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In re Morlas

August 5, 2010

IN RE: PAUL M. MORLAS, JR., DEBTOR,
MICHAEL F. BURKART, PLAINTIFF,
v.
BARONET & CO., INC., A CALIFORNIA CORPORATION; SUISUN CITY/BREEZEWOOD, L.P., A CALIFORNIA LIMITED PARTNERSHIP; AND DOES 1 TO 20 INCLUSIVE, DEFENDANTS.



Chapter 7 Bankruptcy Case No. 08-24692 Trustee Adv.Pro.No. 08-02360

ORDER GRANTING PLAINTIFF‟S MOTION FOR FEES AND COSTS

This matter comes before the Court on Plaintiff Michael F. Burkart‟s ("Plaintiff‟s") motion for an award of attorneys‟ fees and costs. Defendant Baronet & Co. ("Defendant") opposes the motion, and brings a cross motion for fees. For the reasons set forth below, Defendant‟s cross motion for attorneys‟ fees is DENIED and Plaintiff‟s motion for attorneys‟ fees is GRANTED, in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

This motion arises from an action brought by Plaintiff, as the Chapter 7 trustee, against Defendant, for money owed to debtor Paul Morlas ("Debtor") pursuant to a construction subcontract agreement ("the subcontract"). Following a jury trial, in which Defendant also brought counter claims, the jury awarded a judgment of $72,874.43 to Plaintiff, and no money to Defendant. Plaintiff now seeks to be declared the prevailing party and seeks an award of attorneys‟ fees, statutory and non-statutory costs, pre- and post- judgment interest, and costs of enforcement.

II. OPINION

A. Legal Standard

1. Prevailing Party

There is no general right to recover attorney‟s fees under the Bankruptcy Code. Renfrow v. Draper, 232 F.3d 688, 693 (9th Cir. 2000). However, because state law necessarily controls an action on a contract, a party to such an action is entitled to an award of fees if the contract provides for an award and state law authorizes fee shifting agreements. Id. California Civil Code § 1717(a) states that where attorney‟s fees and costs are authorized by contract, the fees should be awarded to the prevailing party. Additionally, California Civil Code § 1717(b)(1) states that the court will decide who is the prevailing party, or that no one party prevails. The prevailing party is the party that recovered greater relief in an action on the contract. Cal. Civil Code § 1717(b)(2). In a contract case, typically a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought. Hsu v. Abbara, 9 Cal.4th 863, 875 (1995). When the results of the litigation on the contract claims are not mixed, a trial court has no discretion to deny attorney fees to the successful litigant. Id. at 875-76.

Section 24 of the subcontract at issue in this case states that:

In the event the parties become involved in litigation or arbitration with each other arising out of this Agreement or other performance thereof in which the services of an attorney or other expert are reasonably required, the prevailing party shall be fully compensated for the costs of its participation in such proceedings, including the cost incurred for attorneys‟ fees and experts‟ fees. Unless judgment goes by default, the attorneys‟ fees award shall not be computed in accordance with any court schedule, but shall be such as to fully reimburse all attorneys‟ fees actually incurred in good faith, regardless of the size of the judgment, it being the intention of the parties to fully compensate for all attorneys‟ fees and experts‟ fees paid or incurred in good faith.

Here, in resolving the dispute which arose from the subcontract, the jury awarded Plaintiff money damages, and did not award any money to Defendants. Moreover, Plaintiff received substantially everything that he requested in the suit. Specifically, Plaintiff sought recovery of $95,006.35, and received a judgment of $72,874.43, thus receiving approximately 77% of the amount sought. Defendant did not receive any monetary award from the jury, and did not prevail on any of the counterclaims.

Thus, while both parties claim to be the prevailing party for purposes of recovering fees, the Court finds that Plaintiff is the prevailing party and entitled to fees. Accordingly, Defendant is not the prevailing party and its motion for fees is DENIED.

2. Calculating Fees

The fee applicant bears the burden of establishing entitlement to an award and documenting the appropriate hours expended and hourly rates. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). The Ninth Circuit requires a district court to calculate an award of attorney‟s fees by first calculating the "lodestar." See Caudle v. Bristow Optical Co. Inc., 224 F3d 1014, 1028 (9th Cir. 2000). "The lodestar is calculated by multiplying the number of hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate." Caudle, 224 F.3d at 1028 (citing Morales v. City of San Rafael, 96 F.3d 359, 363 (9th Cir. 1996). The lodestar should be presumed reasonable unless some exceptional circumstance justifies deviation. Quesada v. Thomason, 850 F.2d 537, 539 (9th Cir. 1998). As the Ninth Circuit has indicated, "a district court should exclude from the lodestar amount hours that are not reasonably expended ...


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