Affordable Builders of America, Inc. v. Thomas ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 Affordable Builders of America, Inc., No. 2:22-CV-01381-KJM-DB 12 Plaintiff, ORDER 13 v. Paul Thomas, et al., 1S Defendants. 16 17 Defendant Paul Thomas seeks attorney’s fees and costs after prevailing on a motion to 18 | dismiss. For the reasons below, the court grants the motion for costs and denies the motion for 19 | attorney’s fees without prejudice. 20 | I. BACKGROUND 21 On March 7, 2023, the court dismissed plaintiff's complaint with prejudice for failure to 22 | comply with court orders. See Prior Order at 6, ECF No. 80.! Defendant timely moved for 23 | attorney’s fees and costs. Mot., ECF No. 85; see also Mot. P. & A. (P. & A.), ECF No. 85-1. 24 | Plaintiff opposes, Opp’n, ECF No. 87, and defendant has replied, Reply, ECF No. 89. The court 25 | submitted the matter without oral arguments. Min. Order, ECF No. 88. ' When citing page numbers on filings, the court uses the pagination automatically generated by the CM/ECF system unless otherwise noted. 1 Defendant also brought counterclaims against plaintiff. Answer & Countercl., ECF No. 9. 2 Defendant’s motion for default judgment on his counterclaims, ECF No. 69, and plaintiff’s 3 countermotion to set aside the clerk’s entry of default, ECF No. 77, are both pending before the 4 assigned magistrate judge. 5 II. COSTS 6 Federal Rule of Civil Procedure 54 authorizes courts to award costs to the prevailing party 7 in federal actions. Fed. R. Civ. P. 54(d)(1) (“Unless a federal statute, these rules, or a court order 8 provides otherwise, costs--other than attorney’s fees--should be allowed to the prevailing party.”). 9 Plaintiff argues defendant’s motion for attorney’s fees and costs is premature because defendant’s 10 counterclaims remain pending. Opp’n at 2. This argument is unpersuasive, as explained below. 11 An involuntary dismissal under Rule 41(b) “operates as an adjudication on the merits,” 12 unless the court orders otherwise. Fed. R. Civ. P. 41(b). Here, the court dismissed plaintiff’s 13 complaint under Rule 41(b) with prejudice. Prior Order at 6. This was a final judgment on the 14 merits in favor of defendant. See San Diego Police Officers’ Ass’n v. San Diego City Emps.’ Ret. 15 Sys., 568 F.3d 725, 741 (9th Cir. 2009) (“[A] party in whose favor judgment is rendered is 16 generally the prevailing party for purposes of awarding costs under Rule 54(d).”) (quoting 17 d’Hedouville v. Pioneer Hotel Co., 552 F.2d 886, 896 (9th Cir. 1977))). Rule 54(d)(1) “creates a 18 presumption in favor of awarding costs to a prevailing party.” Ass’n of Mexican-Am. Educators 19 v. State of California, 231 F.3d 572, 591 (9th Cir. 2000). Because the court issued a final 20 judgment on the merits of plaintiff’s complaint, the motion for attorney’s fees and costs is not 21 premature. 22 Defendant seeks costs in the amount of $288.70 for expenses incurred in this case. Mot. 23 at 2; see Schweikert Decl. ¶ 74, ECF No. 85-2. Plaintiff does not address whether defendant 24 should be awarded these specific costs. See generally Opp’n. The court finds no reason to deny 25 the award of costs to defendant. See Ass’n of Mexican-Am. Educators, 231 F.3d at 593 (“Federal 26 Rule of Civil Procedure 54(d)(1) establishes that costs are to be awarded as a matter of course in 27 the ordinary case.”). Thus, defendant’s motion for costs is granted. 1 III. ATTORNEY’S FEES 2 Unlike costs, the prevailing party is not ordinarily entitled to reasonable attorney’s fees 3 unless a statute or enforceable contract provides otherwise. Travelers Cas. & Sur. Co. of Am. v. 4 Pac. Gas & Elec. Co., 549 U.S. 443, 448 (2007). Defendant argues he is entitled to attorney’s 5 fees under Texas law and the terms of the aircraft lease agreement and related contracts. See 6 generally P. & A. For the reasons below, the court finds he is not. 7 A. Texas Law Applies 8 As a federal court sitting in diversity, see Compl. ¶ 1, ECF No. 1, this court must apply 9 the substantive law of the state in which the court is located, see First Intercont’l Bank v. Ahn, 10 798 F.3d 1149, 1153 (9th Cir. 2015). Thus, state law governs the determination whether 11 attorney’s fees should be awarded. Muniz v. United Parcel Serv., Inc., 738 F.3d 214, 218 (9th 12 Cir. 2013). 13 The parties’ contracts include a choice of law provision specifying Texas law governs 14 disputes arising from the contracts. See Aircraft Lease Agreement ¶ 21, Def.’s Ex. 2, ECF No. 15 14-1 (“This Lease shall be construed and performance shall be governed by the Laws of the State 16 of Texas.”); Promissory Installment Note at 4, Def.’s Ex. 3; Aircraft Contract for Title ¶ 11, 17 Def.’s Ex. 4. Because this court sits in California, it applies California choice of law rules. 18 Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In California, “a freely and 19 voluntarily agreed-upon choice of law provision in a contract is enforceable ‘if the chosen state 20 has a substantial relationship to the parties or the transaction or any other reasonable basis exists 21 for the parties’ choice of law.’” 1-800-Got Junk? LLC v. Super. Ct., 189 Cal. App. 4th 500, 513– 22 15 (2010) (citation and emphasis omitted). However, a choice of law provision will not be 23 enforced if the opposing party “establish[es] both that the chosen law is contrary to a fundamental 24 policy of California and that California has a materially greater interest in the determination of 25 the particular issue.” Id. at 515 (quoting Wash. Mut. Bank, FA v. Super. Ct., 24 Cal. 4th 906, 917 26 (2001)) (emphasis in original). 27 Here, the court finds there is a substantial relationship between Texas and the parties’ 28 transaction. The aircraft’s home base and the location for the delivery upon commencement and 1 return upon termination of the agreement is in Texas. See Aircraft Lease Agreement ¶¶ 6–7;2 see 2 also Cal. Civ. Code § 1646 (“A contract is to be interpreted according to the law and usage of the 3 place where it is to be performed; or, if it does not indicate a place of performance, according to 4 the law and usage of the place where it is made.”). Both parties also agree Texas law governs 5 whether defendant is entitled to reasonable attorney’s fees. See P. & A. at 8; Opp’n at 4. Neither 6 party claims that Texas law contravenes a fundamental policy of California or that California has 7 a greater interest in the determination of this matter. Accordingly, the court applies Texas law to 8 determine whether defendant is entitled to his attorney’s fees. 9 B. The Texas Uniform Declaratory Judgment Act is Inapplicable 10 Defendant argues for the first time in his reply that he can be awarded attorney’s fees 11 under the Texas Uniform Declaratory Judgment Act. Reply at 3. In general, parties “cannot raise 12 a new issue for the first time in their reply briefs.” Eberle v. City of Anaheim, 901 F.2d 814, 818 13 (9th Cir. 1990) (internal marks and citation omitted). However, even if the court were to consider 14 defendant’s argument, he would not be entitled to attorney’s fees under the Texas Act. 15 The attorney’s fee provision of the Act states: “In any proceeding under this chapter, the 16 court may award costs and reasonable and necessary attorney’s fees as are equitable and just.” 17 Tex. Civ. Prac. & Rem. Code § 37.009. Plaintiff’s complaint was not brought under the Act. See 18 generally Compl. Moreover, “the Texas Declaratory Judgment Act functions as a procedural 19 mechanism and does not provide the necessary substantive legal basis for awarding attorneys’ 20 fees in a federal diversity action.” Century Prod. Co. v. Cosco, Inc., 00-0800, 2003 WL 251957, 21 at *7 (N.D. Tex. Jan. 31, 2003), on reconsideration in part, 00-0800, 2003 WL 21468525 (N.D. 22 Tex. June 19, 2003) (citing Utica Lloyd’s of Texas v. Mitchell, 138 F.3d 208, 210 (5th Cir. 2 The agreement states in part: The Aircraft will be delivered to Lessee at Addison Airport, Addison, Texas on the Commencement Date, and shall be returned to Lessor upon termination of the Lease at Addison, Texas. . . . Lessor and Lessee agree that the Aircraft shall be based at Addison Airport, Addison, Texas (the “Base”) during the Term of this Lease. Aircraft Lease Agreement ¶¶ 6–7. 1 1998)). Thus, defendant cannot rely on the Act in seeking attorney’s fees in this diversity action. 2 See Utica Lloyd’s of Tex., 138 F.3d at 210. 3 C. Section 38.001 is Inapplicable 4 Under Texas statutory law, “[a] person may recover reasonable attorney’s fees . . . if the 5 claim is for . . . an oral or written contract.” Tex. Civ. Prac. & Rem. Code § 38.001. “[T]o 6 recover attorney’s fees under section 38.001, a party must (1) prevail on a cause of action for 7 which attorney’s fees are recoverable, and (2) recover damages.” Rohrmoos Venture v. UTSW 8 DVA Healthcare, LLP, 578 S.W.3d 469, 484 (Tex. 2019) (quoting Green Int’l, Inc. v. Solis, 951 9 S.W.2d 384, 390 (Tex. 1997)). As plaintiff argues, see Opp’n at 4, defendant is not entitled to 10 attorney’s fees because he has not recovered damages, see Probus Props. v. Kirby, 200 S.W.3d 11 258, 265 (Tex. App. 2006) (“Under [section 38.001], attorneys’ fees may not be recovered for 12 successfully defending a contract claim.”). Defendant appears to concede this in his reply. See 13 Reply at 2 (“Mr. Thomas will need to be awarded at least $1 of damages to be entitled to attorney 14 fees under Texas law.”). Therefore, section 38.001 is inapplicable, and defendant is not entitled 15 to attorney’s fees under this statute. 16 D. The Contracts Permit Attorney’s Fees for Enforcement Actions 17 Although defendant is not entitled to attorney’s fees under section 38.001, “[p]arties are 18 free to contract for a fee-recovery standard either looser or stricter than [the statute].” Rohrmoos 19 Venture, 578 S.W.3d at 484–85 (quoting Intercont’l Grp. P’ship v. KB Home Lone Star L.P., 295 20 S.W.3d 650, 653 (Tex. 2009)). Here, the remedies section in the Aircraft Lease Agreement 21 states: “If Lessor incurs any expenses, including attorneys’ fees, in the enforcement of any of its 22 rights under this Lease or if Lessor brings any action, proceeding or suit, then Lessor may recover 23 from Lessee such reasonable expenses so incurred.” Aircraft Lease Agreement ¶ 13; see also 24 Promissory Installment Note at 3 (“[I]f suit is brought for collection or enforcement, or if it is 25 collected or enforced through . . . judicial proceeding, then Borrower shall pay Payee all costs of 26 collection and enforcement, including reasonable attorney’s fees and court costs in addition to 27 other amounts due.”); Aircraft Contract for Title ¶ 9 (“In an action here under, the prevailing 28 party shall be entitled to reimbursement of costs of enforcing the agreement.” (verbatim 1 transcription)). Here, nothing in the contracts requires recovery of damages for a party to be 2 entitled to attorney’s fees. Rather, the contractual provisions are “sufficiently different and less 3 stringent than Chapter 38’s standards, rendering section 38.001 inapplicable.” See Rohrmoos 4 Venture, 578 S.W.3d at 485. 5 Accordingly, the court looks to the contracts to determine whether defendant is entitled to 6 attorney’s fees. Apart from providing the court with the relevant contractual terms, defendant 7 does not make any specific arguments interpreting the contracts to support his motion, see P. & 8 A. at 9, nor does plaintiff present arguments in opposition, see generally Opp’n. 9 The court thus turns to general principles of contract interpretation. When evaluating a 10 written contract, courts should give the language “its plain grammatical meaning unless it 11 definitely appears that the intention of the parties would thereby be defeated.” Reilly v. Rangers 12 Mgmt., Inc., 727 S.W.2d 527, 529 (Tex. 1987). Here, the provisions of the agreements 13 specifically state defendant may recover attorney’s fees “in the enforcement of any of its rights 14 under th[e] lease.” See Aircraft Lease Agreement ¶ 13. The Texas Court of Appeals has 15 observed “[t]he ordinary meaning of ‘enforce,’ . . . denotes putting something . . . into execution, 16 causing it to take effect or be effective, or compelling obedience to it.” Wibbenmeyer v. 17 TechTerra Commc’ns, Inc., No. 03-09-00122, 2010 WL 1173072, at *7 (Tex. App. Mar. 26, 18 2010). “‘Enforce’ thus denotes some form of affirmative action in regard to one’s rights under 19 the [contract], and is somewhat narrower than the act of merely obtaining a declaration as to one’s 20 rights under the agreement.” Id. In Wibbenmeyer, the court compared the shareholders’ 21 agreement, which provided for attorney’s fees to any party who “successfully enforced” the terms 22 of the agreement, with contractual provisions interpreted by other courts, including the phrases 23 “enforce or to declare” and “enforce or defend.” Id. (citing first Intercont’l Grp. P’ship, 295 24 S.W.3d at 652 and then Probus Props., 200 S.W.3d at 265). 25 Here, defendant seeks attorney’s fees for defending against plaintiff’s action for 26 declaratory judgment. The express terms of the lease agreement and related contracts provide for 27 an award of attorney’s fees in enforcement actions. See Aircraft Lease Agreement ¶ 13; 28 Promissory Installment Note at 3; Aircraft Contract for Title ¶ 9. The agreements do not include 1 any language providing for attorney’s fees in actions to defend one’s contractual rights or in 2 actions to declare contractual rights. Cf. Probus Props., 200 S.W.3d at 265 (finding party entitled 3 to attorney’s fees for prevailing in defending its rights under terms of lease providing for 4 attorney’s fees in actions to “enforce or defend any of its rights or remedies”); Cutchin v. 5 Summerall, 05-01-00508, 2002 WL 318313, at *3 (Tex. App. Mar. 1, 2002) (unpublished) 6 (finding party entitled to attorney’s fees for prevailing in defense against plaintiff’s claims under 7 contract, which “unambiguously provides that the prevailing party, whether seeking to enforce or 8 defend its rights, is entitled to recover reasonable attorney’s fees” (emphasis in original)). The 9 court finds defendant here is not entitled to attorney’s fees under the aircraft lease agreement and 10 related contracts. 11 Because defendant has not shown he is entitled to attorney’s fees under a statute or an 12 enforceable contract, the motion for attorney’s fees is denied without prejudice. 13 IV. CONCLUSION 14 For the reasons above, the court grants defendant’s motion for costs and denies 15 without prejudice the motion for attorney’s fees. The court awards costs in favor of 16 defendant and against plaintiff in the amount of $288.70. Plaintiff shall pay the costs within 17 30 days of the filed date of this order. Any renewed motion for attorney’s fees must be filed 18 within twenty-one (21) days of the filing date of this order. 19 IT IS SO ORDERED. 20 DATED: May 9, 2023.