Judge: Mark H. Epstein, Case: 20SMCV00483, Date: 2022-12-16 Tentative Ruling

Case Number: 20SMCV00483    Hearing Date: December 16, 2022    Dept: R

This is a hearing to discuss plaintiff’s objections to the court’s proposed statement of decision.  The matter was continued twice and plaintiff requests a third continuance.  The court believes that rather than continue the matter, it will simply resolve the objections by virtue of this order without further hearing.

Plaintiff’s first objection is to the court’s statement that the attorneys’ fee issue is what made this case impossible to settle.  Frankly, both parties acknowledged as much in various pre-trial proceedings and to some extent even during the trial.  It simply is a fact.  That said, it is not really necessary to the court’s ruling (and it is not the basis for the denial of a fee recovery).  Thus, the court will delete the sentence, even though the statement is unquestionably true.  The court will delete the last sentence of the first paragraph.

Plaintiff’s second objection is more substantive.  It claims that it prevailed sufficiently to warrant fees pursuant to Civil Code section 1717 as a matter of right.  According to plaintiff, even though it did not receive 100% of what it sought, it received a high enough percentage so as to warrant fees.  Alternatively, plaintiff argues that even if it is not entitled to fees as a matter of right, the court should exercise its discretion to award fees.  In support, plaintiff relies on de la Cuesta v. Benham (2011) 193 Cal.App.4th 1287.  In that case, the plaintiff recovered 70% of what it sought but was not awarded fees.  The Court of Appeal reversed noting that the court was obligated to compare what the parties’ litigation objectives were and how close each party came.  The appellate court noted that in that case, the losing party took an extreme position and the prevailing party won sufficiently to warrant reversal.  Here, plaintiff contends, it obtained 75% of what it sought—surpassing the de la Cuesta benchmark.  Further, plaintiff defeated the cross-action.

In opposition, defendant contends that plaintiff is being disingenuous.  Defendant argues that it submitted a 998 offer to settle by which plaintiff would recover more than the court actually awarded (even accounting for interest albeit excluding fees), suggesting that plaintiff did not actually prevail.  For that reason, defendant argues, plaintiff is not entitled to its costs or fees.  (Defendant attached the offer to its opposition.  In that light, it certainly does appear that the thing stopping settlement was the fees—even though plaintiff denies it now.  If the actual recovery was less than the offer but plaintiff deems it an unqualified win nonetheless, then there must have been some other reason that the offer was rejected.  That said, the court’s ruling on fees is not based on that point.)

The court had originally thought it should hold the fee issue in abeyance and allow further briefing on the subject.  After all, the 998 offer did not provide plaintiff with any fee award, which means that whether it is better or not better would depend on whether fees are awarded or not.  But this case has gone on too long already.  The court is comfortable with its position here.  de la Cuesta does not (in the court’s view) establish a bright line rule that if a party recovers 70% or more of what it seeks it is entitled to fees.  Rather, that case, like the cases that came before, emphasize that each case is different and (absent an unqualified win, in which case fees must be awarded as a matter of right), the court must look at the facts of each case on its own in light of the test established by our Supreme Court in the seminal Hsu v. Abarra case.  (1995) 9 Cal.4th 863.  Indeed, the de la Cuesta court emphasized that only an unqualified win entitles a party to fees as a matter of right; everything else is discretionary.  (Supra, 193 Cal.App.4th at p. 457.)

Of course, discretion is never unbounded.  The fact that plaintiff is not “entitled” to its fees as a matter of right does not mean that the court has discretion to deny fees without analyzing the case under the Hsu standard.  But that is precisely what the court did.  While it is true that plaintiff recovered more than 50% of what it sought, critically it did not recover all that it sought and there were significant aspects of its damages theory upon which it did not prevail, including its theory as to when it was clear enough that it was not going to obtain a license such that it had substantially complied with the requirement that it obtain a letter from the City denying its application (something it never received).  The court found that plaintiff’s position—that its forwarding of a map on the official website was enough—was not sufficient.  More was needed and it took a while for plaintiff to provide it. 

At issue was 8 months of rent.  The court found for plaintiff as to six months and defendant as to two.  But very critical to the court the issue here required an equitable adjustment to the contract at issue—almost a reformation.  The contract required a formal notification from the City of rejection.  While one could easily imagine that it would hardly bend the contractual language too severely to say that a formal hard copy letter is not required but rather an email notification would do, here there was not even that.  Further, even after an informal determination had been made, the parties anticipated some time lag before the formal notification would issue.  Critically, plaintiff was never able to adduce any actual writing from the City that actually said that Bobnick’s application was not accepted.  Rather, plaintiff had to piece together web site attachments, the list of applicants, and logic to satisfy (in the court’s mind, at least) the parties’ goal given that no formal notification was actually issued.  In the court’s view, while it is true that plaintiff did recover the bulk of what it sought, it was not successful enough to recover its fees. 

Nor did plaintiff really recover 75% of what it sought.  While that is true if one looks only at the months at issue, the court notes that plaintiff sought an amount in excess of $40,000 (exclusive of interest) in the complaint (for breach of contract and unjust enrichment).  And even at trial, plaintiff sought just over $40,000 according to its trial papers.  While it is true that defendant also sought damages for a late fee (unsuccessfully), it did achieve at least some of its litigation objective.  Plaintiff stopped paying rent at the end of December 2019; defendant’s cross-action was also for the rent not paid.  The net (meaning the amount of the security deposit less then unpaid rent), is the amount that plaintiff recovered in the case.  The only reason that plaintiff has a recovery is because defendant held the security deposit.  (While doing so, as the court concluded, was also a breach, that does not mean that defendant obtained none of its litigation objective.)  The court believes that this is precisely the “good news and bad news” situation in which the court is within its discretion to find that there was no prevailing party.  And that is especially true given that it is the equitable reformation cause of action that is really the engine that drives plaintiff’s award.  Thus, the objection is OVERRULED.

The remaining objections are simpler as they all refer to what plaintiff believes are items of evidence that the court ought to have included in its statement.  The court disagrees.  While there are many items of evidence that the court did not recite, the court believes that it recited all of the evidence critical to the resolution of the case.  The court is aware of all of the evidence, including certain things to which plaintiff adverts, but the court does not believe that it needs to address them in its statement.  The remaining objections are OVERRULED.

The court will prepare a final statement of decision in light of the above.  The court invites plaintiff to prepare a form of judgment (inclusive of any interest calculations).  It should submit the judgment to the defense before lodging it with the court for approval as to form or to give defendant an opportunity to object.  If defendant objects, the parties should meet and confer and attempt to resolve their dispute before presenting anything to the court.