Buena Vista, LLC v. New Resource Bank et al

Filing 67

ORDER by Judge Claudia Wilken GRANTING IN PART AND DENYING IN PART DEFENDANT NEW RESOURCE BANKS 60 MOTION FOR ATTORNEYS FEES. (ndr, COURT STAFF) (Filed on 8/26/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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No. C 10-01502 CW

BUENA VISTA, LLC,
Plaintiff,
v.
NEW RESOURCE BANK, a California
corporation; FERGUSON & BREWER
INVESTMENT COMPANY, a California
corporation; MARCUS & MILLICHAP
COMPANY, a California corporation;
and DOE 1 through 20, inclusive,

ORDER GRANTING IN
PART AND DENYING IN
PART DEFENDANT NEW
RESOURCE BANK’S
MOTION FOR
ATTORNEYS’ FEES

Defendants.
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Defendant New Resource Bank, which prevailed in the underlying

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action, now moves for an order directing Plaintiff Buena Vista to

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pay $182,283.50 in attorneys’ fees incurred in its defense.

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Vista opposes the motion.

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by the parties, including declarations filed by Defendant, the

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Court GRANTS Defendant’s motion in part and DENIES it in part.

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Buena

Having considered all the papers filed

BACKGROUND
The underlying action arose out of a business loan to Buena

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Vista, the borrower, from Defendant New Resource Bank, the lender,

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for the construction of Villa del Sol, an ecologically friendly

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residential complex in Martinez, California.

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modification efforts failed and the bank sold the loan to a real

After loan

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estate firm, Buena Vista filed an eight-count complaint against the

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bank, the real estate firm that purchased the loan, and the

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brokerage firm that orchestrated the transaction.

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The complaint alleged: (1) violation of the Racketeer Influenced

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and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.;

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(2) breach of contract; (3) breach of the implied covenant of good

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faith and fair dealing; (4) violation of California’s Unfair

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Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq.;

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(5) intentional misrepresentation; (6) unjust enrichment;

Docket No. 1.

United States District Court
For the Northern District of California

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(7) intentional interference with prospective economic advantage;

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and (8) negligence.

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complaint with leave to amend for failure to state a claim upon

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which relief could be granted.

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Amended Complaint (1AC) renewed all eight causes of action but did

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not remedy any of the original complaint’s deficiencies.

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No. 45.

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leave to amend, for failure to state a claim.

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In May 2010, this Court dismissed the

Docket No. 44.

Buena Vista’s First

Docket

In January 2011, this Court dismissed the 1AC without

New Resource Bank now seeks from Buena Vista attorneys’ fees

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in the amount of $165,256.00 plus $17,027 for preparing this fee

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application, for a total of $182,283.50.

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in the Loan Agreement between them provide that Buena Vista will

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pay all of the bank’s legal expenses “incurred in connection with

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the enforcement of [the] Agreement.”

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its motion that all fees are recoverable because each part of the

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eight-count complaint related to the Loan Agreement.

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Buena Vista argues that the bank cannot recover attorneys’ fees

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because the complaint sounded in tort and not contract; the limited

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It contends that clauses

New Resource Bank argues in

In response,

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scope of the attorneys’ fees clause precludes recovery; and the

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amount of fees requested by the bank is unreasonable.

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LEGAL STANDARD
In the Ninth Circuit, state law governs applications for

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attorneys’ fees in cases where a federal court exercises diversity

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or supplemental jurisdiction.

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67 F.3d 1470, 1478 (9th Cir 1995); Synapsis, LLC v. Evergreen Data

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Systems, Inc., 2006 WL 3302432 at *2 (N.D. Cal.).

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Court exercised supplemental jurisdiction over Buena Vista’s state

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United States District Court
For the Northern District of California

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law claims, California law applies to the bank’s fee application.

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Attorneys’ fees are awarded under California law when a

Mangold v. Cal. Pub. Utils. Comm’n,

Because this

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statute or contract provision so provides.

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Alperson, 25 Cal. 3d 124, 127 (1979); Lerner v. Ward, 13 Cal. App.

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4th 155, 158 (1993).

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attorneys’ fees, applicants may recover under two statutes:

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California Civil Code § 1717 and California Code of Civil Procedure

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§ 1021.

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related to claims “on a contract”:

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Reynolds Metals Co. v.

When a contract allows for an award of

California Civil Code § 1717(a) governs fee applications

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.

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The court determines which party, if any, has prevailed on the

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contract for the purposes of awarding fees.

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§ 1717(b)(1).

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Cal. Civ. Code

California Code of Civil Procedure § 1021 is a broader statute
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allowing for parties to collect any attorneys’ fees made

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recoverable by a contract provision:

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Except as attorneys’ 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 . . .

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Under a § 1021 analysis, an award of attorneys’ fees “turns on the
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language of the contractual attorneys’ fee provision.”

Exxess

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Electronixx v. Heger Realty Corp., 64 Cal. App. 4th 698, 708
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(1998).

The court must determine “whether the party seeking fees

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has ‘prevailed’ within the meaning of the provision and whether the
United States District Court
For the Northern District of California

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type of claim is within the scope of the provision.”

Id.

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DISCUSSION
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I. New Resource Bank’s Fee Application
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Both parties agree that the Loan Agreement between Buena Vista
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and the bank includes an enforceable clause for attorneys’ fees and
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costs.

Decl. Of Bill Peterson, Ex. A; Pl.’s Opp’n, Ex. A.

The

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Agreement provides:
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Attorneys’ Fees; Expenses. Borrower agrees to pay upon
demand all of Lender’s costs and expenses, including
Lender’s attorneys’ fees and Lender’s legal expenses,
incurred in connection with enforcement of this
Agreement.

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The parties disagree, however, about the scope of the clause.

The

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bank claims in its motion that it is entitled to the full cost of
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its defense, $165,256.00, as well as $17,027.50 for its attorneys’
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fee motion, because the complaint was based on the Agreement.
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Buena Vista responds that there is no statutory basis for recovery
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under California Civil Code § 1717 and that even if there is, the
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attorneys’ fees provision in the contract is too narrow to
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encompass the claims in the complaint.

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A. Contract Claims

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The bank asserts that it can recover under § 1717 because

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Buena Vista’s causes of actions were “on the contract.”

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to the bank, “[e]very one of Buena Vista’s claims related to the

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relationship of the parties under the loan agreements.”

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Motion at 6.

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“because the essential elements of each of Buena Vista’s claims

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were based on violations of RICO and fraudulent inducement” and not

United States District Court
For the Northern District of California

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According

Def.’s

Plaintiff responds that § 1717 is inapplicable

the Loan Agreement.

Pl.’s Opp’n at 2.

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Under Civil Code § 1717(a), if a “prevailing party” wins a

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claim that is “on the contract,” and the agreement provides for the

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recovery of attorneys’ fees in the enforcement of the contract,

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then fees can be recovered.

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at 706.

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Barrientos v. 1801-1825 Morton LLC, 583 F.3d 1197, 1216 (9th Cir.

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2009), the provision generally does not encompass an action in

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tort.

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Exxess Electronixx, 64 Cal. App. 4th at 708 (“[A] tort claim is not

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‘on a contract’ and is therefore outside the ambit of section

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1717.”).

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Exxess Electronixx, 64 Cal. App. 4th

Although courts interpret “on the contract” liberally,

Santisas v. Goodin, 17 Cal. 4th 599, 615 (1998); see also

Buena Vista’s assertion that each claim in the complaint

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sounded in tort is incorrect.

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the 1AC included a breach of contract action and a claim for breach

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of the contract’s implied covenant of good faith and fair dealing.

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The 1AC alleged that the bank breached the contract by providing

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only temporary financing, requiring Buena Vista to pay additional

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As the bank points out in its reply,

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fees to keep the loan, disclosing confidential financial

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information, adding terms to loan extensions, selling the note

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without notice, and mismanaging loan withdrawals.

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Buena Vista argued that because of the breach, it spent thousands

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of dollars and “lost opportunities to market Villa Del Sol and

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refinance the property.”

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remedy damages “pursuant to the terms of the agreement.”

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Vista’s claims for breach of contract and breach of the implied

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covenant are actions “on the contract” within the scope of § 1717.

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United States District Court
For the Northern District of California

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Although § 1717 authorizes claims for attorneys’ fees related

Id. ¶ 231.

1AC ¶¶ 300-303.

Buena Vista sought as a
Buena

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to Buena Vista’s causes of action for breach of contract and breach

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of the implied covenant of good faith and fair dealing, the statute

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does not provide for fees related to Buena Vista’s remaining six

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causes of action.

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Unfair Competition Law (UCL) are statutory causes of action, and

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Plaintiff’s claims for intentional misrepresentation, unjust

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enrichment, intentional interference with prospective economic

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advantage, and negligence all sound in tort.1

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bank is entitled only to attorneys’ fees for its defense against

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Buena Vista’s claims for breach of contract and breach of the

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implied covenant of good faith and fair dealing.

Buena Vista’s claims under RICO and California’s

Accordingly, the

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B. Statutory and Tort Claims

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Although Civil Code § 1717 does not authorize an award of

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An action for intentional misrepresentation can be “on the
contract” if it endeavors to avoid, reform, or rescind the
contract. Lafarge Conseils Et Etudes, S.A. v. Kaiser Cement &
Gypsum Corp., 791 F.2d 1334, 1340 n.16 (9th Cir. 1986). Here,
Buena Vista asserted a claim for misrepresentation that sounded in
tort, not contract. Compl. ¶ 395; See Cal. Civ. Code § 3294(a).
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attorneys’ fees for non-contract claims, the bank may find

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additional relief under the California Code of Civil Procedure

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§ 1021, quoted above, which gives binding effect to a private

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agreement reached by parties concerning attorneys’ fees.

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relevant inquiry under this provision is whether the attorneys’

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fees clause in the Loan Agreement is broad enough to encompass

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Buena Vista’s statutory and tort causes of action.

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The

The Loan Agreement provides that Buena Vista will pay the
bank’s attorneys’ fees and legal expenses “incurred in connection

United States District Court
For the Northern District of California

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with the enforcement of this Agreement.”

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claims clearly arise out of the transaction between Buena Vista and

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the bank, none of the statutory or tort causes of action relate to

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the enforcement of the Loan Agreement.

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claim, for example, shares common facts with the claim for breach

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of contract but is not an action to enforce the contract.

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Likewise, its claim under California’s Unfair Competition Law

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arises out of the same transaction as the breach of contract claim,

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but is itself not an action to enforce the contract.

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While the non-contract

Buena Vista’s negligence

If the contract’s drafters had intended the attorneys’ fees

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provision to apply to all claims “arising out of” the contract,

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they would have included language to that effect in the Loan

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Agreement.

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such broad language.

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185 F.3d 932, 939 (9th Cir. 1999) (fees provision covered “[a]ny

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dispute, difference, claim or counterclaim between the parties

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arising out of or in connection with this agreement”).

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Many of the cases cited by the bank provide examples of
See, e.g., Marsu, B.V. v. Walt Disney Co.,

The bank argues that Buena Vista sought attorneys’ fees in the
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complaint and that if a prevailing plaintiff is entitled to an

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award of attorneys’ fees, a defendant should be entitled to

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attorneys’ fees after a successful defense.

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asserted that it was entitled to attorneys’ fees with respect to

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any tort causes of action.

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attorneys’ fees under RICO and for the breach of contract action.

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1AC ¶ 268.

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mutuality of remedy and authorizes an award of attorneys’ fees in a

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breach of contact action.

But Buena Vista never

Buena Vista’s 1AC only requested

As noted above, Civil Code § 1717 provides for

The bank has no freestanding right to

United States District Court
For the Northern District of California

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attorneys’ fees under RICO, however, because the statute only

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provides for fees incurred by a prevailing plaintiff.

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Chen, 95 F.3d 27, 28 (9th Cir. 1996).

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for the RICO claim if the attorneys’ fees provision of the contract

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were broad enough to cover it, but, as explained above, the

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provision here limits recovery to contract actions.

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Chang v.

The bank could recover fees

In sum, the attorneys’ fees provision in the Loan Agreement

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restricts recovery to fees incurred “in connection with the

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enforcement of [the] Agreement,” which does not include any claims

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beyond those on the contract.

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contract claims are therefore unrecoverable.

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II. Apportionment of Attorneys’ Fees

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Attorneys’ fees related to non-

The bank argues that, even if it is not entitled to collect

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attorneys’ fees for the six non-contract causes of action, the

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Court should still grant its fee application in full because non-

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contract causes of action “are entwined with the contract claims”

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such that apportionment would be impractical.

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Def.’s Reply at 2.

Apportionment of attorneys’ fees between fees incurred on a
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contract claim and those incurred on other claims is within the

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sound discretion of the court.

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Cal. App. 4th 1101, 1111 (1996).

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cause of action based on the contract providing for attorneys’ fees

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is joined with other causes of action beyond the contract, the

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prevailing party may recover attorneys’ fees under [Civil Code]

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section 1717 only as they relate to the contract action.”

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Metals Co. v. Alperson, 25 Cal. 3d 124, 129 (1979).

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not increase his recovery of attorneys’ fees by joining claims for

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United States District Court
For the Northern District of California

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which attorneys’ fees are not recoverable to one in which an award

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is proper.

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action should not dilute its right to attorneys’ fees.”

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claims for which attorneys’ fees can be awarded are closely related

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to claims for which there is no basis for awarding attorneys’ fees,

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it may be “‘impracticable, if not impossible, to separate the

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multitude of conjoined activities into compensable and

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noncompensable time units” and, thus, attorneys’ fees need not be

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apportioned for representation of an issue common to both a claim

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in which fees are proper and one in which they are not allowed.

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Id.; Abdallah, 43 Cal. App. 4th at 1111 (citing Fed-Mart Corp. v.

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Pell Enterprises, Inc., 111 Cal. App. 3d 215, 227 (1980)).

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Id.

Abdallah v. United Savings Bank, 43
As discussed above, “[w]here a

Reynolds

A litigant may

Conversely, a “plaintiff’s joinder of causes of
Id.

When

Here, the bank is entitled to attorneys’ fees only for the

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contract claims, and apportionment of fees would be impracticable.

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Each of Buena Vista’s causes of action in the 1AC incorporated the

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same 258 paragraphs of factual detail.

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for example, alleged that Defendants “engaged in a business

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practice designed to defraud money from borrowers and foreclose on

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Buena Vista’s RICO claim,

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their property in violation of RICO.”

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action for violation of California’s UCL, Buena Vista made the same

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arguments used to demonstrate a breach of the agreement.

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336, 340.

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enrichment, intentional interference with prospective economic

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advantage, and negligence claims all included allegations similar

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or identical to those made in the causes of action for breach of

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contract and breach of the implied covenant.

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impossible to disentangle the allegations in the complaint, the

1AC ¶ 261.

In its cause of

1AC ¶¶

Similarly, the intentional misrepresentation, unjust

Because it would be

United States District Court
For the Northern District of California

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Court declines to segregate fees for contract claims from fees for

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non-contract claims.

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III. Calculation of Attorneys’ Fees

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In the Ninth Circuit, the trial court must determine

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attorneys’ fees by calculating the “lodestar.”

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County, 815 F.2d 1258, 1262 (9th Cir. 1987).

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calculated by multiplying the number of hours the prevailing party

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reasonably expended on the litigation by a reasonable hourly rate.”

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Morales v. City of San Rafael, 96 F.3d 359, 363 (9th Cir. 1996).

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There is a strong presumption that the lodestar figure represents a

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reasonable fee.

Jordan v. Multnomah
“The ‘lodestar’ is

Jordan, 815 F.2d at 1262.

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A.

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Determining a reasonable hourly rate is a critical inquiry.

Hourly Rate

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Jordan, 815 F.2d at 1262 (citing Blum v. Stenson, 465 U.S. 886, 895

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n.11 (1984)).

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court may take into account: (1) the novelty and complexity of the

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issues; (2) the special skill and experience of counsel; (3) the

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quality of representation; and (4) the results obtained.

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In establishing the reasonable hourly rate, the

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See

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Cabrales v. County of Los Angeles, 864 F.2d 1454, 1464 (9th Cir.

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1988).

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calculation, and should not serve as independent bases for

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adjusting fee awards.

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rate inquiry should also be informed by reference to the prevailing

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market rates in the forum district.

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1392, 1405 (9th Cir. 1992).

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These factors are subsumed in the initial lodestar

Morales, 96 F.3d at 363-64.

The reasonable

Gates v. Deukmejian, 987 F.2d

For representation in the underlying action, New Resource Bank
seeks hourly rates of $450 for Denise H. Field, shareholder in the

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United States District Court
For the Northern District of California

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firm representing the bank and lead counsel in this case; $410 for

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Kim Arnone, senior counsel; $410 for Randall Manvitz, senior

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counsel; $400 for Marilynn H. Tham, of counsel; $330 for Lori Liu,

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associate; and $295 for Erin Welsh, associate.

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changed at the beginning of the new year, the bank seeks higher

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hourly rates for time spent drafting this motion for attorneys’

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fees: $460 for Ms. Field, $425 for Ms. Arnone, and $150 for the

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work of a paralegal.

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lead counsel explaining the qualifications and experience of its

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attorneys.

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Because rates

The bank has submitted a declaration from

Buena Vista does not challenge the hourly billing rate for Ms.

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Field or any of the other attorneys or firm staff who worked on

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this case.

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fees are out of line with hourly rates charged by lawyers in

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similar firms or in cases like this one.

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finds that the hourly rates charged by the bank’s counsel are

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reasonable.

No evidence has been presented to suggest that these

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Accordingly, the Court

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B.

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The number of hours used in the lodestar calculation must be

Number of Hours

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reasonable.

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justifying his or her claim and must submit detailed time records

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for the court’s consideration.

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796 F.2d 1205, 1210 (9th Cir. 1986), reh’g denied, opinion amended

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on other grounds, 808 F.2d 1373 (9th Cir. 1987).

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were “reasonably expended” should be included in the calculation.

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Hensley v. Eckerhart, 461 U.S. 424, 434 (1983).

In calculating hours, the applicant has the burden of

Chalmers v. City of Los Angeles,

Only hours that

“Those hours may

United States District Court
For the Northern District of California

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be reduced by the court where documentation of the hours is

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inadequate; if the case was overstaffed and hours are duplicated;

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if the hours expended are deemed excessive or otherwise

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unnecessary.”

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Chalmers, 796 F.2d at 1210.

For work in the underlying case, Ms. Field billed 114 hours,

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Ms. Arnone billed 207.9 hours, Mr. Manvitz billed 16 hours, Ms.

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Tham billed 16.2 hours, Ms. Liu billed 15.8 hours, and Ms. Welsh

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billed 35.2 hours, for a total of 405.1 billed hours.

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motion for attorneys’ fees, Ms. Field billed 18.5 hours, Ms. Arnone

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billed 10.9 hours, and the firm’s paralegal billed 25.9 hours for a

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total of 55.3 hours.

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For the

Buena Vista argues that the bank could not have reasonably

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expended so many hours on two motions to dismiss and a motion for

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attorneys’ fees.

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submitted by the bank’s counsel reveal duplicative work and are

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otherwise too vague to qualify as the “detailed time records”

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required by Chalmers.

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unfolded over the course of ten months and involved claims against

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It also contends that the billing statements

Pl.’s Opp’n at 6-9.

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Although the case

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multiple defendants, the Court agrees that the bank’s compensation

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request for 450 hours is excessive.

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The Court finds that deploying six attorneys and spending 400

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hours on two motions to dismiss was excessive.

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in its reply, while the complaint included eight causes of action,

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two claims were contractual and the extra-contractual claims were

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“entwined with the contract claims.”

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bank’s assertion that Buena Vista’s causes of action were linked

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and repetitive weighs against its plea that the complaint contained

As the bank notes

Def.’s Reply at 2.

The

United States District Court
For the Northern District of California

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such complex and “voluminous” allegations as to justify 400 hours

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of six attorneys’ time.

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is likewise unpersuasive.

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all of the work was necessary and reasonable.

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Counsel’s success in securing a dismissal
A favorable outcome does not prove that

Buena Vista argues in its opposition that the bank’s request

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for attorneys’ fees is so unreasonable that the motion should be

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denied in its entirety.

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bank’s motion for attorneys’ fees is so “outrageously unreasonable”

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that it warrants a total denial.

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621, 635 (1982).

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The Court does not conclude that the

See Serrano v. Unruh, 32 Cal. 3d

As discussed above, an award for fees incurred in enforcing

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the contract is appropriate.

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cannot be disentangled, and because the bank’s fees request is

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excessive, the Court awards fees on a proportionate basis: out of a

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total of eight claims, there are two contract claims, so that one

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fourth of the claims asserted are based on a contract.

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the Court awards the bank one fourth of the $165,256 in fees

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requested, which amounts to $41,314.

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Because the contract and tort claims

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Therefore,

Likewise, the Court awards

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one fourth of the fees requested for preparing this fee

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application, which amounts to $4,257.

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the bank $45,571 for attorneys’ fees incurred in litigating the

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contract claims.

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In total, the Court awards

CONCLUSION
For the foregoing reasons, the Court GRANTS New Resource

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Bank’s motion for attorneys’ fees in part and awards $45,571 in

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attorneys’ fees.

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United States District Court
For the Northern District of California

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IT IS SO ORDERED.

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Dated: August 26, 2011
CLAUDIA WILKEN
United States District Judge

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