Judge Teresa A. Beaudet, Case Number: 21STCP00556, Date: 2024-04-18 Tentative Ruling

On February 19, 2021, Petitioner David Wehrly (“Petitioner”) filed a Petition to Confirm Contractual Arbitration Award in this action against Respondents Hawthorne Hangar Operations, LP and Dan Wolfe as Trustee.

On March 9, 2021, Petitioner filed a First Amended Petition to Confirm Contractual Arbitration Award against Respondents Hawthorne Hangar Operations, LP (“HHO”) and Dan Wolfe as Trustee of the Wolfe Family Trust of 1992 (“Wolfe”).

On May 13, 2022, the Court issued a Judgment in this action providing, inter alia, that “The Petition to Confirm Contractual Arbitration Award filed by David Wehrly (‘Petitioner’) under Los Angeles Superior Court case number 21STCP00556 (‘Petition Action’) against Hawthorne Hangar Operations, LP, Dan Wolfe as Trustee of the Wolfe Family Trust of 1992, and Does 1-10 is hereby ORDERED CONFIRMED in favor of Petitioner and against the Respondents Hawthorne Hangar Operations, LP and Dan Wolfe as Trustee of the Wolfe Family Trust of 1992 (‘Respondents’) as follows:…” The May 13, 2022 Judgment further provides, inter alia, that “[i]n total, through May 13, 2022, the Judgment amount in favor of Petitioner and against Respondents is $1,200,439.73…and the Judgment amount in favor of Petitioner and against Messina & Hankin LLP is $3,663.93…”

On September 20, 2023, the Court of Appeal, Second Appellate District, Division One issued an Opinion in Case No. B321452 (Los Angeles County Super. Ct. No. 21STCP00556)

providing, inter alia, that “Dan Wolfe appeals from a judgment confirming an arbitration award in favor of David Wehrly…We hold the arbitrator’s ruling was based on his interpretation of the agreement, not a modification of it, and the ruling did not conflict with the earlier declaratory judgment, which involved a different agreement and different parties. Wolfe has forfeited his illegality challenge for failing timely to raise it before the arbitrator. Accordingly, we affirm.”

On November 22, 2023, a Remittitur was filed in this action providing, inter alia, that “the attached is a true and correct copy of the original order, opinion or decision entered in the above-entitled cause on September 20, 2023 and that this order, opinion or decision has now become final. Respondent David Wehrly is awarded his costs on appeal.”

Petitioner now moves “for an award of attorney’s fees in the amount of $517,662.40…on the grounds that the Court of Appeal, Second Appellate District affirmed the trial court ruling favoring [Petitioner] against Dan Wolfe, as Trustee of the Wolfe Family Trust of 1992 on September 20, 2023 – as well as for fees incurred in connection with defending the Judgment before the United States Bankruptcy Court for the Central District of California.” Petitioner also seeks costs.[1] Wolfe opposes.

Objection to Jamison Decl., ¶ 3: sustained as to “[a]ll the while, Wehrly was well aware that HHO held the valuable Hawthorne Hangar property,” overruled as to the remainder.

Objection to Jamison Decl., ¶ 8: sustained as to the last three sentences, overruled as to the remainder.

Objection to Jamison Decl., ¶ 10: sustained as to the last sentence, overruled as to the remainder.

Objection to Jamison Decl., ¶ 16: sustained as to the first and last sentences, overruled as to the remainder.

Objection to Jamison Decl., ¶ 18: sustained as to “[t]he attorney’s fees incurred in the Bankruptcy proceedings were not incurred to enforce the secured Judgment and are consequently disallowable” and “[m]any entries by Mr. Sandelmann contain impermissible block billing; mixing expensive tasks connected to the Bankruptcy proceedings with tasks connected to the Appeal. In fact, many of Mr. Sandemann’s tasks connected to the Appeal were duplicative efforts of other attorneys in his office, each billing for the same tasks,” overruled as to the remainder.

Pursuant to Civil Code section 1717, subdivision (a), “[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.” Petitioner notes that “[i]t is established that fees, if recoverable at all -- pursuant either to statute or parties’ agreement -- are available for services at trial and on appeal. Indeed, appellate courts have consistently permitted a successful party to recover attorney fees incurred on appeal when a statute expressly permits such an award in the trial court or other lower tribunal.” ((Morcos v. Board of Retirement (1990) 51 Cal.3d 924, 927 [internal quotations, citations, and emphasis omitted].)

The First Amended Petition to Confirm Contractual Arbitration Award (“FAP”) in this action alleges that Petitioner and respondent entered into a written agreement on or about April 24, 2014. (FAP, ¶ 4(a).) Attachment 4(b) to the FAP is a Partnership Interest Purchase Agreement (the “PPA”). (FAP, ¶ 4(b), Attachment 4(b).) The PPA provides, inter alia, that “THIS PARTNERSHIP INTEREST PURCHASE AGREEMENT (‘PPA’) is made and entered into as of April 24, 2014, by and between GREGORY L. GEISER, DAVID WEHRLY, DARIN PUHL, ROBERT FRERICHS and LEVI STOCKTON (collectively referred to herein as ‘Sellers’, and individually as a ‘Seller’), and DAN WOLFE, Trustee of the WOLFE FAMILY TRUST OF 1992, and Nominee (collectively referred to herein as ‘Buyers’, and individually as a ‘Buyer’).” (FAP, ¶ 4(b), Attachment 4(b).)

Petitioner notes that Section 20 of the PPA provides that “[i]n the event of any controversy, claim or dispute between the Parties hereto, arising out of or relating to this PPA or the breach thereof, the prevailing Party, shall be entitled to recover from the losing Party reasonable expenses, including attorneys’ fees and related costs up through and including the exhaustion of all appeals.” (FAP, ¶ 4(b), Attachment 4(b), § 20.)

Petitioner asserts that he is the “prevailing Party” in the appeal filed in Case No. B321452.[2] As set forth above, on September 20, 2023, the Court of Appeal issued an Opinion affirming the Court’s judgment in this action confirming the arbitration award in favor of Petitioner.

Petitioner also indicates that on March 26, 2023, HHO filed a Voluntary Petition for Bankruptcy under Chapter 11 in the case commonly known as Hawthorne Hangar Operations, L.P., Bankruptcy Case No. 2:23-bk-11789-BR (the “HHO BK”). (Sandelmann Decl., ¶ 15.) Petitioner asserts that he is also the “prevailing Party” in the “HHO BK.”

Petitioner’s counsel states that “[o]n May 2, 2023, the HHO BK was converted to a Chapter 7 bankruptcy case.” (Sandelmann Decl., ¶ 16.) Petitioner’s counsel further indicates that “[o]n August 29, 2023, after substantial briefing by Wehrly’s counsel and negotiations with the Chapter 7 Trustee, Wehrly and the Chapter 7 entered into a favorable settlement agreement for payment of an allowed claim amount in exchange for Wehrly: (i) withdrawing all oppositions to the sale of the Hangar Property; (ii) agreeing not to attempt to enforce the Section 10.4 of the PPA against the purchaser of the Hangar Property; and (iii) HHO would be dismissed from the Petition Action – while allowing Wehrly to continue proceeding against Wolfe as to any remaining costs, fees, or damages.” (Sandelmann Decl., ¶ 17.)

In the opposition, Wolfe asserts that “the requested attorney’s fees were discharged under the August 29, 2023 settlement and mutual release agreement.” (Opp’n at p. 10:26-27.) In his supporting declaration, Wolfe’s counsel indicates that “[o]n August 30, 2023, the Bankruptcy Trustee filed a document in the Bankruptcy Court titled: Notice and Submission of the Settlement and Mutual Release Agreement between the Trustee and the Wehrly Parties in Support of the Trustee’s Motion for Entry of an Order approving the Sale of Real Property [ECF No. 159].” (Jamison Decl., ¶ 11, Ex. D.) Wolfe refers to this document as the “SAR.”

The “Settlement And Mutual Release Agreement” attached to the SAR provides, inter alia, that “[t]his Settlement and Mutual Release Agreement (‘Agreement’) is entered into as of August 29, 2023…by Peter Mastan, Chapter 7 Trustee (the ‘Trustee’) for the bankruptcy estate (‘Estate’) of Hawthorne Hangar Operations L.P. (‘Debtor’ and ‘HHO’), on the one hand, and David Wehrly, Robert Frerichs, Gregory L. Geiser, Levi Stockton, and Darin Puhl (collectively, the ‘Wehrly Parties’), on the other hand.” (Jamison Decl., ¶ 11, Ex. D.)

Wolfe appears to cite to Section 9(b) of the Settlement And Mutual Release Agreement in support of his argument that the requested attorney’s fees were “discharged” under the Agreement. Section 9(b) of the Agreement provides as follows:

“The Wehrly Parties’ Release. Except for the obligations due hereunder and as otherwise set forth in this Agreement, and only upon Closing and the entry of the Approval Order, the Wehrly Parties agree to and do release and waive any and all claims, obligations, demands, rights, judgments, causes of action, lawsuits, and liabilities of any kind, nature, or amount, whether in law or equity, whether known or unknown, anticipated or unanticipated, present or contingent, liquidated or unliquidated, concealed or hidden, suspected or unsuspected, including but not limited to compensatory damages, statutory damages, liquidated damages, exemplary damages, equitable relief, punitive damages, costs, expenses and attorneys’ fees that the Wehrly Parties now own or hold (or at any time heretofore owned or held) against the Trustee and his successors, assigns, agents, representatives, clients, employees, independent contractors and/or attorneys and the Estate and its successors, assigns, representative, attorneys and professionals employed and agents, (but only to the extent acting in this capacity) including those claims arising from or relating in any way to the Wehrly Allowed Claim, Judgment, Judgment Lien, and the Wehrly Parties’ purported interests arising from and relating to the Fuel Sale Restriction excluding, however, Dan Wolfe as Trustee of the Wolfe Family Trust of 1992.” (Jamison Decl., ¶ 11, Ex. D, § 9(b), emphasis added.)

Wolfe asserts that “[g]ranting Wehrly’s Motion for an Award of the requested fees and costs would be permitting Wehrly to recover the same fees already discharged by the SAR.” (Opp’n at p. 12:5-7.) But as Wolfe acknowledges, the above referenced provision states, “excluding, however, Dan Wolfe as Trustee of the Wolfe Family Trust of 1992.” (Jamison Decl., ¶ 11, Ex. D, § 9(b).) As set forth above, Petitioner asserts that “only Wolfe would ultimately be liable for the fees and costs requested.” (Mot. at p. 1, fn. 1.) In addition, as noted by Petitioner, Section 9(c) of the Settlement And Mutual Release Agreement provides, inter alia, that “[t]he above release does not affect the Wehrly Parties’ claims against Dan Wolfe as Trustee of the Wolfe Family Trust of 1992. (Jamison Decl., ¶ 11, Ex. D, § 9(b).)

Based on the foregoing, the Court finds that Petitioner has demonstrated that he is entitled to attorney’s fees and costs against Wolfe in connection with the appeal in Case No. B321452.

Wolfe also asserts that “the fees incurred in the Bankruptcy are outside the scope of the fee provision in the 2014 PIPA and the remittitur.” (Opp’n at p. 12:8-19.) As set forth above,

Section 20 of the PPA provides that “[i]n the event of any controversy, claim or dispute between the Parties hereto, arising out of or relating to this PPA or the breach thereof, the prevailing Party, shall be entitled to recover from the losing Party reasonable expenses, including attorneys’ fees and related costs up through and including the exhaustion of all appeals.” (FAP, ¶ 4(b), Attachment 4(b), § 20.) Wolfe asserts that “[w]hile the fees and costs incurred on Appeal are allowable pursuant to the 2014 PIPA, there is no reference to fees incurred in bankruptcy proceedings.” (Opp’n at p. 12:20-21.)

In addition, Wolfe asserts that “the Bankruptcy-related fees cannot be attributed to [Wolfe] in this Action because he was not a Party to (nor legally responsible for) the Bankruptcy proceedings.” (Opp’n at p. 14:5-8.) Wolfe indicates that “Respondent HHO filed a petition for Bankruptcy under Chapter 11 on March 26, 2023.” (Jamison Decl., ¶ 5.)

In the reply, Petitioner asserts that “[n]ot only are the fees from bankruptcy litigation necessary costs for securing the judgment, the language of the PPA is all encompassing in allowing for recovery of attorneys’ fees. Specifically, the PPA states: ‘20. Attorneys’ Fees. In the event of any controversy, claim or dispute between the Parties hereto, arising out of or relating to this PPA or the breach thereof, the prevailing Party shall be entitled to recover from the losing Party reasonable expenses, including attorneys’ fees and related costs up through and including the exhaustion of all appeals.’” (Reply at p. 5:20-27, emphasis in original.) However, Petitioner does not appear to dispute that Wolfe “was not a party to nor a debtor in the Bankruptcy Action.” (Opp’n at p. 13:23.) Thus, it is unclear how Wolfe could be “the losing Party” in the subject bankruptcy proceedings. (See FAP, ¶ 4(b), Attachment 4(b), § 20.)

Petitioner also argues in the reply that “Wolfe and HHO are jointly liable for the damages caused to Wehrly. This includes the attorneys’ fees and costs that Wehrly had to incur to secure his judgment on appeal and during the bankruptcy proceedings.” (Reply at p. 6:11-14.) The Court notes that Petitioner does not cite any legal authority in support of this assertion.

In addition, Petitioner asserts in the reply (without citing to supporting evidence) that “Wolfe controlled HHO while it was in Chapter 11 Bankruptcy, filed and signed all of the schedules, attended the meeting of the creditors, and appeared at the bankruptcy court hearings.” (Reply at p. 6:20-22.) But Petitioner does not cite any legal authority showing that he is entitled to attorney’s fees against Wolfe in such circumstances. As set forth above, Petitioner relies on Section 20 of the PPA in support of his request for attorney’s fees, which provides that “[i]n the event of any controversy, claim or dispute between the Parties hereto, arising out of or relating to this PPA or the breach thereof, the prevailing Party, shall be entitled to recover from the losing Party reasonable expenses, including attorneys’ fees and related costs up through and including the exhaustion of all appeals.” (FAP, ¶ 4(b), Attachment 4(b), § 20, emphasis added.) As discussed, Petitioner does not appear to dispute that Wolfe was not a party to the bankruptcy proceedings.

Based on the foregoing, the Court does not find that Petitioner has demonstrated that he is entitled to attorney’s fees and costs against Wolfe in connection with the subject bankruptcy proceedings.

“[T]he fee setting inquiry in California ordinarily begins with the ‘lodestar,’ i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. … The reasonable hourly rate is that prevailing in the community for similar work. The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided.” ((PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 [internal citations omitted].)

As an initial matter, Petitioner indicates that Craig G. Margulies, Samuel M. Boyamian, and their firm Margulies Faith LLP represented Petitioner in the “Bankruptcy Case of HHO.” (Margulies Decl., ¶¶ 1-2; Boyamian ¶¶ 1-2.) Mr. Margulies states that he “spent 255.60 hours for this matter for a sum that equals to $164,470.50.” (Margulies Decl., ¶ 8.) Mr. Boyamian states that he “spent 164.10 hours for this matter for a sum that equals to $69,508.40.” (Boyamian Decl., ¶ 8.) As set forth above, the Court does not find that Petitioner has demonstrated that he is entitled to attorney’s fees and costs against Wolfe in connection with the subject bankruptcy proceedings. Thus, the Court deducts $233,978.90 ($164,470.50 + $69,508.40) from the total amount of attorney’s fees requested.

Petitioner’s counsel at Beach Cities Law Group, Inc. (“BCLGI”) request the following hourly rates: (1) Frank Sandelmann: $485/hour, (2) Joshua A. Valene: $385/hour, and (3) Christine C. Fries: $315/hour. (Sandelmann Decl., ¶¶ 4-6.) Wolfe does not appear to challenge Petitioner’s counsels’ requested hourly rates. The Court finds Petitioner’s counsels’ hourly billing rates are reasonable.

In his supporting declaration, Petitioner’s counsel states that “BCLGI’s total billed/billable time incurred in this matter through December 16, 2023 is $283,683.50. True and correct redacted copies of BCLGI’s invoices and billing entries in this matter, from June 1, 2022 through December of 2023 are attached hereto as Exhibit A.” (Sandelmann Decl., ¶ 20.)

Wolfe asserts that “[t]he Beach Cities Law Group, attorneys of record in the instant Action before this Trial Court, billed over $100,000 in connection with the Bankruptcy proceedings…” (Jamison Decl., ¶ 18.) This does not appear to be disputed by Petitioner in the reply. However, the exact amount of attorney’s fees that the Beach Cities Law Group billed in connection with the subject Bankruptcy proceedings does not appear to be provided.

In addition, Wolfe argues that “[m]any entries by Mr. Sandelmann contain impermissible block billing; mixing expensive tasks connected to the Bankruptcy proceedings with tasks connected to the Appeal.” (Opp’n at p. 16:23-24.)

Wolfe also notes that many of the billing entries in “Exhibit A” to Mr. Sandelmann’s declaration are redacted. (Sandelmann Decl., ¶ 20, Ex. A.) Wolfe asserts that “[i]t is impossible to determine whether those heavily and unnecessarily redacted fees are connected in any way to the instant Action and, or are recoverable.” (Opp’n at p. 17:9-11.) In the reply, Petitioner notes that “[a] writing that reflects an attorney’s impressions, conclusions, opinions, or legal research or theories is not discoverable under any circumstances.” ((Code Civ. Proc., § 2018.030, subd. (a).) Petitioner asserts that “[t]he redactions applied to the bills reflect attorney work product and are thus proper.” (Reply at p. 8:22.) Petitioner also asserts that “the time entries that were provided are sufficient in explaining the attorneys’ fees and costs incurred.” (Reply at p. 8:15-18.) But the Court agrees with Wolfe that many of the billing entries are redacted such that it is difficult to determine if the time requested is connected to the subject appeal. (See Sandelmann Decl., ¶ 20, Ex. A.)

Petitioner asserts that “there is no requirement that contemporaneous daily billing records be submitted,” (Reply at p. 8:14), citing to PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th at page 1096, where the California Supreme Court noted that “[i]n the present matter, the superior court based the award of attorney fees to the prevailing party, PLCM, on the number of hours expended by counsel multiplied by the prevailing market rate for comparable legal services in San Francisco, where counsel is located. No error appears. The superior court used a proper standard in calculating the fees.” The PLCM Group Court further noted that “[i]n-house counsel for PLCM did not keep contemporaneous daily billing records for work on this matter; for the purposes of the fee request, PLCM prepared a detailed reconstruction of time spent on specific legal tasks performed in the case. We note that maintaining contemporaneous records by in-house counsel of hours spent on a case involving a possible request for attorney fees would facilitate accurate calculation of the lodestar and minimize possible inaccuracies in reconstructing time spent on a matter months or even years after the fact.” (Id. at p. 1096, fn. 4.)

But here, although Petitioner’s counsel at Beach Cities Law Group provided redacted billing records, Beach Cities Law Group did not appear to also provide an outline of time spent on specific legal tasks performed in the case. (See Sandelmann Declaration.)

Wolfe also asserts in the opposition that Petitioner “has engaged in conduct that made much of the litigation unnecessary and, as a result, his fees are unreasonable.” (Opp’n. at p. 15:2-3.) The Court does not find that Wolfe has shown that Petitioner’s conduct in connection with the subject appeal was “unnecessary” such that the requested fees are unreasonable.

Lastly, Wolfe contends that “[w]hile HHO and Wolfe are not joint tortfeasors in this Action, California law is instructive under these circumstances where a plaintiff settles with one co-defendant and subsequently seeks a double recovery from the non-settling co-defendant.” (Opp’n at p. 17:13-15.) In support of this assertion, Wolfe cites to Reed v. Wilson (1999) 73 Cal.App.4th 439, 443, where the Court of Appeal noted that “[p]ursuant to section 877, a good faith settlement bars nonsettling defendants from seeking contribution from a settling defendant, but in return the nonsettling defendants’ ultimate liability to the plaintiff is reduced by the amount stipulated by the release or by the amount of consideration paid.” (Internal quotations omitted.) The Reed Court noted that “[t]he offset provided for in section 877 assures that a plaintiff will not be enriched unjustly by a double recovery, collecting part of his total claim from one joint tortfeasor and all of his claim from another.” (Id. at p. 444.) But as noted by Petitioner, Wolfe acknowledges that “HHO and Wolfe are not joint tortfeasors.” (Opp’n at p. 17:13.) The Court accordingly does not see why Wolfe relies on Reed.

In light of the foregoing, the Court will require a supplemental declaration from Petitioner’s counsel more clearly setting forth the fees incurred by Petitioner solely in connection with the subject appeal in Case No. B321452.

Petitioner’s notice of motion asserts that Petitioner “is also entitled to $4,938.19 in costs.” (Notice of Motion at p. 2:6-7.)[3] Petitioner’s counsel at Beach Cities Law Group states that Petitioner “has incurred costs of suit in the amount of $4,938.19 through the date of the remittitur.” (Sandelmann Decl., ¶ 21.)

In the opposition, Wolfe’s counsel asserts that “Wehrly’s costs include those related to Wehrly’s Writ of Mandate, Wehrly’s Appeal and Wehrly’s involvement in the Bankruptcy proceedings, among other things.” (Jamison Decl., ¶ 19.) Wolfe asserts that “[f]or the foregoing reasons regarding disallowing the attorney’s fees related to these other proceedings, the costs related to those other proceedings should be taxed.” (Opp’n at p. 18:9-11.) In the reply, Petitioner asserts that “the bankruptcy proceeding was a necessary litigation in [Petitioner’s] ultimate recovery of the judgment…Correspondingly, the costs associated with the bankruptcy proceeding should not be taxed.” (Reply at p. 9:5-9.)

As discussed, the Court does not find that Petitioner has demonstrated that he is entitled to attorney’s fees and costs against Wolfe in connection with the subject bankruptcy proceedings. Thus, the Court will require a supplemental declaration from Petitioner’s counsel setting forth the costs incurred by Petitioner solely in connection with the subject appeal in Case No. B321452.

In the motion, Petitioner also seeks “interest on the Judgment at a per diem rate of $328.89.” (Notice of Motion at p. 2:7.) In his supporting declaration, Petitioner’s counsel states that “[s]tarting on May 13, 2022, the Judgment accrued 10% interest at a per diem rate of $328.89.” (Sandelmann Decl., ¶ 22.) However, Petitioner does not appear to explain how such per diem rate was calculated. Thus, the Court does not find that Petitioner has demonstrated that he is entitled to “interest on the Judgment at a per diem rate of $328.89.” (Notice of Motion at p. 2:7.)

Based on the foregoing, the Court continues the hearing on the instant motion to _________________,¿ at 10:00 a.m. in Dept. 50.¿¿

Petitioner’s supplemental declaration to be filed and served by _________________, with a courtesy copy delivered to Dept. 50.¿¿

Wolfe’s response, if any, to be filed and served by _________________, with a courtesy copy delivered to Dept. 50.¿¿

The argument and evidence in the supplemental papers are limited to the requested additional information, as discussed above, and the response thereto. The parties may not include any argument or evidence on any other issue.¿¿¿

[1]Petitioner states in the motion that “[p]ursuant to a settlement reached in connection with HHO’s bankruptcy, HHO withdrew itself as a party to the Appeal on September 18, 2023,” and that “only Wolfe would ultimately be liable for the fees and costs requested.” (Mot. at p. 1, fn. 1.)

[2]Petitioner refers to the “appeal of the Judgment, California Court of Appeal, Second Appellate District Case No. B321452,” as the “HHO Appeal” in the motion. (See Mot. at p. 2:17-19.)

[3]As discussed, the Remittitur filed on November 22, 2023 in this action states, inter alia, that “Respondent David Wehrly is awarded his costs on appeal.”

Superior Court of California

County of Los Angeles

Department 50