Judge Peter A. Hernandez, Case Number: 24STCV08786, Date: 2024-10-03 Tentative Ruling

Judge: Peter A. Hernandez, Case: 24STCV08786, Date: 2024-10-03 Tentative Ruling

Case Number: 24STCV08786 Hearing Date: October 3, 2024 Dept: 34

Lyons LA, Inc. v. 550 West Regent Street Homeowners Association, Inc., et al. (24STCV08786)

Plaintiff/Cross-Defendant Lyons LA, Inc.’s Motion to Strike Request for Attorney’s Fees in Defendant/Cross-Complainant 550 West Regent Street Homeowners Association, Inc.’s Cross-Complaint is DENIED.

Background

Plaintiff Lyons LA, Inc. (“Lyons”) alleges as follows:

On May 1, 2023, Lyons and Defendant 550 West Regent Street Homeowners Association, Inc. (“550 HOA”) entered into a management contract where Lyons agreed to manage a 120-unit condominium development located at 550 West Regents Street, Inglewood, CA 90301 (“Property”) and certain business matters for 550 HOA.

In exchange for Lyons’ services, 550 HOA agreed to pay Lyons a base fee of $3,500 per month which was subject to a late charge if not paid in full by the due date. Under the agreement, Lyons is also entitled to payment of an additional fee if Lyons has any involvement in reconstruction projects in the Property that result from any damage or destruction outside of Lyons’ control.

The management contract provides for a one-year term from May 1, 2023 to April 30, 2024. After the end of this term, the management contract automatically renews for additional one-year periods until terminated. Additionally, the management contract provides that upon termination, the monthly management fee for all months remaining in the initial one-year term would be immediately due to Lyons.

On December 21, 2022, a fire occurred in the Property causing significant damage. On behalf of 550 HOA, Lyons filed an insurance claim for the fire damage, hired a contracting company to repair the units in the Property, and hired another contracting company to repair the Property’s roof.

Due to a change in 550 HOA’s Board, 550 HOA began to sever their relationship with Lyons without Lyons’ knowledge by assuming Lyons’ responsibilities under the management contract. As such, Lyons could no longer perform its obligations under the contract or attend the fire claim.

In a letter dated November 30, 2023, 550 HOA officially terminated their contract with Lyons in violation of the terms in the management contract. 550 HOA has refused to pay their outstanding balance to Lyons.

On April 8, 2024, Lyons filed a complaint, asserting causes of action against 550 HOA and Does 1-10 for:

1. Breach of Contract; and

2. Declaratory Relief.

On June 3, 2024, 550 HOA filed a cross-complaint against Lyons in pro per. On June 17, 2024, after retaining counsel, 550 HOA filed their cross-complaint, asserting causes of action against Lyons and Roes 1-10 for:

1. Breach of Contract; and

2. Declaratory Relief.

On August 19, 2024, Lyons filed this Motion to Strike 550 HOA’s request for attorney’s fees in their Cross-Complaint’s prayer for relief. On September 17, 2024, Lyons filed their opposition to 550 HOA’s Motion. On September 24, 2024, 550 HOA filed their reply to Lyons’ opposition.

Legal Standard

Pursuant to Code of Civil Procedure section 436, “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437.)

Discussion

Lyons moves the Court for an order striking 550 HOA’s request for attorney’s fees and costs in the prayer for relief in page 6, line 8 of the Cross-Complaint arguing that it is irrelevant and improper.

California Code of Civil Procedure section 1021 provides that “[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.” (Code Civ. Proc. § 1021.)

Lyons argues that the management agreement between Lyons and 550 HOA provides that the parties agree to submit any dispute arising out of the management contract before initiating litigation or arbitration. (Mot., 3:6-10.) Section VIII of the management agreement provides in its relevant parts:

If a dispute arises out of or relates to this Agreement, or the breach thereof, and said dispute cannot be resolved independently between the Parties, the Parties agree the dispute shall be submitted first to mediation through JAMS (Judicial Arbitration and Mediation Services) pursuant to its rules with a retired judge who has experience in the issues presented. Either Party may make a demand for mediation and the other Party will be bound to participate in such mediation in good faith, as a condition precedent to the nonparticipating Party requesting arbitration of such dispute as provided below. If the Parties cannot agree on a particular mediator within twenty (20) days of the matter having been submitted to JAMS for mediation, either Party may request that JAMS appoint a mediator from its panel. Further, in the event that a Party refuses to participate in mediation, that Party will not be entitled to recover any attorney’s fees or costs in the event that the matter if arbitrated or litigated.

(Brum Decl., ¶ 3; Cross-Complaint, Exh. A p. 10.)

Thus, Lyons argues that in the event that a party refuses to participate in mediation, that party will not be entitled to recover any attorney’s fees or costs if the matter is arbitrated or litigated. (Mot., 3:6-10.) Lyons argues that since 550 HOA never made a request for mediation prior to filing their Cross-Complaint, 550 HOA is barred from recovering attorney’s fees in connection with their Cross-Complaint. (Id., 3:11-16.)

Lyons contends that on December 14, 2024, Lyons made a written request that 550 HOA participates in a mediation prior to filing Lyon’s Complaint. (Id., 3:18-20; Brum Decl., ¶ 2.) Lyons also argues that on December 21, 2024, 550 HOA’s counsel waived mediation in a phone call with Lyons’ counsel. (Brum Decl., ¶ 4.) Lyons contends that 550 HOA did not request any mediation prior to filing their Cross-Complaint. (Mot., 4:3-18.) Additionally, counsel for both parties met and conferred regarding the request for attorney’s fees but were unable to resolve the dispute. (Ibid.)

In opposition, 550 HOA argues that Lyons’ Motion is based on disputed facts rather than an alleged defect on the face of the Cross-Complaint. (Opp., 2:6-8.) Thus, a motion to strike is improper to challenge 550 HOA’s request for attorney’s fees. (Ibid.) Additionally, 550 HOA argues that Section VIII allows the recovery of “reasonable attorney fees and costs” which is what the Cross-Complaint requested in its prayer for relief. (Id., 2:19-26.) As such, 550 HOA argues that Lyons is not challenging whether an attorney’s fees provision exists in the management contract, but instead argues that 550 HOA did not follow the terms on the contract waiving their rights to attorney’s fees which is a dispute of facts. (Id., 3:1-3.) 550 HOA argues that both parties agreed to dispense with the mediation requirement in Section VIII of the contract and agreed to dispense with the requirement to submit to arbitration. (Id., 3:3-8.) Thus, 550 HOA argues that any party, as the prevailing party, is entitled to request reasonable attorney’s fees. (Ibid.)

In reply, Lyons reiterates the provisions set out in Section VIII of the contract arguing that 550 HOA cannot claim that it complied with the terms allowing their request for attorney’s fees since it never requested Lyons to mediate. (Reply, 2:1-17.)

The management contract between the parties provides terms entitling either party, as the prevailing party, to “reasonable attorneys’ fees and costs” under Section VIII. Section VIII provides that:

In the event of any litigation or arbitration between the Association and Agent, the prevailing Party will be entitled to recover its reasonable attorney fees and costs...

(Cross-Complaint, Exh. A p. 10.)

Nevertheless, Section VIII clearly states that if a party refuses to participate in mediation, that party will not be entitled to recover any attorney’s fees or costs. (Ibid) As such, 550 HOA’s request for attorney’s fees is based on an agreement that allows for it. The issue of whether 550 HOA fulfilled the requirements to be granted attorney’s fees may not be subject to a motion to strike as it is an issue of fact. The request for attorney’s fees was not improperly inserted into 550 HOA’s Cross-Complaint as there is a contractual basis for the request. Rather, there is an issue of whether 550 HOA is entitled to attorney’s fees if it is shown that 550 HOA refused to participate in mediation or both parties waived that condition.

The motion is DENIED.

Conclusion