625 3rd Street Associates, LP v. Alliant Credit Union et al, No. 3:2009cv00564 - Document 259 (N.D. Cal. 2010)
Court Description: ORDER DENYING PLAINTIFF'S MOTION FOR ATTORNEY'S FEES AND PREJUDGMENT INTEREST; GRANTING PLAINTIFF COSTS UNDER FRCP 54; AND DENYING DEFENDANT NCUA'S MOTION FOR ATTORNEY'S FEES by Judge Alsup denying (238) Motion for Attorney Fees in case 3:09-cv-00564-WHA (whalc2, COURT STAFF) (Filed on 12/7/2010)
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625 3rd Street Associates, LP v. Alliant Credit Union et al Doc. 259 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 625 3RD STREET ASSOCIATES, L.P., a California limited partnership, 12 13 14 15 16 17 No. C 09-00564 WHA No. C 09-03820 WHA Plaintiff, v. BOARD OF THE NATIONAL CREDIT UNION ADMINISTRATION, in its capacity as liquidating agent for the Kaiperm Federal Credit Union, KAIPERM FEDERAL CREDIT UNION, a federal credit union, and STANLEY ABRAMS, an individual, Defendants. / 18 ORDER DENYING PLAINTIFF’S MOTION FOR ATTORNEY’S FEES AND PREJUDGMENT INTEREST; GRANTING PLAINTIFF COSTS UNDER FRCP 54; AND DENYING DEFENDANT NCUA’S MOTION FOR ATTORNEY’S FEES 19 20 Having won a fraud damages verdict, plaintiff moves for attorney’s fees under the Equal 21 Access to Justice Act and state law, for prejudgment interest, and for costs. A companion motion 22 to amend the judgment to award rescission in lieu of damages is resolved by separate order. 23 Defendant Board of the National Credit Union Administration in its capacity as liquidating agent 24 for Kaiperm Federal Credit Union also moves for attorney’s fees incurred in successfully 25 defending against a breach of warranty claim. 26 After a jury trial, judgment was entered in favor of plaintiff jointly and severally in the 27 amount of $630,000.00 against defendants NCUA and Stanley Abrams, for fraudulent 28 misrepresentation and concealment. Judgment was entered in favor of defendants and against plaintiff on plaintiff’s breach-of-warranty claim. Dockets.Justia.com 1 For reasons stated below, plaintiff’s motion is DENIED, except that the Clerk shall tax its 2 costs claimed under Federal Rule of Civil Procedure 54. Defendant NCUA’s motion for 3 attorney’s fees is also DENIED. 4 A. PLAINTIFF’S MOTION FOR ATTORNEY’S FEES, PREJUDGMENT INTEREST, AND COSTS 5 This motion is based on a number of arguments, now addressed in turn. 6 1. 7 Plaintiff argues that it is entitled to attorney’s fees under the Equal Access to Justice Act, 8 specifically 28 U.S.C. 2412(d)(1)(A), which states: 9 [A] court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust. 10 11 For the Northern District of California United States District Court Equal Access to Justice Act 12 13 This provision specifically excludes “cases sounding in tort.” This action was primarily a fraud 14 action, which is obviously a case sounding in tort, and fraud was the only claim on which plaintiff 15 prevailed. In its opening brief plaintiff states “fraud is but the basis for rescinding a contract . . . 16 [so] the action sounds in contract” (Br. 19); the cited decisions do not support this amazing 17 proposition. Plaintiff’s counsel is good but not good enough to turn night into day. 18 Cardwell v. Kurtz, 765 F.2d 776 (9th Cir. 1985), is no help to plaintiff. The court therein 19 considered whether plaintiffs were the prevailing party (which they were), as well as whether 20 defendants had a substantial justification (which they did not). Id. at 781–82. The decision did 21 not consider whether the action therein sounded in tort or something else, because it asserted 22 fraud and thus obviously sounded in tort. 23 Accordingly, plaintiff is not entitled to attorney’s fees under the Equal Access to Justice 24 Act. 25 This order also finds, contrary to plaintiff’s view, that “the position of the [NCUA] was 26 substantially justified.” Substantially justified means “justified in substance or in the main,” or 27 concerning a dispute over which “reasonable minds could differ.” Pierce v. Underwood, 487 28 U.S. 552, 565 (1988); Gonzales v. Free Speech Coalition, 408 F.3d 613, 618 (9th Cir. 2005). 2 1 Despite plaintiff’s characterization of the evidence at trial, and although it prevailed on its claim 2 of liability for fraud, plaintiff’s recovery fell far short of its claimed damages, and defendant 3 NCUA was well justified in its position that Kaiperm did not commit fraud. Plaintiff is therefore 4 not entitled to fees and costs on this ground as well. 5 Section 2412 also provides that, even if a plaintiff is not affirmatively entitled to 6 attorney’s fees, a court may award them in its discretion in addition to costs. 28 U.S.C. 2412(b). 7 Still, Section 2412 only allows an award of fees “in any civil action brought by or against the 8 United States or any agency or any official of the United States acting in his or her official 9 capacity.” That is not what we have here. Here, the NCUA was only sued in its capacity as liquidating agent for Kaiperm Federal Credit Union. The trial in no way concerned the propriety 11 For the Northern District of California United States District Court 10 of the actions of the NCUA and solely concerned Kaiperm (and Mr. Abrams). Plaintiff’s 12 citations and further arguments are inapposite and cannot alter this fundamental obstacle. 13 2. 14 Plaintiff next argues that it is entitled to attorney’s fees under California Civil Code 15 16 17 18 The Contract and California Law Section 1717, which states: 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. 19 Plaintiff also cites decisions that reiterate generally principles relating to this section: “In an 20 action to enforce the rescission of a written land sale agreement, containing a clause for attorney’s 21 fees which does not limit recovery of such fees to any particular form of action involving the 22 contract, the prevailing party is entitled to an award of such fees.” Hastings v. Matlock, 171 Cal. 23 App. 3d 826, 841 (1985); Leaf v. Phil Rauch, Inc., 47 Cal. App. 3d 371, 379 (1975) (actions 24 seeking restitution after rescission “involve” the contract and thus entitle the prevailing party to 25 attorney’s fees provided under the contract). 26 Plaintiff prevailed only on its tort claims rather than its contract claim. In the tort context, 27 “the question of whether to award attorneys’ fees turns on the language of the contractual 28 attorneys’ fee provision,” not on Section 1717. Exxess Electronixx v. Heger Realty Corp., 64 Cal. 3 1 App. 4th 698, 708 (1998) (emphasis added). The contract in this case does not entitle plaintiff to 2 attorney’s fees. Section 9.5 of the contract states (emphasis added): 3 If either party [] fails to perform any of its obligations under this Agreement or if any dispute arises between the parties [] concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys’ fees and disbursements, reasonable costs and attorneys’ fees incurred in collecting any judgment or award resulting from such dispute, if any. . . . 4 5 6 7 8 Plaintiff agrees its fraud claims did not involve a dispute concerning interpretation of the 9 agreement (Br. 20). Plaintiff states, however, that it should prevail because, following its line of 10 of the agreement, (2) this approval was required by the agreement, so (3) plaintiff’s claim was For the Northern District of California United States District Court logic: (1) plaintiff’s fraud claims were premised on defendants’ failure to obtain NCUA approval 11 12 that defendants “fail[ed] to perform . . . its obligations under [the agreement],” and (4) plaintiff 13 prevailed and it is entitled to attorney’s fees. 14 Plaintiff’s theory fails at Number One. Plaintiff’s fraud claims were premised on a whole 15 host of theories, only one of which was that defendants failed to obtain NCUA approval. Other 16 theories were that defendants lied about Kaiperm’s financial condition, management plans, and 17 NCUA involvement at Kaiperm generally. On its face the notion that the claim on which plaintiff 18 prevailed — fraud — was brought because plaintiff wanted to enforce the contract is patently 19 inaccurate. We have no way to know which of plaintiff’s many themes was accepted by the jury. 20 The terms of the attorney’s fee provision under the contract do not encompass plaintiff’s fraud 21 claims. 22 3. Prejudgment Interest 23 Plaintiff moves for prejudgment interest based on 12 U.S.C. 1787(i), which provides: 24 25 26 27 In any proceeding related to any claim against an insured credit union’s director, officer, employee, agent, attorney, accountant, appraiser, or any other party employed by or providing services to an insured credit union, recoverable damages determined to result from the improvident or otherwise improper use or investment of any insured credit union’s assets shall include principal losses and appropriate interest. 28 4 1 The sale-and-leaseback of the credit union’s office building in this case was not the type of 2 investment contemplated by this provision. This provision was intended to protect depositors, not 3 others simply buying property from the credit union. 4 Under state law, “damages certain, or capable of being made certain by calculation, and 5 the right to recover which is vested in him upon a particular day, is entitled also to recover 6 interest thereon from that day.” Cal. Civ. Code § 3287(a); see In re Niles, 106 F.3d 1456, 1463 7 (9th Cir. 1997) (finding an amount owing as determined by the bankruptcy court to be “a sum 8 certain” and awarding prejudgment interest). Although it may be true that damages would have 9 vested on the particular day of closing — August 31, 2007 — it is also true that there were absolutely not “damages certain.” Plaintiff inexplicably argues that the amount of damages was 11 For the Northern District of California United States District Court 10 “fixed” in 2007 (Br. 22 n.8). Plaintiff argues that identifying the code section that governed the 12 calculation of damages, Section 3343, rendered “damages certain.” Far from it. The primary 13 dispute during trial concerned the calculation of damages and various figures were put into 14 evidence. This was not a case of “damages certain.” 15 For the first time in plaintiff’s reply brief, it argues that even if prejudgment interest is not 16 awarded under federal statutory law or state law as discussed above, it should be awarded 17 pursuant to “federal equity jurisdiction.” Plaintiff cites a decision from the Third Circuit that was 18 abrogated by a Supreme Court decision in 1993. See United States v. Texas, 507 U.S. 529, 533 19 (1993) (holding that the Debt Collection Act did not disturb the federal common-law right of the 20 federal government to collect prejudgment interest on debts owed to it by the states). Plaintiff 21 cites no authority for a federal common law principle that would apply to warrant prejudgment 22 interest here. Furthermore, a “district court need not consider arguments raised for the first time 23 in a reply brief.” Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007). 24 Accordingly, plaintiff’s request for prejudgment interest on the jury award is DENIED. 25 4. 26 Plaintiff submitted a bill of costs pursuant to Federal Rule of Civil Procedure 54, which Costs Under Federal Rule of Civil Procedure 54 27 allows costs “to the prevailing party.” Plaintiff is the prevailing party in this action for purposes 28 of costs. Defendants do not dispute plaintiff’s entitlement to these costs or their amount (see Opp. 5 1 16 n.4). Accordingly, THE CLERK SHALL TAX $34,049.08, in favor of plaintiff 625 3rd Street 2 Associates, L.P. and against defendants Stanley Abrams and Board of the National Credit Union 3 Administration in its capacity as liquidating agent for Kaiperm Federal Credit Union. 4 B. 5 6 7 8 9 DEFENDANT NCUA’S MOTION FOR ATTORNEY’S FEES Defendant NCUA, like plaintiff, moves for attorney’s fees under California Civil Code Section 1717, which again states: 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. 10 who recovered a greater relief in the action on the contract.” NCUA argues that it is entitled to For the Northern District of California United States District Court Furthermore, under Section 1717(b)(1), “the party prevailing on the contract shall be the party 11 12 fees it incurred in order to prevail on plaintiff’s breach of express warranties claim. It states that 13 it is entitled to these fees despite its loss on plaintiff’s fraud claims. Its premise is that under 14 Section 1717, whether a party is a “prevailing party” is a separate consideration for contract and 15 noncontract claims. 16 Plaintiff responds that “[t]he prevailing party in an action is the one who prevails on the 17 majority of issues” (Opp. 2). Plaintiff cites federal law in support of this notion. Plaintiff is 18 correct that this is the case under federal law, but California law applies to plaintiff’s claims in 19 this action, as the parties have acknowledged all along, and defendant NCUA is invoking Section 20 1717, a California law. In contrast to federal law, under California law, a party prevails for 21 purposes of Section 1717 when “the judgment was a ‘simple, unqualified win’ for the 22 [defendants] on the only contract claim between them and the [plaintiffs].” Hsu v. Abbara, 9 Cal. 23 4th 863, 876 (1995) (citation omitted) (emphasis added). California courts accordingly disregard 24 noncontract claims in determining the prevailing party on a contract claim under Section 1717. 25 “If an action asserts both contract and tort or other noncontract claims, section 1717 applies only 26 to attorney fees incurred to litigate the contract claims.” Santisas v. Goodin, 17 Cal. 4th 599, 615 27 (1998). Even if a plaintiff succeeds on a noncontract claim, a defendant is the “prevailing party” 28 under Section 1717 if it defeated plaintiff’s contract claim. See Korech v. Hornwood, 58 Cal. 6 1 App. 4th 1412, 1419–22 (1997). That is the case here. Defendant NCUA prevailed on the 2 contract claim, so by a technical application of Section 1717 it would be entitled to attorney’s 3 fees. 4 Nevertheless, Section 1717 “consistently adheres to the theme of equity.” PLCM Group 5 v. Drexler, 22 Cal. 4th 1084, 1091 (2000). “[A] court ‘abuses its discretion if it awards 6 contractually-authorized attorney’s fees under circumstances that make the award inequitable or 7 unreasonable.’” Anderson v. Melwani, 179 F.3d 763, 766 (9th Cir. 1999) (citation omitted). 8 With these principles as guidance, this order holds that defendant NCUA is not entitled to 9 attorney’s fees for successfully defending against plaintiff’s breach of warranties claim. The jury found that Kaiperm was guilty of committing fraud during the formation of the contract at issue 11 For the Northern District of California United States District Court 10 in this case. Equity cannot sanction an award of fees in these circumstances. Therefore, 12 defendant NCUA’s motion for attorney’s fees is DENIED. 13 14 IT IS SO ORDERED. 15 16 Dated: December 7, 2010. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 7
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