Judge: Joseph Lipner, Case: 21SRCV37974, Date: 2023-10-03 Tentative Ruling

Case Number: 21SRCV37974    Hearing Date: October 3, 2023    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

          Cross-Defendants Kanon Ventures, LLC, Mark Beskind, Jeff Stauffer, Ara Tavitian, and Avedis Tavitian (“the Kanon Parties”) move for an award of attorneys’ fees against cross-complainants Swing House Stages, Inc. (“Swing House”) and Genoveva Winsen (“Winsen”) (collectively “Cross-Complainants”) in the amount of $326,469.76.

          The Court DENIES the motion as to Cross-Complainant Genoveva Winsen.  The Court GRANTS  the motion as to Cross-Complainant Swing House Stages, Inc., but deferred for further briefing the amount of the attorney’s fees. The Court sets a hearing for November 21, 2023, at 8:30 am to hear argument on a reasonable amount of fees to be awarded against Cross-Complainant Swing House in favor of Cross-Defendants the Kanon Parties.  The Court sets further briefing in accordance with the schedule below.

Background

          On October 14, 2021, plaintiff/cross-defendant West Casitas, LLC sued defendant/cross-complainant Swing House Stages, Inc., asserting one cause of action for breach of lease. According to the complaint, Swing House rented a commercial space from West Casitas beginning in 2014. In April 2020, concurrent with the onset of the COVID-19 pandemic, Swing House stopped paying rent. As of October 1, 2021, shortly before West Casitas sued, Swing House had accrued approximately $430,000 in rent arrears.

          On March 28, 2022, Swing House and a new party, Genoveva Winsen, cross-complained against West Casitas as well as Kanon Ventures, LLC and four individuals: Mark Beskind, Jeff Stauffer, Avedis Tavitian, and Ara Tavitian. Cross-Complainants asserted causes of action for (1) breach of lease, (2) breach of the implied covenant of good faith and fair dealing, (3) intentional fraud, (4) fraud by negligence, (5) fraud by concealment, (6) discrimination, (7) sexual harassment, (8) unfair business practices, (9) declaratory relief, and violations of (10) state and (11) local COVID-19 tenant protection laws.

          On June 7, 2023, the Court granted summary judgment in favor of all Cross-Defendants on the March 2022 cross-complaint.

          Kanon Ventures, Besking, Stauffer, and Avedis and Ara Tavitian – all cross-defendants except West Casitas – now move the Court to award them attorneys’ fees. The Kanon Parties argue the lease agreement between West Casitas and Swing House contains a fee-shifting provision that permits them to recover attorneys’ fees from the Cross-Complainants pursuant to Civil Code section 1717.

          Both Swing House and Winsen have opposed the Kanon Parties’ motion, but they make no argument regarding Swing House’s liability for fees. They insist, first, that the Kanon Parties are not entitled to fees from Winsen, and second, that the Court should award only reduced fees.

Legal Standard

Per Civil Code section 1717, “[i]n 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); see also Silver Creek, LLC v. BlackRock Realty Advisors, Inc. (2009) 173 Cal.App.4th 1533, 1538.) 

“Code of Civil Procedure section 1021 codifies the ‘American rule’ that each party to litigation ordinarily pays its own attorney fees. [Citation.] ... But [Civil Code] section 1717 provides an exception where the parties enter into an enforceable agreement authorizing an award of fees. Such an agreement may authorize attorney fees to the prevailing party in any litigation between the parties, whether the litigation sounds in contract or tort. [Citation.].” (Westwood Homes, Inc. v. AGCPII Villa Salerno Member, LLC (2021) 65 Cal.App.5th 922, 926–927.)

“An action (or cause of action) is ‘on a contract’ for purposes of section 1717 if (1) the action (or cause of action) ‘involves’ an agreement, in the sense that the action (or cause of action) arises out of, is based upon, or relates to an agreement by seeking to define or interpret its terms or to determine or enforce a party’s rights or duties under the agreement; and (2) the agreement contains an attorney fees clause.” (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 242.) “Fees may be awarded for noncontractual issues where the fee provision is broad enough to cover those claims.” (El Escorial Owners' Assn. v. DLC Plastering, Inc. (2007) 154 Cal.App.4th 1337, 1365.)  

Discussion

The Kanon Parties have no contractual relationship with Swing House or Winsen.

          As an initial matter, the Court has already determined that the Kanon Parties have no direct contractual relationship with Swing House or Winsen.

          In its ruling on Cross-Defendants’ motion for summary judgment, the Court repeatedly and decisively found that none of the Kanon Parties was a party to the lease agreement on which they now rely. (7/7/23 Order, 5:25-26 [“Kanon Cross-Defendants have submitted evidence showing that they were not parties to the lease”]; 8:16-18 [“The court ... finds ... there exists no contract between Kanon Cross-Defendants and Cross-Complainants”]; 12:1-2 [“Kanon Cross-Defendants have met their burden to show that there is no contractual relationship between them and Cross-Complainants”]; 17:2-3 [“Kanon Cross-Defendants have met their burden to show that any payments for rent were made to West Casitas pursuant to the terms of the Lease”]; 18:13-14 [“Kanon Cross-Defendants have shown that there is no ‘written instrument or instrument under which the parties’ rights need to be declared’”].)

Because the Kanon Parties have no contract with Swing House or Winsen, the question is whether they can recover attorneys’ fees based on the contract between Swing House and West Casitas. In fact, Cross-Complainants concede that Kanon Parties can recover fees from Swing House. So the true question is slightly narrower: whether the Kanon Parties can recover fees from Winsen, individually, based on a lease between West Casitas and Swing House.

The Kanon Parties are not entitled to fees from Winsen because she would not have been personally entitled to fees from them if Cross-Complainants had prevailed.

          “The ‘mutuality of remedy’ doctrine is typically used [to determine entitlement to fees] in cases in which a party establishes that it is ... not a party to a contract ... . Under that doctrine, if the party would have been exposed to fees had the court found against it, then that party is entitled to fees for prevailing.” (Eden Township Healthcare Dist. v. Eden Medical Center (2013) 220 Cal.App.4th 418, 429; see also Hyduke’s Valley Motors v. Lobel Financial Corp. (2010) 189 Cal.App.4th 430, 435 [“a non-signatory who prevails in an action on the contract is entitled to attorney fees provided it would have been liable for fees had the other party prevailed”], citing Reynolds Metals Co. v. Alperson  (1979) 25 Cal.3d 124, 129.)

          “Conversely, on occasion attorney fees may be assessed against a non-signatory who loses an action on the contract. ... ‘The courts have generally ruled that, if a prevailing signator would be entitled to fees against a nonprevailing nonsignator, then nonsignators in litigation on such contracts are both entitled to attorney fees if they prevail and obligated to pay attorney fees if another party prevails.’ ” (Hyduke’s Valley Motors v. Lobel Financial Corp., supra, 189 Cal.App.4th at p. 435, italics in original.)

          But crucially here, “the mere fact [that a] complaint plead[s] a breach of contract cause of action is not dispositive.” (Id., at p. 436.) In order for a suit to be “on a contract” as contemplated in Civil Code section 1717, the “gravamen” of the relief sought must be “to enforce ... rights in the ... contracts.” (Ibid.)

          Winsen did not seek to enforce personal rights against the Kanon Parties that arose from the contract between West Casitas and Swing House. Although the cross-complaint refers imprecisely to “Cross-Complainants” in the plural many times, the allegations about responsibility for the lease cannot reasonably be read to include Winsen.  For example, in alleging that “Cross-Complainants assumed the Lease” (Cross-Complaint ¶ 52), Winsen’s cross-complaint did not appear to be alleging that Winsen is personally responsible for the lease.  Moreover, the specific facts alleged do not reflect any claim by Winsen, individually, against the Kanon Parties, arising from the lease contract. Winsen did not have standing to assert either of the first two causes of action, as she was not a party to the lease. To the extent Winsen alleged the Kanon Parties perpetrated a fraud against her, it was only as the agent for Swing House. Her discrimination and harassment claims arose from her business relationships with the Kanon parties, which although they originated from her professional role at Swing House, did not relate directly to its lease. And only Swing House, for itself and itself only, sought recovery under the actions for unfair business practices, declaratory relief, and COVID protection laws.

          Winsen could not have recovered fees on the contract, because she did not sue on the contract. So the Kanon Parties cannot recover fees from her either.

/ / /

The cases cited by the Kanon Parties are unhelpful, because they only affirm that mutuality of remedy may be determined at the pleading stage, without exploring how mutuality of remedy should be determined.

          The Kanon Parties cite Cano v. Glover (2006) 143 Cal.App.4th 326, 331 (Cano), Jones v. Drain (1983) 149 Cal.App.3d 484 (Jones), and Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124 (Reynolds) for the proposition that a party may be liable for attorneys’ fees on a contract even if the court determines a contract does not exist between them. And, citing Cano, supra, and Manier v. Anaheim Bus. Ctr. Co. (1984) 161 Cal.App.3d 503, 508 (Manier), they claim they can hold Winsen liable because she asserted she was a tenant in the cross-complaint and she sought attorneys fees for herself on that basis.

          All these cases are circular as applied to the Kanon Parties’ argument. In Cano, the plaintiff sued for breach of contract, plain and simple, then tried to evade his liability for fees after losing at the pleading stage because “a contract had not been proven”. (Cano, supra, at p. 331.) In Jones, the court similarly found that the question of whether the suit was on the contract or not could be resolved at the pleading stage – it did not rule that the suit was on the contract solely because a contract action had been pled. (Jones, supra, at p. 487.) The cases do not closely examine mutuality of remedy. They simply affirm it can be evaluated from the face of a complaint. Manier is similarly unhelpful; the court there did not grapple directly with the question of whether a suit was on a contract, but instead affirmed that where it is, both parties are entitled to fees. (Manier, supra, at p. 508.)

          As for Reynolds – “[t]he seminal case dealing with attorney’s fees on contract causes of action” (Jones, supra, at p. 487) – Reynolds held, based on mutuality of remedy, that “[w]here a cause of action based on the contract providing for attorneys’ fees is joined with other causes of action beyond the contract the prevailing party may recover attorneys’ fees ... only as they relate to the contract action.” (Reynolds, supra, at p. 129.)

Later applications of Reynolds held that the mutuality analysis requires more than simply pointing to the names of a party’s causes of action or checking whether they used singular or plural nouns. (E.g. Hyduke’s Valley Motors v. Lobel Financial Corp., supra.) A deeper analysis of the cross-complaint here shows that Winsen, had she prevailed, would not have been entitled to fees, and neither are the Kanon parties.

/ / /

Cross-Complainants have not shown that the fee award against Swing House should be reduced.

          Swing House argues the Court should reduce the Kanon Parties’ fees by $113,092 arising from a dubiously successful anti-SLAPP motion. This argument is off-base, and the law Swing House cites does not support it. Graciano v. Robinson Ford Sales, Inc. (2006) 133 Cal.App.4th 140, 147 (Graciano), Moran v. Endres (2006) 135 Cal.App.4th 952, 955-956, and City of Santa Monica v. Stewart (2005) 126 Cal.App.4th 43, 78 all discuss the availability of fees sought under the anti-SLAPP statute itself. The same rules do not apply to fees sought under Civil Code section 1717. In fact, Graciano distinguishes the anti-SLAPP context as a special case where “the court has discretion to eliminate hours on unsuccessful claims or simply reduce the award to account for the limited success.” (Id., at p. 158.)

          That said, the Court is of the tentative opinion that $330,000 is too high an amount of fees. An unreasonably inflated fee request is grounds for a court to deny the request altogether. (Guillory v. Hill (2019) 36 Cal.App.5th 802, 806; Ketchum v. Moses (2001) 24 Cal.4th 1122, 1138; Serrano v. Unruh (1982) 32 Cal.3d 621, 635.) That said, a “party opposing [a] fee award can be expected to identify the particular charges it considers objectionable.” (Gorman v. Tassajara Development Corp. (178 Cal.App.4th 44, 101.)

          Rather than impose the unjust result of an inflated award or no award at all, the Court calls for more briefing. The Court holds that the Kanon Parties are entitled to an award of fees against Swing House but sets a further hearing on the matter of reasonability.,

          Conclusion

          The Court DENIES Cross-Defendants’ motion as to Cross-Complainant Genoveva Winsen.

          The Court GRANTS Cross-Defendants’ motion as to Cross-Complainant Swing House, LLC, in an amount to be determined upon further briefing and argument.

          The Court sets a hearing for November 21, 2023, at 8:30 am to hear argument on a reasonable amount of fees to be awarded against Cross-Complainant Swing House in favor of Cross-Defendants the Kanon Parties.

          Cross-Defendants/moving parties may submit briefing on the matter of reasonability, not to exceed ten (10) pages in length, no later than fourteen days prior to the hearing date. Cross-Complainants may submit an opposition, not to exceed ten (10) pages, no later than seven (7) days prior.  The parties are encouraged to meet and confer and agree upon a reasonable amount of attorney’s fees.