DKN Holdings v. Faerber ( 2014 )

Filed 4/9/14: pub. order 4/25/14 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
DKN HOLDINGS LLC,
Plaintiff and Appellant, E055732, E056294
v. (Super.Ct.No. RIC1109512)
WADE FAERBER, OPINION
Defendant and Respondent.
APPEAL from the Superior Court of Riverside County. John Vineyard, Judge.
Affirmed.
Prenovost, Normandin, Bergh & Dawe, Michael G. Dawe and Paula M. Harrelson
for Plaintiff and Appellant.
Callahan & Blaine, Edward Susolik and Michael S. LeBoff for Defendant and
Respondent.
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I. INTRODUCTION
Plaintiff DKN Holdings LLC (DKN) appeals from a judgment of dismissal after
the trial court sustained, without leave to amend, defendant Wade Faerber’s demurrer to
DKN’s complaint for monies due under a commercial lease. (Code Civ. Proc., § 430.10
subd. (e).)1 DKN also appeals from a postjudgment order awarding Faerber $54,817.50
in attorney fees as the prevailing party in the action on the lease, claiming the fee award
is unreasonable. The two appeals have been consolidated for oral argument and decision.
In this appeal, we affirm the judgment of dismissal and the attorney fee award. In
case No. E056497, DKN appeals a postjudgment order dismissing another defendant,
Matthew Neel, whose default was entered after he was served with the complaint but
failed to appear. In that appeal, we affirm the order dismissing Neel.
II. BACKGROUND
A. Synopsis
By its complaint in the present action, DKN, a lessor on a commercial lease, sued
Faerber and Neel, two of three colessees, for unpaid rents and other monies due under the
lease. In a prior action, DKN obtained a money judgment for over $3 million against the
third colessee, Roy Caputo, following a court trial on the merits for monies due under the
lease. The lease provides that colessees shall be “jointly and severally responsible” to
comply with its terms. Although DKN sued Faerber and Neel in the prior action, along
1 All further statutory references are to the Code of Civil Procedure unless
otherwise indicated.
2
with Caputo, DKN dismissed them without prejudice before trial and judgment. The
judgment against Caputo is apparently unsatisfied.
The question on the present appeal from the judgment of dismissal is whether the
judgment against Caputo in the Caputo action bars DKN’s claims against Faerber and
Neel in the present action. The trial court concluded that the judgment against Caputo
bars DKN’s claims in the present action, and we agree. We conclude that the complaint
does not and cannot state a cause of action against Faerber and Neel for monies due under
the lease, because DKN’s claims against Faerber and Neel in the present action are barred
by the claim preclusion aspect of the res judicata doctrine.
B. The Lease Agreement
In June 2004, Faerber, Neel, and Caputo agreed to lease retail space in a Murrieta
shopping center known as Margarita Square from the center’s co-owners and lessees,
DKN and CDFT Limited Partnership (CDFT). The parties signed a “Standard
Retail/Multi-Tenant Lease-Net” lease with a 10-year term. Section 48 of the lease
provides that “multiple parties” signing the lease as lessors or lessees “shall have joint
and several responsibility” to comply with its terms. (Italics added.) For purposes of the
present demurrer, Faerber and DKN do not dispute that Caputo, Faerber, and Neel were
jointly and severally liable to DKN under the lease.
Faerber is an orthopedic surgeon, and Caputo is also a physician. Faerber, Caputo,
and Neel intended to use the leasehold to build and operate an “upscale” fitness and
training center under the trade name Evolution Elite Sports and Fitness Club. In
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September 2004, the lease was amended to increase the size of the leasehold from
approximately 15,000 square feet to approximately 22,000 square feet, and the rent was
increased. Around March 2007, Faerber and Caputo acquired Neel’s interest in the
business and orally agreed to indemnify Neel for any liability he may incur for monies
due under the lease.
C. The First Action on the Lease
In June 2007, Caputo sued DKN, seeking to rescind or cancel the lease and for
money damages based on fraud, breach of fiduciary duty, and other grounds or causes of
action (the Caputo action).2 In a nutshell, Caputo alleged that DKN failed to make
material disclosures concerning the leasehold and breached its obligations under the
lease, resulting in the failure of the fitness club. Among other things, Caputo claimed
DKN failed to disclose that (1) a streambed near the shopping center was required by law
to be planted with native vegetation that could not be trimmed and that would block
views to the leasehold, and (2) a center median would have to be constructed on Murrieta
Hot Springs Road, reducing and inhibiting access to the shopping center.
In the Caputo action, DKN and CDFT cross-complained against Caputo, Faerber,
and Neel for monies due under the lease. Caputo was served with DKN’s first amended
cross-complaint, but Faerber and Neel were not served. Following a June 2011 court trial
and statement of decision on the complaint and first amended cross-complaint, Caputo
2 The Caputo action, Roy Caputo, M.D. v. DKN Holdings LLC et al., was filed in
the Riverside County Superior Court and was assigned case No. RIC474609.
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was denied any relief on his complaint, and DKN/CDFT was awarded over $2.8 million
in money damages on its cross-complaint against Caputo. Faerber and Neel were
dismissed as (unserved) cross-defendants following the entry of the judgment against
Caputo. Thereafter, DKN/CDFT did not move to add Faerber or Neel to the judgment
against Caputo as additional judgment debtors. (§ 989.)
D. The Present Complaint Against Faerber and Neel
On June 1, 2011, shortly before the statement of decision was issued in the Caputo
action, DKN filed the present action against Faerber and Neel, asserting two cause of
action. The first cause of action, for breach of the lease, names both Faerber and Neel
and seeks the same money damages that DKN was awarded against Caputo in the Caputo
action. The second cause of action, for breach of an oral indemnity agreement against
Faerber, alleges DKN is entitled to the benefit of Faerber’s March 2007 oral agreement to
indemnify Neel for any liability Neel may incur under the lease. The claim alleges
Faerber “is now obligated to DKN for Neel’s non-payment of rent on the oral contract for
indemnity.”
E. Faerber’s General Demurrer
Faerber demurred to the complaint on the ground it failed to state a cause of action
because the judgment against Caputo barred DKN’s claims against Faerber and Neel for
monies due under the lease. (§ 430.10, subd. (e).) Faerber claimed that DKN was
improperly splitting its single cause of action or primary right for monies due under the
lease into two separate suits, the first against Caputo in the Caputo action and the second
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against Farber and Neel in the present action. In opposing the demurrer, DKN claimed
that joint and several obligors, such as Caputo, Faerber, and Neel, may be sued in
separate actions under California law.
The trial court sustained Faerber’s demurrer, without leave to amend, and entered
judgment in favor of Faerber. In a postjudgment order, Faerber was awarded $54,817.50
in attorney fees.
III. DISCUSSION/FAERBER’S GENERAL DEMURRER
A. Standard of Review on Demurrer
We independently review the court’s order sustaining, without leave to amend,
Faerber’s general demurrer to DKN’s complaint in the present action. (Federal Home
Loan Bank of San Francisco v. Countrywide Financial Corp. (2013) 214 Cal. App. 4th
1520, 1526.) “We first review the complaint de novo to determine whether it contains
facts sufficient to state a cause of action under any legal theory. [Citation.] ‘“‘We treat
the demurrer as admitting all material facts properly pleaded, but not contentions,
deductions or conclusions of fact or law. [Citation.] We also consider matters which
may be judicially noticed.’ [Citation.]”’ [Citation.] ‘We affirm if any ground offered in
support of the demurrer was well taken but find error if the plaintiff has stated a cause of
action under any possible legal theory. [Citations.] We are not bound by the trial court’s
stated reasons, if any, supporting its ruling; we review the ruling, not its rationale.
[Citation.]’ [Citation.]” (Estate of Dito (2011) 198 Cal. App. 4th 791, 800.)
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B. The Judgment Against Caputo in the Caputo Action Bars DKN’s Claims Against
Faerber and Neel in the Present Action
DKN claims Faerber’s demurrer was erroneously granted and the complaint states
a cause of action. DKN argues that, under California law, joint and several obligors, such
as Faerber, Neel, and Caputo, may be sued in separate actions. As we explain, DKN is
mistaken. Joint and several obligors may not be sued in separate actions when, as here,
the claim or claims against them are barred by a prior judgment under the claim
preclusion aspect of the res judicata doctrine.
“‘As generally understood, “[t]he doctrine of res judicata gives certain conclusive
effect to a former judgment in subsequent litigation involving the same controversy.”
[Citation.] The doctrine “has a double aspect.” [Citation.] “In its primary aspect,”
commonly known as claim preclusion, it “operates as a bar to the maintenance of a
second suit between the same parties on the same cause of action. [Citation.]” [Citation.]
“In its secondary aspect,” commonly known as collateral estoppel, “[t]he prior judgment
. . . ‘operates’” in “a second suit . . . based on a different cause of action . . . ‘as an
estoppel or conclusive adjudication as to such issues in the second action as were actually
litigated and determined in the first action.’ [Citation.]” [Citation.]’” (Boeken v. Philip
Morris USA, Inc. (2010) 48 Cal. 4th 788, 797.)
The purpose of the doctrine of res judicata is “‘to preserve the integrity of the
judicial system, promote judicial economy, and protect litigants from harassment by
vexatious litigation.’ [Citations.]” (Brinton v. Bankers Pension Services, Inc. (1999) 76
7
Cal. App. 4th 550, 556.) “‘“The prerequisite elements for applying the doctrine to either
an entire cause of action or one or more issues are the same: (1) A claim or issue raised
in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the
prior proceeding resulted in a final judgment on the merits; and (3) the party against
whom the doctrine is being asserted was a party or in privity with a party to the prior
proceeding. [Citations.]”’ [Citation.]” (Boeken v. Philip Morris USA, Inc., supra, 48
Cal.4th at p. 797.) The party asserting the preclusive effect of a prior judgment bears the
burden of establishing it. (Ferraro v. Camarlinghi (2008) 161 Cal. App. 4th 509, 529.)
The present case concerns the claim preclusion aspect of res judicata, not the issue
preclusion or collateral estoppel aspect. We independently conclude that all three
elements of the res judicata doctrine apply, and that the judgment in the Caputo action
bars DKN’s claims against Faerber in the present action.
First, it is undisputed, and the judicially noticed records from the Caputo action
show, that DKN was a party to the Caputo action and the action resulted in a final
judgment on the merits against Caputo. As a party to the Caputo action, DKN is bound
by the judgment in that action, and res judicata may be invoked against DKN based on
the final judgment. (Arias v. Superior Court (2009) 46 Cal. 4th 969, 985 [res judicata
operates “only against those who were parties, or in privity with parties, to that prior
litigation and who are thus bound by the resulting judgment.”].)
Furthermore, Faerber and Neel may invoke res judicata against DKN in the
present action based on the final judgment in the Caputo action, even though Faerber and
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Neel were not parties to the Caputo action. “The party seeking the benefit of the [res
judicata] doctrine . . . need not have been a party to the earlier lawsuit.” (Arias v.
Superior Court, supra, 46 Cal.4th at p. 985.) “Only the party against whom the doctrine
[of res judicata] is invoked must be bound by the prior proceeding.” (Vandenberg v.
Superior Court (1999) 21 Cal. 4th 815, 828.)
In addition, the present action against Faerber and Neel is based on the same
claims that DKN asserted against Caputo in the Caputo action. In California, the primary
rights theory applies in determining whether two proceedings involve identical causes of
action, for purposes of claim preclusion. (Mycogen Corp. v. Monsanto Co. (2002) 28
Cal. 4th 888, 904.) Under the primary rights theory of code pleading, which has long
been followed in California, “‘a “cause of action” is comprised of a “primary right” of the
plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the
defendant constituting a breach of that duty. [Citation.] The most salient characteristic
of a primary right is that it is indivisible: the violation of a single primary right gives rise
to but a single cause of action. [Citation.] . . .
“‘As far as its content is concerned, the primary right is simply the plaintiff’s right
to be free from the particular injury suffered. [Citation.] It must therefore be
distinguished from the legal theory on which liability for that injury is premised: “Even
where there are multiple legal theories upon which recovery might be predicated, one
injury gives rise to only one claim for relief.” [Citation.] The primary right must also be
distinguished from the remedy sought: “The violation of one primary right constitutes a
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single cause of action, though it may entitle the injured party to many forms of relief, and
the relief is not to be confounded with the cause of action, one not being determinative of
the other.” [Citation.]’” (Mycogen Corp. v Monsanto Co., supra, 28 Cal.4th at p. 904.)
DKN’s claims against Faerber and Neel are based on the same primary right—the
right to recover monies due under the lease—that DKN asserted against Caputo in the
Caputo action. The first cause of action against both Faerber and Neel for their failure to
pay monies due under the lease is based squarely on DKN’s right to recover monies due
under the lease. Similarly, DKN’s second cause of action against Faerber (only) seeks
the benefit of Faerber’s oral agreement to indemnify Neel for any liability Neel may incur
under the lease. As such, the second cause of action is based on DKN’s primary right to
recover monies due under the lease, even though it seeks to vindicate that right by the
alternative remedy of obtaining the benefit of Faerber’s agreement to indemnify Neel.
(Boeken v. Philip Morris USA, Inc., supra, 48 Cal.4th at p. 798 [“under the primary rights
theory, the determinative factor is the harm suffered.”].)
DKN argues that because joint and several obligors are jointly and severally, or
individually, liable on an obligation, a claim against each of them constitutes a separate
claim. DKN is mistaken. Under the primary rights theory, and for purposes of applying
the res judicata doctrine, the claims are identical. (Lippert v. Bailey (1966) 241
Cal. App. 2d 376, 382 [Fourth Dist., Div. Two] [“A single cause of action may not be
maintained against various defendants in separate suits as the plaintiff has suffered but
one injury.”].)
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Relying on a passage from the California Supreme Court’s 56-year-old decision in
Williams v. Reed (1957) 48 Cal. 2d 57, 65 (Williams), DKN argues that a judgment
against one joint and several obligor does not foreclose a later action against another joint
and several obligor on the same obligation. The Williams court observed: “It is true in
most jurisdictions, including California, that joint obligors upon the same contract are
indispensible parties. They may not be sued separately [citations]. If judgment is
obtained in a separate action against one, it bars an action against the others. [Citation.]
When the obligation is joint and several, it is not nonjoinder to sue one alone [citations].
The same is true of an action against one or more and less than all of a number of persons
jointly and severally obligated as tort feasors. In such a case the judgment obtained
against one is not a bar to an action against the remaining joint and several obligors.
‘Nothing short of satisfaction in some form constitutes a bar . . . .’” (Ibid., quoting
Grundel v. Union Iron Works (1900) 127 Cal. 438, 442.)
Based on this passage from Williams, DKN argues that because Caputo, Faerber,
and Neel are jointly and severally liable for the unpaid rents and other monies due under
the lease, the judgment against Caputo does not bar DKN’s identical claims against
Faerber and Neel in the present action. We disagree. As the trial court noted in
sustaining the demurrer, the passage from Williams is “wrong” and incorrectly states the
law—to the extent it may be construed as allowing an obligee, such as DKN, to obtain
separate judgments in separate actions against joint and several obligors, based on the
same claims. Williams did not address the issue presented here: whether a final
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judgment on the merits against one joint and several obligor bars a subsequent action and
judgment against additional joint and several obligors, on the same obligation, by the
same claimant. (People v. Alvarez (2002) 27 Cal. 4th 1161, 1176 [“cases are not authority
for propositions not considered.”].) Thus, Williams does not support DKN’s position.3
To be sure, courts are generally authorized to render separate judgments, in the
same action or in separate actions, against joint and several obligors. (Melander v.
Western Nat. Bank (1913) 21 Cal. App. 462, 474-478 [construing former § 414, now
§ 410.70 & §§ 578, 579, as authoring courts to enter separate judgments in separate
actions against joint and several obligors];4 see also Grundel v. Union Iron Works, supra,
127 Cal. at p. 442 [joint and several tort feasors may be sued in separate actions].) But
even when joint and several obligors are not required to be sued in the same action (see
§§ 410.70, 379, 389) when, as here, a final judgment on the merits has been rendered in
3 DKN similarly relies on a 1918 Georgia appellate court case which, like
Williams, did not address the effect of the res judicata doctrine of a prior judgment on
successive actions on the same claims against joint and several obligors. (Johnson v.
Georgia Fertilizer & Oil Co. (1918) 21 Ga.App. 530 [94 S.E. 850].)
4 Section 410.70 provides: “In an action against two or more persons who are
jointly, jointly and severally, or severally liable on a contract, the court in which the
action is pending has jurisdiction to proceed against such of the defendants as are served
as if they were the only defendants.”
Section 578 provides: “Judgment may be given for or against one or more of
several plaintiffs, and for or against one or more of several defendants; and it may, when
the justice of the case requires it, determine the ultimate rights of the parties on each side,
as between themselves.”
Section 579 provides: “In an action against several defendants, the Court may, in
its discretion, render judgment against one or more of them, leaving the action to proceed
against the others, whenever a several judgment is proper.”
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one action against a joint and several obligor, res judicata will bar the assertion of
identical claims against other joint and several obligors, in a subsequent action, by parties
bound by the judgment in the prior action.
DKN also relies on the following passage from Witkin: “If the defendants are
both jointly and severally liable, joinder is not mandatory but permissive, and the
plaintiff, although he or she has but one cause of action, may sue one defendant first and
another later. Despite the theoretical incongruity, the plaintiff is not barred in the second
action because the defense of res judicata is available only when both the cause of action
and the parties are the same.” (4 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 65, p.
124, italics added.) Like the passage from Williams, supra, 48 Cal.2d at page 65, the trial
court rejected this passage from Witkin as an incorrect statement of the law,5 and we
agree it is incorrect. The passage from Witkin mistakenly indicates that defendants in the
current proceeding must have been parties to the prior proceeding, in which a final
judgment on the merits was obtained on the same claims, in order to invoke res judicata
in the current proceeding, but this is not the law. As discussed, only the party against
whom res judicata is invoked must have been a party to the prior action and bound by the
judgment in that action. (Arias v. Superior Court, supra, 46 Cal.4th at p. 985.) It is not
necessary that the party invoking the doctrine in the prior proceeding have been a party to
the prior proceeding, or bound by the judgment in that proceeding. (Ibid.)
5 The trial court commented that the quoted passage from Witkin was “one of
those classic examples of Witkin referring to and relying on a case that doesn’t support
the theory published in Witkin.” (Underlining omitted.)
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C. DKN’s Partnership Claim is Unavailing
DKN further claims its complaint states a cause of action because the trial court in
the Caputo action found that Faerber, along with Caputo and Neel, were “partners” on the
lease. DKN is mistaken. In its statement of decision in the Caputo action, the trial court
did not find that Caputo, Faerber, and Neel were partners, and even if it had, the finding
would not be binding on Faerber or Neel because they were not parties to the Caputo
action. In generally describing the lease, the trial court in the Caputo action loosely
referred to Caputo, Faerber, and Neel as “partners” who “wanted to lease and build out
premises for a fitness club . . . .”
In any event, DKN argues Faerber’s “partnership liability” under the lease “creates
an independent basis” for holding him responsible in the present action on the lease, apart
from his joint and several liability as a colessee. DKN reasons that California’s Uniform
Partnership Act of 1994 (Corp. Code, § 16100 et seq.) permits a plaintiff to sue partners
in separate actions. Though the Uniform Partnership Act of 1994 provides that “an
action” may be brought against the partnership “and any or all of the partners in the same
action or in separate actions” (Corp. Code, § 16307, subd. (b), italics added), this
statutory authorization to sue partners in separate actions does not apply when, as here,
the claims asserted in the subsequent action are barred by res judicata principles.
D. DKN’s Misrepresentation Claim is Unavailing
Based on facts neither alleged in the complaint nor judicially noticed, DKN claims
Faerber misled and deceived DKN to dismiss Faerber from the Caputo action, without
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prejudice. DKN argues that Faerber has “unclean hands” because, near the outset of the
Caputo action, the attorney representing Caputo, Faerber, and Neel falsely represented to
DKN that, shortly after the lease was signed in June 2004, the three colessees, together
with DKN’s representative, Bill Dendy, amended the lease to exclude Faerber and Neel
as colessees and to provide that Caputo was the sole lessee. Dendy was the managing
partner of CDFT, the co-owner of the shopping center, and DKN’s colessor on the lease
with Caputo, Faerber, and Neel.
DKN represents that Dendy, who died in 2005, was the only person on DKN’s
side of the transaction who had personal knowledge of whether the lease was amended to
exclude Faerber and Neel as lessees, as Faerber claimed. The lease was not well
documented, and there were ambiguities and omissions in the documents constituting the
lease. DKN claims it did not serve Faerber or Neel with its amended cross-complaint in
the Caputo action and instead dismissed Faerber and Neel, without prejudice, based on
their attorney’s representation that the lease was amended to exclude them. Now,
however, DKN argues that the evidence presented at trial in the Caputo action, including
Faerber’s testimony, shows Faerber’s counsel misrepresented the facts, and that Faerber
and Neel were in fact intended to be bound by the lease.
DKN’s argument is unavailing. Even if the complaint were amended to allege that
Faerber negligently or intentionally misled DKN regarding his and Neel’s status as
colessees under the lease, the complaint would not state a cause of action against Faerber
or Neel. (Estate of Dito, supra, 198 Cal.App.4th at pp. 800-801 [when the facts pleaded
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do not state a cause of action, we determine whether the plaintiff has demonstrated a
reasonable possibility that the defect can be cured by amendment].) DKN does not argue
that Faerber is equitably estopped from asserting that the present action against him is
barred by res judicata principles, and even if it did, it could not state facts sufficient to
support the reasonable reliance element of equitable estoppel. (See Superior Dispatch,
Inc. v. Insurance Corp. of New York (2010) 181 Cal. App. 4th 175, 187-188 [reasonable
reliance element of equitable estoppel is question of fact for the trier of fact unless
reasonable minds could reach only one conclusion based on the evidence].)6
DKN was represented by counsel in the Caputo action, and DKN dismissed
Faerber and Neel from that action before discovery was completed and the matter
proceeded to trial. In the absence of documentation showing the lease had been amended
to exclude Faerber and Neel as colessees, DKN did not reasonably rely on any oral
misrepresentation by Faerber or his counsel that the lease had been amended, shortly after
it was signed, to exclude Faerber and Neel as colessees.
IV. DISCUSSION/THE ATTORNEY FEE AWARD
The trial court awarded Faerber $54,817.50 in attorney fees as the prevailing party
on DKN’s complaint pursuant to a fee provision in the lease. (Civ. Code, § 1717.) The
award was around 30 percent less than the $78,177.50 sum Faerber sought for defending
6 In the trial court, DKN argued Faerber was judicially estopped from arguing in
the present action that he should have been a party to the Caputo action, because in the
Caputo action he took the inconsistent position of claiming he was not intended to be a
lessee and had to be dismissed from the Caputo action.
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the complaint. DKN claims the $54,817.50 award is unreasonably high, and constitutes
an abuse of the trial court’s discretion. We find no abuse of discretion.
A. Background
In support of the $78,177.50 attorney fee motion, Faerber’s lead counsel, Edward
Susolik, submitted a declaration, together with invoices to Faerber, showing the hours
billed and the hourly rates charged to Faerber in connection with representing him in the
present action. The hours billed were recorded contemporaneously with the hours
worked. Susolik had over 20 years of experience as a litigator and trial lawyer, had
handled “numerous complex real estate litigation matters,” and charged $525 an hour.
Two attorneys who assisted Susolik had 12 and 13 years of experience, and were billed at
$395 an hour. A paralegal’s time was charged at $155 per hour.
In Susolik’s experience, the hourly rates charged were consistent with the hourly
rates charged by other attorneys and paralegals “in the community” with similar skill and
experience. Susolik’s law firm, Callahan & Blaine, was located in Orange County. The
law firm representing DKN, Prenovost, Normandin, Bergh & Dawe, was also located in
Orange County.
The total number of hours billed was 167.2. The invoices show the attorneys billed
for time incurred in preparing the demurrer and the attorney fee motion, attending the
hearings on the motions, reviewing and analyzing the complaint and the rulings in the
Caputo action, arranging for and attending a one-day mediation at Judicial Arbitration
and Mediation Services, preparing “a comprehensive mediation brief,” engaging in
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further settlement discussions, conducting “factual investigation and legal research
relevant to the claims and defenses” in the present action, and preparing and serving a
motion for sanctions (§ 128.7), which was not filed. The attorneys also prepared and
presented a demand letter to DKN’s counsel, with case citations, demanding the dismissal
of the complaint because its claims were barred by “the rule against splitting causes of
action.” The letter warned that DKN and its attorneys would be subject to sanctions if
the complaint was not dismissed. By its complaint, DKN was seeking over $5.2 million
from Faerber for monies due under the lease.
In opposing the attorney fee motion, DKN argued the amount sought was “grossly
excessive for the filing of a single demurrer” based on a simple, straightforward legal
theory. In addition, the community for determining counsel’s compensable hourly rates
was “the Riverside County Area,” and the rates charged, an average of $460 an hour, was
excessive for Riverside County.
Further, there was “no need” for Faerber to hire new counsel in the present action,
and the fees counsel billed in order to “get up to speed” on the Caputo action were
unnecessary and duplicative of the work performed by the attorney who represented
Faerber, Neel, and Caputo in the Caputo action. DKN also asked the court to subtract
16.55 hours billed for preparing the sanctions motion because the motion was not filed
and was prepared and served “for the purpose of intimidation and gamesmanship.” DKN
also objected to various hours billed in connection with preparing intra-firm memoranda,
the demand letter, the mediation brief, and the demurrer. For example, DKN noted that
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1.55 hours in paralegal time was billed for making copies of the demurrer and placing
them in a binder. More generally, DKN complained there were “multiple attorneys
billing to perform the same task, sometimes more than once, throughout the invoices.”
At the hearing on the motion, the trial court awarded Faerber $54,817.50 as a
reasonable fee, which was $23,360, or approximately 30 percent, less than the $78,177.50
amount Faerber requested. The court said: “The billing rate is borderline, but I have not
reduced it. I think it’s a little high, but not so high I can say it’s unreasonable.” The
court did not identify each billing entry it excluded, but said it was excluding the 16.5
hours billed for the unfiled sanctions motion, and what “appeared to be inflated a number
of hours for an internal memo,” as well as two letters to opposing counsel demanding
dismissal of the complaint, and other time entries that appeared to be unrelated to the
action.
B. Applicable Law and Analysis
An order granting or denying attorney fees is reviewed for an abuse of discretion.
(Graciano v. Robinson Ford Sales, Inc. (2006) 144 Cal. App. 4th 140, 148.) Civil Code
section 1717, the basis for the attorney fee award to Faerber, provides that “[r]easonable
attorney’s fees shall be fixed by the court . . . .” A trial court has broad authority to fix
the amount of a reasonable fee. (PLCM Group, Inc. v. Drexler (2000) 22 Cal. 4th 1084,
1095.) The amount awarded is governed by equitable principles and will not be disturbed
on appeal unless it is “‘clearly wrong’” (ibid.) or “‘manifestly excessive in the
circumstances.’” (Horning v. Shilberg (2005) 130 Cal. App. 4th 197, 210.)
19
A trial court’s fee setting inquiry “ordinarily begins with the “‘lodestar,’” i.e., the
number of hours reasonably expended multiplied by the reasonable hourly rate.” (PLCM
Group, Inc. v. Drexler, supra, 22 Cal.4th at p. 1095.) “‘[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.]” (Ibid.) The reasonable hourly rate is “that
prevailing in the community for similar work.” (Ibid.; see also Ketchum v. Moses (2001)
24 Cal. 4th 1122, 1133 [lodestar rate is the “prevailing rate for private attorneys in the
community conducting noncontingent litigation of the same type.”].)
Once the lodestar figure is fixed, the court may adjust it based on a consideration
of factors specific to the case, in order to arrive at an amount representing the fair market
value of the legal services provided. (PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th at
p. 1095; Building a Better Redondo, Inc. v. City of Redondo Beach (2012) 203
Cal. App. 4th 852, 870.) As relevant here, these factors include the nature of the litigation,
its difficulty, the amount involved, the skill required in its handling, and the success or
failure of the representation. (PLCM Group, Inc. v. Drexler, supra, at p. 1096.) The
court may also reduce or deny a fee request that appears unreasonably inflated or
duplicative. (Serrano v. Unruh (1982) 32 Cal. 3d 621, 635 & fn. 21.)
DKN claims the court abused its discretion in failing to calculate the lodestar and
use it as “the starting point” in determining the $54,817.50 fee award, and that the court
instead used “the excessive fee totals” submitted by Faerber as a starting point in its
analysis, resulting in an excessive fee award. We disagree.
20
Counsel’s time records are ordinarily the proper starting point in determining the
lodestar. (See Horsford v. Board of Trustees of California State University (2005) 132
Cal. App. 4th 359, 397.) Here, the court calculated the lodestar and determined a
reasonable fee by examining counsel’s detailed time records and considering whether the
hours billed were reasonable and the particular services rendered were reasonably related
to the case. The court also determined that counsel’s hourly rates were “borderline” and
“a little high,” but not unreasonable. The court then reduced the $78,177.50 fee request
by $23,360, by striking the 16.5 hours billed for the unfiled sanctions motion and other
items the court deemed “inflated,” duplicative, or not reasonably related to the case.
After eliminating these items, the court arrived at $54,817.50 as a reasonable fee. This
was proper.
DKN claims the hourly rates billed by Faerber’s Orange County-based attorneys—
from $395 to $525 an hour—were higher than the hourly rates charged by attorneys
performing comparable work in Riverside County. (Camacho v. Bridgeport Fin., Inc.
(9th Cir. 2008) 523 F.3d 973, 979 [“Generally, when determining a reasonable hourly
rate, the relevant community is the forum in which the district court sits.”].) DKN claims
it adduced “uncontroverted evidence,” based on the “Laffey Matrix” that the hourly rates
for lawyers in Riverside County was $355.26. Not so.
The Laffey matrix is “an inflation-adjusted grid of hourly rates for lawyers of
varying levels [i.e., years] of experience in Washington D.C.” published by the
Department of Justice. (Prison Legal News v. Schwarzenegger (9th Cir. 2010) 608 F.3d
21
446, 454.) As Faerber points out, the Ninth Circuit has questioned whether the Laffey
matrix is a reliable indicator of hourly rates for lawyers practicing outside Washington
D.C. (Ibid. [“[J]ust because the Laffey matrix has been accepted in the District of
Columbia does not mean that it is a sound basis for determining rates elsewhere”]; but
see Nemecek & Cole v. Horn (2012) 208 Cal. App. 4th 641, 651-652 [affirming attorney
fee award based on $419.43 hourly rate calculated under the Laffey matrix as reasonable,
even though that hourly rate was higher than the hourly rates billed to the client and
resulted in a fee award higher than the fee actually incurred].)
The Laffey matrix assumes that the only relevant consideration in establishing an
attorney’s reasonable hourly rate is the number of years an attorney has been practicing.
(See In re HPL Techs., Inc., Secs. Litig. (2005) 366 F. Supp. 2d 912, 921-922.) Under the
Laffey matrix for 2011-2012, Susolik, with over 20 years of experience, would have an
hourly rate of $734, if he were working in Washington D.C. The two attorneys who
worked under Susolik had 11 to 19 years of experience, and on that basis would have an
hourly rate of $609 in Washington D.C. But rather than applying these rates, DKN
argued that a $355.26 blended hourly rate should have been applied. DKN calculated this
rate by applying a “local quotient” of .484 to Susolik’s $734 hourly rate ($734 x .484 =
$355.26). The local quotient was taken from the May 2010 Metropolitan and
Nonmetropolitan Area Occupational Employment and Wage Estimates for the Riverside-
San Bernardino-Ontario area, published by the Bureau of Labor Statistics.
22
The court was by no means required to use the Laffey matrix in calculating the
reasonable hourly rates chargeable to DKN in the Faerber matter. Instead, the court was
entitled to rely upon its own experience, and on the representations of Faerber’s counsel,
in determining those rates. (Serrano v. Priest (1977) 20 Cal. 3d 25, 49 [“The
‘experienced trial judge is the best judge of the value of professional services rendered in
his court . . . .’”]; Davis v. City of San Diego (2003) 106 Cal. App. 4th 893, 902-904 [trial
court may rely on representations of counsel in determining counsel’s reasonable hourly
rate].) As noted, the court determined that the $395 to $525 hourly rates charged by
Faerber’s attorneys were “a little high,” but not unreasonable. This was not an abuse of
discretion, given the attorneys’ experience, the complexity of the issues involved, the
$5.2 million amount at stake, and the result obtained.
DKN further argues Faerber failed to establish the reasonableness of his attorney’s
$395 to $525 hourly rates because he did not explain why he needed to hire attorneys
based in Orange County, rather than attorneys based in Riverside County. DKN points
out that when local counsel is available to perform the same work at lower rates than
counsel from outside the area, “[a] plaintiff must at least make ‘“a good-faith effort to
find local counsel.”’” (Rey v. Madera Unified School Dist. (2012) 203 Cal. App. 4th 1223,
1241.) This is because, in calculating the lodestar, “[t]he reasonable hourly rate is that
prevailing in the community for similar work.” (PLCM Group, Inc. v. Drexler, supra, 22
Cal.4th at p. 1095.)
23
Here, however, DKN presented no evidence that the rates charged by Faerber’s
Orange County attorneys were higher than the rates Riverside County attorneys would
have charged for comparable work. It is by no means a given that Riverside County
attorneys would have charged lower hourly rates than Faerber’s attorneys charged for the
work they performed, as DKN assumes. (See Perrin v. Goodrich (C.D. Cal. May 14,
2012, ED CV 08-00595 LLP) 2012 U.S. Dist. LEXIS 67933 [at pp. *16-17] [in awarding
attorney fees in civil rights litigation, hourly rate of $600 would not be unreasonable
“[e]ven if the Court were to consider Riverside the relevant community for establishing
hourly rates”].) Further, nothing in the record suggests the trial court did not consider or
was not aware of the rates Riverside County attorneys would have charged in
determining that the rates charged by Faerber’s Orange County attorneys were
reasonable, and comparable, to Riverside County rates.
Lastly, DKN complains that the 167.2 in hours billed was “grossly unreasonable,”
for various reasons, including because the time spent getting “up to speed” on the Caputo
action was unnecessary; the time spent preparing the unfiled sanctions motion was
unnecessary; there was no need for Faerber to hire new counsel; the present case only
involved a “simple demurrer”; and other time billed by the attorneys was overlapping or
duplicative. But as indicated, the court reduced Faerber’s fee request by $23,360, and in
doing so specifically eliminated the 16.5 hours billed for the unfiled sanctions motion and
numerous items the court deemed “inflated,” duplicative, or not reasonably related to the
litigation. Faerber fails to point to any hours billed that were not eliminated but should
24
have been eliminated from the fee award. (Premier Medical Management Systems, Inc.
v. California Ins. Guarantee Assn. (2008) 163 Cal. App. 4th 550, 564 [party challenging
attorney fees as excessive because too many hours are claimed has burden of pointing to
specific items challenged; general arguments that fees are excessive, duplicative, or
unrelated do not suffice].)
V. DISPOSITION
The judgment dismissing DKN’s complaint and the postjudgment order awarding
Faerber $54,817.50 in attorney fees are affirmed. Faerber shall recover his costs on each
appeal. (Cal. Rules of Court, rule 8.278.)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
KING
J.
We concur:
HOLLENHORST
Acting P. J.
RICHLI
J.
25
Filed 4/25/14
COURT OF APPEAL -- STATE OF CALIFORNIA
FOURTH DISTRICT
DIVISION TWO
ORDER
DKN HOLDINGS LLC,
Plaintiff and Appellant, E055732, E056294
v. (Super.Ct.No. RIC1109512)
WADE FAERBER,
The County of Riverside
Defendant and Appellant.
THE COURT
Requests having been made to this Court pursuant to California Rules of Court,
rule 8.1120(a), for publication of a nonpublished opinion heretofore filed in the above
entitled matter on April 9, 2014, and it appearing that the opinion meets the standard for
publication as specified in California Rules of Court, rule 8.1105(c),
26
IT IS ORDERED that said opinion be certified for partial publication, with the
exception of part IV, pursuant to California Rules of Court, rule 8.1105(b).
KING
J.
We concur:
HOLLENHORST
Acting P.J.
RICHLI
J.
27