Opinion
OPINION NOT FOR PUBLICATION
MEMORANDUM DECISION ON PLAINTIFFS' APPLICATION FOR COSTS AND PLAINTIFFS' AMENDED MOTION FOR ATTORNEYS' FEES
Robert Kwan, United States Bankruptcy Judge
Pending before this court are the Plaintiffs' Application for Costs (ECF 71) and Plaintiffs' Amended Motion for Attorneys' Fees (ECF 96). Having considered the costs application and amended fee motion and further argument and briefing of Plaintiffs and their counsel, the court now issues its rulings on the application and motion as set forth in this memorandum decision.
BACKGROUND
Plaintiffs first filed a motion for attorneys' fees and an application for costs on September 9, 2013, and submitted a bill of costs and a second application for costs the next day. Plaintiffs are represented by the law firm of Weinberg, Roger & Rosenfeld, of Alameda, California, and the attorneys' fees claimed for services rendered by lawyers and other staff at this firm and costs of litigation incurred by the firm on behalf of Plaintiffs in this case. The court on its own motion continued the hearings on the amended fee motion and costs application on October 1, 2013, to October 22, 2013, to avoid any prejudice to defendant as the party to be assessed fees and costs under the fee and cost requests because the adversary proceeding had been administratively closed at the time the applications were filed and the adversary proceeding was not reopened until September 24, 2013. Plaintiffs subsequently filed their Amended Motion for Attorneys' Fees on September 30, 2013, along with supporting declarations, which added fees related to their appeal to the United States District Court, which had not been previously included. On October 15, 2013, Plaintiffs filed declarations asserting that no opposition had been filed to the Amended Fee Motion or Plaintiffs' Application for Costs. The court took the rescheduled hearing on the applications off calendar due to the filing of the Amended Fee Motion and the need to review the additional billing statements and issued further scheduling orders resetting the hearing on the applications.
On March 13, 2014, the court issued an order setting forth its tentative ruling on the merits of the fee and cost applications in the form of a draft memorandum decision. This order provided that the parties in interest, Defendant, Plaintiffs and their respective counsel, would be afforded an opportunity to file written responses to the court's tentative ruling no later than April 18, 2014, with any reply due April 25, 2014. Id. citing In re Driscoll, 2014 WL 465453, slip op. at *5 (9th Cir. BAP 2014) (unpublished memorandum opinion). Plaintiffs timely filed their response and a supporting declaration on April 17, 2014. No reply was filed by defendant. The court also conducted a hearing on June 10, 2014, to allow the parties in interest to present oral arguments on the tentative ruling. Plaintiffs filed a post-hearing brief in support of the motion with supporting declarations on June 24, 2014. The court now issues its rulings in this memorandum decision.
ANALYSIS
Plaintiffs seek fees in the amount of $326,353.00 as the prevailing parties in this adversary action to determine debt dischargeability under 11 U.S.C. § 523(a). Amended Fee Motion at 1:2-7, 2:14-18. Plaintiffs also seek an award of costs in the amount of $9,377.42. Plaintiffs' Application for Costs, ECF 84. A prevailing creditor in a 11 U.S.C. § 523 action may recover a nondischargeable judgment for attorneys' fees and costs if the creditor would be able to recover the fees and costs outside of bankruptcy under applicable federal or state law. In re Dinan, 448 B.R. 775, 785-786 (9th Cir. BAP 2011). Calculation of attorneys' fees is governed by state law when the award is based on state fee-shifting laws, such as those claimed by Plaintiffs here pursuant to California Labor Code, § 1194(a) and California Code of Civil Procedure, § 1021.5. Graham-Suit v. Clainos, 756 F.3d 724, 751 (9th Cir. 2014), citing, Northon v. Rule, 637 F.3d 937, 938 (9th Cir. 2011). Plaintiffs assert two separate statutory bases under California law for their recovery of fees and costs in this action against defendant, California Labor Code, § 1194(a) and California Code of Civil Procedure, § 1021.5, which are discussed below.
This court's review of Plaintiffs' application for an award of attorneys' fees involves an exercise of this court's judicial discretion in determining whether such an award should be made under applicable state fee-shifting laws. Graham-Suit v. Clainos, 756 F.3d at 751, citing inter alia, Nichols v. CityofTaft, 155 Cal.App.4th 1233 (2007). The court reviewed each and every billing entry and cost entry set forth on the billing statements of the Weinberg, Roger & Rosenfeld law firm submitted in support of Plaintiffs' application for costs and amended motion for attorneys' fees, and the court's analysis, commentary and ruling on each and every entry is set forth in Exhibit 1 to this decision attached hereto. The court's examination of every billing and cost entry in the cost application and the amended fee motion was labor-intensive and time-consuming because the entries were voluminous and required additional work because multiple attorneys were working on the case and the division of labor between the attorneys was not always clear from the billing entries, which required the court to review the billing entries against the record of proceedings, including a review of pleadings, orders and hearing transcripts in proceedings in both the bankruptcy court and the district court. In order to evaluate the reasonableness of the fees for particular tasks, the court had to identify the attorneys who worked on the tasks, and oftentimes, as discussed, multiple attorneys worked on the same tasks, though the billing entries were not organized by task, but by billing attorney, and therefore required the court to use its knowledge of the proceedings to determine when different attorneys were working on the same task. This was not as easy as it may sound because the attorneys used different terminology in preparing billing entries and the court had to interpret the different wording of billing entries for specific tasks. In its review of the billing entries of Plaintiffs' attorneys to determine the reasonableness of the fees billed, the court has made specific rulings with explanatory commentary on each entry which was disallowed in part or in whole. For some entries, the court examined and allowed in full without any reduction. For some of these entries, the court had considered them together with the partial or complete disallowance of other entries based on a computation of the reasonableness of the amount of time billed for particular tasks. Thus, there may have been full allowance of billing entries for particular tasks where there was disallowance in part or in whole for the same tasks and, as the court attempted to explain in the commentary, this was done because the court had made a computation and determination of the reasonableness of the entire amount of time billed for a particular task, which may have involved multiple billing entries by multiple attorneys. The court determined that it was required to go to this level of detail because that apparently is the expectation put upon a trial court to review an application for an award of attorneys' fees. As the Ninth Circuit has observed, trial courts "must show their work when calculating [such awards], " Padgett v. Loventhal, 706 F.3d 1205, 1208 (9th Cir. 2013), and a trial "court acts within its discretion in awarding fees when the amount is reasonable and the court fully explains its reasoning in making the award."), McCown v. City of Fontana, 565 F.3d 1097, 1102 (9th Cir. 2009); see also, Muniz v. United Parcel Service, Inc., 738 F.3d 214, 227 (9th Cir. 2013) (M. Smith, J., concurring in part and dissenting in part).
In Graham-Suit, the Ninth Circuit described the trial court's discretion in making awards under state fee-shifting law as follows: "A trial court's exercise of discretion concerning an award of attorney fees will not be reversed unless there is a manifest abuse of discretion." 756 F.3d at 751, quoting, Nichols v. City of Taft, 155 Cal.App.4th 1233, 66 Cal.Rptr.3d 680, 684 (2007). "[R]eversal is appropriate where [1] there is no reasonable basis for the ruling or [2] the trial court has applied the wrong test or standard in reaching its result." Id., 66 Cal.Rptr.3d at 685 (internal quotation marks omitted).
I. Reasonable Fees and Costs Are Awardable Pursuant to California Labor Code § 1194(a)
Plaintiffs first seek an award of reasonable attorneys' fees and costs pursuant to California Labor Code § 1194. Amended Fee Motion at 3:20-5:20. This statute awards prevailing employees "reasonable attorneys' fees" and "costs of suit" on minimum wage and overtime compensation claims. California Labor Code § 1194(a). Defendant's debt owed to Plaintiffs was excepted from discharge under 11 U.S.C. § 523(a)(2)(A) on the basis of Defendant's violation of minimum wage and overtime compensation laws. Judgment on Remand from United States District Court for Central District of California, ECF 67. Plaintiffs' entitlement to an award of fees and costs under Labor Code § 1194 is undisputed at this point, and the remaining issue to be determined is whether the fees and costs sought are reasonable and should be granted in full, or if not, whether they should be reduced. The party seeking an award of attorneys' fees under California law bears the burden to prove that the fees it seeks are reasonable. Gorman v. Tassajara Development Corp., 178 Cal.App.4th 44, 98 (2009).
A. Reasonableness of Attorneys' Fees Required
Plaintiffs contend that the attorneys' fees sought are reasonable in light of the extensive efforts by their attorneys to investigate the allegations regarding Defendant's business practices, the work required to recreate Defendant's records from third-party sources, and the work expended on discovery, trial, the appeal, and the subsequent motions in this court to reopen the adversary proceeding and pursue this fee motion. Amended Fee Motion at 10:22-27. The Supreme Court of California has stated that a trial court has broad authority to determine the amount of a reasonable fee. PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1095 (2000). A "fee setting inquiry in California ordinarily begins with the 'lodestar, ' i.e. the number of hours reasonably expended multiplied by the reasonable hourly rate." Id.
Before analyzing the specific details of the amended fee application, the court has general comments about the application. This adversary case presented a relatively straightforward action under 11 U.S.C. §§ 523(a)(2)(A), (4) and (6) because the underlying debt was established through issue preclusion by Labor Commissioner findings and Superior Court judgments, and the primary remaining issue for purposes of 11 U.S.C. §§ 523(a)(2)(A) and (a)(6) was that of the debtor's knowledge and intent.
The Weinberg, Roger & Rosenfeld law firm, plaintiffs' counsel, specializes in labor and employment law, not bankruptcy law, and this became apparent to the court through the course of the proceedings. The law firm did not refer the bankruptcy matter to a law firm that specializes in bankruptcy law, and instead handled the matter itself.
Instead of focusing on the elements of plaintiffs' claims under 11 U.S.C. §§ 523(a)(2)(A), (a)(4) and (a)(6), the law firm attempted to reprove defendants' violations of the California Labor Code, even though that had already been determined by the Labor Commissioner. See Complaint, ECF 1; Plaintiffs' Trial Brief, ECF 27; Colloquy between counsel and court at trial, Audio Recording, September 13, 2012 at 10:55-11:19 a.m. For example, the court ordered the law firm to supplement plaintiffs' trial brief because the original trial brief did not address the merits of the elements of the claims pleaded in the adversary complaint under the Bankruptcy Code, and to the extent that they were relying upon the doctrines of issue or claim preclusion based on the Labor Commissioner's determinations, the original trial brief did not address those doctrines either. Id., Colloquy between counsel and court at trial, Audio Recording of Trial, September 13, 2012 at 10:55-11:00 a.m. and 11:18-11:19 a.m.
The litigation was not complex. The elements to determine dischargeability under 11 U.S.C. 523(a)(2)(A), (a)(4) and (a)(6) are well established.
The elements of a claim under 11 U.S.C. § 523(a)(2)(A) based on false pretenses, false representation or actual fraud require Plaintiff to prove: (1) Defendant made a representation; (2) Defendant knew the representation was false at the time he or she made it; (3) Defendant made the representation with the intent to deceive; (4) Plaintiff justifiably relied upon the representation; and (5) Defendant sustained losses as a proximate result of the misrepresentation having been made. Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 2010); see also, 4 March, Ahart and Shapiro, California Practice Guide: Bankruptcy, H 22:452 at 22-65 (2015).
The elements of a claim under 11 U.S.C. § 523(a)(4) based on fraudulent breach of fiduciary duty require Plaintiff to prove: (1) Defendant was acting in a fiduciary capacity; and (2) while acting in that capacity, the debtor engaged in fraud. Lovell v. Stanifer(ln re Stanifer), 236 B.R. 709, 713 (9th Cir. BAP 1999); see also, 4 March, Ahart and Shapiro, California Practice Guide: Bankruptcy, H 22:607 at 22-87.
The elements of a claim under 11 U.S.C. § 523(a)(6) require Plaintiff prove that Defendant both "willfully" and "maliciously" inflicted injury upon Plaintiff. Ormsby m. First American Title Co. of Nevada {In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010); see also, 4 March, Ahart and Shapiro, California Practice Guide: Bankruptcy, U 22:670 at 22-97. Under 11 U.S.C. § 523(a)(6), the "willful injury" requirement is met when Plaintiff proves that the debtor had a subjective motion to inflict the injury or the debtor believed the injury was substantially certain to occur as a result of his or her conduct. Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1208 (9th Cir. 2001); In re Ormsby, 591 F.3d at 1206. Further, the "malicious injury" requirement is met when Plaintiff proves that Defendant committed: (1) a wrongful act; (2) done intentionally; (3) that necessarily causes injury; and (4) that is committed without just cause or excuse. In re Jercich, 238 F.3dat1209.
The Labor Commissioner had already found that defendant violated various provisions of the Labor Code, and that determination was entitled to preclusive effect, although plaintiffs' counsel did not brief the issue at the outset of the case.
Because of the Labor Commissioner's determination, the substantive issue in the debt dischargeability proceedings in this court was not whether defendant violated the California Labor Code, but whether he acted with fraudulent and/or willful and malicious intent in violating the law by denying the workers meal and rest breaks.
In their trial briefs, plaintiffs' counsel argued that defendant "willfully" failed to pay them pay for overtime work, "willfully" failed to provide them with duty-free meal breaks and "willfully" failed to pay all wages earned and unpaid upon an employee's discharge. Plaintiffs' Trial Brief, ECF 27 at 3. Although their trial briefs stated that defendant acted willfully, at trial plaintiffs' counsel did not ask defendant any questions regarding defendant's knowledge of the applicable labor laws or his intent in violating them, and instead focused on the violations themselves. For example, plaintiffs' counsel spent time questioning defendant about whether defendant's car was moving as he transported his employees between job sites or whether the employees were required to provide their own equipment on the job. Testimony of Chang Sup Han, Audio Recording, September 13, 2012 at 9:53-9:56 a.m. and 10:01-10:02 a.m. Presumably, plaintiffs' counsel was attempting to show that defendant had violated California's labor laws, but, as described above, this had already been determined, and these questions had no direct relevance to a dischargeability determination under 11 U.S.C. §§ 523(a)(2)(A), (a)(4) and (a)(6).
Plaintiffs' claim under 11 U.S.C. § 523(a)(4) that defendant fraudulently breached a fiduciary duty to plaintiffs as their employer or embezzled funds from them lacked legal merit. Plaintiffs' counsel at trial conceded that they had no legal authority for asserting a claim for breach of fiduciary duty based on the employer-employee relationship, which was later held by the Ninth Circuit not to be a valid theory in Bos v. Board of Trustees, 795 F.3d 1006 (9th Cir. 2015). Colloquy between counsel and court at trial, Audio Recording, September 13, 2012 at 11:14-11:15 a.m.
Plaintiffs' claim under 11 U.S.C. § 523(a)(6) was that defendant willfully and maliciously injured them in his "deliberate non-payment of wages and benefit contributions for off-the-clock overtime and weekend work hours supports nondischargeability under [11 U.S.C] § 523(a)(6)." Similarly to the claim under 11 U.S.C. §523(a)(2)(A), establishing liability under this claim required plaintiffs to produce evidence regarding defendant's intent, and not the underlying labor violations, but plaintiffs' counsel focused on the labor violations.
In sum, plaintiffs' counsel were specialists in employment law, and had successfully proven that defendant violated California's labor laws before the Labor Commissioner. In this court, faced with an unfamiliar legal problem - dischargeability under the Bankruptcy Code - plaintiffs' counsel focused on what they knew, and attempted to reprove defendant's violations of California's labor laws instead of proving defendant's intent or willfulness, which was the only issue relevant to dischargeability in this proceeding. This failure to identify and focus on the relevant issues resulted in significant overbilling, which the court describes in more detail below and in Exhibit 1 to this memorandum decision.
In this memorandum decision and its analysis, rulings and commentary in the attached Exhibit 1, the court identifies specific concerns with the fee applications regarding excessive, duplicative or otherwise unreasonable billing. The problems include block billing or lumping of time entries into a single entry for each day, which makes it impossible for the court to determine exactly how much of the claimed time is reasonable and appropriate for specific tasks, the excessive time spent on particular tasks and the multiple assignment of attorneys for particular tasks, including conferences, billing in minimum increments of quarter hours rather than tenths, and fees for basic legal research, such as research of court procedures and rules. The court will briefly discuss herein its concerns and findings regarding the reasonableness of time expended; these concerns are discussed in great detail in the court's analysis, rulings and commentary on each billing and cost entry submitted by Plaintiffs' counsel in Exhibit 1 to this decision, and the court refers the reader to that exhibit for a full understanding of the court's reasoning.
1. Computation of the "Lodestar" and Whether Requested Hours Were Reasonably Expended
Plaintiffs' declarations and attorney billing statements from the Weinberg, Roger & Rosenfeld law firm indicate that the attorneys' fees they are requesting to be awarded them were calculated under the lodestar method by applying the attorneys' regular hourly rates to the hours expended by the attorneys on the case. Raisner Declaration at fflj 2-4 and 22; Exhibit 1. The work in this adversary proceeding before this court was primarily performed by Attorney Jordan D. Mazur (263.25 hours at $375.00 per hour, or $98,718.75) and Attorney Christian L. Raisner (90.75 hours at $645.00 per hour, or $58,533.75). Amended Fee Motion at 11:18-25. Attorney Emily P. Rich also performed 44.4 hours of work at $595.00 per hour for a total of $26,418.00. Id. The appellate work before the United States District Court was primarily performed by the same attorneys at those same hourly rates: Attorney Jordan D. Mazur (89.25 hours totaling $33,468.75), Attorney Christian L. Raisner (96.75 hours totaling $62,403.75), and Attorney Emily P. Rich (37.25 hours totaling $22,163.75). Id. at 11:25-28. Mr. Mazur served as lead counsel at all stages of the litigation, although Ms. Rich was one of the primary authors of the appellate brief. Raisner Declaration at fflj 11 and 13.
2. Unreasonable, Excessive, and Duplicative Work
The attorneys' fees incurred and sought to be awarded must be reasonably necessary to the conduct of the litigation. Robertson v. Fleetwood Travel Trailers of California, 144 Cal.App.4th 785, 817-818 (2006). "A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether." Meister v. Regents of University of California, 67 Cal.App.4th 437, 447-448 (1998), citing, Serrano v. Unruh, 32 Cal.3d 621, 635 (1982). "Padding" through inefficient or duplicative efforts is not subject to compensation. Ketchum v. Moses, 24 Cal.4th 1122, 1132 (2001). An unreasonably excessive fee may be denied entirely because to do otherwise would encourage misconduct (as the only consequence would be reduction to the fee the applicant was originally entitled to). Meister v. Regents of University of California, 67 Cal.App.4th at 448. After reviewing the billing entries submitted by the Plaintiffs' attorneys in this case, it is not clear that all of the hours reported and claimed by the attorneys were "reasonably" expended.
The court's concerns about reasonable fees relate to the billing entries for services rendered by all of the attorneys, but particularly those submitted by Mr. Mazur. These concerns are specifically raised and discussed in the court's analysis, rulings and commentary set forth in Exhibit 1 attached to this decision. However, the court briefly describes its general concerns herein. First, every single entry by Mr. Mazur contains an entry for "Review of file/documents" even though the entries are often separated by one or only a few days. Raisner Declaration, Exhibit 1. It is impossible for the court to determine how much time was devoted to this activity because counsel lumps his time entries into a single entry per day and does not separate distinct activities. Regardless, it is difficult for the court to see why an attorney would need to review the client's file every single time he works on the case as if he had no independent memory of the case. Plaintiffs argue that these entries are proper because an attorney working on a file would usually need to review produced or obtained documents, and that the focus would not be on the same documents each day. Plaintiffs' Tentative Ruling Response at 6:24-7:3. They contend that the notations do not mean that he reviewed the entire file each day. Id. The only evidence to support this contention is Ms. Rich's testimony that Mr. Mazur had an excellent memory and she believes the notation indicated that he reviewed some documents in the case. Rich Declaration at ¶18. Mr. Mazur's time entries do not necessarily support that argument because he also includes entries for review of specific discovery documents or communications on several dates. See Raisner Declaration at Exhibit 1. It seems more likely that Mr. Mazur was actually reviewing the client file every day, which was unnecessary, or that he was padding his time entries by including this notation when there was no such review, which most likely appears to be the case. Time billed by Mr. Mazur for file review each and every time he worked on the case seems excessive, and the court will make a reduction for this as set forth herein.
The court also notes that the lawyers, and Mr. Mazur in particularly, have repeated entries for research on court procedures, the complaint, bankruptcy, discovery required, discovery deadlines, status conferences, interrogatories, summary judgment (when no such motion was filed), depositions, discovery remedies, declarations, trial procedure, and trial, which should not be charged. Raisner Declaration, Exhibit 1. The specific billing entries which relate to this issue are identified in the court's analysis, rulings and commentary in Exhibit 1 attached hereto. Attorneys are expected to know elementary principles of law that are commonly known by well-informed attorneys, and to discover those additional rules of law that may readily be found by standard research techniques, and should not excessively bill for acquiring such knowledge. Camarillo v. Vaage, 105 Cal.App.4th 552, 561 (2003). An award of attorneys' fees cannot be reasonable if that fee could not ethically be charged to a client. Time billed for such basic research is unreasonable and the court will make a reduction as set forth herein. These entries suggest that the billing lawyers were new or unfamiliar with bankruptcy court practice or federal court practice in general, and were using this case for training purposes to learn basic federal litigation practices, and should not be ethically charged to a client or to an opposing party under a fee-shifting statute. The court is mindful that defendant is not a sympathetic litigant in that he had been found to have shortchanged his workers by the Labor Commissioner to, but if the burden of payment of attorneys' fees and costs are shifted to him under the California fee shifting statutes, which the court determines to be appropriate in principle, such fees and costs must be reasonable, and that if for some reason, defendant does not pay the award of attorneys' fees and costs due to lack of collectability or other reason, then plaintiffs as the clients of the firm remain contractually liable for the fees and costs charged by the firm, and it seems to the court that such fees and costs that they may owe should be reasonable and ethically charged as well.
3. Block Billing, "Lumping, " and Vague Descriptions
Another significant problem with the attorneys' billing entries is block billing and lumping of services into a single time entry for the day. "Block billing" or "lumping" of time entries may not be objectionable perse, but it can exacerbate vagueness in a fee request and it is "a risky choice since the burden of proving entitlement to fees rests on the moving party." Christian Research Institute v. Alnor, 165 Cal.App.4th 1315, 1325 (2008), citing, ComputerXpress, Inc. v. Jackson, 93 Cal.App.4th 993, 1020 (2001). Vague, block-billed time entries inflated with noncompensable time can harm an attorney's credibility with the court, which is his or her chief asset in submitting a fee request. Christian Research Institute v. Alnor, 165 Cal.App.4th at 1325-1326. The court may disallow attorneys' fees when the billing entries are vague and do not allow the court to determine the reasonableness of the work performed. Id. at 1324-1326.
A fee applicant cannot "submit a plethora of noncompensable, vague, blockbilled attorney time entries and expect particularized, individual deletions as the only consequence" and the court has the power to disallow fees entirely or partially to discourage the making of unreasonable fee demands. Christian Research Institute v. Alnor, 165 Cal.App.4th at 1329. "Trial courts retain discretion to penalize block billing when the practice prevents them from discerning which tasks are compensable and which are not." Heritage Pacific Financial, LLC v. Monroy, 215 Cal.App.4th 972, 1010-1011 (2013).
Discussing federal law, the Ninth Circuit Bankruptcy Appellate Panel has also expressed disapproval of lumping and block billing. "[L]umping or clumping is universally discouraged by bankruptcy courts because it permits an applicant to claim compensation for rather minor tasks which, if reported separately, might not be compensable." In re Stewart, 2008 WL 8462960, slip op. at *6 (9th Cir. BAP 2008) (unpublished memorandum opinion) citing In re Auto. Warranty Corp., 138 B.R. 72, 74 (Bankr.D.Colo. 1991). "When services are lumped together, the bankruptcy court is prevented from determining the necessity of each service and 'from fairly evaluating whether individual tasks were expeditiously performed within a reasonable period of time.'" Thomas v. Namba (In re Thomas), 2009 WL 7751299, slip op. at *5 (9th Cir. BAP 2009) (unpublished memorandum opinion), quoting, In re Hudson, 364 B.R. 875, 880 (Bankr. N.D.N.Y. 2007). "When fee applications are submitted with a portion or all of the requested fees based on lumped entries, courts may reduce, rather than disallow, compensation." In re Thomas, 2009 WL 7751299, slip op. at *6 citing In re Welch, 480 F.3d 942, 946 (9th Cir. 2007).
Here, the court finds that the attorneys' credibility has been harmed because their time entries are frequently vague (i.e. "legal research re: discovery") and the block billing or lumping of time entries makes it impossible to tell what amount of time is allotted to each task or to separate compensable tasks from those that are not. Many of the billing entries are vague in describing the services rendered or reflect work for basic research, or both, such as research on court procedures or "bankruptcy." Raisner Declaration, Exhibit 1. It is difficult for the court to assess the reasonableness of the fees if the description of the services are vague, and the court will make specific reductions based on the failure to adequately describe the services rendered.
The court also notes an apparent coincidence that Mr. Mazur billed three consecutive days of exactly 10 hours each on May 14, 2013, May 15, 2013, and May 16, 2013, in connection with the appeal in this case. Raisner Declaration, Exhibit 1 at 24.
While the court finds the attorneys' requested fees to be excessive, unreasonable, and vague, all of which are made worse by the block-billing or lumping of time entries, it does not find their actions to be so egregious as to warrant disallowing fees entirely. The court will therefore reduce fees as to specific block billed or lumped entries as set forth in this order.
4. Identification of Specific Tasks
In its review of the attorneys' billing entries, the court was able to identify certain tasks which were representative of the problems it found throughout the motion for attorneys' fees. For example, Plaintiffs' attorneys spent approximately 20 hours, billed by four different attorneys, researching and responding to an order to show cause issued by the district court on appeal for failure to timely file a designation of record and a statement of issues on appeal. See case number 2:13-cv-01524-0DW, ECF 9. Responding to an order to show cause for failing to timely file those documents should not require 20 hours of billable time, and asking for attorneys' fees for such work is particularly egregious when it is the attorneys' own fault that the order to show cause was issued in the first place.
The court is particularly troubled by the five hours it apparently took Mr. Raisner and Ms. Rich to draft and file a request for extension of time to file its opening brief on appeal, billed on May 10, 2013.
Plaintiffs' attorneys also billed over 15 hours of time for researching, drafting, and filing a motion to reopen the adversary proceeding in the bankruptcy court after entry of the order from the district court remanding the case. Such an excessive time spent on a relatively simple motion warrants the application of a negative lodestar when an attorney with bankruptcy experience would have spent a fraction of the time on such a motion.
Finally, the court notes that Plaintiffs' attorneys spent over 50 hours on work related to the statement of issues on appeal and designation of record, entirely apart from time spent on the opening appellate brief. In the court's view, this amount of time is excessive and entirely unreasonable for the complexity of the mostly administrative work involved.
B. Costs
Plaintiffs also request an award of costs in the amount of $9,377.42 as the prevailing party pursuant to Federal Rule of Bankruptcy Procedure 8014, which incorporates Federal Rule of Civil Procedure 54, and Local Bankruptcy Rule 7054-1. Plaintiffs' Application for Costs at 2:1 -18. California Labor Code § 1194(a) also permits an award of "costs of suit." The costs requested appear to be actual, necessary, supported by credible evidence, and in accordance with allowable costs as set forth in Court Manual Section 2.8(e) and Local Bankruptcy Rule 7054-1. Therefore, the court will award the costs as requested in the amount of $9,377.42 under California Labor Code § 1194(a).
II. Attorneys' Fees and Costs Pursuant to California Code of Civil Procedure § 1021.5
Plaintiffs also assert that they should be awarded attorneys' fees under California Code of Civil Procedure § 1021.5 because their actions benefitted the public. Amended Fee Motion at 5:21 -10:8. That statute provides for an allowance of attorneys' fees to the prevailing party in an action that "resulted in enforcement of an important right affecting the public interest" if (1) a significant benefit has been conferred on the general public or a large class of people, (2) an award is appropriate due to the necessity and financial burden of private enforcement, and (3) the fees should not be paid out of the recovery in the interest of justice. California Code of Civil Procedure, § 1021.5. In the event that the court finds that any one of the statutory criteria is not met, this is sufficient to deny fees and a court need not make findings as to the remaining criteria. Satrap v. Pacific Gas & Electric Company, 42 Cal.App.4th 72, 80-81 (1996). Here, the court determines that Plaintiffs' claim for attorneys' fees under § 1021.5 succeeds because Plaintiffs' lawsuit satisfies each requirement under § 1021.5
A. Significant Benefit Conferred on a Large Class of People
Plaintiffs argue that their lawsuit benefitted a large class of people because the finding of nondischargeability in this case will show other workers that justice can be achieved and encourage attorneys to represent victims of wage fraud in nondischargeability actions. Amended Fee Motion at 8:17-9:3. The court is also persuaded by the testimony by declaration of Lilia Garcia-Brower, who is experienced in this area by virtue of her role as the Executive Director of the Maintenance Cooperation Trust Fund, a statewide janitorial watchdog organization. Garcia-Brower Declaration, ECF 99, at H 2 and 8. California courts have held that the "significant benefit . . . conferred on the general public or a large class of persons" element is met when "the cost of the claimant's legal victory transcends his personal interest-that is, when the burden of the litigation was disproportionate to the plaintiff's individual stake in the matter." Monterey/Santa Cruz County Building & Construction Trades Council v. Cypress Marina Heights LP, 191 Cal.App.4th 1500, 1523 (2011), citing Roybal v. Governing Board of Salinas City Elementary School District, 159 Cal.App.4th 1143, 1151 (2008). Here, counsel for Plaintiffs succeeded in rendering nondischargeable judgments totaling $95,421.59 awarded to Plaintiffs by the Labor Commissioner. Even considering the reduced fee award resulting from the court's deductions, the burden of litigation, represented here by an award of attorneys' fees and costs to Plaintiffs' attorneys, exceeds the Plaintiffs' individual stakes in the matter.
$34,323.62 to Castro, $48,253.76 to Juarez, and $12,844.21 to Fernandez. Castro Decision, Exhibit 4; Juarez Decision, Exhibit 6; Fernandez Decision, Exhibit 8
In determining that the lawsuit has benefitted a large class of people, the court is again persuaded by the testimony by declaration of Lilia Garcia-Brower. Garcia-Brower competently testifies to the large number of janitors in California (some 229, 000) and the significant problems they face upholding their rights under California's labor laws. Id. at fflj3-5. The court also notes that these kinds of wage claims are becoming quite common in California and, according to one study cited by Plaintiffs' counsel, only "17 percent of California workers who prevailed in their wage claims before the DLSE [California's Division of Labor Standards Enforcement] and received a judgment were able to recover any payment at all between 2008 and 2011 ." To the extent a finding of nondischargeability sways the behavior of other employers in California, Plaintiffs have conferred a significant benefit on a large class of people. Based on the above reasons, the court determines that the first element under California Civil Code § 1021.5 is met.
E. Cho, T. Koonse & A. Mischel, "Hollow Victories, The Crisis in Collecting Unpaid Wages for California Workers" (http://nelp.3cdn.net/f6fc363a30266f0cd3_pzm6id1xa.pdf)
B. The Necessity and Financial Burden of Private Enforcement Make and Award of Attorneys' Fees and Costs Appropriate
Plaintiffs argue that this element is met because "[n]o state agency can be expected to pursue these Labor Commissioner judgments via nondischargeability proceedings in bankruptcy court. No governmental agency or non-profit organization pursued the case on behalf of the Plaintiffs. Likewise, no attorneys made an offer to handle the case pro bono." Plaintiffs Amended Motion for Attorneys' Fees at 10:5-8. California courts have found this element to be satisfied when plaintiffs produced evidence that no public agency was willing to pursue the litigation and the cost of litigation was high. Monterey/Santa Cruz County Building & Construction Trades Council v. Cypress Marina Heights LP, 191 Cal.App.4th at 1523 ("plaintiffs' enforcement action was necessary because no public agency was willing to pursue this litigation...These findings were supported by the evidence.") Again, the court is persuaded that the "necessity" prong of this element is met based on the testimony of Ms. Garcia-Brower, who testifies to the difficulty other low-wage workers have had in obtaining competent counsel and enforcing and collecting judgments because most lawyers are unfamiliar with bankruptcy laws. Garcia-Brower Declaration ¶ 7. The court is further persuaded that the "high cost" prong of this element is met by the high fees and costs incurred by Plaintiffs, described in detail above, in pursuing this nondischargeability action, thus meeting both the "necessity" and the "financial burden" prongs of this element.
C. It Would Be Unjust To Have the Fees Paid Out of the Recovery
Few California cases discuss this element in any detail, and Plaintiffs have not cited any which do so. The court in Cutler v. Franchise Tax Board, 229 Cal.App.4th 419 (2014) stated that "the cases that find attorney fees should be paid out of the recovery are uniformly cases where a fund has been created-a fund containing money besides the amount due to the plaintiff-from which fees could be paid." Id. at 303. Because this case did not lead to the creation of a "common fund, " the court finds this element satisfied.
D. Fees and Costs Awarded Under § 1021.5 Must Be Reasonable
Fees and costs awarded under California Code of Civil Procedure § 1021.5 are subject to the same lodestar analysis as those awarded under other California fee-shifting statutes. See Northwest Energetic Services., LLC v. California Franchise Tax Board, 159 Cal.App.4th 841, 879 (2008), as modified on denial of rehearing (2008) (applying lodestar analysis in reviewing an award of attorneys' fees under California Code of Civil Procedure, § 1021.5). Moreover, California courts have held that in awarding fees under § 1021.5, as with any other fee-shifting statute, "the predicate of any attorney fee award, whether based on a percentage-of-the-benefit or a lodestar calculation, is the necessity and usefulness of the conduct for which compensation is sought." Thayer v. Wells Fargo Bank, N.A., 92 Cal.App.4th 819, 846 (2001) (emphasis added). In Thayer, the court, while reviewing an award of attorneys' fees under § 1021.5, determined that it is in the public interest to "strongly discourage" attorneys from seeking fees awards for "duplicative work that was neither difficult nor particularly productive, involved little or no risk, may well have delayed settlement, and seems to have been primarily designed to line counsel's pockets. . . ." Id.
The court's analysis above and individualized scrutiny of the submitted billing entries applies equally to an award of attorneys' fees and costs under California Code of Civil Procedure § 1021.5, and Plaintiffs' recovery would be the same under either section.
III. Conclusion
For the foregoing reasons, the court approves the applications for fees and costs submitted by Plaintiffs as set forth herein and awards professional fees and costs of $138,866.50 for services rendered and $9,377.42 for costs, for a total of $148,243.92, pursuant to California Labor Code § 1194(a) and California Code of Civil Procedure § 1021.5. In determining the appropriate award for professional fees, the court has analyzed the timesheets submitted by Plaintiffs, attached as Exhibit 1 to the Raisner Declaration, and revised the time allowed for individual billing entries in accordance with the standards set forth above. As discussed previously, the court's analysis, rulings and commentary on all of the billing entries is attached as Exhibit 1 to this decision. Although the Raisner Declaration does not provide billing rates for each professional involved, the court used the rate provided in the table in the Amended Motion. ECF 96 at 11:18-12:4. When no billable rate was given for a timekeeper, for example, timekeeper "ERN, " the court assumed an hourly rate of $300 per hour. Any reduction in hours billed by these professionals would be multiplied by $300 and then subtracted from the total amount requested by Plaintiffs. The court further determines that these awarded amounts are excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A) in accordance with the judgment entered in this case on August 9, 2013. See Cohen v. de la Cruz, 523 U.S. 213, 223(1998).
This memorandum decision constitutes the court's findings of fact and conclusions of law. A separate order on the application for costs and the amended motion for attorneys' fees partially awarding attorneys' fees and costs for the reasons set forth in this memorandum decision is being entered concurrently herewith.
IT IS SO ORDERED.
Exhibit 1
(Exhibit Omitted)