Vecron Exim Ltd. v. Clinton Lee Stokes, III

Filing 117

MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: RE DEFENDANTS MOTION FOR ATTORNEY FEES 112 . The Court DENIES defendants motion for attorney fees in the amount of $34,290.00. (lc)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:17-cv-02944-CAS- RAOx

Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

Present: The Honorable

Date

‘O’
July 17, 2019

CHRISTINA A. SNYDER

Catherine Jeang

Not Present

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

(IN CHAMBERS) - DEFENDANT’S MOTION FOR ATTORNEY
FEES (Dkt. 112, filed May 5, 2019)

The Court vacated the hearing on this motion on May 24, 2019, dkt. 113, and the
Court finds this motion appropriate for decision without oral argument. Fed. R. Civ. P.
78; Local Rule 7-15.
I.

INTRODUCTION

On April 19, 2017, plaintiff Vecron Exim Ltd. (“Vecron”) filed this action against
defendant Clinton Lee Stokes, III (“Stokes”), asserting a single claim for breach of
contract. Dkt. 1 (“Compl.”). The Court entered judgment on April 24, 2019. Dkt. 111.
On May 5, 2019, defendant filed the instant motion for attorney’s fees, seeking
$34,290.00 in fees. Dkt. 112 (“Mot.”). At that time, plaintiff, a business entity, had not
retained counsel, and therefore on May 24, 2019, the Court issued an order to show why
it should not grant defendant’s motion for attorney’s fees, and it granted plaintiff thirty
(30) days to retain counsel and file an opposition. Dkt. 113. On June 19, 2019, Allan
David Johnson appeared on behalf of plaintiff, dkt. 114, and plaintiff filed an opposition,
dkt. 115 (“Opp’n”). Defendant did not file a reply.
Having carefully considered the parties’ arguments, the Court finds and concludes
as follows.
II.

BACKGROUND

Plaintiff filed this action against defendant alleging a sole claim for breach of
contract. Compl. at 1. Plaintiff asserted that on January 23, 2017, it entered into a valid
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Case No.

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Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

Memorandum of Understanding with defendant (the “Agreement”), under which
defendant was to pay plaintiff $650,000 by February 19, 2017. Compl. at 2–3.
According to plaintiff, defendant breached the Agreement by failing to adhere to the
payment obligation. Id. at 4.
On May 26, 2017, defendant, appearing pro se, filed a motion to dismiss for
improper venue and failure to join PPB as an indispensable party. Dkt. 9. The Court
denied defendant’s motion. Dkt. 13. On August 28, 2017, defendant retained Kahil J.
McAplin as counsel, and filed an answer in which defendant admitted that he “entered
into a Memorandum of Understanding, which is a valid and binding contract among
Vecron and Debtors.” Dkt. 20 (“Answer”) at 2 (admitting the allegation contained in
paragraph 6 of the complaint).
On April 6, 2018, plaintiff moved for summary judgment. Dkt. 41. In the months
proceeding, defendant failed to respond to discovery matters, and defendant failed to
timely file an opposition to plaintiff’s motion for summary judgment. See Dkt. 40, 45.
Then, on May 4, 2018, a few days before the scheduled hearing on plaintiff’s motion for
summary judgment, defendant filed an ex parte application for an order continuing all
dates. Dkt. 51. Defendant stated, in a declaration attached to his ex parte application
that,
I am informed that Mr. McAlpin filed an Answer on my behalf that admits that I
entered into [the Agreement]. Mr. McAlpin never consulted with me about the
facts of this case prior to filing the Answer. After I received a copy of the Answer
he filed, I confronted him of the mistake in the Answer, I asked him how and when
to let the other side know that I never signed the contract, he replied “at trial.”
Because he was my lawyer, I believed him.
Id., Declaration of Clinton Stokes, ¶ 4. Defendant further declared that, despite his
efforts, there was a “lack of communication” between himself and McAlpin, and that
McAlpin never informed defendant of plaintiff’s discovery requests. Id. ¶¶ 5–10. At the
time of defendant’s ex parte application, defendant retained Scott A. Meehan (“Meehan”)
as new counsel. Dkt. 51.
The Court granted defendant’s motion to continue all dates, dkt. 54, and granted
defendant leave to amend his initial answer, dkt. 68. Subsequently, defendant filed an
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Case No.

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Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

amended answer wherein he changed his previous position and denied entering into the
Agreement with plaintiff. Dkt. 60-1 (“FAA”) ¶ 6.
On December 10, 2018, defendant filed a motion for summary judgment, dkt. 101
(“MSJ”), and plaintiff’s counsel filed a motion to withdraw as counsel, dkt. 100. Plaintiff
did not oppose defendant’s motion, and upon request of the Court, dkt. 107, plaintiff filed
a declaration stating that it understood that if the summary judgment motion was granted,
plaintiff’s breach of contract claim would be dismissed with prejudice, dkt. 104 ¶ 7. In
light of the uncontroverted record before it, the Court therefore found that defendant
never signed the Agreement, but instead his half-brother Michael Stokes signed the
Agreement, forging defendant’s name. Dkt. 106 at 5. Accordingly, on January 15, 2019,
the Court granted defendant’s motion for summary judgment on the grounds that plaintiff
and defendant never formed a valid agreement under which the payment obligation could
be enforced against defendant. Id. at 7. At that time, the Court also granted plaintiff’s
counsel’s motion to withdraw counsel. Id. at 5.
Defendant now moves for attorney’s fees pursuant to an attorney’s-fee clause in
the Agreement.
III.

LEGAL STANDARD

Federal Rule of Civil Procedure 54(d)(2) “creates a procedure but not a right to
recover attorneys' fees.” MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co., 197 F.3d 1276,
1280 (9th Cir. 1999). Accordingly, “there must be another source of authority for such
an award.” Id. at 1281 (quoting Abrams v. Lightolier, Inc., 50 F.3d 1204, 1224 (3d Cir.
1995)). “The requirement under Rule 54(d)(2) of an independent source of authority for
an award of attorneys' fees gives effect to the ‘American Rule’ that each party must bear
its own attorneys' fees in the absence of a rule, statute, or contract authorizing such
award.” Abrams, 50 F.3d at 1224.
When a district court “exercis[es] its subject matter jurisdiction over a state law
claim, so long as ‘state law does not run counter to a valid federal statute or rule of
court,. . . state law denying the right to attorney's fees or giving a right thereto, which
reflects a substantial policy of the state, should be followed.’” MRO Commc'ns, 197
F.3d at 1281 (quoting Alyeska Pipeline Serv. Co. v. Wilderness Society, 421 U.S. 240,
259 n.31 (1975)). California has codified the American Rule in Code of Civil Procedure
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

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Case No.

2:17-cv-02944-CAS- RAOx

July 17, 2019

Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

Section 1021, which provides: “Except as attorney's fees are specifically provided for by
statute, the measure and mode of compensation of attorneys and counselors at law is left
to the agreement, express or implied, of the parties.” Cal. Civ. Proc. Code § 1021; see
Sears v. Baccaglio, 60 Cal. App. 4th 1136, 1143–44 (1998) (explaining that Section 1021
codifies the rule that “each party to a lawsuit must ordinarily pay his or her own
attorney's fees”). One such statute is California Civil Code § 1717, which provides in
part:
In 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.
Cal. Civ. Code § 1717(a) (West).
“[S]ection 1717 was originally enacted to limit the ability of a dominant
contracting party to provide for a right to attorney's fees on only one side of an
agreement.” Sears, 60 Cal. App. 4th at 1144. Accordingly, “[i]f the contract provides for
fees at all, then the prevailing party may recover them, even if the contract purports to
specify only one of the parties as eligible.” 7 Witkin, Cal. Proc., Judgment § 165 (5th ed.
2008). “Whether a contractual attorney fee clause provides for a fee award in a particular
case is a question of contract interpretation.” Windsor Pac. LLC v. Samwood Co., Inc.,
213 Cal. App. 4th 263, 273 (2013).
IV.

DISCUSSION

Defendant argues that he is entitled to an award of attorney’s fees, under California
Civil Code § 1717, because plaintiff’s breach of contract action falls within the scope of
the attorney’s-fee provision articulated in Section 11 of the Agreement and because
defendant successfully defended that claim. See Mot. at 3–5. Defendant seeks an award
of attorney’s fees in the sum of $34,290.00, which he claims were reasonably incurred.
Id. at 5. From the time that he was retained in May 2018, defense counsel asserts that he
performed 76.2 hours of legal services at a rate of $450.00 per hour. Dkt. 112-1
(“Meehan Decl.”) ¶¶ 10–11.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

‘O’

Case No.

2:17-cv-02944-CAS- RAOx

July 17, 2019

Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

Plaintiff opposes defendant’s motion. Opp’n at 2. First, plaintiff contends that
Nevada law applies in this case because the Agreement includes a choice-of-law clause,
which provides that the Agreement will be “governed and construed in accordance with”
Nevada law. Id. at 8; see also Dkt. 112-2 ¶ 14.1 Plaintiff asserts that under Nevada law,
there is no statutory equivalent to Cal. Civ. Code § 1717; thus, plaintiff reasons that
defendant cannot rely on § 1717 and is not entitled to attorney’s fees. Opp’n at 8–11.
In the alternative, plaintiff argues that even if California law applies, defendant is
barred by equitable principles from receiving an award of attorney’s fees. Id. at 2.
According to plaintiff, “all of the fees [defendant] incurred in this action were completely
avoidable, unnecessary, and self-inflicted.” Id. Specifically, plaintiff contends that
defendant “chose to hide for over a year his true identity and the truth that his halfbrother signed the [Agreement] instead of him” and knew that his half-brother had
impersonated him during negotiations with plaintiff and the litigation. Id. at 11. Plaintiff
presents evidence that defendant knew of his half-bother’s scheme and had the ability to
avoid incurring fees. Id. at 13. For example, plaintiff presents the deposition transcript
in which defendant states that he knew that his half-brother had impersonated him during
negotiations with plaintiff by using an email address containing defendant’s name and
during this litigation by attending a mediation over the phone on behalf of defendant. See
Dkt. 115-2, Ex. 1 Deposition of Clinton Stokes (“Stokes Deposition”) at 152:2–152:23;
56:16–58:11. Furthermore, plaintiff asserts that defendant stated that he knew the day he
was served with the complaint that his half-brother had forged his signature on the
Agreement. Id. at 105:15–106:20. Also, plaintiff presents an email message, dated April
21, 2017 and with the subject line “The Vecron Plan,” in which defendant tells his halfbrother that he needs to “get this resolved” or else he “will advise Chuck [of Vecron] that
it has been you that has been communicating with him and that he’s got no recourse with
me as I did not approve nor sign this [Agreement].” Dkt. 115-2, Ex. 4.

1

The choice of law provision provides that, “[t]his Agreement will be governed by
and construed in accordance with the laws of the State of Nevada, USA, and the Seller
and the Buyer hereby attorn to the jurisdiction of the Courts of the State of Nevada,
USA.” Dkt. 112-2 ¶ 14.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:17-cv-02944-CAS- RAOx

Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

A.

Date

‘O’
July 17, 2019

Choice of Law

As a preliminary matter, the Court finds that the choice-of-law provision contained
in the Agreement is not enforceable because the Court previously found the Agreement to
be invalid. Here, defendant did not consent to the Agreement since he did not sign it,
making the Agreement invalid. Therefore, the Court does not find that the parties
properly agreed on the choice-of-law provision. “[A] choice-of-law provision—like any
other contractual provision—will not be enforced if it was included because of improper
means or mistake.” Discover Bank v. Superior Court, 134 Cal. App. 4th 886, 897 (Cal.
Ct. App. 2005) (citing Restatement (Second) of Conflict of Laws § 187 com. b) (“[A]
choice-of-law” provision […] will not be given effect if the consent of one of the parities
to its inclusion in the contract was obtained by improper means, such as by
misrepresentation, duress, or undue influence, or by mistake.”). Accordingly, California
law applies to the instant motion.
B.

Entitlement to Attorney’s Fees

Section 1717 applies in this case because the Agreement provides that “[i]n the
event that any Party finds it necessary to retain counsel in connection with a contract
claim relating to the interpretation, defense, or enforcement of this agreement, the
prevailing Party shall recover its reasonable attorney’s fees and expenses from the
unsuccessful Party.” Dkt. 112-2 ¶ 11. A prevailing party under § 1717 is the one “who
recovered a greater relief in the action on the contract.” Cal. Civ. Code § 1717(b)(1)
(West). A defendant is a prevailing party, if he or she “obtains a simple, unqualified
victory by defeating the only contract claim in the action.” Hsu v. Abbara, 9 Cal. 4th
863, 877 (1995). As a result, “Section 1717 entitles the successful defendant to recover
reasonable attorney fees incurred in defense of that claim if the contract contained a
provision for attorney fees.” Id. Furthermore, “it has been consistently held that when a
party litigant prevails in an action on a contract by establishing that the contract is
invalid, inapplicable, unenforceable, or nonexistent, Section 1717 permits that party's
recovery of attorney fees whenever the opposing parties would have been entitled to
attorney fees under the contract had they prevailed.” Santisas v. Goodin, 17 Cal. 4th 599,
611 (1998).
Here, defendant prevailed in an “action on a contract, where the contract
specifically provides that attorney’s fees and costs, which are incurred . . . shall be
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
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Case No.

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Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

awarded,” which renders him a prevailing party under § 1717. Cal. Civ. Code § 1717(a).
The Court granted defendant’s motion for summary judgment and entered judgment in
his favor. Accordingly, he “obtain[ed] a simple, unqualified victory by defeating the only
contract claim in the action.” Hsu, 9 Cal. 4th at 877. Although defendant prevailed
because the Agreement was found to be invalid, the Court’s finding does not bar his
entitlement to reasonable attorney’s fees because § 1717 applies even where a defendant
defeats a contract claim by showing that they were never a party to the contract. Hsu, 9
Cal. 4th at 870-71 (explaining that § 1717 would “fall short of its goal of full mutuality of
remedy if its benefits were denied to parties who defeat contract claims by proving that
they were not parties to the alleged contract or that it was never formed.”).
C.

Reasonableness of Fees

Under § 1717, “reasonable attorney’s fees shall be fixed by the court.” Cal. Civ.
Code § 1717(a). “The trial court has broad discretion to determine the amount of a
reasonable fee, and the award of such fees is governed by equitable principles. The first
step involves the lodestar figure—a calculation based on the number of hours reasonably
expended multiplied by the lawyer's hourly rate.” EnPalm, LLC v. Teitler, 162 Cal. App.
4th 770, 774 (Cal. Ct. App. 2008).
However, a trial court may then adjust a lodestar figure based on a consideration of
different factors including: “1) novelty and difficulty of questions involved; 2) skill
displayed by attorney; 3) extent to which nature of litigation precluded other employment
by attorney; and 4) contingent nature of fee award.” Ketchum v. Moses, 24 Cal. 4th
1122, 1132 (2001). Also, a court may consider “the nature of the litigation, its difficulty,
the amount involved, the skill required in its handling, the skill employed, the attention
given, the success or failure, and other circumstances in the case.” Melnyk v. Robledo,
64 Cal. App. 3d 618, 623–624 (Cal. Ct. App. 1976) (emphasis added). The “other
circumstances” include whether a party “engaged in conduct that made much of the
litigation unnecessary and, as a result, most of the lodestar figure represented attorney
fees that were unreasonable.” EnPalm, 162 Cal. App. 4th at 775. Accordingly, while a
court may not “reduce a prevailing party's contractual attorney fees for purely subjective
reasons, such as its views on the merits of a case, or antipathy toward a party, her
counsel, or counsel's litigation strategy,” and neither “may [fees] be reduced solely to
punish a party for such reasons,” id. at n.5, a court “has discretion to reduce a prevailing
party's contractual attorney fees to the extent they were unnecessary,” id.; see also
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Date

‘O’

Case No.

2:17-cv-02944-CAS- RAOx

July 17, 2019

Title

VECRON EXIM LTD. V. CLINTON LEE STOKES, III

Simmonds v. Wells Fargo Bank, N.A., No. SA-CV-18-01280-JVS (JDEx), 2019 WL
856862, at *3 (C.D. Cal. Jan. 22, 2019) (explaining that, under California law, “the Court
may reduce an attorneys' fee award where the documentation is lacking or where the
hours billed were excessive, redundant, otherwise unnecessary, or not reasonably
expended”). For example, in EnPalm, the court applied equitable principles to reduce
attorney’s fees. Id. at 773. In that case, defense counsel requested $116,000 in fees. Id.
After the court concluded that a reasonable lodestar was actually $50,000, it then reduced
the fee award to $5,000 because, although the defendant was the prevailing party, she had
lied under oath, which unnecessarily extended litigation and unreasonably incurred
additional attorney’s fees. Id.; see also PSM Holding Corp. v. Nat'l Farm Fin. Corp., 743
F. Supp. 2d 1136, 1167 (C.D. Cal. 2010), aff'd in part, 884 F.3d 812 (9th Cir. 2018)
(denying all fees and costs for a bankruptcy proceedings after finding that such an award
“would be inequitable because those proceedings were unnecessary”).
Here, the Court finds that defendant is barred from recovering any attorney’s fees
under § 1717 because the time spent on the present case by defense counsel was
effectively unnecessary. Although defendant only requests fees for the time once he
corrected his answer, the Court still finds that the fees were incurred solely due to
defendant’s dishonesty before the Court and his failure to correct his false admittance for
over a year. Rather than candidly alert plaintiff and the Court of his role in this matter at
the beginning of this litigation, which could have ended the litigation, defendant
obfuscated his role thereby unnecessarily expanding the amount of litigation and
misguiding its direction. Plaintiff never opposed defendant’s motion for summary
judgment, and affirmatively agreed that summary judgment could be entered in favor of
defendant. Therefore, the work done by Meehan on behalf of defendant to address these
issues was likely avoidable. Given these facts, the Court finds that the entire sum of
$34,290.00 in attorney’s fees was unreasonably incurred by defendant. Defendant’s
motion is therefore DENIED.
V.

CONCLUSION

In accordance with the foregoing, the Court DENIES defendant’s motion for
attorney fees in the amount of $34,290.00.
IT IS SO ORDERED.
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