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Russell City Energy Co., LLC v. City of Hayward

United States District Court, N.D. California

February 17, 2015

RUSSELL CITY ENERGY COMPANY, LLC, Plaintiff,
v.
CITY OF HAYWARD, Defendant.

REPORT AND RECOMMENDATION RE DEFENDANT'S MOTION FOR ATTORNEYS' FEES [DOCKET NO. 40]

DONNA M. RYU, Magistrate Judge.

This matter has been referred to the undersigned for a Report and Recommendation on Defendant City of Hayward's motion for attorneys' fees. [Docket No. 40.] The court finds that this matter is appropriate for resolution without oral argument. N.D. Cal. Civ. L.R. 7-1(b). For the following reasons, the court issues this Report and Recommendation, with a recommendation that the motion be dismissed, or in the alternative, denied.

I. Factual & Procedural Background

The factual allegations in the complaint are summarized in the district judge's order granting Defendant's motion to dismiss. Plaintiff Russell City Energy Company, LLC ("RCEC") and City of Hayward ("the City") are parties to a 2005 agreement and a 2006 amendment thereto (together, "the Agreement") in which RCEC agreed to build the Russell City Energy Center ("the Energy Center"), a "natural gas fired combined cycle power plant, " in Hayward, California. (Compl. Ex. A (Agreement).) In July 2014, RCEC filed this lawsuit against the City alleging five state law claims and one federal claim arising out of the City's alleged breach of the Agreement. RCEC's claims were based upon the City's 2011 notification that its Utility Users Tax Ordinance ("UUT") applied to the Energy Center's operations. Specifically, RCEC alleged that the City's determination that the tax applied to the Energy Center, as well as the City's subsequent tax assessments on the Energy Center, violated a provision of the Agreement that stated "the City shall not impose any other levies, fees, taxes, contributions, or charges on [RCEC]... other than such levies, fees, taxes, contributions, or charges generally applicable to similarly situated owners of real property located in the City." ( See Compl. ¶¶ 3, 6, 44, 45, Agreement § 6.)

RCEC filed an amended complaint in August 2014, asserting claims for 1) breach of contract; 2) promissory estoppel; 3) anticipatory repudiation; 4) violations of the contracts clauses of the United States and California constitutions, pursuant to 42 U.S.C. § 1983; and 5) declaratory relief. [Docket No. 19.] The City moved to dismiss the amended complaint, and on November 13, 2014, the Honorable Jeffrey S. White granted the City's motion and entered judgment. [Docket Nos. 36 (Dismissal Order), 37.] The court held that the Tax Injunction Act ("TIA"), 28 U.S.C. § 1341, and principles of comity precluded the court from exercising jurisdiction over RCEC's claims. The TIA provides that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." The TIA applies to municipal taxes like the City's UUT. 28 U.S.C. § 1341; Hibbs v. Winn, 542 U.S. 88, 100 n.1 (2004) ("State taxation, for § 1341 purposes, includes local taxation."). The court concluded that the "crux of each of RCEC's claims for relief is that the UUT does not apply to it, and the City breached its agreement by assessing the tax against it"; accordingly, since "RCEC [sought] orders that would enable it to avoid paying state taxes, " the court lacked subject matter jurisdiction over the action. (Dismissal Order 5-6.)

The City now seeks attorneys' fees incurred in defending this action under section 21 of the Agreement, which provides:

If an arbitration, mediation, court or other proceeding is brought to enforce or interpret any of the terms of this Agreement, the Party not prevailing shall pay the prevailing Party's attorney fees, costs and disbursements, and such other sums as the arbitrator, mediator or court may determine to be reasonable for the prevailing Party in the case.

(Agreement § 21.) RCEC opposes the motion.

II. Legal Standard

California law governs the method of calculating attorneys' fees awarded under state law. Mangold v. Cal. Pub. Util. Comm'n, 67 F.3d 1470, 1478 (9th Cir. 1995). "Unless authorized by either statute or agreement, attorney's fees ordinarily are not recoverable' in California." Sunnyside Dev. Co., LLC v. Opsys Ltd., No. 05-cv-0553 MHP, 2007 WL 2462141, at *1 (N.D. Cal. Aug. 29, 2007) (quoting Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 127 (1979)). California Civil Code section 1717 governs contractual fee provisions, and provides in relevant part:

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.

Cal. Civ. Code § 1717(a).

The starting point for determining reasonable attorneys' fees is the "lodestar, " which is calculated by multiplying the number of hours reasonably expended on litigation by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). In determining a reasonable amount of hours, the court must review time records to decide whether the hours claimed by the applicant are adequately documented and whether any of the hours were unnecessary, duplicative or excessive. Chambers v. City of L.A., 796 F.2d 1205, 1210 (9th Cir. 1986), reh'g denied, amended on other grounds, 808 F.2d 1373 (9th Cir. 1987). To determine reasonable hourly rates, the court must look to the prevailing ...


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