Law Offices of Ray Hsu & Associates, Ray Hsu and May To for Defendant, Cross-complainant and Appellant. Endler Law and Jeffrey B. Endler for Plaintiff, Cross-defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC616028) APPEAL from a judgment of the Superior Court of Los Angeles County, Daniel S. Murphy, Judge. Affirmed. Law Offices of Ray Hsu & Associates, Ray Hsu and May To for Defendant, Cross-complainant and Appellant. Endler Law and Jeffrey B. Endler for Plaintiff, Cross-defendant and Respondent.
The Independent Wholesale Sales Representatives Contractual Relations Act of 1990 (the Act) provides unique protections for independent contractors working as wholesale sales representatives. (Civ. Code, § 1738.11 et seq.) Among other requirements, contracts between these independent salespeople and the manufacturers they represent must be in writing. The contracts must provide for the rate and method by which the salesperson's commission is computed, when the commission is paid, the territory assigned to the sales representative, and all exceptions to the assigned territory and customers therein. (§ 1738.13.) Failure to adhere to the statutory requirements gives the aggrieved salesperson a right of action along with the ability to recover prevailing party attorney fees and, upon proof of intentional malfeasance, treble damages. (§§ 1738.15, 1738.16.)
Unless otherwise specified, all further statutory references are to the Civil Code.
Plaintiff Brittanie Newman (Newman) sued defendants Knit Creations, Inc., doing business as LAmade (LAmade), and others for allegedly underpaying her commissions and contractual travel costs. LAmade cross-complained against Newman, contending among other things she made misrepresentations to claim commissions. In a second amended complaint filed more than a year into the litigation and shortly before trial, Newman was granted leave to add a claim against LAmade under the Act. Her amended pleading also added a prayer for statutory attorney fees and treble damages.
Following a bench trial, the court entered judgment in favor of Newman and against LAmade on both the complaint and the cross-complaint, awarding Newman damages of $41,049.60 and attorney fees as the prevailing party. Newman filed a post-trial motion for attorney fees to recover actual fees of $85,750, plus a lodestar multiplier of 2, for a total of $171,500. LAmade opposed the motion, arguing that Newman's claim for violation of the Act—the only vehicle by which she could recover attorney fees—was not added until late in the litigation, limiting her right to recover fees incurred prior to the addition. LAmade also asserted Newman had no right to recover fees incurred to defend its cross-complaint, and that Newman was not entitled to fees incurred on claims as to which LAmade prevailed.
The trial court disagreed, finding all of Newman's claims, as well as LAmade's cross-claims, so intertwined that separating attorney time into compensable and noncompensable units was impracticable. The court rejected the requested multiplier, and awarded fees of $85,750.
Finding the trial court's rationale did not exceed the bounds of reason, we affirm.
A. Newman's Work for LAmade
LAmade, a brand and wholesaler of contemporary women's clothing, used independent sales representatives to market its products to retailers. LAmade's president and chief financial officer were, respectively, Jack Chang (Jack) and Elbert Chang (Elbert). Its sales representatives, including Newman, were independent contractors, not employees of the company. Newman's sales efforts were not exclusive to LAmade; she simultaneously represented other fashion lines while marketing LAmade's products. The same was true for Candice Puthawala (Puthawala), another independent sales representative for LAmade whose sales territory included the state of Nevada.
We refer to Jack and Elbert by their first names solely to distinguish between father and son and intend no disrespect thereby.
On May 2, 2012, Newman and LAmade signed a representation agreement (agreement) defining the following pertinent terms under which Newman would market and sell LAmade's fashion apparel line: (1) "for all regular priced specialty store sales generated by" Newman, she would receive a 10 percent commission; (2) Newman would be the designated specialty store representative for LAmade in Northern California, Washington, Oregon, Idaho, Wyoming, North Dakota, South Dakota, and Alaska; (3) commissions would be based on net invoice totals; (4) LAmade would pay Newman a $500 monthly fee to cover travel expenses; (5) Newman would provide LAmade with a monthly travel report; (6) LAmade would cover the costs of all agreed upon regional tradeshows, excluding travel and accommodations; and (7) Newman's annual sales target for her territory would be $1 million.
The agreement was silent as to what commission Newman would receive for discounted sales or sales to stores other than "specialty" stores, an issue that would be hotly contested at trial.
Newman alleged LAmade modified her contract four months later in an email to provide her with a 2 percent bonus commission on all annual sales beyond the $1 million level.
Newman asserted that she successfully established hundreds of new accounts as an independent sales representative for LAmade, including accounts with Stitch Fix and an "even better relationship" with Zappos, a Nevada-based company. Nonetheless, Newman contended LAmade never properly compensated her according to her two-tiered commission rate. She further alleged that, while LAmade did pay her the $500 contractual monthly payment for travel expenses, the company did not reimburse her for all excess travel costs or regional tradeshow fees.
LAmade terminated Newman's employment on March 20, 2015.
B. The Complaint
In April of the following year, Newman filed a complaint against LAmade, Jack, and Elbert alleging causes of action for breach of contract, common counts, fraud and deceit, promissory estoppel, conversion, intentional and negligent infliction of emotional distress, breach of the implied covenant of good faith and fair dealing, and unjust enrichment/misappropriation.
C. The Cross Action
On October 7, 2016, LAmade, Jack, and Elbert filed a cross-complaint against Newman and her company, Brittanie Newman, Inc., as well as Newman's husband, Brett Malkin, for breach of contract, fraud, intentional interference with contractual relations, intentional and negligent interference with prospective economic relations, and intentional infliction of emotional distress.
Following a series of demurrers, LAmade's operative second amended cross-complaint, filed on November 21, 2017, asserted claims by LAmade, only, against Newman, only, for breach of contract, intentional interference with contractual relations, and negligent interference with prospective economic relations.
LAmade alleged that, despite the fact it regularly made monthly travel reimbursement payments to Newman in accordance with the agreement, Newman breached her obligation to provide monthly travel reports to the company. LAmade further contended that Newman forced LAmade to pay both Newman and Puthawala a 3 percent commission on the Nevada-based Zappos account—which, by contractual territory, belonged solely to Puthawala—causing Puthawala to become upset and terminate her relationship with LAmade. LAmade also asserted Newman interfered with Puthawala's ability to display LAmade's goods at its showroom.
D. Motion for Leave to Add a Claim Under the Act
Meanwhile, according to his own declaration, Newman's attorney discovered "for the first time" on September 26, 2017 that Newman was "entitled to the protections of" the Act. Newman sought leave to amend her complaint to add a claim under the Act, which LAmade did not oppose. Thus, Newman's operative second amended complaint, filed on November 17, 2017, asserted the prior existing claims for breach of contract, common counts, promissory estoppel, and breach of the implied covenant of good faith and fair dealing, and added for the first time a claim for violation of the Act.
Newman correctly notes that LAmade mischaracterizes its response to Newman's motion for leave to file her second amended complaint. LAmade contends that the trial court granted Newman's motion for leave on October 12, 2017, "[d]espite [LAmade's] vehement objections and opposition to [Newman's] motion." In fact, the record indicates that LAmade filed no opposition whatsoever to the motion for leave despite a specially-set deadline of October 6, 2017. While we question LAmade's affirmative statement in its brief that it "vehement[ly] object[ed]" to the proposed amendment, we decline Newman's invitation to find LAmade is "[e]stopped" from receiving appellate review. LAmade appealed from the order granting attorney fees, not the order granting leave to amend.
In addition to the general and special damages sought in the prior two iterations of her complaint, Newman added prayers for treble damages and statutory attorney fees pursuant to sections 1738.15 and 1738.16 of the Act.
At trial, the parties did not dispute the agreement provided for a 10 percent commission to be paid by LAmade to Newman for all regularly priced specialty store sales. Nor did they dispute the fact that the agreement was silent as to the effect of customer discounts on Newman's commission. Their testimony diverged, however, on the questions of which of Newman's customers were "specialty stores" and, separately, what her commission would be for sales of discounted items to any of her customers.
Elbert testified there was a sliding scale for commissions on discounted sales ranging from 5 to 9 percent (and occasionally lower for deeply discounted items). Elbert's testimony was confirmed by LAmade's expert, who testified sliding-scale commissions on discounted sales were common in the fashion industry. The trial court found that, as a graduate of the Fashion Institute of Design and Merchandising and an experienced salesperson in the apparel industry, Newman "knew or should have been aware" of the sliding scale for discounted sales. LAmade did, in fact, pay her a commission based on this sliding scale.
With respect to the Zappos account, the trial court rejected LAmade's argument that Newman was only entitled to a 3 percent commission because the customer was located in Nevada, which was actually Puthawala's territory, not Newman's. Instead, based on the sliding scale for sales discounted by 13 percent, the trial court determined Newman should have received a commission of 7 percent.
On Newman's claim that she did not receive her 2 percent bonus for annual sales exceeding $1 million, the trial court rejected LAmade's argument and testimony that the bonus was only applicable to " 'regular priced specialty store sales,' " finding the email on which the contract modification was based identified no such limitation. However, the court sided with LAmade on Newman's assertion she was not paid all of her contractually-mandated travel expenses, determining she received all payments to which she was entitled.
Based on these findings, the trial court found LAmade breached its agreement with Newman, entitling her to damages of $41,048.60. The court also determined LAmade violated the Act by failing to identify the commission rate for discounted sales. The trial court declined to find LAmade's omission was intentional, and did not award treble damages. As the prevailing party on her claim under the Act, the court found Newman was entitled to "reasonable attorney fees and costs."
As to Newman's remaining claims, the trial court found Newman was entitled to judgment on her common count cause of action, but failed to establish her claims for promissory estoppel or breach of the covenant of good faith and fair dealing. Promissory estoppel did not apply because the promises made to Newman by LAmade were supported by consideration. The claim for breach of the implied covenant, in turn, was duplicative of the breach of contract claim.
LAmade was unsuccessful on its cross-complaint. The court found LAmade suffered no damages as a result of any alleged breach by Newman of her obligation to provide monthly travel reports, and the company failed to set forth credible facts to support a breach of contract concerning the showroom space. The trial court determined LAmade failed to proffer any credible evidence to support its interference claims. "Newman did not do anything to disrupt . . . Puthawala's ability to come back to the showroom . . . . Newman did not make any fraudulent representation concerning her knowing the buyers from Zappos. . . . Puthawala did not have exclusive rights to Nevada, and in fact, Newman had several accounts in the State of Nevada besides Zappos. There was no evidence that Newman's actions caused . . . Puthawala to terminate her contract with [LAmade], and in fact, . . . Puthawala left the apparel industry on her own volition to pursue a career in health foods."
The trial court entered judgment in favor of Newman in the amount of $41,048.60, and deemed Newman "the prevailing party on both the [c]omplaint and [c]ross-complaint, [entitling her] to reasonable attorney's fees and costs."
F. Motion for Attorney Fees
Post-trial, Newman filed a motion seeking prevailing party attorney fees for 245 hours of attorney time billed at the rate of $350 per hour. In addition to the $85,750 in fees actually incurred, Newman argued for application of a lodestar multiplier of two to account for the "complicated case involving both prosecuting and defending" the claims asserted by and against her, the alleged novelty of the Act, and the "risks" assumed by Newman's counsel in representing her. Newman supported her motion with an itemized billing statement from counsel that broke down tasks by date, description, and time spent.
LAmade sought to reduce Newman's requested fees of $171,500 to less than $10,000, arguing (1) Newman was not entitled to any fees prior to September 25, 2017, the date she amended her complaint to state a claim under the Act; (2) she could not recover fees for responding to LAmade's demurrers, which were partially successful; (3) Newman was only entitled to fees incurred in prosecuting her claim for violation of the Act and not any of her other affirmative causes of action; (4) any fees related to defending LAmade's cross-complaint were not recoverable; and (5) any fee award should take into account Newman's inflexibility, which purportedly prevented the case from settling prior to trial.
On reply, Newman asserted all of the issues presented by her complaint were inextricably intertwined because her complaint "consisted of one basic premise, i.e., that [she] was underpaid on a promised commission rate, . . . was not paid her bonus commissions, and was not reimbursed for certain travel expenses." Newman contended that LAmade's strategy to avoid the allegations of her complaint "was to file a [c]ross-[c]omplaint," alleging that she was not paid because she was "a liar" and committed "various business torts" against LAmade.
The trial court agreed with Newman and awarded her the entire amount incurred of $85,750, finding her counsel's efforts "were so intertwined that it would be impracticable to separate the attorney's time into compensable and noncompensable units as all of the claims relate to the payment of the commission at issue under . . . section 1738.10."
This timely appeal of the order granting Newman's motion for attorney fees followed.
A. Standard of Review
"Once a trial court determines entitlement to an award of attorney fees, apportionment of that award rests within the court's sound discretion. [Citations.] We review the court's decisions for abuse of discretion. [Citation.] The court abuses its discretion whenever it exceeds the bounds of reason, all of the circumstances before it being considered. The burden is on the party complaining to establish that discretion was clearly abused and a miscarriage of justice resulted. [Citations.]" (Carver v. Chevron U.S.A., Inc. (2004) 119 Cal.App.4th 498, 505.) " 'The "experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong" '—meaning that it abused its discretion. [Citations.]" (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.)
In ruling on a motion for attorney fees, the trial court is not required to issue a statement of decision addressing disputed legal and factual issues. (569 E. County Boulevard LLC v. Backcountry Against the Dump, Inc. (2016) 6 Cal.App.5th 426, 440, fn. 17.) " 'No specific findings reflecting the court's calculations [are] required. [Citation.] "The record need only show that the attorney fees were awarded according to the 'lodestar' or 'touchstone' approach." [Citation.] On appeal we infer all findings in favor of the prevailing parties.' [Citation.]" (Lockaway Storage v. County of Alameda (2013) 216 Cal.App.4th 161, 193.)
B. The Trial Court Did Not Abuse Its Discretion
On appeal, LAmade does not dispute that its contractual relationship with Newman was governed by the Act. Nor has it appealed from the factual findings the court made regarding violations of the Act. Instead, LAmade contends the trial court abused its discretion by failing to carve out and award only those fees incurred by Newman for prosecuting her claim for violation of the Act. LAmade asserts four purported errors in the fee award: (1) Newman should not have been awarded any of the fees she incurred prior to November 17, 2017, the date she filed her second amended complaint; (2) Newman was not entitled to fees incurred to defend the company's cross-complaint; (3) the trial court should have reduced fees because Newman was only marginally successful at trial; and (4) the fee award should have been discounted based on Newman advancing "frivolous" legal positions. We discuss each of these contentions in turn.
1. Fees Incurred Prior to Claim for Violation of the Act
"Unless authorized by either statute or agreement, attorney's fees ordinarily are not recoverable as costs. [Citations.]" (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 127-128.) Where recoverable, a prevailing party entitled to fees should be awarded attorney fees for all hours reasonably spent on the litigation. (Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 249.)
LAmade does not dispute that Newman is entitled to recover fees for her successful claim under the Act. It claims, however, that the fee award should reflect that "less than 5 [percent] of the case dealt with" the Act. LAmade does not explain how it calculated this apparently arbitrary figure, but we need not address it as we reject the underlying premise of LAmade's argument, i.e., that Newman cannot recover any fees incurred prior to filing her claim for violation of the Act on November 17, 2017.
"Attorney's fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed." (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at pp. 129-130; Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1132-1133.) It is within the trial court's discretion to allocate awards of attorney fees. The recognized barrier to segregation for purposes of calculating fee awards is the existence of inextricably intertwined issues making it impracticable, if not impossible, to separate the multitude of conjoined activities into compensable and noncompensable fees. (Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, 1297 (Heppler).)
In Heppler, the appellate court found the trial court abused its discretion in failing to allocate fees. The plaintiffs in Heppler sued a contractor, who cross-claimed against four subcontractors, for construction defects. The trial court awarded plaintiffs all of their requested attorney fees against one subcontractor, Martin, pursuant to a contract provision. The Court of Appeal reversed, noting: "Martin's part of the case could have been tried in considerably less time than seven weeks had the trial not taken up issues that involved the other nonsettling subcontractors. It strikes us as eminently unfair to tag Martin with all of plaintiffs' attorney fees for the entire seven-week trial. [¶] . . . [¶] Not all the issues involving Martin's case were integrally associated with the other issues in the case; at the very least, some of them could have been severed and isolated for purposes of the attorney fee award." (Heppler, supra, 73 Cal.App.4th at p. 1297.)
LAmade urges us to draw a parallel between this case and Heppler, concluding with little supporting argument that "there are no 'inextricably intertwined issues' making apportionment of attorney fees impractical or impossible. . . . The fact that [the causes of action other than for violation of the Act] relate[ ] to the payment of commissions does not make it 'inextricably intertwined' such that apportionment of attorney fees is impractical or impossible." We decline LAmade's invitation, finding that "payment of commissions," among other issues, is exactly what makes Newman's fee award unsusceptible to apportionment.
In Heppler, a clear line of demarcation existed between the compensable and noncompensable causes of action. The attorney fees expended in pursuing the other subcontractors fell outside the compensable contract-based attorney fees. Here, we find no such distinct boundary between the statutory cause of action and the remaining claims for breach of contract, common counts, promissory estoppel, and breach of the implied covenant of good faith and fair dealing. Nor does LAmade suggest one. Each claim implicated Newman's allegation that she was entitled to payment of commissions not defined by the agreement, as the Act required them to be. For example, Newman's breach of contract cause of action alleged LAmade "chose to not pay [Newman] on her full commissions, including but not limited to bonus commissions, earned between August 2013 and April 15, 2015 on the Zappos [a]ccount." Not only did the trial court find that, based on LAmade's own sliding scale for commissions on discounted sales, Newman should have received a 7 percent commission on all Zappos sales instead of the 3 percent she was actually paid, it also determined LAmade's failure to include the commission for discounted goods constituted a violation of the Act. Both the contract cause of action and the claim for violation of the Act rested on one central theme: the sufficiency of the agreement between Newman and LAmade. Indeed, the bulk of the testimony by trial witnesses centered on interpretation of the agreement and how to compensate Newman for sales of discounted items, a term not defined by the agreement. Time incurred to develop those facts and arguments necessarily related to Newman's claim under the Act, even if it was filed after some work was performed.
A similar overlap exists with Newman's common counts cause of action ("[t]his [amount] represents underpayment of commissions not paid at the proper percentage rate"), her claim for promissory estoppel (LAmade "never intended to honor [its] promise to [Newman] to pay her an across-the-board 10 [percent] commission rate and never intended to honor [its] promise to [Newman] to pay her the 2 [percent bonus])," and her cause of action for breach of the implied covenant of good faith and fair dealing (LAmade "violated its inherent duty to act fairly and in good faith, each time the company threated to terminate [Newman] to avoid paying [her] contractually earned commissions").
The question before this court is not whether the trial court could have apportioned the fees, but whether it abused its discretion in declining to do so. As already noted, "[a]ttorney's fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed." (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at pp. 129-130.) We find the issues underlying Newman's claim so interrelated that it was reasonable for the court to find it could not separate them into claims for which attorney fees are properly awarded and claims for which they are not—and certainly not based solely on the date the claim under the Act was filed. Accordingly, we find no abuse of discretion in the trial court's decision not to apportion the attorney fee award to segregate time incurred prior to Newman's addition of her claim for violation of the Act.
2. LAmade's Cross-complaint
LAmade next contends Newman cannot recover the fees she incurred to defend against its cross-complaint because its cross-claims were "not compulsory" and LAmade "could have filed [its] tort claim for tortious interference with [its] business relationship with . . . Puthawala in a completely separate action."
While we do not necessarily agree that LAmade's claims against Newman were not compulsory, we need not decide that issue because it does not matter whether the claims were or were not compulsory. As LAmade concedes by its citation to Maxim Crane Works, L.P. v. Tillbury Constructors (2012) 208 Cal.App.4th 286, there is no bar to awarding fees incurred on a noncovered cross-claim where, as here, the issues in the complaint and cross-complaint are " 'inextricably intertwined.' " (Id. at p. 300.)
If a defendant's cause of action against the plaintiff is related to the subject matter of the complaint, it must be raised by a cross-complaint; failure to plead it will bar the defendant from asserting it in any later lawsuit. (Code Civ. Proc., § 426.30; Al Holding Co. v. O'Brien & Hicks, Inc. (1999) 75 Cal.App.4th 1310, 1313-1314.)
LAmade's cross-complaint alleged, inter alia: (1) Newman attempted to take over the Zappos account by making "false statements" about her relationship with Zappos' buyer; (2) LAmade nonetheless decided to award the Zappos account to Newman but, notwithstanding the terms of the agreement, would "only pay 3 [percent] commission to [Newman], not the 10 [percent] commission rate that [Newman] was receiving for specialty store accounts"; (3) Puthawala was "ang[ry]" Newman was assigned the Zappos account, which "was originally under [Puthawala's] territory," and asked for a matching 3 percent commission on all sales made by Newman to Zappos; and (4) Elbert told Newman and her husband during a March 5, 2015 meeting that, notwithstanding the express language of the agreement, Newman was not entitled to a full 10 percent commission on sales to Zappos because it was not a specialty store and goods were sold to Zappos at a discounted rate.
The allegations of the cross-claims were thus inextricably intertwined with Newman's claim for violation of the Act, and, a fortiori, inextricably intertwined with the claim giving rise to a right to attorney fees. The crux of LAmade's cross-complaint was that it did not have to pay Newman the commissions or other entitlements she claimed because of Newman's own breach of contract or tortious conduct. Whether LAmade was excused from its obligations to Newman could not be parsed out from the question of whether, and to what amount, Newman was entitled to receive commissions.
"The court abuses its discretion whenever it exceeds the bounds of reason, all of the circumstances before it being considered." (Carver v. Chevron U.S.A., Inc., supra, 119 Cal.App.4th at p. 505.) LAmade failed to satisfy its burden to establish that the trial court abused its discretion by awarding fees to Newman to defend LAmade's cross-complaint.
3. Unsuccessful Claims or Frivolous Positions
LAmade's final arguments are that the fee award should be reduced because Newman did not prevail on all of her affirmative claims, did not prevail against Jack and Elbert, and advanced "frivolous" litigation theories and positions. We read these assertions as arguments the trial court either improperly found in Newman's favor after trial, or improperly determined that Newman was the prevailing party.
LAmade appeals solely from the fee award, and any appeal from the court's factual findings at trial is untimely. In any event, LAmade fails to identify particular fees that it claims were erroneously awarded, instead suggesting some unspecified "discount" should have been applied. LAmade's failure to identify particular fees it contends were improper forecloses its claim of error. When confronted with voluminous legal bills, "trial courts are not required to identify each charge they find to be reasonable or unreasonable, necessary or unnecessary. The party opposing the fee award can be expected to identify the particular charges it considers objectionable." (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 101.)
The attorney fees order is affirmed. Newman is to recover her costs on appeal.
NOT TO BE PUBLISHED
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------
ROTHSCHILD, P. J.