Park Miller, LLC et al v. Durham Group, Ltd. et al, No. 3:2019cv04185 - Document 72 (N.D. Cal. 2020)
Court Description: ORDER GRANTING IN PART DENYING IN PART REQUEST FOR DAMAGES AND ATTORNEYS FEES; DENYING REQUEST FOR DISCOVERY. Signed by Judge William H. Orrick on 12/17/2021. (jmdS, COURT STAFF) (Filed on 12/17/2020)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 PARK MILLER, LLC, et al., 7 Plaintiffs, 8 v. 9 DURHAM GROUP, LTD., et al., 10 Defendants. United States District Court Northern District of California 11 Case No. 19-cv-04185-WHO ORDER GRANTING IN PART DENYING IN PART REQUEST FOR DAMAGES AND ATTORNEYS’ FEES; DENYING REQUEST FOR DISCOVERY Re: Dkt. No. 68 12 On October 13, 2020, I granted Park Miller LLC (“Park Miller”), a wealth advisory firm, 13 14 and its clients (the “Contracting Plaintiffs”) (collectively plaintiffs) default judgment against 15 defendants Durham Group, Ltd. (“DGL”) and Durham Commercial Capital Corp (“DCC”). Order 16 Granting Motion for Default Judgment (“Default Judgment Order”) [Dkt. No. 66].1 However, in 17 order to obtain a judgment in the amount sought, I found that plaintiffs must provide further 18 information about the damages suffered and attorneys’ fees and costs incurred. Id. at 4–6. I granted in part and denied in part their request for discovery, ordering them to “resubmit 19 20 proposed limited discovery in support of the specific form of judgment it seeks.” Id. at 7. I was 21 inclined to allow plaintiffs to “subpoena Craig McGrain for deposition with no more than five 22 document requests that are narrowly tailored to the defendants’ financial state and/or its request 23 for punitive damages, and to propound up to five interrogatories and five document requests to 24 DGL and DCC, similarly narrowly tailored.” Id. Before me is plaintiffs’ second supplemental brief in support of their request for damages, 25 26 attorneys’ fees, and discovery. Second Supplemental Memorandum in Support of Application For 27 28 1 My previous order detailed the background of this case, which I incorporate by reference here. Default Judgment Order at 1–2. 1 Entry of Default Against Durham Group Limited and Durham Commercial Capital (“Second 2 Suppl. Mot.”) [Dkt. No. 68-4]. I have also received two letters from Craig McGrain, objecting to 3 further involvement in this case. [Dkt. Nos. 67, 69]. After three rounds, some of the deficiencies previously identified have been adequately United States District Court Northern District of California 4 5 fixed while others still persist. Plaintiffs’ request for damages and attorneys’ fees is GRANTED 6 in part and DENIED in part and their request for discovery is DENIED. 7 I. DAMAGES REQUESTED 8 A. 9 The Contracting Plaintiffs claim to have suffered $4,200,000 in damages for breach of the Contract Damages 10 underlying promissory notes, in addition to $1,583,946.75 in interest. Second Suppl. Mot. 2. 11 Together, they request $5,997,390.11 in contract damages. Id. 12 In my previous order, I found that Contracting Plaintiffs provided “no evidentiary support 13 for [their] assertions that (i) none of the sums loaned had been repaid as of the default, (ii) the 14 defendants defaulted on all of the notes on December 1, 2018, and (iii) as of the default, the 15 principal on every note had been transferred to the ‘Operating Account,’ which triggered a higher 16 interest rate.” Default Judgment Order 4. I instructed Contracting Plaintiffs to “provide a 17 declaration certifying that this information is true.” Id. 18 In his second supplemental declaration, John Miller, a Principal at Park Miller, asserts the 19 following: “Defendants defaulted on all promissory notes on December 1, 2018, as was required 20 under each of the notes. Park Miller did not receive any letter or confirmations of payment in 21 December 2018. Park Miller confirmed with each of its clients that Defendants did not make an 22 interest payment in December 2018. Defendant[s] have not paid interest or made any payments on 23 any promissory notes since December 2018.” Declaration of John Miller in Support of Second 24 Supplemental Memorandum (“Miller Decl.”) [Dkt. No. 68-1] ¶ 12. 25 He further states that “Park Miller received a copy of the letter [DGL] sent to each client 26 monthly with interest calculation and payment, and that “[t]he last letters that Park Miller received 27 were in November 2018,” which “reflected the amount of the principal each client had invested 28 with Defendants and broke down the amount that was in the Holding Account and the amount that 2 1 was in the Operating Account.” Id. ¶ 10; see also id. ¶ 11 (table with each client’s principal, 2 Holding Account and Operating Account amounts). The November 2018 letters “also reflect that 3 none of the principal was paid back on any of the promissory notes.” Id. ¶ 10. Copies of the 4 November 2018 letters are attached to the declaration. See Exs. H–N. This declaration fixes the 5 deficiencies I previously identified. Contracting Plaintiffs also ask for $213,443.36 in liquated damages based on the following 6 7 8 9 10 11 provision in the promissory notes: In the event that any payment required to be made under this note shall not have been received by the holder of this note with ten (10) days after the date on which it is due, a “late charge” of five cents ($.05) for each one ($1.00) dollar so overdue shall become immediately due to the Holder as liquidated damages for failure to make prompt payment. (Said charge shall be payment in any event on the due date of the next payment requited to be made hereunder.) United States District Court Northern District of California Miller Decl., Exs. A–G. This argument was not raised in either of the two earlier motions. In any 12 event, I find that contract damages in the form of unpaid principal and interest provide Contract 13 Plaintiffs with complete relief. 14 Contract Plaintiffs are entitled to $5,715,079.50 in contract damages ($4,200,000 in 15 principal amount plus $1,515,079.50 in interest).2 16 B. 17 Tort Damages Park Miller asserts that it suffered damages as a result of the defendants’ intentional 18 interference with contractual relations and negligent interference with prospective economic 19 relations. Second Suppl. Mot. 7. It claims that it lost eight clients due to these wrongful actions, 20 resulting in $1,750,680.20 in damages. Id. at 8. It lost $4,597.91 as a result of refunding fees to 21 22 23 its clients associated with the defendants’ investment accounts and an additional $23,750.00 for the clients that have stayed with it. Id. In addition, it faces “several threatened lawsuits” from former clients as a result of the defendants’ actions in the amount of over $4,000,000.00 in 24 25 26 27 28 2 $68,867.25 is the total interest due each month on all the promissory notes. Contracting Plaintiffs previously calculated 22 months of interest due, between the December 2018 default and October 2020. In their second supplemental motion, Contracting Plaintiffs calculate interest for 23 months, between December 2018 and November 2020, for a total of $1,583,946.75 in interest due ($68,867.25 x 23). I find that a 22-month calculation of interest is reasonable given that default was entered in October 2020, reducing the total interest amount to $1,515,079.50 ($68,867.25 x 22). 3 1 potential liability. Id. at 9. Together, it argues that the total amount of losses sustained is 2 $1,779,022.11, in addition to potential liability of over $4,000,000.00. I previously told Park Miller that general assertions of total damages do not suffice and United States District Court Northern District of California 3 4 that it “must provide evidentiary support for its statements that it lost clients, refunded fees to 5 existing clients, and faces lawsuits from clients stemming from the defendants’ wrongful 6 conduct.” Default Judgment Order 5. Specifically, I told Park Miller that it must “explain how 7 each amount was calculated, provide evidentiary support for its losses, and provide support for its 8 contention that these losses resulted from the defendants’ conduct as alleged in the complaint.” Id. 9 “In addition, Park Miller must provide further information regarding the lawsuits that it faces and 10 why damages resulting from such lawsuits would not run afoul of the election of remedies 11 doctrine.” Id. 12 Park Miller has provided evidentiary support for the fees it refunded to existing clients. 13 The claim that it refunded $4,597.91 in fees associated with any investments with defendants is 14 supported by the record of returns attached to Miller’s second supplemental declaration. See 15 Miller Decl. ¶ 19 & Ex. O (list of refunded fees, with account numbers and client names partially 16 redacted). 17 It fails, however, to do the same with respect to damages sustained due to lost clients and 18 lost revenue from the Durham investments. It conclusorily asserts that it suffered $175,068.02 in 19 yearly revenues from lost clients, and then based on an estimation that those clients would have 20 remained clients for at least ten years it calculates its total loss as $1,750,680.20. Miller Decl. ¶ 21 19. It also conclusorily claims that “[f]or the clients we retained, the lost revenue to us from the 22 loss of the Durham investments is $23,750 per year.” Id. ¶ 18. Nothing in the motion or attached 23 declarations explains how these amounts were calculated or provides evidentiary support for these 24 losses. 25 It similarly fails to provide sufficient support for the lawsuits it faces from former clients. 26 It only points to a declaration from attorney Richard Bowles, who represented it in a mediation 27 with “some of [Park Miller’s] clients who invested with Defendants in this action” and “sought 28 over $4,925,000.00 in recovery” from Park Miller. Declaration of Richard T. Bowles in Support 4 United States District Court Northern District of California 1 of Second Supplemental Memorandum (“Bowles Decl.”) [Dkt. No. 68-3] ¶ 2. It is unclear who 2 these other clients are and how they are connected to defendants conduct in this lawsuit. No other 3 evidentiary support is provided about that particular mediation. 4 The Bowles declaration points to another set of actions brought by Kevin Hagan, a former 5 Park Miller client, who “seeks in excess of $4,000,000.00” and who originally brought a demand 6 for arbitration against Park Miller, filed suit in the District of Hawaii against it, and most recently 7 brought a motion to compel arbitration in this District. Id. ¶ 3; see also id., Exs. A–C (copies of 8 the arbitration demand, and complaints filed in District of Hawaii, and in this District). 9 Copies of the arbitration demand and complaints reveal some connection to defendants’ 10 conduct. See Bowles Decl., Ex. A at 3 (Statement of Claim filed December 10, 2019 before the 11 American Arbitration Association, alleging “[h]ad the Hagans been informed of the inherent risks 12 with Durham, they never would have agreed to loan, over the next 6 years, $4 million to Durham . 13 . . [who] default[ed] in or around December of 2018 resulting in a complete and total loss of the 14 Hagan’s principal investment”); id., Ex. C ¶ 23 (alleging the same in Complaint filed April 13, 15 2020 in District of Hawaii, Case. No. 20-cv-157); id., Ex. B ¶¶ 14–17 (alleging the same in 16 Complaint For Motion to Compel Arbitration filed September 30, 2020 in this District, Case No. 17 20-cv-6818-CRB; after Park Miller objected to the Hawaii action “on venue grounds,” Hagan 18 agreed to dismiss the Hawaii action without prejudice and subsequently sought relief from this 19 District). 20 Based on these attached documents, there is some evidentiary support that the Hagan 21 lawsuit is related to defendants’ conduct. But this just shows one client lawsuit Park Miller is 22 facing, not “several threatened lawsuits.” Second Suppl. Mot. 8. Park Miller also does not give 23 an exact figure in damages it seeks from this threatened lawsuit; it simply says that it faces 24 potential liability of over $4 million. It appears more appropriate that Park Miller seek 25 indemnification in the Hagan lawsuit from the parties directly responsible as opposed to pursuing 26 some arbitrary and unspecified amount of damages due to potential liability in this case. 27 28 Accordingly, Park Miller has only shown that it is entitled to $4,597.91 in tort damages for the fees it refunded to clients associated with the Durham investments. 5 1 2 3 4 C. Attorneys’ Fees and Costs Plaintiffs previously asserted that they incurred a certain amount in attorneys’ fees and court costs but failed to provide any “further break-down of these fees and costs.” Default Judgment Order 5. In order to recover these fees, I found that plaintiffs “must provide a legal basis for the attorneys’ fees and costs, as well as detailed information regarding this request, 5 including what costs were incurred, attorney billing rates, and the hours worked on particular tasks 6 for this matter.” Id. at 5–6. 7 8 9 10 United States District Court Northern District of California 11 In their second supplemental motion, plaintiffs claim that they “incurred $140,939.50 in attorneys’ fees with Bowles & Verna for the various matters,” “$3,486.54 in fees for counsel in Hawaii,” and “additional attorneys’ fees in the amount of $99,500.00 when they hired Jack Rose to form an Ad Hoc Committee in order to resolve the disputes over Defendants’ default on the promissory notes,” amounting to a total of $243,926.04. Second Suppl. Mot. 9. 12 Plaintiffs have provided evidentiary support for the fees incurred with Bowles & Verna. 13 See Bowles Decl. ¶ 4 & Ex. D (detailed time records between April 2019 and August 2020 14 15 documenting the tasks completed and the time spent). I find that Richard Bowles’ $450 hourly rate and Alexandra M. Tomp’s $320 and $310 hourly rates are reasonable. This supports a finding 16 for the $140,939.50 incurred in fees. 17 Plaintiffs do not seek recovery of any court costs in the second supplemental motion. 18 Bowles’ declaration mentions that it incurred $4,577.80 in court costs, but there is no breakdown 19 or explanation provided for that amount. 20 For counsel in Hawaii and Jack Rose, plaintiffs have only provided a conclusory 21 declaration and no further breakdown of the fees. See Declaration of Stuart Park in Support of 22 23 24 Second Supplemental Memorandum (“Park Decl.”) [Dkt. No. 68-2] ¶ 8 (“In addition to the attorneys’ fees incurred through Bowles & Verna, $99,500.00 in attorneys’ fees for an Ad Hoc Committee was also incurred” and “[w]e also paid Hawaii counsel, Bays, Lung & Holma 25 $3,486.54 in conjunction with the filing in Hawaii.”); id., Ex. H (January 22, 2020 email from 26 27 Jack Rose stating that “The total amount of funds received by this firm on this matter was: $99,500.00”). This is not a sufficient basis to allow me to award damages, let alone attorneys’ 28 6 1 fees. Plaintiffs have shown that they are entitled to $140,939.50 in attorneys’ fees associated 2 3 with Bowles & Verna. 4 II. United States District Court Northern District of California 5 REQUEST FOR DISCOVERY Plaintiffs previously requested discovery “related to punitive damages, as well as to DGL 6 and DCC’s assertions that they are insolvent.” Default Judgment Order 6. I found the requests 7 were “far from narrowly tailored” because it included 50 interrogatories and 71 document 8 requests, “which request broad information such as the identity of all of the defendants’ employees 9 for the past ten years, all financial records for the past ten years, and all documents related to 10 communications that the defendants had with any person affiliated with 1-800 SOLAR.” Id. I 11 told plaintiffs to “resubmit proposed limited discovery in support of the specific form of judgment 12 it seeks” and that the requests should be “narrowly tailored to the defendants’ financial state 13 and/or its request for punitive damages.” Id. at 7. 14 15 16 Plaintiffs now resubmit discovery “in support of effectuating judgment.” Second Suppl. Mot. 10. As such, they no longer seek discovery related to punitive damages sought before. Plaintiffs remain entitled to discovery to enforce the judgment, but that is not what they 17 ask for here. Their proposed document requests and interrogatories reduce the number of requests, 18 but the requests themselves remain just as broad as before, if not broader. In some instances, they 19 have simply combined two previous broad requests for documents or interrogatories into one 20 similarly broad request. See id., Exs. 1–5; see, e.g., Ex. 1 at 4 (“Any and all of your organizational 21 documents and documents related to your organizational documents for the last ten (10) years”; 22 “Any and all of your financial records for the last ten (10) years”; “Any and all documents related 23 to 1-800 Solar, including but not limited to communications you had with any person affiliated 24 with 1-800 Solar”). 25 26 27 28 After three failed attempts to adequately describe the specific discovery needed to effectuate judgment, plaintiffs request for discovery is DENIED. CONCLUSION Plaintiffs’ request for damages and attorneys’ fees is GRANTED as follows: (i) contract 7 1 damages to Contracting Plaintiffs in the amount of $5,715,079.50 ($4,200,000.00 in principal 2 amount plus $1,515,079.50 in interest); (ii) tort damages to Park Miller in the amount of $4,597.91 3 for refunding fees to lost clients; (iii) attorneys’ fees in the amount of $140,939.50 to Bowles & 4 Verna LLP. Plaintiffs’ remaining requests for damages and attorneys’ fees, as well as their 5 request for discovery, are DENIED. 6 7 IT IS SO ORDERED. Dated: December 17, 2020 8 9 William H. Orrick United States District Judge 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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