determine the party's litigation objectives and to see if it achieved them.” (Harris v. Rojas (2021) 66 Cal.App.5th 817, 822 [citing Hsu v. Abbara (1995) 9 Cal.4th 863, 876-877].) “When the case is strictly about money, the litigation objective is a dollar figure.” (Id. at 824.) “[T]rial courts are well positioned to evaluate what counts as a win. The trial court gains familiarity with the parties and the attorneys during the case and the trial.” (Id. at 825.)

Following a bench trial, the Court entered judgment in favor of Coldwater and against DVD Factory in the net amount of $47,170.82 in the lead case. Coldwater was able to establish its entitlement to and recovered $47,170.82 against DVD Factory (= $169,670.82 – $122,500).[1] The Court found in its Statement of Decision that this was the net balance of what DVD Factory owed to Coldwater based on the results of the FAC and Cross-Complaint. (Statement of Decision at p.25.)

Coldwater argues that it prevailed at trial and received a net recovery award, which included offsets paid by DVD Factory. In opposition, DVD Factory argues that there is no prevailing party in this action neither Coldwater nor DVD Factor achieved its litigation goals.

Pursuant to the Court’s request, Coldwater provided a Computation/Itemization of Damages on September 30, 2022 for the damages it sought during trial. For the causes of action in lead case by Coldwater against DVD Factor, Coldwater sought: (1) $51,741 for the 1^st cause of action for breach of written lease (unpaid rent); (2) $100,603.82 for the 2^nd cause of action for breach of written lease pursuant to written assignment of claims by M. Morris, Inc. (unpaid utilities); (3) $404,278 (inclusive of punitive damages) for the 3^rd cause of action for breach of written lease (wrongful removal of utilities installations); (4) $400,280 (inclusive of punitive damages) for the 4^th cause of action conversion against DVD Factory and Daniel Quinn; and (5) $18,140 for the 5^th cause of action for waste and damages to premises against DVD Factory and Daniel Quinn. The total amount of damages Coldwater claimed against DVD Factory and others on the complaint in the lead case was $979,042.82. However, the damages claimed on the 3^rd and 4^th causes of action were duplicative, and thus, the Court will reduce this number by $400,280. Thus, the total non-duplicative damages sought were $578,762.82.

In relation to the $578,762.82 claimed damages figure, the net recovery of $47,170.82 (actual damages) is only 8.15% of the total recovery sought by Coldwater. While low in proportion, the Court will still find that Coldwater is--to this equitable extent--the prevailing party on the complaint in the lead case because it did ultimately prevail on its contract causes of action against DVD Factory by more than $1. However, the Court will consider the low proportion of recovery, as well as the fact that Coldwater did not prevail on all claims and against additional parties when determining the amount of attorney’s fees that will be awarded to Coldwater.

In opposition, DVD Factory argues that it achieved a better result than if it had accepted Coldwater’s pre-litigation demand. However, it does not appear that Coldwater served an offer pursuant to CCP 998, which may have affected whether attorney’s fees as costs would have been appropriate. Moreover, DVD Factory has never asserted that a right to costs as the prevailing party.

Coldwater seeks attorney’s fees in the amount of $377,806.50, plus anticipated additional fees in the amount of $10,500.00 against DVD Factory.

In support of the motion, Coldwater provides the declaration of Gregory Gershuni, Plaintiff’s counsel. Mr. Gerhuni provides the billing records from June 2, 2021 to February 13, 2023, as Exhibit 1 to his declaration. (Gershuni Decl., ¶¶3, 14, Ex. 1.) He states that the usual rates for his firm for this type of litigation is $540/hour (without distinction of the experience of any associates, if any) and $195/hour for paralegal time. (Id., ¶3.) Mr. Gershuni states that he has been practicing law for 45 years and details the work that was performed in the case over the past 2 years. (Id., ¶¶4-11.) He also states that he anticipates an additional 10 hours for the reply brief and attending the hearing. (Id., ¶15.) In total, he seeks $388,306.50 in attorney’s fees. (Id., ¶16.)

While the Court has found that Coldwater is entitled to fees, the Court will reduce the fees so that are proportional to the outcome of the case. As noted above in the Judgment, Coldwater prevailed on the complaint in the lead case against DVD Factory, but it did not prevail in establishing personal liability against Daniel Quinn or James Kohls (dismissed by Coldwater). Coldwater also prevailed against Combat Zone in the sum of $6,000 on the complaint in the related case, but there is no basis for it to recover fees based on those claims. Taking into consideration the outcome of the related cases, the numerous parties involved, and the apportionment of fees, the Court will reduce the fees such that the fees awarded will be 8.15% of the requested attorney’s fees by Coldwater.

Implicit in this finding is a finding that Mr. Gershuni’s billing rate is appropriate. Nevertheless, a large proportion of the hours expended were expended in effort that was not successful, either as to the parties or the claims involved. As the Plaintiff, Coldwater controlled the scope of the dispute. Its approach to litigation was over the top, and resulted, in the Court’s view, in over-the-top expenditures by both parties. Coldwater inflated its claims under the lease and repeated them as tort claims as to which it named individuals who were clearly acting in their representative capacity.[2] It asserted that reasonable positions under the lease were malicious and fraudulent. Sadly, this caused DVD Factory to respond in kind, and a medium size dispute about amounts due under a commercial lease became a bitter, personal affair in which both sides traded unprovable personal accusations and went to the effort of a lengthy trial to prove them, threatening the assets of both sides’ principals in the process. Coldwater must accept some responsibility for this, in the Court’s view, as it was the first party to “up the ante” in this way. Those decisions, and the expenditures of fees that resulted, were not reasonable.

Taking 8.15% of $388,360.50 (= $377,806.50 requested attorney’s fees + $10,500 anticipated attorney’s fees), this amounts to $31,651.38 in attorney’s fees. The Court finds that this award of attorney’s fees is reasonable and equitable proportion in light of the results of the case. For example, it represents an award of 67% of the damages ultimately awarded. As such, the motion for attorney’s fees is granted, but in the reduced amount of $31,651.38 .

Plaintiff/Cross-Defendant 7230 Coldwater, LLC’s motion for attorney’s fees is granted in the amount of $31,651.38.

[1] In the Statement of Decision, the $169,670.82 was calculated by the award of $69,067 on the 1^st cause of action and $100,603.82 on the 2^nd cause of action in Coldwater’s favor. The $122,500 figure was the amount DVD Factory was entitled to recover for its claims for breach of contract against Coldwater in DVD Factor’s cross-complaint.

[2] There was no substantial evidence of alter-ego liability.