Ennis v. Mortgage Tree Lending, Inc. et al, No. 2:2008cv01301 - Document 171 (E.D. Cal. 2010)

Court Description: ORDER denying 152 Motion for Attorney Fees signed by Judge Garland E. Burrell, Jr on 8/24/2010. (Matson, R)
Download PDF
Ennis v. Mortgage Tree Lending, Inc. et al Doc. 171 1 2 3 IN THE UNITED STATES DISTRICT COURT 4 FOR THE EASTERN DISTRICT OF CALIFORNIA 5 6 ROBERT ENNIS, Plaintiff, 7 v. 8 9 10 11 12 13 14 15 MORTGAGETREE LENDING, INC., a California corporation; DIANA GROSSMANN, an individual; ROBERT DRAIZEN, an individual; PATRICK MIZE, an individual; and RODNEY LOWE, an individual and Trustee of the R&K Lowe 1997 Revocable Trust, the Merissa Shea Lowe Irrevocable Trust, and the Kara Brook Lowe Irrevocable Trust, Defendants. ________________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2:08-cv-1301-GEB-EFB ORDER DENYING DEFENDANTS’ MOTION FOR ATTORNEY’S FEES* On June 1, 2010, Defendants Robert Lowe and Robert Draizen 16 17 (collectively, “Defendants”) filed a motion for attorney’s fees under 18 Federal Rule of Civil Procedure 54 and California Civil Code section 19 1717. 20 April 27 and 28, 2010, on Plaintiff’s conversion claim. 21 found that Plaintiff prevailed on his conversion claim against 22 Defendant Lowe and awarded Plaintiff $243,516.66, but found in favor 23 of Defendant Draizen. 24 attorney’s fees under a contract since they are prevailing parties on 25 Plaintiff’s breach of contract, “disregard of the corporate entity” 26 and breach of fiduciary duty claims. (Docket No. 152.) A jury trial was held in this action on The jury Defendants argue they are entitled to Defendant Draizen also argues he 27 28 * argument. This matter is deemed suitable for decision without oral E.D. Cal. R. 230(g). 1 Dockets.Justia.com 1 is entitled to an award of attorney’s fees since he is a prevailing 2 party on Plaintiff’s conversion claim. 3 motion, arguing that there is no contractual or statutory basis for 4 awarding attorney’s fees to either Defendant. 5 below, Defendants’ motion is DENIED. 6 I. 7 Plaintiff opposes Defendants’ For the reasons stated BACKGROUND Plaintiff filed his complaint in Washington state court, 8 alleging claims of breach of contract, conversion, unjust enrichment, 9 wrongful withholding of wages, tortious interference with contractual 10 relations, breach of fiduciary duty, and negligence against 11 MortgageTree Lending, Inc. (“MortgageTree”), Diana Grossmann, Robert 12 Draizen, Patrick Mize and Rodney Lowe. 13 complaint also sought to “[d]isregard . . . MortgageTree’s corporate 14 entity.” 15 (Compl. ¶ 21.) Plaintiff’s (Prayer for Relief ¶ 2.) The state court case was removed to federal court and then 16 was transferred to this court. 17 parties filed a Joint Pretrial Statement (“JPS”) in which the parties 18 stated that Plaintiff’s following three claims against Defendants Lowe 19 and Draizen would proceed to trial: conversion, breach of fiduciary 20 duty, and disregard of the corporate entity. 21 hearing held on April 27, 2010, Plaintiff voluntarily dismissed his 22 breach of fiduciary duty and disregard of the corporate entity claims. 23 24 II. Later, on November 11, 2009, the However, at a pre-trial LEGAL STANDARD “Under the American Rule, the prevailing party [in 25 litigation] is ordinarily not entitled to collect a reasonable 26 attorneys’ fee from the loser. 27 28 This default rule can, [however,] . . . be over come by statute [or] . . . by an enforceable contract allocating attorney’s fees.” Travelers Cas. & Sur. Co. of Am. v. 2 1 Pacific Gas & Elec. Co., 549 U.S. 443, 448 (2007) (quotations and 2 citations omitted). 3 attorneys’ fees under a fee shifting provision in the “Agreement, 4 Waiver and General Release,” (the “Agreement”) entered into by 5 Plaintiff and MortgageTree on October 27, 2003. 6 C.) 7 Defendants contend they are entitled to recover (Lapcevic Decl. Ex. State law governs the interpretation and application of 8 contractual attorney fee provisions. 9 Midwest Fed. Sav. Bank, 36 F.3d 785, 800 (9th Cir. 1993) (applying See Resolution Trust Corp. v. 10 California law to interpret contract that included fee shifting 11 provision). 12 governs the recovery of attorneys’ fees recoverable under a contract. 13 See Farmers Ins. Exchange v. Law Offices of Conrado Joe Sayas, Jr., 14 250 F.3d 1234, 1237 (9th Cir. 2001) (stating that under California 15 law, “where the parties have contractually obligated themselves to pay 16 attorneys’ fees” section 1717 governs.) 17 pertinent part: 18 19 20 21 22 California Civil Code section 1717 (“section 1717") Section 1717 provides in (a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs . . . . 23 24 (b)(1) The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract . . . . 25 (2) 26 27 Where an action has been voluntarily dismissed . . . , there shall be no prevailing party for purposes of this section. 28 3 1 Cal. Civ. Code § 1717. 2 recover the attorney fees [they] seek[], (1) [a] contract must 3 authorize such fees, (2) [Defendants] must be the prevailing party, 4 and (3) the fees incurred must be reasonable.” 5 MBA Const., No. 2:04-CV-836-GEB-JFM, 2005 WL 3406336, at *2 (E.D. Cal. 6 Dec. 12, 2005). 7 III. 8 9 “Therefore, in order for [Defendants] to First Nat. Ins. Co. v. DISCUSSION Defendants argue they are entitled to recover attorneys’ fees under a fee shifting provision in the Agreement. Plaintiff 10 responds that since neither Defendant Draizen nor Defendant Lowe are a 11 party to the Agreement, there is no contractual basis for awarding 12 attorneys’ fees, and further, Defendants are not prevailing parties 13 under section 1717 on Plaintiff’s claims. 14 The pertinent language of the Agreement provides: 15 In the event any action or proceeding is brought to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs incurred in such action or proceeding. 16 17 18 (Lapcevic Decl. Ex. C.) 19 A. 20 Plaintiff’s Breach of Contract Claim Defendants argue they prevailed on Plaintiff’s breach of 21 contract claim since Plaintiff “did not preserve [his breach of 22 contract claim] . . . for trial[;] [n]or did [he] . . . voluntarily 23 dismiss his breach of contract claim against Mortgage Tree Lending.” 24 (Memo. P. & A. in Supp. Mot. for Attorney’s Fees 4:3-5.) 25 further contend that section 1717 “permits defendants who are 26 prevailing parties in a matter on an alter ego theory of liability for 27 breach of contract to recover reasonable attorney’s fees.” 28 24.) Defendants (Id. 4:22- Plaintiff rejoins that Defendants are not entitled to an award 4 1 of attorneys’ fees since neither Defendant was a party to the 2 Agreement, nor were they a prevailing party on Plaintiff’s breach of 3 contract claim. 4 “The prevailing party determination [under section 1717] can 5 be made only upon final resolution of the contract claims . . . .” 6 Poseidon Dev., Inc., v. Woodland Lane Estates, LLC, 152 Cal. App. 4th 7 1106, 1120 (2007) (quotations and citations omitted). 8 abandoned his breach of contract claim when he failed to preserve this 9 claim for trial. Plaintiff Therefore, there was no “final resolution” of 10 Plaintiff’s breach of contract claim. 11 his breach of contract claim for trial was akin to a voluntary 12 dismissal, which prevents Defendants from prevailing on this claim 13 under section 1717. 14 Inc., No. CIV S-02-0258 WBS/KJM, 2003 WL 25656778, at *1 (E.D. Cal. 15 Jun. 13, 2003) (holding that defendant was not prevailing party where 16 plaintiff abandoned claim prior to trial). 17 Defendants’ motion is denied. 18 B. Plaintiff’s failure to preserve Cf. Dodson v. Pan Pacific Retail Properties, Therefore, this portion of Plaintiff’s “Alter Ego” Theory of Liability 19 Defendants also argue they are entitled to recover 20 attorneys’ fees for defending against Plaintiff’s alter ego theory of 21 liability because section 1717 “permits defendants who are prevailing 22 parties in a matter on an alter ego theory of liability for breach of 23 contract to recover reasonable attorney’s fees.” 24 Supp. Mot. for Attorney’s Fees 4:22-25.) 25 he 26 dismissal] bars any claim for fees under” section 1717. 27 8.) (Memo. P. & A. in Plaintiff counters since “voluntary dismiss[ed] his ‘alter ego’ claim . . . [this 28 5 (Opp’n 2:6- 1 Under California law, “[a] claim against a defendant, based 2 on the alter ego theory, is not itself a claim for substantive relief, 3 . . . but rather, procedural, i.e., to disregard the corporate entity 4 as a distinct defendant and to hold the alter ego individuals liable 5 on the obligations of the corporation where the corporate form is 6 being used by the individuals to escape personal liability, sanction a 7 fraud or promote a injustice.” 8 Filter Co., 204 Cal. App. 3d 1351, 1358 (1998). 9 Plaintiff alleged the alter ego theory of liability to hold the Hennessey’s Tavern, Inc. v. Am. Air In this case, 10 individual Defendants liable for MortgageTree’s breach of the 11 Agreement. 12 claim, there was no longer a substantive claim to support his alter 13 ego theory of liability. 14 on Plaintiff’s breach of contract claim, they are not entitled to 15 recover fees for defending against Plaintiff’s alter ego theory of 16 liability, which was premised upon Plaintiff’s breach of contract 17 claim. 18 However, when Plaintiff abandoned his breach of contract C. Since Defendants are not a prevailing party Plaintiff’s Breach of Fiduciary Duty Claim 19 Defendants further argue they are entitled to attorneys’ 20 fees for prevailing on Plaintiff’s breach of fiduciary duty claim. 21 Defendants contend “[t]he contractual language in [the Agreement] 22 . . . is sufficiently broad to permit all actions and not just 23 actions based on contractual violations.” 24 Mot. for Attorney’s Fees 6:7-12.) 25 Agreement does not encompass Plaintiff’s tort claims and that neither 26 Defendant is a party to the Agreement. 27 28 (Memo. P. & A. in Supp. Plaintiff rejoins that the (Opp’n 3:1-4, 7:22-24.) Plaintiff voluntarily dismissed his breach of fiduciary duty claim at the pre-trial hearing held on April 27, 2010. 6 Therefore, 1 Defendants are not a prevailing party on this claim under section 2 1717. 3 action has been voluntarily dismissed . . . there shall be no 4 prevailing party”). 5 recover attorneys’ fees under a contract to which they are not a 6 party. 7 defending against this claim. See Cal. Civ. Code § 1717(b)(2) (stating that “[w]here an Further, Defendants have not shown that they may Defendants, therefore, are not entitled to recover fees for 8 D. 9 Plaintiff’s Conversion Claim Lastly, Defendant Draizen contends he is entitled to recover 10 attorneys’ fees under the Agreement since he prevailed on Plaintiff’s 11 conversion claim. 12 recover fees since he was not a party to the Agreement nor is the 13 language of the Agreement broad enough to encompass Plaintiff’s 14 conversion claim. 15 Plaintiff rejoins that Defendant Draizen may not Defendant Draizen has also not shown that the Agreement, to 16 which he is not a party, authorizes him to recover fees for prevailing 17 on Plaintiff’s conversion claim nor that the fee-shifting provision 18 encompasses Plaintiff’s conversion claim. 19 Draizen is not entitled to attorneys’ fees for prevailing on 20 Plaintiff’s conversion claim. 21 IV. 22 Therefore, Defendant CONCLUSION For the reasons stated above, Defendants’ motion for 23 attorney’s fees is DENIED. 24 Dated: August 24, 2010 25 26 27 GARLAND E. BURRELL, JR. United States District Judge 28 7