Opinion
NOT FOR PUBLICATION
MEMORANDUM DECISION
DAVID E. RUSSELL United States Bankruptcy Judge
On December 27, 2011, plaintiff Truss Design & Manufacturing, Inc. (the "plaintiff") filed a Notice of Motion and Motion Seeking an Award of Attorneys' Fees and Costs Following Trial, Docket Control No. JLP-7 (the "Motion"). By way of the Motion, as thereafter supplemented, the plaintiff seeks $84,525.83 in attorney's fees, $2,108.30 in costs, and $12,614.39 in expert witness fees, to be awarded in favor of the plaintiff as the prevailing party in this adversary proceeding. The plaintiff's counsel is Pagano & Kass, APC ("Counsel"). Defendants Steve Durossette and Jill Durossette did not file opposition to the Motion. For the reasons set forth below, the court will grant the Motion in part.
An amended notice filed March 6, 2012 refers to the amount of costs requested as $5,244; however, it is clear from a supplemental declaration filed January 17, 2012 that the $5,244 figure represents attorney's fees "for services that have yet to be billed to Plaintiff." There is no other indication in the record that the amount of requested costs is anything other than $2,108.30.
I. BACKGROUND
On October 18, 2011, this court issued a judgment in this adversary proceeding in the amount of $300,000 in favor of the plaintiff and against the defendants, and ordered that the judgment is nondischargeable. The judgment referred to the promissory note at issue in this proceeding as "contain[ing] a provision that awarded attorneys' fees and reasonable costs of suit to the prevailing party . . . ." The judgment also included a statement that the plaintiff had prevailed in the proceeding. The Motion followed.
II. ANALYSIS
This court has jurisdiction over the Motion pursuant to 28 U.S.C. §§ 1334 and 157(b)(1). The Motion is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
A. Standards for Award of Attorney's Fees in Dischargeability Action
Since the decision of the Supreme Court in Travelers Cas. & Sur. Co. v. Pacific Gas & Elec. Co., 549 U.S. 443, 127 S.Ct. 1199, 167 L.Ed.2d 178 (2007), the allowance of claims for attorney's fees in bankruptcy generally is recognized as governed by state law. Id. at 450-51. This is particularly true in exception to discharge cases . . . where the litigation ordinarily has no direct impact on the bankruptcy estate.
Charlie Y., Inc. v. Carey (In re Carey), 446 B.R. 384, 390 (9th Cir. BAP 2011), footnote omitted.
B. Standards Under California Law
California law permits recovery for attorney's fees under two separate provisions. Section 1717 allows a party to recover attorney's fees incurred in the litigation of a contract claim. . . . Section 1021 permits recovery of attorney's fees by agreement between the parties, and does not limit recovery of attorney's fees to actions on the contract. . . . Attorney's fees for fraud claims may be recovered if the contract so provides.
Terra Nova Indus. v. Chen (In re Chen), 345 B.R. 197, 200 (N.D. Cal. 2006), citations and footnotes omitted.
The attorney's fee clause in the parties' contract need not refer explicitly to actions for fraud in order for such actions to be encompassed by it. Where, for example, the clause in a contract for the purchase and sale of real property permitted recovery of fees for "bring[ing] any suit . . . with respect to the subject matter or enforcement of the Agreement, " the clause was broad enough to encompass the seller's attorney's fees incurred in defending a claim that the seller failed to disclose the presence of asbestos on the property. 3250 Wilshire Boulevard Bldg. v. W. R. Grace & Co., 990 F.2d 487, 489 (9th Cir. 1993).
The language of this provision includes not only contract enforcement actions, but actions relating to the "subject matter" of the agreement. The subject matter of the agreement is obvious: the sale of the 3250 Wilshire Boulevard property by MetLife to Wilshire. Wilshire's lawsuit claimed that MetLife violated various duties by failing to disclose, prior to the sale, the alleged fact that MetLife was divesting itself of the building because of its asbestos content. Such a lawsuit clearly relates to the "subject matter" of the Purchase and Sale Agreement, regardless of whether Wilshire's claims, strictly speaking, sounded in tort or contract. Accordingly, as the prevailing party, MetLife is entitled to attorney's fees and expenses for defending this action.
The plaintiff quotes the applicable provision in the promissory note that provides for attorney's fees in this matter, and the defendants have not suggested that this adversary proceeding does not fall within the scope of the provision or that attorney's fees are not appropriately awarded under one or the other of California's fee-shifting statutes cited above.
Therefore, the only question before the court is the reasonableness of the fees requested. The party moving for an award of attorney's fees has the burden of proof. City of Colton v. Singletary, 206 Cal.App.4th 751, 784 (May 30, 2012). The court is to begin with the lodestar figure; that is, the product of the number of hours reasonably spent and the reasonable hourly rate prevailing in the community for similar services. Christian Research Institute v. Alnor, 165 Cal.App.4th 1315, 1321 (2008).
The court should consider "whether the case was overstaffed, how much time the attorneys spent on particular claims, and whether the hours were reasonably expended, " Christian Research Institute, 165 Cal.App.4th at 1320; inefficient or duplicative services are not to be compensated. Id. at 1321.
[A]scertaining the fee amount is left to the trial court's sound discretion. Trial judges are entrusted with this discretionary determination because they are in the best position to assess the value of the professional services rendered in their courts.
Id., citations omitted.
C. The Fees Requested in This Case
Applying these standards to the fees requested in this case, the court finds, first, that Counsel's hourly rates - $245 and $225 for the two partners and $175 and $150 for the two associates - are reasonable and well within prevailing rates in this community during the time in which the services were performed.
With that said, the court also finds that the case was overstaffed. What the court finds striking is that Counsel found it appropriate to utilize the services of two partners and two associates in this case. While the legal and factual issues in the case were not ordinary or common, the court does not believe they were so complex as to require the services of four attorneys, each billing relatively large amounts of time.
The court recognizes that the lead partner on the case was likely to be and ultimately was a witness at the trial, and that Counsel thus had to have two attorneys at the trial itself. This does not explain why it was necessary or reasonable to utilize the services of three attorneys through the first ten months of the case, adding a fourth in the final months.
The court also finds that the allocation of services among these four attorneys resulted in some instances in unnecessary duplication of effort. For example, Counsel's time records reveal several instances of an associate preparing relatively simple documents, such as various stipulations and the three pretrial conference statements, and a partner reviewing and revising those documents. Although in some of these instances, the partner did not charge for his time, in others, he did. In the case of a motion for summary judgment, an associate did the bulk of the work, but his work was reviewed and revised by both partners.
In addition, in the court's view, the amount of time spent by Counsel on several of the documents filed with the court, such as the various stipulations, the amended complaint (14 hours), the three pretrial statements (22 hours), the trial brief/trial statement (13 hours not including associate's time), and the proposed findings of fact and conclusions of law (21 hours), was excessive. Many of these documents repeated information previously presented.
Further, the trial in this proceeding involved the issue of damages only, the issue of liability having been resolved in the plaintiff's favor by way of summary judgment. Between the time the court granted the motion for summary judgment on liability and the conclusion of the trial, Counsel billed at least $44,000 in attorney's fees - on the damages issue alone. Beginning in June 2011, ten months into the case, Counsel chose to assign preparation of a trial brief to an associate who had not previously worked on the case to prepare the trial brief, despite the fact that two partners and another associate had already worked extensively on the case and presumably had developed a good deal of familiarity with the facts and the issues. It thus appears Counsel did not delegate work on the case in a prudent manner.
The time sheets indicate that the associate who had worked on the case previously did not work on it at all after March 2011; the court recognizes the possibility that he had left the firm. But that would not explain why one of the two partners who had also been working on the case would not have been a more cost-effective choice. As it turned out, the new associate spent 37 hours and billed $6,545 for legal research, reviewing the file, and preparing memos to the lead partner on the case, all apparently in aid of the preparation of the trial brief, and the partners spent another 13.7 hours and billed another $3,246 for legal research and preparation of the trial brief which, as had been ordered by the court, was only five pages long and contained almost no legal analysis or citations, focusing instead on the factual issues surrounding the amount of the plaintiff's damages.
The court recognizes that it sees only the tip of the iceberg in any given case, and is aware that many things play out behind the scenes. Further, fee motions are unavoidably reviewed in hindsight, and second-guessing a law firm's decisions as to both the allocation of its resources and the amount of time its attorneys ought reasonably to devote to a case is an undesirable task. Nevertheless, particularly as here, where the obligation for the requested fees is to be transferred to the non-prevailing party, the court must exercise its discretion and deny fees as appropriate.
Thus, the court will award attorney's fees payable by the defendants to the plaintiff as follows. First, the court will deduct $3,381 from the amount of attorney's fees requested, on account of the fees incurred in preparing a motion to file under seal unredacted versions of Counsel's time records. That motion was based on the contention that the substance of Counsel's billing records is protected by the attorney-client privilege and/or the work product rule. A quick call to an attorney practicing regularly in this court would have informed Counsel that attorney billing statements submitted in support of fee applications are rarely, if ever, filed under seal, and are rarely filed with significant redactions, if any.
The motion was denied, with the proviso that Counsel should file redacted versions of the billing statements.
Deducting $3,381 from the total attorney's fees requested, $84,525.83, leaves $81,144.83, of which the court will deduct 25% on account of its findings of overstaffing, unnecessary duplication of effort and time, inefficient allocation of resources, and excessive time billed, all as discussed above.Thus, the fee award will be $60,858.62 ($81,144.83 - $20,286.21).
Attorney's fee awards proceeding from the lodestar calculation and then enhancing or reducing the total by an across-the-board percentage amount is acceptable under California law. See, e.g., Serrano v. Unruh, 32 Cal.3d 621, 625, 639, 644 (1982) [hours reduced by 20%]; City of Colton, 206 Cal.App.4th at 786 [fees reduced by 50%]; Building a Better Redondo, Inc. v. City of Redondo Beach, 203 Cal.App.4th 852, 872-73 (Jan. 25, 2012) [applying a 25% upward multiplier]; Christian Research Institute, 165 Cal.App.4th at 1323-29 [approving fees for 71 hours out of more than 600 hours requested, citing overstaffing, duplicative and unnecessary work].
D. The Costs Requested in This Case
The court will award the plaintiff the amount of costs incurred in this case, as itemized in the plaintiff's Amended Bill of Costs, Ex. JLP-7 in support of the Motion, but will not award the requested expert witness fees, $12,614.39. As a general rule, California law allowing an award of costs in favor of a prevailing party, Cal. Code Civ. Proc. § 1032(b), does not encompass fees of experts not ordered by the court. Cal. Code Civ. Proc. § 1033.5(b)(1). The plaintiff cites Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC, 185 Cal.App.4th 1050, 1066 (2010), in which the court awarded the prevailing party its expert witness fees. However, first, the weight of California case law is to the contrary. See Carwash of America-Po v. Windswept Ventures No. 1, 97 Cal.App.4th 540, 543-44 (2002), and cases collected at p. 544.
Fees of expert witnesses ordered by the court are recoverable. Cal. Code Civ. Proc. § 1033.5(a)(8).
Similarly, under federal law, taxable costs include compensation of court appointed experts only. 28 U.S.C. § 1920(3); see also Lovell v. Chandler, 303 F.3d 1039, 1058 (9th Cir. 2002).
Second, the Thrifty Payless court awarded the prevailing party its expert witness fees based solely on the fact that the attorney's fee clause in the parties' contract specifically provided that the prevailing party would be entitled to "reasonable expenses, " including "witness and expert fees." 185 Cal.App.4th at 1066. In the present case, by contrast, the attorney's fee clause in the promissory note covered "such sums as are incurred for attorneys' fees and associated legal expenses." The language does not refer to expert witness fees, and the court cannot conclude that the defendants intended the phrase "associated legal expenses" to obligate them for the plaintiff's expert witness fees despite contrary prevailing authority.
III. CONCLUSION
For the reasons set forth above, the Motion will be granted in part and the court will award the plaintiff, as the prevailing party herein, the sum of $60,858.62 in attorney's fees and $2,108.30 in costs. The court will issue an appropriate order.
Id.; cf. Redwood Theaters, Inc. v. Davison (In re Davison), 289 B.R. 716, 725 (9th Cir. 2003) [the plaintiff alleged fraud but "did not allege any breach of the Agreement or seek to enforce any rights under the Agreement."].