Salameh v. 5th and K Master Assn. CA4/1 (2016) · DecisionDepot
Salameh v. 5th and K Master Assn. CA4/1
California Court of Appeal Aug 30, 2016 No. D067232Unpublished
Filed 8/30/16 Salameh v. 5th and K Master Assn. CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
TAMER SALAMEH et al., D067232
Cross-complainants and Appellants,
v. (Super. Ct. No. 37-2010-00094424- CU-OR-CTL) 5TH AND K MASTER ASSOCIATION, INC. et al.,
Cross-defendants and Respondents.
APPEALS from a judgment and order of the Superior Court of San Diego County,
Joel M. Pressman, Judge. Affirmed.
Aguirre & Severson, Michael J. Aguirre, Maria C. Severson; Stris & Maher and
Peter K. Stris for Cross-Complainants and Appellants.
Lewis Brisbois Bisgaard & Smith, Charles S. Haughey, Jr., Raul L. Martinez,
Esther P. Holm and Eric Kizirian for Cross-defendants and Respondents 5th & K Master
Association, Inc., 5th & K Parcel 1 Owners' Association, Inc., 5th & K Parcel 2 Owners'
Association, Inc., 5th & K Parcel 3 Owners' Association, Inc., Bhavesh Patel, Ron
Adelhelm and Renee Molloy.
Cox, Castle & Nicholson, Frederick H. Kranz and Lynn T. Galuppo for Cross-
defendants and Respondents Tarsadia Hotels, 5th Rock, LLC, MKP One, LLC, MSP
Cross-complainants, who are owners of condominium guestrooms in the Hard
Rock Hotel San Diego (Hotel), appeal an attorney fee award of $3,524,959.00 to a group
of nine cross-defendants (collectively, Tarsadia)1 and another attorney fee award of
$1,377,172.32 to a different group of seven cross-defendants (collectively, the
Association)2 following entry of judgment on the pleadings in cross-defendants' favor.
Cross-complainants contend that the awarded fees are not reasonable in relation to the
results achieved by cross-defendants, cross-defendants' attorneys billed an excessive
number of hours, and the trial court failed to scrutinize the attorneys' hourly rates. We
reject these contentions and affirm.
1 The Tarsadia cross-defendants are Tarsadia Hotels, 5th Rock, LLC, MKP One, LLC, MSP One, LLC, Gaslamp Holdings, LLC, T-12 Three, LLC, Evolution Hospitality, LLC, Tarsadia Investments, LLC, and T-2 Development, LLC. Throughout the case, they have been represented by the law firm Cox, Castle & Nicholson.
2 The Association cross-defendants are 5th & K Master Association, Inc., 5th & K Parcel 1 Owners' Association, Inc., 5th & K Parcel 2 Owners' Association, Inc., 5th & K Parcel 3 Owners' Association, Inc., Bhavesh Patel, Ron Adelhelm and Renee Molloy. Throughout the case, they have been principally represented by the law firm Lewis Brisbois Bisgaard & Smith (Lewis Brisbois). 2
FACTUAL AND PROCEDURAL BACKGROUND
In March 2014, after over three years of litigation, cross-defendants obtained
judgment on the pleadings with respect to a third amended cross-complaint (TACC).
(Salameh et al. v. 5th and K Master Association, Inc. et al. (Sept. 23, 2015, D066096)
[nonpub. opn.] (Salameh I).) Subsequently, Tarsadia and the Association each moved for
an award of attorney fees under (1) Civil Code section 1717, (2) Code of Civil Procedure
sections 1021, 1032, and 1033.5, and (3) the contracts at issue, including the parties'
purchase/sale contracts and rental management agreements. Cross-defendants argued
that they were entitled to attorney fees as the prevailing party under the relevant
contractual and statutory provisions, and that the amounts of fees requested were
reasonable based on the lodestar calculation, counsel's necessarily incurred time and
market rates, the nature of the litigation and amount at issue, the difficulty in handling
and resolving the dispute, and the result obtained.
As to the initial lodestar figure, cross-defendants multiplied the number of hours
spent by each of their attorneys and paralegals by each person's negotiated hourly rate.
Tarsadia's counsel spent approximately 8,300 hours on the case and the Association's
counsel spent approximately 6,400 hours. A mix of partners, associates, and paralegals
billed these hours at various hourly rates. As for the nature of the case, cross-
complainants filed their original cross-complaints in 2011 as putative class actions,
including fraud and unfair competition claims, asserting that cross-defendants had
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overcharged them for the management and maintenance of their Hotel units.3 Cross-
complainants sought more than $45 million in fees collected by Tarsadia under rental
management agreements, more than $19 million in assessments collected by the
Association, and an undetermined amount of punitive damages. After over three years of
extensive motion practice, discovery, depositions, discovery disputes, class certification,
and class notice, the cross-claims resolved entirely in cross-defendants' favor.4
Tarsadia presented the redacted monthly billing statements of its counsel,
reflecting entries for each team member by task rounded to tenths of an hour, the person's
billing rate, and total fees incurred. Tarsadia also submitted the declaration of its
counsel, Frederick H. Kranz, a partner at Cox, Castle & Nicholson. In addition to
attesting to some of the foregoing matters, Kranz averred to his principal role in
representing Tarsadia, the roles of the other professionals he selected to work on the
matter at lower billing rates, the consistency of their hourly rates with those charged by
other similar law firms handling similar work in Southern California, and the fact that
Tarsadia had paid his firm's bills at the listed rates throughout the litigation. The
attorneys' hourly rates varied based on seniority and experience, from $360 for associates
up to $615 for the lead partner. Kranz further declared that the billing statements
3 Cross-complainants filed their cross-complaints in response to the homeowners' associations' collection actions for allegedly unpaid assessments. The court consolidated the cases and stayed the collection actions until the cross-complaints could be resolved.
4 This court summarized a portion of these proceedings in Salameh I, and noted that cross-complainants filed the TACC to conform to their most recent legal theories. 4
reflected reductions totaling $219,375.25 for duplicative or discounted work, which
Tarsadia was not requesting as part of its award.5
The Association presented similarly detailed, redacted monthly billing records of
its counsel, as well as the declaration of Charles S. Haughey, Jr., a partner at Lewis
Brisbois, and Craig L. Combs, an attorney at Wasserman Kornheiser.6 Like Kranz,
Haughey substantiated the fees his firm was requesting, attesting to the number of hours
spent by each member of his firm, the staffing structure and rates charged by each person,
the consistency of those rates with other major firms handling similar litigation in
Southern California, and that Lewis Brisbois had charged the contract rates that it had
previously negotiated with the Association's insurer. Lewis Brisbois charged flat hourly
rates of $230 for its senior partners and $175 for its senior associates.
Through their counsel's declarations and numerous lodged documents, Tarsadia
and the Association recounted in substantial detail cross-complainants' factual and legal
allegations and the lengthy procedural history of the case, which they maintained
5 The record indicates that Tarsadia may have requested $3,529,459 in attorney fees, yet the trial court awarded $3,529,959 in its tentative ruling issued to the parties, confirmed as its final order after a hearing on the motions. Cross-complainants have not raised this possible typographical error, and thus, have forfeited the issue. (See Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564 (Premier Medical).)
6 Wasserman Kornheiser LLP maintains a niche practice representing hundreds of common interest development associations, serves as the Association's general counsel, prosecuted the Association's collection actions, and also performed work in defending against the cross-complaints. Combs declared that his $200 hourly rate was reasonable in light of his specialized practice, that his firm's bills are directly reimbursed by the Association, and that the Association's request of $58,591 for fees incurred by his firm related solely to defending against the cross-complaints. 5
necessitated the number of attorney hours expended. Tarsadia and the Association
indicated that the class action nature of the case had amplified the demands on counsel's
time. For example, they described how cross-complainants had served hundreds of
discovery requests, and that in order to respond, cross-defendants were required to collect
and produce an enormous volume of documents. In addition, there were 57 depositions
that continued over 73 days or sessions. Further, there were a number of discovery
disputes. Cross-defendants explained that another complication arose when cross-
complainants shifted their legal theories at the class certification stage, and the altered
legal theories led to the TACC's filing and motions for judgment on the pleadings.
Tarsadia and the Association argued that all of their fees were reasonably necessary for
the defense of the case, given their significant risk exposure, the complex factual
background and shifting legal theories, and the manner in which cross-complainants
litigated the case.
In opposition, cross-complainants asserted that they had "prevailed" on a number
of motions before cross-defendants ultimately prevailed on their motions for judgment on
the pleadings, and further contended that cross-defendants' counsel had spent time on
matters that were not reasonably necessary to the litigation. Cross-complainants argued
that cross-defendants had taken unnecessary depositions, including those of a married
couple and their 16-year-old daughter,7 and that the successful motions for judgment on
the pleadings could and should have been brought at an earlier point in the litigation.
7 Cross-complainants did not identify the deponents by their names. 6
Without summarizing or attaching any deposition transcripts, cross-complainants'
counsel, Maria C. Severson, summarily averred that the depositions taken were
unnecessary. Cross-complainants raised no objection to Tarsadia's and the Association's
being represented by different law firms, did not challenge any hourly rates, and failed to
identify any particular time entries or amounts that should be stricken. Instead, they
merely urged the court to globally reduce the amounts of the requested fees.
In reply, cross-defendants maintained that they were the "prevailing party," having
obtained a complete dismissal of the action in their favor, and pointed out that cross-
complainants had not challenged any of the billing entries or hourly rates used to
calculate the lodestar figure. They reiterated the hard-fought and aggressive nature of the
litigation and stated that the successful motions for judgment on the pleadings could not
have been filed earlier. Tarsadia submitted an additional declaration of its counsel, Lynn
T. Galuppo, who explained that (1) cross-defendants had taken the depositions of only 12
witnesses, nine of whom were named parties, to develop facts and arguments for their
substantive defenses and opposition to class certification; and (2) it was necessary to
depose a cross-complainant's daughter because the cross-complainant was not fluent in
English and he testified that his daughter had also heard the sales representations made to
him.
In October 2014, the trial court granted the attorney fee motions, finding that
cross-defendants were entitled to attorney fees under the contracts at issue and that
detailed evidence supported the reasonableness of the fees requested. The court noted
that cross-complainants had not shown that any particular amounts billed were
7
unreasonable, that their arguments were conclusory and devoid of factual support, and
that they had failed to present rebuttal evidence pertaining to the reasonableness of the
hours or rates. Further, the court rejected cross-complainants' argument that the
depositions taken were unnecessary, observing that cross-complainants had taken a large
majority of the depositions in the case and had not established that the "daughter's"
deposition was not needed.
DISCUSSION
I. Legal Principles and Standard of Review
Cross-complainants do not contest that relevant contractual and statutory
provisions authorized an award of attorney fees in this case. (See, e.g., Code Civ. Proc.,
§ 1021 [parties may agree to "the measure and mode of compensation" for attorneys].)
However, they challenge the reasonableness of the attorney fees awarded. Reasonable
attorney fees authorized by contract shall be awarded to the prevailing party as "fixed by
the court." (Civ. Code, § 1717.) "The trial court has broad discretion to determine the
amount of a reasonable fee, and the award of such fees is governed by equitable
principles." (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 92.)
The fee setting inquiry in California typically begins with the lodestar, i.e., the
number of hours reasonably expended multiplied by the reasonable hourly rate. (PLCM
Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 (PLCM).) The reasonable hourly
rate is that prevailing in the community for similar work. (Ibid.) The lodestar figure may
then be adjusted up or down to arrive at the fair market value for the legal services
provided, based on the trial court's consideration of factors " 'including the nature of the
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litigation, its difficulty, the amount involved, the skill required in its handling, the skill
employed, the attention given, the success or failure, and other circumstances in the
case.' " (Id. at p. 1096; see also Graciano v. Robinson Ford Sales, Inc. (2006) 144
Cal.App.4th 140, 154 (Graciano).)
This court reviews an order granting or denying attorney fees for abuse of
discretion. (PLCM, supra, 22 Cal.4th at p.1095; Graciano, supra, 144 Cal.App.4th at p.
148.) "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.' " (Serrano v.
Priest (1977) 20 Cal.3d 25, 49; PLCM, supra, at p. 1095.)
II. The Trial Court Did Not Abuse its Discretion in Determining Cross-defendants' Attorney Fee Award
According to cross-complainants, the trial court abused its discretion in
determining the attorney fee awards, improperly shifted the burden of proof, and did not
require cross-defendants to demonstrate the reasonableness of their requested fees. We
reject these arguments. The court used a proper standard in calculating the award—it
took the number of hours expended by counsel multiplied by their hourly rates, which it
determined to be the prevailing market rate for comparable legal services. (PLCM,
supra, 22 Cal.4th at p. 1096.) The court relied on cross-defendants' unrefuted evidence,
including detailed billing records and attorney declarations, which provided the court
with a sufficient basis to determine prevailing hourly rates and "whether the case was
overstaffed, how much time the attorneys spent on particular claims, and whether the
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hours were reasonably expended." (Christian Research Institute v. Alnor (2008) 165
Cal.App.4th 1315, 1320.) Under the circumstances, cross-defendants met their burden to
demonstrate the reasonableness of their requested fees, and cross-complainants failed to
show otherwise by "point[ing] to the specific items challenged, with a sufficient
argument and citations to the evidence." (Premier Medical, supra, 163 Cal.App.4th at p.
564.) We examine each of cross-complainants' specific contentions below.
Cross-complainants first contend that the fee award was not reasonable in relation
to the results achieved. In that regard, they divide the case into two segments: before
cross-complainants agreed to file the TACC (November 6, 2013) and after that date.
They argue that they "prevailed" during the earlier segment of the case and therefore, that
cross-defendants should not recover fees for work performed during that time.
The trial court did not abuse its discretion by declining to reduce fees based on the
parties' success or failure on particular motions filed during the pendency of the
litigation. A "prevailing party" includes a cross-defendant "in whose favor a dismissal is
entered." (Code Civ. Proc., § 1032, subd. (a)(4).) Prevailing parties should ordinarily be
"fully compensat[ed]" for their reasonable attorney fees incurred in litigating an action to
a successful conclusion. (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1133 (Ketchum);
see Hsu v. Abbara (1995) 9 Cal.4th 863, 877 [defendant that obtained an unqualified
victory on a contract claim was entitled to recover its attorney fees "incurred in defense
of that claim"].) Moreover, "there is no requirement that the trial court make an award of
attorney fees in an amount that is commensurate with or in proportion to the degree of
success in the . . . litigation." (Bernardi v. County of Monterey (2008) 167 Cal.App.4th
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1379, 1398.) Accordingly, cross-defendants were entitled to all of their reasonably
incurred defensive fees, and the trial court was not obligated to reduce fees based on the
results of particular motions. Rather, the court could properly consider the
reasonableness of their fees in relation to their overall success of prevailing on all of the
asserted cross-claims.
Second, cross-complainants contend that Tarsadia and the Association overstaffed
the case, that they unnecessarily used two different law firms, and that their attorneys
billed an excessive number of hours. Cross-complainants' unsupported assertion that
cross-defendants "overstaffed" the case fails to establish an abuse of the trial court's
discretion. (Raining Data Corp. v. Barrenechea (2009) 175 Cal.App.4th 1363, 1375.) A
party challenging an attorney fee award must present specific arguments and evidence to
support its claims. (E.g., Premier Medical, supra, 163 Cal.App.4th at pp. 561-562.)
However, cross-complainants have not provided any examples of inefficient or
duplicative work. Instead, they make conclusory allegations that this occurred. We have
no basis to conclude that the attorneys performed inefficiently or billed for duplicative
work. We may reasonably infer that the trial court found no inefficiency after properly
considering counsel's declarations and billing records and the lack of any specific
challenge by cross-complainants. (See Ketchum, supra, 24 Cal.4th at p. 1140 [" ' "[a]ll
intendments and presumptions are indulged to support [the judgment] on matters as to
which the record is silent " ' "].) Indeed, the court justifiably resolved the issue of
allegedly unnecessary depositions in cross-defendants' favor since the available evidence
showed that they took a reasonable number of depositions for appropriate reasons.
11
With respect to the contention that there was no need for cross-defendants to be
represented by different counsel, Tarsadia and the Association are entirely separate legal
entities that faced different factual allegations, theories of liability, risk exposure, and
potential conflicts. (See Salameh I.) For instance, the Association, including the
individually sued board members who were employees of the hotel developer, might
have asserted indemnity claims against one or more of the Tarsadia cross-defendants.
The trial court could reasonably conclude that Tarsadia and the Association required the
services of different law firms to represent their distinct interests.
Third, cross-complainants argue that the trial court did not sufficiently scrutinize
than Lewis Brisbois. The argument is forfeited because cross-complainants did not
previously challenge counsel's hourly rates. In any event, the argument fails on its
merits. A reasonable hourly rate is derived from the market value of the attorney's
services, regardless of whether the attorneys claiming fees " ' " charge nothing for their
services, charge at below-market or discounted rates, represent the client on a straight
contingent fee basis, or are in-house counsel." ' " (Center For Biological Diversity v.
County of San Bernardino (2010) 188 Cal.App.4th 603, 619.) The lead partner at Cox,
Castle & Nicholson declared that his firm's rates were consistent with those charged in
the marketplace and that Tarsadia had paid his firm's bills throughout the three-year
litigation. Lewis Brisbois charged arguably below-market, discounted rates—i.e., its
contractually negotiated rates with the Association's insurer. Tellingly, cross-
complainants presented no alternative evidence of market rates. The court did not abuse
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its discretion by relying on the unrebutted declarations of cross-defendants' attorneys.
In summary, cross-complainants have not persuaded us that the trial court's
decision was clearly wrong. Cross-defendants presented ample evidence of the work that
their attorneys performed in defending against the prospect of a $64 million judgment.
Counsel submitted detailed daily time entries for more than three years of litigation,
accompanied by declarations explaining how the entries were prepared, reviewed, and
invoiced to their clients. Cross-complainants have not shown that the fee awards are
excessive or exceed the bounds of reason. (Peak-Las Positas Partners v. Bollag (2009)
172 Cal.App.4th 101, 114.)
DISPOSITION
The judgment and order granting cross-defendants' motions for attorney fees are
affirmed. Cross-defendants are entitled to recover costs on appeal.
AARON, J.
WE CONCUR:
O'ROURKE, Acting P. J.
PRAGER, J.*
* Judge of the San Diego Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. 13
AI Brief
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Holding. The court affirmed the trial court's award of attorney fees, holding that the trial court did not abuse its discretion in determining the reasonableness of the fees where the appellants failed to provide specific evidence or arguments to rebut the respondents' detailed billing records and declarations.
Issues
Did the trial court abuse its discretion in awarding attorney fees by failing to properly scrutinize the reasonableness of the hours billed and the hourly rates?
Did the trial court err by failing to reduce the fee award based on the results of specific motions or the alleged overstaffing of the case?
Disposition. Affirmed
Quotations verified verbatim against the opinion
“The trial court has broad discretion to determine the amount of a reasonable fee, and the award of such fees is governed by equitable principles.”
“The '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.'”
“Cross-complainants have not shown that the fee awards are excessive or exceed the bounds of reason.”