Nguyen v. JNK Investments CA6 ( 2015 )

Filed 6/30/15 Nguyen v. JNK Investments CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
MINH TAM NGUYEN et al., H040901
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. 111CV194930)
v.
JMK INVESTMENTS, INC., et al.,
Defendants and Appellants.
I. INTRODUCTION
Plaintiffs,1 who were tenants in a shopping center, brought a civil action for breach
of contract against the entity managing the shopping center, defendant JMK Investments,
Inc. (JMK Investments), and against the trustee of the trust that owned the shopping
center, defendant John M. Kehriotis, individually and as trustee of the John M. Kehriotis
and Nancy M. Kehriotis Living Trust dated March 25, 1993. Plaintiffs alleged that
defendants improperly charged amounts under their lease agreements, including
excessive management and landscaping fees. While the litigation was pending,
defendants issued monetary credits to plaintiffs totaling at least $46,000. The parties
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Plaintiffs in this action are Minh Tam Nguyen, Teresa T.H. Nguyen, Hung T.
Lam, San Quang Bui, Suman Ramakumar, Nguyen Tran, Huong Ngoc Nguyen, Thao T.
Pham, and MTM Seafood, Inc.
eventually entered into a settlement in which defendants agreed to pay plaintiffs $22,500
to resolve the matter, with costs and attorney’s fees to be determined by the court.
Plaintiffs subsequently filed a motion for more than $20,000 in costs and nearly
$129,000 in attorney’s fees. Defendants opposed the motion. The trial court granted the
motion in part, awarding costs in the amount of $16,961 and attorney’s fees in the
amount of $76,000 without any explanation of its reasoning. A judgment was thereafter
entered in favor of plaintiffs for the sum of the costs and fees.
On appeal, defendants contend that the trial court erred by awarding plaintiffs
unreasonable and unnecessary costs. Defendants also argue that plaintiffs were not
entitled to attorney’s fees pursuant to Civil Code section 1717.2 Defendants further
contend that, to the extent plaintiffs were entitled to attorney’s fees, the court abused its
discretion with respect to the amount awarded, and the matter must be remanded for
further consideration by the trial court and for a statement of its reasoning.
Plaintiffs have cross-appealed. They contend that the trial court erred by failing to
award the full amount of costs and attorney’s fees that they requested.
For reasons that we will explain, we will affirm the judgment.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties
Plaintiffs were tenants in a shopping center owned by the John M. Kehriotis and
Nancy M. Kehriotis Living Trust. The Kehriotises set up a corporation, defendant
JMK Investments, which managed the shopping center for the trust. JMK Investments
apparently owned and operated Pyramid Landscaping, an entity not licensed under the
Contractors’ State License Law (Bus. & Prof. Code, § 7000, et seq.). JMK Investments
charged plaintiffs for, among other things, the work of Pyramid Landscaping.
2
All further statutory references are to the Civil Code unless otherwise indicated.
2
B. The Complaint
In February 2011, plaintiffs filed a complaint against defendant JMK Investments
and defendant John Kehriotis, individually and in his capacity as trustee of the trust.
Each plaintiff allegedly entered into a lease with defendants for a space at the shopping
center. As part of the leases, defendants had certain obligations regarding maintenance
and care of the property. At the same time, plaintiffs were required to pay a percentage
of the expenses associated with common area maintenance (CAM) and a management fee
not to exceed 10 percent of the common area expenses.
Plaintiffs alleged that defendants improperly charged for “numerous fraudulent
expenses including but not limited to 1) management fees in excess of 10% of the CAM;
2) book keeping fees; 3) utility fees for non Common Areas; 4) excessive landscaping
fees; 5) unitemized taxes, insurance and maintenance fees; and 6) expenses associated
with improvements to the property.” Plaintiffs also alleged that defendants “artificially
increased the amount of expenses incurred in maintaining the property by contracting for
services to be rendered to the [property] between themselves.” Defendants also allegedly
failed to provide itemized quarterly statements as required, and plaintiffs were “not aware
of the exact amount of overcharges” until November 2010 when there was a “gross
overcharge for maintenance.” Plaintiffs alleged on information and belief that the total
amount of overcharges were in excess of $1 million.
Plaintiffs alleged 10 causes of action, including breach of contract and tort claims.
Among other relief, plaintiffs sought restitution, compensatory damages, punitive
damages, and an accounting to determine the amount of allowable expenses under the
lease agreements.
C. The Monetary Credits
In May 2011, a few months after the complaint was filed, defense counsel
informed plaintiffs’ counsel by letter that the trust had “decided to change its policies”
regarding two fees. First, a bookkeeping fee, which was based on 10 percent of the CAM
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charges, would be renamed the management fee. Second, a management fee that had
been previously charged to tenants for defendant JMK Investments’ management of the
shopping center would no longer be charged. The letter further indicated that the trust
would issue monetary credits to plaintiffs for the formerly labeled management fees that
had been paid since 2008. The total amount credited was nearly $40,000. Defense
counsel stated in the letter that “the Trust is not offering the credits in exchange for the
Tenants dismissing the accounting action. The credits are being given in the hope they
will facilitate the amicable resolution of this matter. The Trust will continue to audit its
records for purposes of determining whether further credits are appropriate. If the Trust
decides it will apply further credits, they will be applied without condition.”
In August 2012, defense counsel sent a letter and spreadsheets to plaintiffs’
counsel, explaining that the spreadsheets showed the permissible management fees, the
management fees actually charged by defendant JMK Investments, and the credit if it
“charged more than was permissible.” The spreadsheets covered 2007 to 2011. The
letter also addressed plaintiffs’ expert’s calculation of damages. Defense counsel
contended that certain adjustments needed to be made in plaintiffs’ calculation. Near the
end of the letter, defense counsel stated, “In light of the most recent credits being offered
by JMK and the admonitions of the Court, perhaps it is time that you reconsider your
position and dismiss this matter.” Plaintiffs have interpreted the spreadsheets attached to
the letter as reflecting a credit of nearly $8,200, while defendants contend the spreadsheet
reflects a credit of approximately $6,200.
D. The Settlement Negotiations
In the meantime, between April 2012 and January 2013, the parties engaged in
settlement negotiations while the trial date was repeatedly continued. Defendants offered
to settle for $15,000, while plaintiffs’ settlement offers ranged from $60,000 to $1.15
million per plaintiff (or a total of $540,000 to $10.35 million for all nine plaintiffs).
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E. The Trial Court’s Statement of Decision Regarding Landscaping Charges
The parties eventually agreed that a significant portion of plaintiffs’ claim for
damages related to the propriety of landscaping charges that were passed on to plaintiffs
as a component of the CAM charges due under the leases. The parties also agreed that a
ruling by the trial court on the issue would significantly impact settlement. The parties
ultimately stipulated to having the court determine the following two legal issues
regarding the landscaping charges: (1) whether defendants were required to use a
licensed landscaping contractor and/or a tree service contractor for certain landscaping
services, and (2) whether defendants could charge plaintiffs for landscaping services that
were performed through an unlicensed contractor.
In May 2013, the trial court issued a statement of decision based upon agreed facts
by the parties. According to the statement of decision, the trust set up defendant JMK
Investments to manage the shopping center, and JMK Investments owned and operated
Pyramid Landscaping, an unlicensed entity. JMK Investments charged plaintiffs for the
work of Pyramid Landscaping. The court determined that defendants were required to
use a licensed landscaping contractor and/or tree service contractor for certain, but not
all, landscaping services. The court also determined that defendants could charge
plaintiffs for the reasonable value of landscaping services that were performed by an
unlicensed contractor for items that did not require a contractor’s license. Pyramid
Landscaping could thus seek to establish the reasonable charges for those services it
performed that did not require a license. The court observed that if the matter went to
trial, it would need to determine the reasonable rate for the services that did not require a
license.
The trial court also briefly discussed in the statement of decision the relationship
between Pyramid Landscaping and defendant JMK Investments. The court explained
that JMK Investments created Pyramid Landscaping, that Pyramid Landscaping “initially
appears to be an independent business entity,” but that Pyramid Landscaping did not file
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a fictitious business name statement in Santa Clara County or in San Jose. Pyramid
Landscaping executed a landscaping service contract with JMK Investments. The court
observed that certain provisions in the landscaping service contract between Pyramid
Landscaping and JMK Investments “raise serious questions whether this document was
designed to deceive third parties by giving an appearance of an independent relationship
which did not exist.”
F. The Parties’ Settlement
The parties thereafter entered into a settlement agreement effective September 6,
2013. Defendants agreed to pay plaintiffs a total of $22,500 to resolve the matter, with
attorney’s fees and costs to be determined by the court. The parties also agreed that the
settlement proceeds could be considered by the court in determining whether plaintiffs
received a net monetary recovery and were the prevailing party under Code of Civil
Procedure section 1032, subdivision (a)(4).
G. Plaintiffs’ Motion for Attorney’s Fees and Costs
In early 2014, plaintiffs filed a motion for attorney’s fees and costs, along with a
memorandum of costs. Regarding costs, plaintiffs sought more than $20,000. Plaintiffs
argued that, based on the settlement proceeds, they received a net monetary recovery
within the meaning of Code of Civil Procedure section 1032, and therefore they were
entitled to costs. Plaintiffs further argued that they had reasonably and necessarily
incurred costs, including for depositions, service of process, and expert fees.
Plaintiffs also requested attorney’s fees in the amount of $128,802.50 based on an
attorney’s fee provision in the parties’ leases. Plaintiffs contended that they were the
prevailing party for purposes of attorney’s fees within the meaning of section 1717
because they had obtained a net monetary recovery based on the settlement. Plaintiffs’
attorney’s fee request was based on 418.4 attorney hours at the rate of $250 per hour, plus
243.2 paralegal hours at the rate of $100 per hour, for the period of February 2011
through September 2013.
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H. Defendants’ Motion to Strike or Tax Costs and Opposition to Motion for
Attorney’s Fees
Defendants filed a motion to strike or tax costs. They contended that the costs for
depositions, service of process, and expert witnesses were not reasonable and/or
necessary.
Defendants also filed opposition to plaintiffs’ motion for attorney’s fees. Among
other arguments, defendants contended that plaintiffs were not the prevailing party for
purposes of an attorney’s fee award under section 1717. Defendants also argued that the
monetary credits they issued to plaintiffs in May 2011 and August 2012 could not be
considered in determining the net monetary recovery or the prevailing party. Defendants
further argued that, to the extent the court awarded attorney’s fees, plaintiffs should
receive less than the amount requested.
I. Plaintiffs’ Opposition to Defendants’ Motion to Strike or Tax Costs
Plaintiffs filed opposition to defendants’ motion to strike or tax costs. Plaintiffs
contended that the costs they incurred were reasonable and necessary to the conduct of
the litigation. Plaintiffs also filed a reply brief in support of their motion for attorney’s
fees. Plaintiffs argued that, based on the relief they sought and the relief they obtained –
including defendants’ monetary credits to correct the CAM overcharges, defendants’
settlement payment, and defendants’ cessation of fraudulent billing practices – they were
the prevailing party under section 1717. Plaintiffs also contended that the attorney’s fees
they incurred were reasonable.
Defendants filed a reply brief in support of their motion to strike or tax costs.
Defendants continued to argue that their pre-settlement monetary credits to plaintiffs
could not be considered in determining the prevailing party. Defendants also argued that
the costs sought by plaintiffs were not reasonable or necessary.
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J. The Trial Court’s Orders Regarding Attorney’s Fees and Costs
A hearing was held on the motions. By written order filed March 25, 2014, the
trial court granted plaintiffs’ motion for attorneys’ fees after “having considered the
moving and responding documents, together with the arguments of counsel, and . . .
having personally reviewed all six volumes of pleadings in this matter.” The court
awarded plaintiffs $76,000 in attorney’s fees but did not provide an explanation of how it
calculated the amount.
The trial court also granted in part defendants’ motion to strike or tax costs. The
court taxed some of the fees of plaintiffs’ expert in the amount of $3,140.60. The court
denied defendants’ motion to tax other costs.
On April 23, 2014, a judgment was filed in favor of plaintiffs and against
defendants in the amount of $92,961, based on attorney’s fees of $76,000 and costs of
$16,961. Defendants filed amended notices of appeal from the judgment on April 30,
2014. Plaintiffs filed an amended notice of cross-appeal on May 6, 2014.
III. DISCUSSION
Defendants’ appeal and plaintiffs’ cross-appeal challenge the trial court’s orders
regarding costs and regarding attorney’s fees. We will first consider the appeal and
cross-appeal on the issue of costs, and then we will consider the appeal and cross-appeal
on the issue of attorney’s fees.
A. Costs
On appeal, defendants contend that the trial court erred in awarding costs to
plaintiffs for five depositions, for service of process, and for the fees of plaintiffs’ three
experts. Plaintiffs in their cross-appeal contend that the trial court erred by taxing the
costs for one of their expert’s fees.
Code of Civil Procedure section 1032 provides for the recovery of the costs of suit
to a “prevailing party.” (Id., subd. (b).) A prevailing party within the meaning of this
section includes “the party with a net monetary recovery.” (Id., subd. (a)(4).) In this
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case, the parties’ settlement agreement provides that “[s]ettlement proceeds can be
considered in determining whether Plaintiffs have received a net monetary recovery for
purposes of deciding prevailing party status under Code of Civil Procedure section 1032,
subdivision (a)(4).” (See Khavarian Enterprises, Inc. v. Commline, Inc. (2013) 216
Cal. App. 4th 310, 320; Code Civ. Proc., § 1032, subd. (c).) As plaintiffs obtained a net
monetary recovery of $22,500 from defendants by way of settlement, plaintiffs are the
prevailing parties entitled to costs.
Code of Civil Procedure section 1033.5, subdivision (a) sets forth specific items
allowable as costs. Code of Civil Procedure section 1033.5 further provides that any
allowable costs must be “reasonable in amount” and “reasonably necessary to the conduct
of the litigation rather than merely convenient or beneficial to its preparation.” (Id.,
subd. (c)(2), (3).)
“If items on their face appear to be proper charges, the verified memorandum of
costs is prima facie evidence of their propriety, and the burden is on the party seeking to
tax costs to show they were not reasonable or necessary.” (Jones v. Dumrichob (1998)
63 Cal. App. 4th 1258, 1266 (Jones); accord, Adams v. Ford Motor Co. (2011) 199
Cal. App. 4th 1475, 1486-1487 (Adams).) “[A] party’s ‘mere statements in the points and
authorities accompanying its notice of motion to strike cost bill and the declaration of its
counsel are insufficient to rebut the prima facie showing [that the costs were necessarily
incurred].’ ” (Jones, supra, at p. 1266.) “ ‘On the other hand, if items are properly
objected to, they are put in issue and the burden of proof is on the party claiming them as
costs.’ [Citation.]” (Ibid.) “Whether an item listed on the memorandum was reasonably
necessary is a question of fact to be decided by the trial court. [Citation.]” (Adams,
supra, at p. 1487.) A trial court’s decision regarding whether costs were reasonably
necessary is reviewed for abuse of discretion. (Id. at pp. 1484, 1488.)
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1. Depositions
In their memorandum of costs, plaintiffs sought deposition costs of $679.30 for
Maria Zavorskas, $947.80 for John Kehriotis, $579.90 and $555.95 for Isabella Rennie
(reflecting a deposition over the course of two days), and $482.66 for plaintiffs’ expert
Robert Griswold. The trial court denied defendant’s motion to tax these costs.
On appeal, defendants contend that the depositions of Zavorskas, Kehriotis, and
Rennie, who were defendant JMK Investments’ property manager, president, and
accountant, respectively, were not reasonably necessary. Defendants argue that all three
individuals were deposed about the CAM charges and thus their depositions were
duplicative. Further, the depositions were taken more than a year after the litigation was
commenced, and after all accounting records and necessary information had been
produced. Defendants also argue that written discovery requests would have been more
cost effective to obtain information regarding matters such as who owned Pyramid
Landscaping and the identity of the shareholders of JMK Investments. Regarding the
deposition of plaintiffs’ expert Griswold about a landlord’s standard of care, defendants
argue that the deposition was “unnecessary and unreasonable in light of the issues
involved in the case” concerning landscaping charges. Lastly, defendants contend that
plaintiffs failed to provide a “breakdown or explanation” of the expenses incurred for
each deposition which made it “impossible” for defendants to determine whether the
costs were recoverable.
Plaintiffs respond that the deposition costs were reasonably necessary because
defendants designated Zavorskas, Kehriotis, and Rennie as trial witnesses. Further, these
individuals were deposed about unlawful CAM charges and the ownership of defendant
JMK Investments and Pyramid Landscaping. Plaintiffs’ expert witness Griswold was
designated to and did testify about various issues in the case, including issues related to
the hiring of third party licensed contractors to perform work at the shopping center.
Regarding the basis for the claimed deposition costs, plaintiffs cite to a declaration from
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counsel and copies of invoices and account statements concerning the costs of taking the
depositions and the costs of the deposition transcripts.
We determine that the trial court did not abuse its discretion in awarding
deposition costs. Allowable costs include “[t]aking, video recording, and transcribing
necessary depositions including an original and one copy of those taken by the claimant
and one copy of depositions taken by the party against whom costs are allowed.” (Code
Civ. Proc., § 1033.5, subd. (a)(3).) The depositions at issue were taken between April
and July 2012, which was prior to defendants sending the August 2012 letter to plaintiffs
concerning the second set of monetary credits, and prior to the parties stipulating to a
court determination regarding the landscaping/licensing issues. The issues addressed at
the depositions, such as CAM charges, landscaping charges, use of a landscaping
contractor, and the relationship between Pyramid Landscaping and defendant JMK
Investments, thus appeared relevant to the case at the time. The record also reflects that
defendants ultimately identified Zavorskas, Kehriotis, and Rennie as trial witnesses.
Under the circumstances, the court did not abuse its discretion in determining that the
depositions were reasonably necessary to the conduct of the litigation. Further, regarding
the cost of the depositions, plaintiffs, in opposition to defendants’ motion to tax costs,
provided a declaration from counsel and invoices and account statements from the
reporting services that transcribed the depositions. Defendants fail to demonstrate that
the trial court abused its discretion in determining that all the deposition costs were
recoverable under Code of Civil Procedure section 1033.5, subdivision (a)(3).
2. Service of process
In their memorandum of costs, plaintiffs sought costs for service of process
on defendant JMK Investments, as well as costs for service of process on three
nonparties: (1) Aircom Mechanical in the amount of $75, (2) GT Waste in the amount
of $49.98, and (3) California Capital Insurance Company in the amount of $193.66.
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Defendants moved to tax the costs of service of process on the three nonparties. The trial
court denied defendants’ motion.
On appeal, defendants contend that allowable costs do not include costs for service
on nonparties. Defendants also argue that the costs, which were “presumably for
document subpoenas,” were not reasonably necessary because defendant JMK
Investments “produced documents that included all necessary information regarding the
dispute at issue.” Defendants contend that plaintiffs did not “need the information
received from [the third parties] in order to proceed with this matter.”
Plaintiffs respond that the costs for service of subpoenas on third parties by a
registered process server are recoverable. Plaintiffs also contend that the subpoenas were
necessary as they sought defendants’ insurance policies, bills for CAM charges, and other
documents, which were not produced by defendants in discovery.
Defendants fail to establish that the trial court erred in refusing to tax costs for
service of the subpoenas. Allowable costs include “[s]ervice of process by a . . .
registered process server.” (Code Civ. Proc., § 1033.5, subd. (a)(4).) Defendants fail to
articulate a legal argument or provide a citation to legal authority supporting their
contention that the costs for serving a subpoena on a nonparty are not allowable under
Code of Civil Procedure section 1033.5, subdivision (a)(4). Further, defendants provided
only a conclusory declaration from counsel to support their contention that they produced
all necessary information to plaintiffs and that plaintiffs did not need to subpoena any
third party documents. (See Jones, supra, 63 Cal.App.4th at p. 1266 [“party’s ‘mere
statements in the points and authorities accompanying its notice of motion to strike cost
bill and the declaration of its counsel are insufficient to rebut the prima facie showing’ ”
that the costs were necessarily incurred].) Under the circumstances, defendants fail to
establish that the trial court abused its discretion in awarding costs for service of the
subpoenas on the third parties.
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3. Expert fees
Defendants contend that the trial court erred in awarding expert fees for
(1) Richard R. Fimmel, (2) Robert S. Griswold, and (3) Stephen M. Reiss. In their cross-
appeal, plaintiffs contend that the trial court erred by reducing Griswold’s fee.
a. background
In their memorandum of costs, plaintiffs sought expert fees for: (1) Griswold in
the amount of $6,281.20; (2) Fimmel in the amount of $2,500; and (3) Reiss in the
amount of $7,150.60. Defendants moved to strike or tax the expert fees on the grounds
that they were not necessary to the litigation or reasonable. In opposition, plaintiffs
contended that the fees were reasonable and necessary. Plaintiffs provided
(1) declarations from counsel regarding the experts, (2) curricula vitae of the experts,
and (3) time records for Griswold and Reiss. In the declarations, counsel stated that
Fimmel was paid a “retainer” of $2,500, and that Fimmel charged this amount as a “one-
time nonrefundable charge.”
The trial court denied defendants’ motion to tax the fees of Fimmel and Reiss.
The court taxed Griswold’s fees by $3,140.60, which represented one-half the amount
that plaintiffs had requested.
b. analysis
The parties’ leases provide that the prevailing party may recover expert witness
fees. On appeal, although defendants object to the amount of fees awarded by the trial
court, they do not challenge the court’s authority to award such fees. (Compare Thrifty
Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal. App. 4th 1050, 1066 [expert
witness fees may be recovered as costs pursuant to the parties’ agreement by the normal
procedures for requesting and taxing costs] with Carwash of America-Po v. Windswept
Ventures No. 1 (2002) 97 Cal. App. 4th 540, 541-542 [expert witness fees recoverable
pursuant to a contractual provision may not be awarded as costs but must be must be
pleaded and proven separately].)
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i. Richard R. Fimmel
Defendants contend that the trial court erred in awarding $2,500 in expert fees for
Fimmel because the amount was a “flat retainer fee” and plaintiffs failed to provide any
detail regarding the hours Fimmel expended in the case.
The record reflects that Fimmel had been a real estate attorney and real estate
broker since the 1970’s. His hourly rate as an expert for consultation, depositions, and
trial testimony was $400, and he charged a “one-time nonrefundable charge of $2,500.”
Fimmel was designated as an expert witness by plaintiffs to testify about the custom and
practice in interpreting commercial leases. When plaintiffs designated Fimmel as an
expert witness, plaintiffs’ counsel stated in a declaration that Fimmel would “be
sufficiently familiar with the pending action to submit to a meaningful oral deposition
concerning the specific testimony, including any opinion and its basis that the expert is
expected to give at trial.”
The record contains excerpts from Fimmel’s deposition, which lasted 27 minutes.
Fimmel testified that defendants’ handling of CAM charges at the shopping center was
not consistent with the provisions of the lease or the standard and practice in the industry.
In making this determination, Fimmel looked at a random selection of CAM statements
for a particular tenant over the course of a calendar year and analyzed the charges in
those statements. He found inappropriate bookkeeping fees and management fees.
Fimmel testified about typical practices in the industry regarding property management
fees.
In view of the record, the trial court did not abuse its discretion in determining that
the time spent by Fimmel in the case was reasonably necessary to the conduct of the
litigation, and that $2,500 was a reasonable fee for Fimmel’s time. Plaintiffs’ complaint
involved the propriety of defendants’ charges, including bookkeeping and management
fees, under their leases. Fimmel’s opinions appeared relevant to that issue. In view of
the relevance of Fimmel’s opinions, the time he spent in reaching his opinions and
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preparing for his deposition, including reviewing CAM statements, was reasonably
necessary to the conduct of the litigation. Regarding the reasonableness of the $2,500 fee
for Fimmel, we observe that at his hourly rate of $400, Fimmel would have had to have
worked at least 6.25 hours to generate $2,500 in fees ($2,500 / $400 per hour =
6.25 hours). Given that Fimmel, at a minimum, had conversations with counsel,
reviewed litigation-related documents in order to reach his several opinions, and had to
prepare for his deposition, we do not believe that it was an abuse of discretion for the trial
court to conclude that Fimmel had spent at least 6.25 hours in connection with the
litigation.
ii. Robert S. Griswold
Defendants contend that the trial court erred by only reducing Griswold’s fee of
$6,281.20 to $3,140.60, which represents one-half the amount requested by plaintiffs.
Defendants argue that the 16.75 hours Griswold spent on the case was inflated and
unreasonable because (1) all of his opinions were general opinions about the standard of
care for the management of commercial properties with respect to CAM charges, (2) his
deposition took less than an hour, (3) his conclusions that defendant JMK Investments
should have hired a licensed contractor and bid out the contract, and about industry
custom and standards, were heavily based on his expertise and experience and very
loosely based on the facts in this matter, and (4) he did not prepare a report or provide
any numerical calculations.
The record reflects that Griswold had managed residential and commercial
properties for many years and had been a court-appointed receiver. Griswold was
designated as an expert witness by plaintiffs to testify as to the propriety of, among other
matters, failing to seek qualified contractors to perform services at a shopping center and
the policies and procedures a management company should use.
At his deposition, Griswold testified that his opinions concerned the overall
standard of care, custom, and practice regarding commercial property management and
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the billing of CAM charges, rather than an analysis of the accuracy of actual invoices, in
order to avoid “cumulative expert testimony.” Griswold testified that a management fee
of only 10 percent of the CAM charges was permissible. Regarding landscaping charges,
Griswold testified that for the nature and size of the shopping center, multiple bids should
be obtained for the monthly landscaping service, and the entity hired should be an
unaffiliated company with a contractor’s license who offered the best value. Griswold
further testified that everything charged to the tenant, such as plants, irrigation, and so
forth, should be for items actually needed at the property. Griswold’s deposition lasted
less than an hour.
Griswold’s invoice to plaintiffs’ counsel detailed the dates and amount of time he
spent on each task in connection with the case between May 2012 and April 2013. The
tasks included 5.25 hours of communications with plaintiffs’ counsel’s office; 4.5 hours
to review the depositions of Zavorskas, Kehriotis, and Rennie as well as to review a
spreadsheet from plaintiffs’ expert Reiss; 5.5 hours to review 549 pages of documents
including leases and CAM billings; and 1.5 hours for internet research on defendants.
Griswold’s invoice reflected a total of 16.75 hours for these tasks, and his hourly rate was
$375. He did not charge plaintiffs for his deposition time because defense counsel had
already paid him for that time.
Defendants fail to persuasively articulate why it was an abuse of discretion for the
trial court to reduce Griswold’s fee of $6,281.20 by only 50 percent. Griswold’s invoice
detailed the amount of time he spent on each task in the case. The court reduced
Griswold’s fee by one-half after apparently agreeing with defendants’ contention that
Griswold offered only general opinions about industry standards and that he primarily
relied on his experience rather than the specific facts of the case. Regarding the reduced
amount that the court did allow for Griswold’s expert fee, we believe it was reasonably
necessary for the expert to acquaint himself with some of the facts of the case by
reviewing case-related documents and/or having case-related communications with
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counsel before rendering opinions on industry customs and standards that were relevant
to the case. We do not believe an abuse of discretion has been shown by the court’s
failure to reduce the expert’s fee by a greater amount.
In their cross-appeal, plaintiffs contend that the trial court erred by reducing
Griswold’s fee. They argue that Griswold’s document review, as well as his review of
the depositions taken in the case and his communications with plaintiffs’ counsel, were
all necessary for him to prepare for his deposition and to provide his opinions.
We are not persuaded by plaintiffs’ argument regarding the necessity of all the
time that Griswold spent on the case. First, plaintiffs do not explain the necessity of
Griswold’s 1.5 hours of internet research on defendants. Second, while we believe it was
reasonably necessary for Griswold to acquaint himself with some of the facts of the case
by reviewing case-related documents and/or having case-related communications with
counsel before rendering opinions in the case, plaintiffs fail to persuasively articulate
why it was necessary for Griswold to spend 10 hours reviewing depositions and other
documents in addition to spending more than 5 hours in communications with plaintiffs’
counsel’s office in order for Griswold to reach his particular opinions and to prepare for
his deposition. No abuse of discretion has been shown by the court’s 50 percent
reduction of expert fees for Griswold.
iii. Stephen M. Reiss
Defendants contend that expert fees of $7,150.60 for Reiss, a forensic accountant,
were unreasonable and unnecessary. According to defendants, Reiss simply took a CAM
statement that had been prepared by defendant JMK Investments, removed certain
charges as directed by plaintiffs, and then recalculated the CAM charges.
Plaintiffs respond that Reiss reviewed the charges, eliminated improper charges,
recalculated the bookkeeping and management fees at 10 percent, and determined the
correct amount of charges. Plaintiffs contend that expert fees for Reiss were therefore
reasonable and necessary.
17
The record reflects that Reiss was a certified public accountant. Reiss was
designated as an expert witness by plaintiffs to testify about the propriety of quarterly
CAM charges, among other matters.
At his deposition, Reiss testified that the “scope” of his assignment from plaintiffs
was to review the CAM charges; eliminate charges that were improper according to the
lease or otherwise, such as the landscaping and bookkeeping charges; “recompute the
management fee” at 10 percent with those charges removed; and “substitute the correct
number in the charges.” Plaintiffs’ counsel’s office identified the bookkeeping charge
as improper and asked him to remove the charge. Reiss independently confirmed the
impropriety of the charge and conducted his own research on the propriety of the
landscaping charge. Reiss ultimately prepared a document based on his analysis of
CAM charges. The document showed defendant JMK Investments’ total CAM charges
(based on CAM statements it had issued), the “expected” charge, and the overcharge.
Plaintiffs submitted a detailed time record regarding the time Reiss spent in the
case. The time record indicates that Reiss, in addition to calculating overcharges, also
spent time verifying defendant JMK Investments’ calculation of credits. We cannot
conclude that it was unreasonable or unnecessary for plaintiffs to retain an accountant to
conduct an independent review of prior charges in the case in order to calculate
overcharges, or to confirm the accuracy of defendants’ new calculations concerning
credits, particularly where the basis for defendants’ charges under the leases and the
calculations of those charges were at issue. No abuse of discretion has been shown by
the trial court’s failure to reduce expert fees for Reiss.
B. Attorney’s Fees
On appeal, defendants contend that the trial court erred in determining that
plaintiffs were the prevailing party for purposes of awarding attorney’s fees under
section 1717. Defendants further contend that the trial court committed reversible error
by failing to explain how it calculated the amount of attorney’s fees.
18
In their cross-appeal, plaintiffs contend that the trial court erred by awarding only
$76,000 in attorney’s fees. They contend that there “was no basis for this reduction in
light of the circumstances of this case.”
We will consider each contention in turn.
1. Prevailing party determination under Civil Code section 1717
As we stated above, Code of Civil Procedure section 1032 provides for the
recovery of the costs of suit to a “prevailing party.” (Id., subd. (b).) Allowable costs
include attorney fees when authorized by contract. (Code Civ. Proc., § 1033.5,
subd. (a)(10)(A).) Attorney’s fees awarded pursuant to section 1717 are specifically
authorized as allowable costs. (Code Civ. Proc., § 1033.5, subd. (c)(5).)
Section 1717, subdivision (a) provides that, “[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.” (Italics added.) In this case, the
parties’ lease agreements provide that the prevailing party is entitled to recover
reasonable attorney’s fees, expert witness fees, and court costs.3
Although both Code of Civil Procedure section 1032 and Civil Code section 1717
refer to prevailing parties, a finding that plaintiffs are the prevailing parties under Code of
Civil Procedure section 1032 for purposes of costs, “although a necessary prerequisite for
3
The parties’ leases provide that, in an action instituted by the landlord John M.
Kehriotis to enforce his rights, the prevailing party is entitled to recover reasonable
attorney’s fees, expert witness fees, and court costs. Although the instant action was
instituted by the plaintiff tenants rather than by the landlord Kehriotis, none of the parties
dispute that plaintiffs may seek attorney’s fees under this contractual attorney’s fees
provision pursuant to section 1717. (See Hsu v. Abbara (1995) 9 Cal. 4th 863, 865, 870;
Pacific Custom Pools, Inc. v. Turner Construction Co. (2000) 79 Cal. App. 4th 1254,
1268, 1270.)
19
an award of attorney fees as costs,” is “not determinative” of whether they are also the
prevailing party entitled to recover attorney’s fees under the lease agreements and
section 1717. (Zintel Holdings, LLC v. McLean (2012) 209 Cal. App. 4th 431, 438 (Zintel
Holdings).) The issue of the prevailing party for purposes of costs under Code of Civil
Procedure section 1032 must be analyzed separately from the issue of the prevailing party
for purposes of attorney’s fees under section 1717. (David S. Karton, A Law Corp. v.
Dougherty (2014) 231 Cal. App. 4th 600, 607 (Karton).) We thus turn to the legal
standard for awarding attorney’s fees to the prevailing party under section 1717.
Section 1717 defines the phrase “party prevailing on the contract” as “the party
who recovered a greater relief in the action on the contract.” (Id., subd. (b)(1).) The trial
court “may also determine that there is no party prevailing on the contract for purposes of
this section.” (Ibid.) Section 1717 “vests the trial court with discretion in making the
prevailing party determination.” (Hsu v. Abbara (1995) 9 Cal. 4th 863, 871 (Hsu).) On
appeal, “ ‘ “[s]uch a determination will not be disturbed on appeal absent a clear abuse of
discretion.” ’ [Citation.]” (Kachlon v. Markowitz (2008) 168 Cal. App. 4th 316, 349
(Kachlon).)
“[I]n deciding whether there is a ‘party prevailing on the contract,’ the trial court
is to compare the relief awarded on the contract claim or claims with the parties’
demands on those same claims and their litigation objectives as disclosed by the
pleadings, trial briefs, opening statements, and similar sources. The prevailing party
determination is to be made only upon final resolution of the contract claims and only by
‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in
its contentions.’ [Citation.]” (Hsu, supra, 9 Cal.4th at p. 876.) “[A] court may base its
attorney fees decision on a pragmatic definition of the extent to which each party has
realized its litigation objectives, whether by judgment, settlement, or otherwise.
[Citation.]” (Santisas v. Goodin (1998) 17 Cal. 4th 599, 622 (Santisas).)
20
The California Supreme Court has explained that section 1717 “allow[s] those
parties whose litigation success is not fairly disputable to claim attorney fees as a matter
of right, while reserving for the trial court a measure of discretion to find no prevailing
party when the results of the litigation are mixed.” (Hsu, supra, 9 Cal.4th at p. 876.) For
example, if a party obtains a “simple, unqualified victory” on the only contract claim in
the action, the party is entitled to attorney’s fees as a matter of law and the trial court may
not deny fees by finding that there was no party prevailing on the contract. (Id. at p. 877;
see also id. at p. 876.)
However, “[i]f neither party achieves a complete victory on all the contract claims,
it is within the discretion of the trial court to determine which party prevailed on the
contract or whether, on balance, neither party prevailed sufficiently to justify an award of
attorney fees.” (Scott Co. v. Blount, Inc. (1999) 20 Cal. 4th 1103, 1109 (Scott Co.).)
“ ‘[T]ypically, a determination of no prevailing party results when both parties seek
relief, but neither prevails, or when the ostensibly prevailing party receives only a part of
the relief sought.’ [Citation.]” (Hsu, supra, 9 Cal.4th at p. 875.)
“[I]n determining litigation success, courts should respect substance rather than
form, and to this extent should be guided by ‘equitable considerations.’ For example, a
party who is denied direct relief on a claim may nonetheless be found to be a prevailing
party if it is clear that the party has otherwise achieved its main litigation objective.
[Citations.]” (Hsu, supra, 9 Cal.4th at p. 877, italics omitted.)
In this case, defendants state that “neither party achieved a complete victory.”
They contend, however, that they obtained “greater relief” under section 1717,
subdivision (b)(1) because plaintiffs sought more than $1 million in the complaint and
made a settlement demand of more than $10 million but ultimately recovered only
$22,500. Defendants also argue that “very limited charges were determined to be
improper,” specifically, charges for landscaping services by an unlicensed contractor
when a contractor’s license was required. According to defendants, the licensing
21
requirement was not the basis for the litigation and the complaint did not seek
reimbursement of landscaping fees for services requiring a license and thus plaintiffs did
not prevail on any cause of action in the complaint. Defendants further contend that
plaintiffs’ settlement demands were unreasonable, that the case ultimately settled for an
amount closer to defendants’ settlement offer, and that the average recovery per plaintiff
represents a nominal amount. Lastly, defendants contend that the court erred to the
extent it considered the credits that defendant issued in May 2011 and August 2012 while
the litigation was pending.
Plaintiffs respond that they succeeded in their litigation objectives, which included
compensatory damages according to proof, an accounting to identify the allowable
expenses, and restitution of money paid in excess of the amounts allowed. Although
plaintiffs acknowledge that they did not recover the full amount of money that they had
demanded, they point to their allegation in the complaint that they were “not aware of the
exact amount of overcharges charged to each” plaintiff “[d]ue to the un-itemized and
suspect nature of many of the charges.” Plaintiffs further observe that the $22,500
settlement was larger than defendants’ prior settlement offer of $15,000. Plaintiffs also
contend that the court did not err to the extent it considered the monetary credits that
defendant issued while the litigation was pending.
We determine that the trial court did not abuse its discretion in concluding that
plaintiffs were the prevailing parties on the contract. (§ 1717; Kachlon, supra, 168
Cal.App.4th at p. 349.) Plaintiffs’ claims in the action, as summarized by defendants’
counsel in a declaration in opposition to plaintiffs’ motion for attorney’s fees, “centered
around alleged overcharges for certain landscaping charges, management fees and
bookkeeping fees included in the common area expenses (‘CAMS’) for the period of
February 24, 2007 through December 31, 2011 . . . .” The record reflects that, as a result
of the litigation, plaintiffs were able to secure (1) an audit by defendants of prior charges
under the leases, (2) the elimination of a particular management fee and a credit for past
22
payments of that fee, (3) an additional credit for excessive management fees that were
charged, and (4) a monetary settlement for improper landscaping charges. In view of the
plaintiffs’ litigation objectives concerning improper charges and the extent to which those
objectives were realized by defendants’ elimination of a fee, providing monetary credits,
and agreeing to a monetary settlement for another fee, we do not believe the trial court
abused its discretion in concluding that plaintiffs recovered greater relief in the action as
compared to defendants, and that plaintiffs were therefore the parties prevailing on the
contract. (§ 1717, subd. (b); Hsu, supra, 9 Cal.4th at pp. 876, 877; Santisas, supra, 17
Cal.4th at p. 622.)
Although plaintiffs’ large settlement demands suggest that they overestimated the
value of the case, their overestimation appears to have been due at least in part to the
difficulty in ascertaining the proper charges under the leases, a matter which defendants
themselves determined only after conducting an audit or review of prior charges.
Further, although the total amount plaintiffs received in the form of credits and a
settlement payment may have been significantly less than the amounts they demanded
during the course of the litigation, it was still “within the discretion of the trial court to
determine which party prevailed on the contract” where, as in this case, none of the
parties appeared to achieve a “complete victory.” (Scott Co., supra, 20 Cal.4th at
p. 1109; see Jackson v. Homeowners Assn. Monte Vista Estates-East, (2001) 93
Cal. App. 4th 773, 788 [trial court did not abuse its discretion in awarding attorney’s fees
to plaintiffs where there was not a “clear win by either side” and “substantial arguments”
supported both sides’ claims of victory].)
We are not persuaded by defendants’ contention that the issues concerning the
landscaping charges were not encompassed by plaintiffs’ complaint. Plaintiffs alleged in
the complaint that defendants “improperly charged” plaintiffs “numerous . . . expenses”
including “excessive landscaping fees.” Contrary to defendants’ assertion on appeal, the
complaint does not limit the excessive landscaping fees to only those inflated as a result
23
of defendants contracting for services between themselves. Moreover, the parties agreed
in a written stipulation that the trial court’s determination of legal issues regarding
landscaping charges for an unlicensed contractor’s services would have a “significant
impact on Plaintiffs’ claims for damages and their remaining claims and that a ruling on
this issue by the Court would have a significant impact on the parties for purposes of a
final resolution by settlement . . .” The trial court subsequently determined that
defendants could not charge for landscaping services by an unlicensed contractor if the
work required a contractor’s license. The parties thereafter entered into a settlement
agreement in which defendants agreed to pay plaintiffs a total of $22,500 to resolve the
case. In their opening brief on appeal, defendants implicitly acknowledge that the
settlement payment was intended at least in part to resolve the issue of landscaping
charges. It thus appears that the issue of landscaping charges and the use of an
unlicensed contractor were part of plaintiffs’ contract claim in this litigation.
We are also not persuaded by defendants’ contention that plaintiffs’ conduct
regarding settlement, including “unreasonabl[e]” and “grossly inflated” settlement
demands, warrants a finding that defendants were the parties prevailing on the contract.
“[I]n determining litigation success, courts . . . should be guided by ‘equitable
considerations.’ ” (Hsu, supra, 9 Cal.4th at p. 877, italics omitted.) However, “equitable
considerations must be connected to litigation success on the claims presented,” rather
than the litigation tactics or motives of the parties. (Silver Creek, LLC v. BlackRock
Realty Advisors, Inc. (2009) 173 Cal. App. 4th 1533, 1540; see id. at p. 1541.) “[T]he trial
court may not invoke equitable considerations unrelated to litigation success, such as the
parties’ behavior during settlement negotiations or discovery proceedings, except as
expressly authorized by statute. (See, e.g., Deane Gardenhome Assn. v. Denktas[ (1993)]
13 Cal. App. 4th 1394, 1398-1399 [trial court improperly relied on party’s obstreperous
behavior and uncompromising litigation stance to find there was no prevailing party];
Bruckman v. Parliament Escrow Corp. (1987) 190 Cal. App. 3d 1051, 1059 [stating that
24
party’s failure to offer to compromise did not affect that party’s right to attorney fees
under section 1717].) To admit such factors into the ‘prevailing party’ equation would
convert the attorney fees motion from a relatively uncomplicated evaluation of the
parties’ comparative litigation success into a formless, limitless attack on the ethics and
character of every party who seeks attorney fees under section 1717.” (Hsu, supra, at
p. 877.) We therefore decline to consider plaintiffs’ behavior during settlement
negotiations in the absence of a statute authorizing consideration of such conduct.
Lastly, we are not persuaded by defendants’ contention that the trial court could
not consider the monetary credits that defendants issued to plaintiffs while the litigation
was pending. As an initial matter, defendants acknowledge that it is not clear that the
court actually considered the monetary credits. However, even assuming the court
considered the monetary credits in determining which party prevailed on the contract
under section 1717, we find no abuse of discretion for the following reasons.
Defendants contend that the parties’ settlement agreement limits the trial court
from considering anything other than “settlement proceeds,” and that settlement proceeds
do not include monetary credits.
The portion of the settlement agreement cited by defendants does not support the
contention that the trial court was precluded from considering monetary credits when
determining the party prevailing on the contract under section 1717. The portion of the
settlement cited by defendants states: “The determination of plaintiffs’ motion for costs
and attorney’s fees, shall be pursuant to California Civil Code section 1717 and Code of
Civil Procedure section 1032, respectively. Settlement proceeds can be considered in
determining whether Plaintiffs have received a net monetary recovery for purposes of
deciding prevailing party status under Code of Civil Procedure section 1032,
subdivision (a)(4). Further, in such determination by the court, the holding of Chinn v.
KMP Property Management et a1. (166 Cal. App. 4th 175 . . .) shall not be applicable.”
25
The reference to “settlement proceeds” in the parties’ settlement agreement thus
pertains to the trial court’s determination of “net monetary recovery for purposes of
deciding prevailing party status under Code of Civil Procedure section 1032,
subdivision (a)(4)” regarding costs. The quoted portion of the settlement agreement does
not expand or limit, or otherwise address, the trial court’s determination of “the party
who recovered a greater relief in the action” for purposes of deciding the “party
prevailing on the contract” under section 1717, subdivision (b)(1) regarding attorney’s
fees. Defendants do not cite any provision in the settlement agreement that precludes the
trial court from considering monetary credits in making its determination regarding
attorney’s fees under section 1717. (See Santisas, supra, 17 Cal.4th at p. 622 [in
determining the issue of attorney’s fees under section 1717, a court may consider whether
a party “has realized its litigation objectives, whether by judgment, settlement, or
otherwise”]; Hsu, supra, 9 Cal.4th at p. 877 [equitable considerations should guide the
determination of litigation success, and a party denied direct relief on a claim may still be
the prevailing party if it achieved its main litigation objective].) Moreover, the fact that
the settlement agreement is, according to defendants, an integrated agreement is
irrelevant, as the trial court’s consideration of monetary credits would not be at variance
with any of the settlement terms cited by defendants.
For similar reasons, defendants’ argument that monetary credits are not within the
definition of “prevailing party” and “net monetary recovery” under Code of Civil
Procedure section 1032, subdivision (a)(4) does not advance their position that the trial
court erred in considering monetary credits when deciding the issue of attorney’s fees.
The issue of prevailing party for purposes of costs under Code of Civil Procedure
section 1032 must be analyzed separately from the issue of prevailing party for purposes
of attorney’s fees under section 1717, as the two statutes define prevailing party
differently. (Karton, supra, 231 Cal.App.4th at p. 607; see also Zintel Holdings, supra,
209 Cal.App.4th at p. 438 [finding of prevailing party under Code of Civil Procedure
26
§ 1032 is “not determinative” of whether that party is also the prevailing party under
§ 1717]; Goodman v. Lozano (2010) 47 Cal. 4th 1327, 1335, fn. 3 [rejecting the
contention that Code of Civil Procedure § 1032, subd. (a)(4) must be construed in light
of § 1717].)
Defendants also argue that their issuance of monetary credits was unrelated to the
litigation against them. For example, defendants contend that the first monetary credit
issued in May 2011 was due to a policy change regarding the bookkeeping fee.
Defendants contend that the second monetary credit issued in August 2012 “was issued
as part of a regular, yearly reconciliation of CAM charges which reconciliation is
required by the Plaintiffs’ leases.”
However, defendants do not cite any provision in the leases requiring a yearly
reconciliation, nor do they otherwise cite evidence in the record that supports the
contention that the reconciliations were “part of a regular, yearly” occurrence. Moreover,
even assuming defendants regularly reconciled CAM charges every year, the monetary
credits issued in May 2011 and August 2012 were for fees and charges going as far back
as 2007, which corresponds to the timeframe covered by plaintiffs’ complaint. Under the
circumstances, it would be reasonable for the trial court to infer that the litigation
commenced by plaintiffs in February 2011 was the impetus for defendants reviewing
prior charges and issuing monetary credits. Further, the May 2011 letter from defense
counsel to plaintiffs’ counsel stated that the credits were “being given in the hope they
will facilitate the amicable resolution of this matter.” The August 2012 letter from
defense counsel to plaintiffs’ counsel similarly referred to the parties’ litigation and stated
in part, “In light of the most recent credits being offered by JMK and the admonitions of
the Court, perhaps it is time that you reconsider your position and dismiss this matter.”
Based on the timing of the monetary credits, the time period covered by the credits, and
the correspondence by defense counsel concerning the credits and the litigation, the trial
27
court could reasonably conclude that the monetary credits were being given as a result of
plaintiffs’ pending litigation against defendants.
In sum, defendants fail to establish that the trial court abused its discretion in
determining that plaintiffs were the parties prevailing on the contract under section 1717.
2. Trial court’s failure to explain basis for attorney’s fees award
Defendants contend that the trial court committed reversible error by failing to
“specifically state” how it calculated the amount of attorney’s fees awarded, citing
In re Vitamin Cases (2003) 110 Cal. App. 4th 1041.
A trial court is not required to issue a statement of decision regarding an attorney’s
fee award. (Ketchum v. Moses (2001) 24 Cal. 4th 1122, 1140 (Ketchum); In re Tobacco
Cases I (2013) 216 Cal. App. 4th 570, 589; Gorman v. Tassajara Development Corp.
(2009) 178 Cal. App. 4th 44, 67 (Gorman) [finding “no California case law analogue to
[Code of Civil Procedure] section 632 requiring trial courts to explain their decisions on
all motions for attorney fees and costs, or even requiring an express acknowledgment of
the lodestar amount”].) Further, on appeal “ ‘ “[a]ll intendments and presumptions are
indulged to support [the judgment] on matters as to which the record is silent, and error
must be affirmatively shown.” ’ [Citation.]” (Ketchum, supra, at p. 1140.) As a general
rule, and in the absence of evidence to the contrary, “we presume that the trial court has
properly followed established law. [Citations.]” (People v. Diaz (1992) 3 Cal. 4th 495,
567 (Diaz); see Gorman, supra, at p. 67.)
In In re Vitamin Cases, supra, 110 Cal.App.4th at page 1052, the appellate court
stated, “When the record is unclear whether the trial court’s award of attorney fees is
consistent with the applicable legal principles, we may reverse the award and remand the
case to the trial court for further consideration and amplification of its reasoning. (See,
e.g., Ketchum[, supra,] 24 Cal.4th [at p.] 1142 . . . ; Thayer[ v. Wells Fargo Bank (2001)]
92 Cal.App.4th [819,] 846 [(Thayer)]; Ramos v. Countrywide Home Loans, Inc. (2000)
82 Cal. App. 4th 615, 629-630 (Ramos).)” However, neither In re Vitamin Cases, nor any
28
of the cases it cited, reversed solely due to the lack of an explanation by the trial court.
Rather, in each case, the reviewing court expressed concern about apparent errors in the
trial court’s decision. (See In re Vitamin Cases, supra, at p. 1061 [“We reverse the
award of attorney fees and costs in this case and remand that issue to the trial court for
reconsideration in light of the specific concerns we have expressed”]; see also id. at
pp. 1054-1058, 1060-1061; Ketchum, supra, at p. 1141 [“we are persuaded that
Ketchum’s assertions of error have sufficient merit to require remand of this matter for
recalculation of attorney fees under an appropriate exercise of discretion pursuant to the
standard we have clarified herein”]; see also id. at pp. 1141-1142; Thayer, supra, at
p. 835 [failing to “find the requisite factual basis in the record” justifying an increase in
the lodestar award and concluding that trial court abused its discretion in applying a
multiplier]; see also id. at pp. 835-839, 846; Ramos, supra, at p. 629 [“Under all the
relevant circumstances, we would not be justified in presuming in this case that the trial
court considered only appropriate factors in applying this particular multiplier to the
lodestar figure”]; see also id. at pp. 626, 627, 629.)
In this case, defendants fail to provide a persuasive argument supporting a
conclusion that the trial court abused its discretion in its determination of the amount of
attorney’s fees to award plaintiffs. Defendants contend, based on the premise that the
court could not properly consider their monetary credits to plaintiffs, that the attorney’s
fee award of $76,000 was more than three times the amount of plaintiffs’ recovery of
$22,500 under the settlement agreement. Without any citation to authority, defendants
argue that the “fee award should be a fraction of the sum recovered.”
As we have explained, however, the trial court could properly consider the
monetary credits, which included approximately $40,000 in May 2011 and at least $6,000
in August 2012, in determining the relief recovered by plaintiffs. Further, even assuming
plaintiffs recovered only $22,500 pursuant to the written settlement or, according to
defendants, only approximately $12,778 for disputed landscaping services, defendants
29
fail to provide a persuasive argument or legal authority supporting the proposition that
an award of attorney’s fees of $76,000 amounts to an abuse of discretion under the
circumstances of this case, based solely on the size of plaintiffs’ recovery and the amount
of attorney’s fees awarded. (See Niederer v. Ferreira (1987) 189 Cal. App. 3d 1485,
1507-1508 [explaining that the amount of money involved in the litigation is a
consideration in determining an award of attorney’s fees but is not a controlling factor];
Stokus v. Marsh (1990) 217 Cal. App. 3d 647, 651, 656-657 [attorney’s fee award of
$75,000 was reasonable where plaintiff was awarded $6,166 in damages].)
In sum, “ ‘ “error must be affirmatively shown” ’ ” (Ketchum, supra, 24 Cal.4th at
p. 1140), and “we presume that the trial court has properly followed established law” in
the absence of evidence to the contrary (Diaz, supra, 3 Cal.4th at p. 567; see Gorman,
supra, 178 Cal.App.4th at p. 67). We conclude that defendants have not shown a basis
for reversing the attorney’s fee award.
3. The trial court’s failure to award the full amount of attorney’s fees requested
In their cross-appeal, plaintiffs contend that the trial court erred by awarding only
$76,000 in attorney’s fees because there was no basis for reducing the requested amount
of $128,802.50.
a. background
Plaintiffs sought $128,802.50 in their motion for attorney’s fees. The amount was
based on 418.4 attorney hours at the rate of $250 per hour, plus 243.2 paralegal hours at
the rate of $100 per hour, for the period of February 2011 through September 2013. In
support of the motion, plaintiffs provided time records showing the tasks performed by
the attorneys and paralegals.
In opposition to plaintiffs’ motion, defendants contended that plaintiffs’ claimed
lodestar figure should be reduced because certain amounts were unnecessary. In
particular, defendants contended that the following amounts should be deducted from the
fees sought by plaintiffs: (1) $3,850 for approximately 25 hours of “duplicative attorney
30
time” where more than one attorney attended or participated in the same hearing or
conference; (2) $1,075 for three attorneys to take 4.3 hours to complete case management
statements on Judicial Council forms; (3) $24,320 for all paralegal time due to the
absence of information about the paralegals’ qualifications and based on the particular
tasks billed; (4) $10,700 for attorney time in preparing for a jury trial, including jury
instructions and verdict forms, because plaintiffs failed to post fees and waived a jury
trial; (5) $1,775 for time spent handling unrelated matters, including an unlawful
detainer; (6) $13,622.50 for unnecessary and excessive time spent on discovery matters;
(7) $6,525 for excessive time spent on settlement; and (8) $17,575 for “bulk billing
blocks” making it “impossible to determine” the amount of time spent on each task, for a
total reduction of nearly $80,000 from the lodestar amount.
Defendants further contended that the matter involved a simple contract dispute
between the parties regarding CAM charges, that the amount in controversy was
“minimal” compared to plaintiffs’ “grossly inflated prayer and settlement demands,” and
that the amount of attorney’s fees requested did not bear any rational relationship to the
amount recovered. To the extent the court awarded any attorney’s fees, defendants
contended the amount should be no more than $20,000, “an amount reasonable for the
prosecution of a simple breach of contract claim.”
In reply, plaintiffs disputed the eight categories of billing entries that defendants
claimed warranted a reduction in the lodestar. Plaintiffs also contended that the matter
was a complex case, that they had made efforts to minimize attorney’s fees, and that they
had obtained a net monetary recovery along with the cessation of defendants’ fraudulent
billing practices.
At the hearing on the motion for attorney’s fees, the trial court stated that it had
read the parties’ papers and most of the cases cited. The court asked about plaintiffs’
10 causes of action, and plaintiffs’ counsel stated that “the same work . . . went into each
of these causes of action.” The court also elicited information about other aspects of the
31
litigation, including offers to compromise under Code of Civil Procedure section 998 and
discovery disputes. In a subsequent written order, the trial court awarded $76,000 in
attorney’s fees, after “having considered the moving and responding documents, together
with the arguments of counsel, and . . . having personally reviewed all six volumes of
pleadings in this matter . . . .”
b. analysis
Section 1717, subdivision (a) provides that “[r]easonable attorney’s fees shall be
fixed by the court.” “[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. ‘California courts have consistently held that a computation of time spent on
a case and the reasonable value of that time is fundamental to a determination of an
appropriate attorneys’ fee award.’ [Citation.] The reasonable hourly rate is that
prevailing in the community for similar work. [Citations.] 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. [Citation.] Such an approach
anchors the trial court’s analysis to an objective determination of the value of the
attorney’s services, ensuring that the amount awarded is not arbitrary. [Citation.]”
(PLCM Group, Inc. v. Drexler (2000) 22 Cal. 4th 1084, 1095 (PLCM Group).)
“ ‘After the trial court has performed the calculations [of the lodestar], it shall
consider whether the total award so calculated under all of the circumstances of the case
is more than a reasonable amount and, if so, shall reduce the section 1717 award so that it
is a reasonable figure.’ ‘It is well established that the determination of what constitutes
reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.]
The value of legal services performed in a case is a matter in which the trial court has its
own expertise. [Citation.] . . . The trial court makes its determination after consideration
of a number of factors, including the nature of the litigation, its difficulty, the amount
involved, the skill required in its handling, the skill employed, the attention given, the
32
success or failure, and other circumstances in the case.’ [Citation.]” (PLCM Group,
supra, 22 Cal.4th at pp. 1095-1096.) “ ‘A fee request that appears unreasonably inflated
is a special circumstance permitting the trial court to reduce the award or deny one
altogether.’ [Citation.]” (Gorman, supra, 178 Cal.App.4th at p. 99.)
“[T]he trial court has broad authority to determine the amount of a reasonable fee.
[Citations.]” (PLCM Group, supra, 22 Cal.4th at p. 1095.) “ ‘The “experienced trial
judge is the best judge of the value of professional services rendered in his court, and
while his judgment is of course subject to review, it will not be disturbed unless the
appellate court is convinced that it is clearly wrong[”] ’—meaning that it abused its
discretion. [Citations.]” (Ibid.) “[D]iscretion must not be exercised whimsically, and
reversal is appropriate where there is no reasonable basis for the ruling or the trial court
has applied ‘the wrong test’ or standard in reaching its result. [Citation.]” (Nichols v.
City of Taft (2007) 155 Cal. App. 4th 1233, 1239 (Nichols).)
In this case, plaintiffs claimed a lodestar figure of $128,802.50, but the trial court
awarded only $76,000 in attorney’s fees. Because the trial court awarded less than
plaintiffs’ claimed lodestar figure, the trial court either reduced the lodestar, applied a
negative multiplier, or both.
“In determining the lodestar figure, the trial court was not required to specify
which hours it had allowed or did not allow.” (Taylor v. Nabors Drilling USA, LP (2014)
222 Cal. App. 4th 1228, 1250.) Further, a court’s failure to specify the factors it
considered in selecting a multiplier does not compel a reversal. (Id. at p. 1249.) “ ‘In
reviewing a challenged award of attorney fees and costs, we presume that the trial court
considered all appropriate factors in selecting a multiplier and applying it to the lodestar
figure. [Citation.] This is in keeping with the overall review standard of abuse of
discretion, which is found only where no reasonable basis for the court’s action can be
shown. [Citation.]’ [Citations.]” (Id. at pp. 1249-1250.)
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Plaintiffs contend that there was no basis for reducing the lodestar amount by
more than 40 percent. According to plaintiffs, this was a “difficult” case. Plaintiffs
characterize the case as involving 11 parties, 10 causes of action, “multiple percipient and
expert witnesses,” “substantial documentary evidence,” and “novel issues of law that
were decided in Plaintiffs’ favor,” including regarding the use of an unlicensed
landscaping contractor and whether plaintiffs could be charged for such services.
Plaintiffs contend that their counsel “was skilled, and made considerable efforts to
minimize” their attorney’s fees, as evidenced by the stipulation to have the trial court
make a determination regarding the landscaping/licensing issue. Plaintiffs further
contend that they achieved “considerable success,” including the recovery of more than
$70,000 and the cessation of defendant’s “fraudulent billing practices which would have
otherwise resulted in additional improper charges to Plaintiffs over the remaining
duration of their” leases.
We are not persuaded by plaintiffs’ argument that the trial court had no basis for
reducing the amount of attorney’s fees requested. Although the case involved 11 parties,
each of the nine plaintiffs entered into “substantially similar” leases with the two
defendants according to the allegations of plaintiffs’ complaint. Plaintiffs do not point to
anything in the record to suggest that there were significant differences between the
plaintiffs regarding their legal positions for example, or that the two defendants presented
anything other than a joint defense. Similarly, although plaintiffs alleged 10 causes of
action, plaintiffs’ counsel stated at the hearing on the attorneys’ fee motion that “the same
work . . . went into each of these causes of action.” Thus, the number of parties and the
number of causes of action do not appear to have been an accurate indicator of whether
the case was complex.
Regarding the number of witnesses and documents, the record reflects that
plaintiffs deposed defendant John M. Kehriotis and two employees of defendant JMK
Investments regarding CAM charges and other issues. Plaintiffs also apparently retained
34
three expert witnesses. Beyond these six witnesses, plaintiffs do not specifically identify
any other relevant witness in their briefing on appeal. Plaintiffs also do not provide a
citation to the record concerning the “substantial documentary evidence” purportedly
involved in this case, nor do they otherwise detail the content or significance of the
“substantial” documents.
Similarly, plaintiffs do not identify the “novel issues of law” decided in their favor
in this case, other than the two landscaping/licensing issues, which the trial court
disposed of in a few pages in a relatively straightforward statement of decision. The trial
court’s statement of decision on the landscaping/licensing issue ultimately resulted in a
settlement of only $22,500 a few months later. Defendants had earlier acknowledged
certain errors in its charges under the leases by issuing monetary credits to plaintiffs in
May 2011 and August 2012. In fact, the first set of credits in May 2011 was issued
shortly after the civil action was filed in February 2011.
Regarding efforts to minimize attorney’s fees, the only effort identified by
plaintiffs is the stipulation by all parties to have the trial court make a determination
concerning the two landscaping/licensing issues. This stipulation occurred in January
2013, nearly two years after the action had been filed, and only after plaintiffs’ attorneys
had already spent a significant amount of time on the case according to their time entries.
We further observe that in the trial court, defendants in opposition to plaintiffs’
motion for attorney’s fees contended that the fees for eight categories of attorney or
paralegal time should be reduced, resulting in a smaller lodestar figure. Plaintiffs on
appeal do not address the substance of those contentions by defendants, or otherwise
establish that it would have been error for the court to reduce the lodestar on the basis of
one or more of those eight categories. (See Ketchum, supra, 24 Cal.4th at p. 1140
[“ ‘ “error must be affirmatively shown” ’ ”].)
The trial court indicated that it had considered the attorney’s fee motion and
opposition papers, and that it had “personally reviewed all six volumes” of the court file
35
as part of its determination of the fee award. “ ‘The “experienced trial judge is the best
judge of the value of professional services rendered in his court.” ’ ” (PLCM Group,
supra, 22 Cal.4th at p. 1095.) The trial court may have determined that, as argued by
defendants below, some of the claimed attorney or paralegal hours were not reasonable,
or that the lodestar figure should be reduced because, for example, the litigation involved
a noncomplex contract dispute where the final settlement amount recovered by the
plaintiffs, after defendants had essentially conceded other monetary credits, was
relatively small in relation to the amount of fees requested. (See id. at pp. 1095-1096.)
On appeal, plaintiffs fail to establish that the amount of attorney’s fees ultimately
awarded by the court was “ ‘ “clearly wrong” ’ ” (Ketchum, supra, 24 Cal.4th at p. 1132),
or that “there is no reasonable basis for the ruling” (Nichols, supra, 155 Cal.App.4th at
p. 1239). Plaintiffs thus fail to show that the trial court abused its discretion by reducing
the requested attorney’s fee award to $76,000.
C. Attorney’s Fees on Appeal
We observe that defendants have not prevailed on their appeal, and plaintiffs have
not prevailed on their cross-appeal. Nevertheless, plaintiffs contend that they are entitled
to recover attorney’s fees on appeal. “ ‘Although this court has the power to fix attorney
fees on appeal, the better practice is to have the trial court determine such fees.’
[Citation.]” (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA,
Inc. (2005) 129 Cal. App. 4th 1228, 1267.) Accordingly, upon an appropriate motion, the
trial court is to consider whether attorney’s fees incurred on appeal should be awarded
and, if so, the amount.
IV. DISPOSITION
The judgment is affirmed. The parties are to bear their own costs on appeal.
Upon an appropriate motion, the trial court is to consider whether attorney’s fees incurred
on appeal should be awarded and, if so, the amount.
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___________________________________________
BAMATTRE-MANOUKIAN, ACTING P.J.
WE CONCUR:
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MIHARA, J.
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MÁRQUEZ, J.