Judge Thomas D. Long, Case 21STCV24129 2022-08-02 Tentative Ruling

On June 29, 2021, Plaintiff Isaac Cohen filed this action against Defendants Daniel Bobroff, Jason Dodo, Nicolas Bobroff, Pro Concepts LLC, Sherebourne Properties Inc., Ebson International Inc., Metropolis Beauty LLC, and others, alleging (1) breach of contract, (2) contribution, (3) money lent, and (4) unjust enrichment. On December 9, 2021, the Court sustained a demurrer as to Jason Dodo, Nicolas Bobroff, Sherebourne Properties Inc., Ebson International Inc., and Metropolis Beauty LLC without leave to amend. The Court sustained the demurrer as to Daniel Bobroff and Pro Concepts LLC with leave to amend.

The Court entered judgment in favor of Nicolas Bobroff (“Defendant”) on May 13, 2022. On July 7, 2022, Defendant filed a motion for attorney fees.

Defendants seek attorney fees of $40,877.35 pursuant to contract. Plaintiff argues attorney fees are not recoverable for the second cause of action for contribution, the only cause of action asserted against Defendant, because it was not an action on a contract.

Attorney fees are recoverable only when authorized by contract or law. (Code Civ. Proc., § 1033.5, subd. (a)(10).) A prevailing party may recover reasonable attorney fees in any action on a contract where the contract specifically provides that attorney fees and costs incurred to enforce that contract shall be awarded, whether that party is specified in the contract or not. (Civ. Code, § 1717, subd. (a).) “California courts liberally construe the term ‘“‘on a contract””’ as used within section 1717. [Citation.] As long as the action ‘involve[s]’ a contract it is ‘on [the] contract’ within the meaning of Section 1717. [Citations.]” (Dell Merk, Inc. v. Franzia (2005) 132 Cal.App.4th 443, 455.)

The complaint alleged Pro Concepts and Rosenthal & Rosenthal of California Inc. (“Rosenthal”) entered into a Financing Agreement for Rosenthal to make loans and other financial accommodations to Pro Concepts. (Complaint ¶¶ 30-31.) In connection with the Financing Agreement, Daniel Bobroff and Jason Dodo each executed a guarantee. (Id. at ¶¶ 32- 33.) Sherebourne, Ebson, Metropolis, and other defendants also executed identical guarantees. (Id. at ¶¶ 34, 36.) In reliance on these guarantees, Plaintiff executed an identical guarantee. (Id. at ¶¶ 35, 36.) When the debtors failed to pay the outstanding $1,713,800.36 in full, Plaintiff fulfilled the terms of his personal guarantee and paid to Rosenthal at least $1,713,800.36 of the outstanding balance, but he was not reimbursed by anyone. (Id. at ¶¶ 37-39.) Plaintiff alleged Pro Concepts and Daniel Bobroff breached their obligations under the Financing Agreement by failing to pay the balance owed, and he sought contribution from Daniel Bobroff, Jason Dodo, Nicolas Bobroff, and the other guarantors as co-guarantors. (Id. at ¶¶ 41-44, 47-52.) The Court sustained the demurrer on the grounds that Plaintiff expressly waived his right to assert his causes of action that arose directly or indirectly from Plaintiff’s contribution and subrogation rights as a surety under Civil Code section 2848.

Defendant identifies the guarantee between Rosenthal and Beauty Stop as the source of the attorney fees provision. The guarantee states, “In the event Rosenthal takes any action, including retaining attorneys, for the purpose of effecting collection of the Obligations or of any of the liabilities of the undersigned hereunder, or protecting any of Rosenthal’s rights hereunder, the undersigned shall pay all costs and expenses of every kind for protection of the rights of Rosenthal or for collection of the Obligations or such liabilities, including reasonable attorney’s fees.” (Complaint, Ex. 4 at p. 2.) The guarantee is signed by Daniel Bobroff on behalf of Beauty Stop LLC, along with other entities. Neither Plaintiff nor Defendant signed the contract.

“As a general rule, [contract-based] attorney fees are awarded only when the lawsuit is between signatories to the contract. [Citation.] However, under some circumstances, the Civil Code section 1717 reciprocity principles will be applied in actions involving signatory and nonsignatory parties. [Citation.] Two situations may entitle a nonsignatory to attorney fees. First is where the nonsignatory party ‘stands in the shoes of a party to the contract.’ Second is where the nonsignatory party is a third party beneficiary of the contract. [Citation.]” (Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 966 (Cargill).)

Defendant contends that Plaintiff became subrogated to Rosenthal’s rights after he paid off the obligation to Rosenthal under the Financing Agreement. (Motion at p. 12; see Complaint ¶¶ 37-39.) “Payment of a principal’s debt by a surety is the prototypical situation in which the equitable right to subrogation arises. ‘Subrogation is the right to recover from the debtor-obligor. A surety, e.g., pays the principal debtor’s obligation to the creditor, and in equity is substituted for the creditor, or subrogated to his rights against the debtor.’” (Golden Eagle Ins. Co. v. First Nationwide Financial Corp. (1994) 26 Cal.App.4th 160, 169.)

Plaintiff does not dispute that he is standing in the shoes of Rosenthal. Plaintiff also does not dispute that Defendant stands in the shoes of Beauty Stop, his alleged alter ego, and would be entitled to attorney fees to the same extent that Beauty Stop would be. (See Burkhalter Kessler Clement & George LLP v. Hamilton (2018) 19 Cal.App.5th 38, 46 [non-signatory entitled to contractual attorney fees because of alleged alter ego theory of liability].)

Plaintiff argues the contribution cause of action is not “on a contract,” and attorney fees are not recoverable for this tort cause of action, citing Santisas v. Goodin (1998) 17 Cal.4th 599 (Santisas). (Opposition at p. 3.) Defendant does not address Santisas in his reply. In Santisas, the California Supreme Court recited the law regarding attorney fees pursuant to contract: “this court has held that section 1717 applies only to actions that contain at least one contract claim. [Citations.] If an action asserts both contract and tort or other noncontract claims, section 1717 applies only to attorney fees incurred to litigate the contract claims. (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d 124, 129-130.)” (Santisas, supra, 17 Cal.4th at p. 615.) In Reynolds, the California Supreme Court also stated, “Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under section 1717 only as they relate to the contract action.” (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.)

Plaintiff alleges Beauty Stop, with Defendant as its alter ego, was a co-guarantor of the payments owed to Rosenthal, and Plaintiff sought contribution and reimbursement from Defendant and others when he paid off the entire balance due. (Complaint ¶¶ 10, 25-26, 47-51.) In doing so, he sought to be subrogated to the rights of Rosenthal, the creditor. Plaintiff’s right to contribution from Defendant, if any, arises from Beauty Stop’s guarantee. Indeed, it is Plaintiff’s waiver within his own identical guarantee that was the basis for the Court sustaining the demurrer and finding that Plaintiff waived his right to contribution from the defendants. (See December 9, 2021 Order.) Although not directly a breach of contract cause of action, the contribution cause of action is one on the guarantee, without which Plaintiff could not have sought contribution from Defendant.

California courts apply the “lodestar” approach to determine what fees are reasonable. (See, e.g., Holguin v. DISH Network LLC (2014) 229 Cal.App.4th 1310, 1332.) This inquiry “begins with the ‘lodestar,’ i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate.” (PLCM Group v. Drexler (2000) 22 Cal.4th 1084, 1095.) From there, 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.” (Ibid.) Relevant factors include “(1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, [and] (4) the contingent nature of the fee award.” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1132.) The party seeking fees has the burden of documenting the appropriate hours expended and hourly rates. (City of Colton v. Singletary (2012) 206 Cal.App.4th 751, 784.)

Defendant’s counsel charge various hourly rates: $625 for Daniel J. Kessler; $525 for Joshua A. Waldman; $325 for Michael McConnell; $150 for paralegal Jason Zulueta; $150 for paralegal Jamie Coley; and $140 for legal assistant Andrea Frljuckic. (Kessler Decl. ¶ 6.)

Defendant’s billing records reflect 104.01 hours billed, for a total of $35,627.35 in fees after providing a discount. (Waldman Decl. ¶¶ 11, 13 & Ex. 6.) Defendant also requests $5,250.00 for 10 additional hours related to this motion. (Waldman Decl. ¶ 13.) Defendant seeks a total of $40,877.35 in attorney fees.

Plaintiff argues $2,533.67 is improperly billed for administrative tasks. (Opposition at pp. 12-13.) Plaintiff identifies several items billed for “Code all documents in litigation management system,” “Continue to update customized coding in litigation management system,” “Receive case documents and load same into litigation management system with customized coding,” and “Convert information from Joshua A. Waldman into spreadsheets calculating fees in regard to Motion for Attorney’s Fees.” These are appropriate paralegal tasks, and Defendant’s counsel billed them at paralegal rates. (See City of Oakland v. McCullough (1996) 46 Cal.App.4th 1, 7 [“[I]t has been said that ‘necessary support services for attorneys, e.g., secretarial and paralegal services, are includable within an award of attorney fees.’”].)

Plaintiff identifies 7.77 hours incurred on behalf of Daniel Bobroff or Pro Concepts between August 2021 and November 2021. (Opposition at pp. 13-14.) The Court deducts the $3,047.00 billed for this work from the shared fees billed for the demurrer, as further explained below.

Defendant’s counsel billed $9,152.09 for 20.76 hours in connection with drafting and researching this motion. (Waldman Decl. ¶ 12.) This amount is excessive when this motion and the March 9, 2022 attorney fees motion filed by Jason Dodo and Metropolis Beauty LLC share vastly similar (and in some sections, identical) argument and language regarding apportionment and the reasonableness of fees. (Compare Motion at pp. 15-22 with March 9, 2022 Fees Motion at pp. 13-19.) Because about half of this motion is recycled from the prior motion, it is not plausible that counsel spent 20.76 hours drafting it. The Court finds that a reasonable amount of time spent on the new portions of the motion is 10 hours at counsel’s $440.85 average hourly rate in June 2022 (Waldman Decl. ¶ 12), for a total of $4,408.50.

Defendants seek $5,250.00 for 10 additional hours related to this motion. (Waldman Decl. ¶ 13.) Of this amount, 1 hour was spent reviewing and finalizing this motion, 6 hours is anticipated for reviewing the opposition and preparing a reply, and 3 hours is anticipated for preparing for and attending the hearing. This amount is excessive, and the Court reduces these fees by $2,625.00.

Plaintiff argues the attorney fees for the demurrer should be apportioned because the demurrer was brought on behalf of all seven defendants, four defendants have not obtained final judgments, and two other defendants already had their motion for attorney fees denied. (Opposition at pp. 14-15.) Defendant argues apportionment would be impossible because the other demurring defendants had joint defenses that are inextricably intertwined. (Motion at pp. 15-16.)

All demurring defendants did have a joint argument as to waiver, and the Court sustained the demurrer on this basis. However, the Court granted Plaintiff leave to amend the first and third causes of action with respect to Daniel Bobroff and Pro Concepts. Also, the demurrer addressed more than just Plaintiff’s waiver of his contribution rights, which was the basis for Defendant’s dismissal and judgment. The demurrer also addressed the first and third causes of action – which were not brought against Defendant – on the merits.

Defendant also argues he should be reimbursed for all fees because Plaintiff sought reimbursement of almost $2 million, and the attorney fees “pale in comparison to the total potential liability he faced if Plaintiff had prevailed on his claims (which may have happened had Nicolas not defended against these claims as zealously and diligently as he did).” (Motion at p. 21.) But the non-moving defendants faced the same liability, and they continued to face potential liability following the demurrer. Defendant cites no law support this as a basis for awarding him the full amount of fees incurred for the demurrer.

Accordingly, the Court finds it appropriate to apportion the attorney fees incurred through the demurrer.

Defendant’s counsel explains that between July 2021 and December 2021, they billed $26,475.26 for reviewing the Complaint, researching defenses, drafting the demurrer, analyzing the opposition to the demurrer, preparing the reply brief, appearing at the hearing, and drafting the proposed judgment. (Waldman Decl. ¶ 12.) After deducting the $3,047.00 billed for Daniel Bobroff or Pro Concepts (fees that were not shared among all demurring defendants), the remaining shared attorney fees through the demurrer total $23,428.26. Each of seven demurring defendants are therefore allocated $3,346.89.

Defendant is allocated $3,346.89 in fees for work performed prior to and through the demurrer.

The amount billed for drafting and researching this motion is reduced by $4,743.59, from $9,152.09 to $4,408.50.

The additional time anticipatorily billed for this motion is reduced by $2,625.00, from $5,250.00 to $2,625.00.

The motion for attorney fees is GRANTED IN PART. The Court awards Defendant $10,380.39 in attorney fees.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court