Judge: Melissa R. Mccormick, Case: Kells v. Blueridge Business Group LLC, Date: 2023-08-17 Tentative Ruling
Defendants Blueridge Business Group, Christopher A. Wills, Michael W. Meier, Linda L. Meier, Steven Pearson, and The Richard and Susan Zimbelman Revocable Trust dated April 23, 2018’s Motion for Attorneys’ Fees and Costs
Defendants Blueridge Business Group, Christopher A. Wills, Michael W. Meier, Linda L. Meier, Steven Pearson, and The Richard and Susan Zimbelman Revocable Trust dated April 23, 2018 move for an award of attorneys’ fees and costs against plaintiff Patricia Kells as trustee of the Patricia Lynn Kells Living Trust. The court granted defendants’ motion for summary judgment on March 9, 2023. See 3/9/23 Order & 3/27/23 Judgment. For the following reasons, defendants’ motion is granted.
Plaintiff is the widow of Robert T. Kells, Jr. (Robert) a former member of defendant Blueridge Business Group. Robert initially owned 20% of Blueridge; Robert sold 5% of his interest in Blueridge in 2001 and 10% of his interest in 2003, leaving Robert with a 5% ownership share. Robert died in 2008.
Plaintiff filed this lawsuit on July 16, 2021. Plaintiff filed her original complaint in her individual capacity and alleged she was a 20% owner of Blueridge, which plaintiff alleged owned a property on Neville Street in Orange, California. Plaintiff alleged Blueridge and “the other members” of Blueridge contested plaintiff’s alleged ownership of the property. Plaintiff sought to quiet title to the property.
Plaintiff filed a first amended complaint on February 24, 2022. Plaintiff filed the first amended complaint as the trustee of the Patricia Lynn Kells Living Trust and “as the lawful representative of the estate of Robert T. Kells, Jr.” The first amended complaint included Blueridge and added five new defendants. Plaintiff alleged she was a 20% owner of Blueridge, which plaintiff alleged owned the Neville Street property. Plaintiff alleged Blueridge had “recently sold” the property to a third party, and that plaintiff was identified as a 5% owner of Blueridge in the sales documents.
The first amended complaint alleged causes of action for declaratory relief and breach of fiduciary duty. Plaintiff alleged a controversy had arisen and existed between plaintiff and defendants concerning Robert’s ownership interest in Blueridge because plaintiff contended Robert did not sell 15% of his interest and defendants contended he had. Plaintiff also alleged the individual defendants breached fiduciary duties to Robert by failing to pay Robert the fair market value for his interest in Blueridge. Plaintiff sought, among other declarations, declarations that Robert’s sales of his interests in Blueridge were invalid and that the individual defendants breached fiduciary duties to Robert. Plaintiff also sought $967,510.40 in damages. The court granted defendants’ motion for summary judgment on March 9, 2023, and thereafter entered judgment in defendants’ favor.
Plaintiff’s claims in the operative first amended complaint were based on alleged breach of contract. Plaintiff alleged in the first amended complaint that defendants breached fiduciary duties by failing to obtain an appraisal for the 2001 and 2003 sales of Robert’s interests in Blueridge, which led to an alleged undervaluation of Robert’s interests. Plaintiff’s theory in the first amended complaint was that an appraisal would have reflected a higher fair market value and that the sums Robert received in exchange for selling his interests were too low.
Plaintiff alleged, inter alia:
• “An actual controversy has arisen and now exists between Plaintiff and the Defendants concerning their respective rights and duties in that the Defendants claim that Robert Kells sold 15% of his interest in Blueridge LLC and the right to 15% of interest in the voting power of Blueridge LLC while the Plaintiff claims that he did not sell 15% of interests [sic] in Blueridge LLC according to the terms of Exhibit B [i.e., the Blueridge Operating Agreement, attached as Exhibit B to the first amended complaint] and that the individual Defendants violated their fiduciary obligations to Robert Kells as co-members of the Defendant Blueridge LLC . . . ”;
• “[T]he operating agreement provided that the Defendant Blueridge LLC would be required to pay the Plaintiff the fair market value of the former member’s interest as determined by an independent appraiser selected by the Former Member and a committee of Remaining Members holding majority interest in the remaining membership”; and
• “Defendants breached [fiduciary] duties by failing and refusing to follow the provisions of the operating agreement under Paragraph 7.3 thereof and by refusing to undertake the transaction to transfer Robert Kells[’s] interest in writing and according to fair and equitable terms.”
Among other relief, plaintiff sought:
• “[A] declaration that Robert Kells’[s] purported sale of his interest in the voting power of Blueridge LLC was invalid because it violated the terms of Exhibit B [i.e., the Blueridge Operating Agreement, attached as Exbibit B to the first amended complaint] and that the individual Defendants violated their fiduciary obligations to Robert Kells as co-members of the Defendant Blueridge LLC . . .”; and
• “Attorney’s fees in Paragraph 12.11 of Exhibit B [i.e., the Blueridge Operating Agreement, attached as Exhibit B to the first amended complaint].”
The Blueridge Operating Agreement, which, as noted above, plaintiff attached as Exhibit B to the first amended complaint, contains a prevailing party attorneys’ fees and costs provision as follows:
“12.11 Attorney Fees. In the event that any dispute between the Company and the Members or among the Members should result in litigation or arbitration, the prevailing party in such dispute shall be entitled to recover from the other party all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys’ fees and expenses, all of which shall be deemed to have accrued upon the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. Any judgment or order entered in such action shall contain a specific provision providing for the recovery of attorney fees and costs incurred in enforcing such judgment and an award of prejudgment interest from the date of the breach at the maximum rate allowed by law. For purposes of this Section: (i) attorney fees shall include, without limitation, fees incurred in the following: (1) post-judgment motions; (2) contempt proceedings; (3) garnishment, levy and debtor and third party examinations; (4) discovery; and (5) bankruptcy litigation and (ii) prevailing party shall mean the party who is determined in the proceeding to have prevailed or who prevails by dismissal, default or otherwise.”
First Amended Complaint Ex. B (¶ 12.11); Preciado Decl. Ex. 2 (¶ 12.11).
Civil Code § 1717(a) states that in any action on a contract, where the contract specifically provides that attorneys’ 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 attorneys’ fees in addition to other costs. See also Civ. Proc. Code § 1033.5(a)(10)(A) (attorneys’ fees authorized by contract are recoverable as costs under Civ. Proc. Code § 1032). Reasonable attorneys’ fees shall be fixed by the court and shall be an element of the costs of suit. Civ. Code § 1717(a).
Plaintiff does not dispute that defendants are the prevailing parties, nor could she. The court granted defendants’ motion for summary judgment and entered judgment in defendants’ favor.
Plaintiff instead argues that the attorneys’ fees provision the Blueridge Operating Agreement does not apply to her because she “never contracted” with Blueridge Business Group or defendants’ counsel, she did not sign the Blueridge Operating Agreement, and she is not a party to the Blueridge Operating Agreement. None of these arguments succeeds.
Plaintiff alleged in her first amended complaint that she was a 20% owner of Blueridge. She alleged the sales documents for the Neville Street property identified her as a 5% owner of Blueridge. She alleged her claims were “based upon her position as Trustee of the Patricia Lynn Kells Living Trust which included the interest in Blueridge LLC,” and “as the lawful representative of the estate of Robert T. Kells Jr.” In sum, plaintiff pursued this lawsuit on the theory that she had inherited or otherwise acceded to Robert’s membership interest in Blueridge, and based on that status sought court declarations and other relief against Blueridge and the other members premised on plaintiff’s interpretation of the Blueridge Operating Agreement. Whether plaintiff sued Blueridge and the members as an alleged member of Blueridge or as an assignee of Robert’s membership interest, the attorneys’ fees provision in the contract over which plaintiff sued applies to plaintiff. See First Amended Complaint Ex. B (¶ 12.11) (attorneys’ fees provision applies to any dispute between Blueridge and the members or among the members that results in litigation or arbitration); California Wholesale Material Supply, Inc. v. Norm Wilson & Sons, Inc. (2002) 96 Cal.App.4th 598, 605-06 (assignee of predecessor’s rights in contract between third party and predecessor that included attorneys’ fees provision “stepped into [predecessor’s] shoes as a matter of law,” including requirement to pay third party’s attorneys’ fees when assignee filed and lost lawsuit based on assigned contract).
Plaintiff also expressly sought an award of attorneys’ fees pursuant to the attorneys’ fees provision in the Blueridge Operating Agreement. First Amended Complaint (Prayer for Relief) ¶ 5 (prayer for “attorney’s fees in Paragraph 12.11” of Blueridge Operating Agreement). Defendants do not dispute that had plaintiff prevailed, plaintiff would have been entitled to an award of attorneys’ fees and costs from defendants pursuant to paragraph 12.11 of the Blueridge Operating Agreement. See, e.g., Exarhos v. Exarhos (2008) 159 Cal.App.4h 898, 903-04 (under reciprocity rules of Civ. Code § 1717, 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 attorneys’ fees if the nonsignatory plaintiff would have been entitled to its fees had the plaintiff prevailed).
Defendants prevailed in the case, and are the prevailing parties for purposes of an award of attorneys’ fees and costs.
When determining a reasonable attorneys’ fees award using the lodestar method, the court begins by deciding the reasonable hours the prevailing party’s attorney spent on the case and multiplies that number by the prevailing hourly rate for private attorneys in the community who conduct noncontingent litigation of the same type. Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 998; see also Environmental Protection Info. Ctr. v. California Dep’t of Forestry & Fire Protection (2010) 190 Cal.App.4th 217, 248. The court may rely on personal knowledge and familiarity with the legal market in setting a reasonable hourly rate. Heritage Pac. Fin., LLC v. Monroy (2013) 215 Cal.App.4th 972, 1009.
The court then has the discretion to increase or decrease the lodestar figure by applying a positive or negative multiplier based on a variety of factors that the court did not consider when determining the lodestar figure, such as the novelty and difficulty of the issues presented, the extent to which the nature of the litigation precluded other employment by the attorneys, and the contingent nature of the fee award. See Northwest Energetic Servs., LLC v. California Franchise Tax Bd. (2008) 159 Cal.App.4th 841, 879-82; Graciano v. Robinson Ford Sales, Inc. (2006) 144 Cal.App.4th 140, 154. The court is not required to impose a multiplier; the decision is discretionary. Galbiso, 167 Cal.App.4th at 1089; Nichols v. City of Taft (2007) 155 Cal.App.4th 1233, 1241.
As an initial matter, the court finds defendants’ counsel’s hourly rates reasonable (Attorney Partida $550 per hour; Attorney Carrigan $400 per hour; Attorney Preciado $400 per hour; Attorney Gangi $250 per hour; and Paralegal Li $150 per hour). Having reviewed and considered defendants’ evidence, and having presided in similar cases, the court finds these hourly rates reasonable for attorneys and litigation staff in the community who conduct litigation of the same type as in this case.
The court has read and considered plaintiff’s arguments, defendants’ arguments, defendants’ counsel’s invoice, and the parties’ other evidence. Based on that review, the court finds defendants’ request for reimbursement of 284.60 hours of attorney and paralegal time reasonable. Defendants’ counsel expended those hours over two years of litigation, which included preparation of defendants’ motion for summary judgment, written discovery, defendants’ deposition, and efforts to resolve the case short of judgment. Preciado Decl. ¶¶ 27, 30, 31, 37, 40. The court awards defendants $117,390 in attorneys’ fees.
Defendants filed a costs memorandum on April 10, 2023, seeking $5,942.60 in costs (ROA 158). Plaintiff has not filed a motion to strike or tax defendants’ costs. Defendants are awarded $5,942.60 in costs.
Defendants to give notice and to submit by August 24, 2023 a proposed amended judgment reflecting the above attorneys’ fees and costs award.