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Dufour v. Allen

United States District Court, C.D. California

May 22, 2017


          Present: The Honorable CHRISTINA A. SNYDER JUDGE



         The Court finds this motion appropriate for decision without oral argument. See Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. Accordingly, the hearing date of June 5, 2017 is vacated, and the matter is hereby taken under submission.[1]


         This lawsuit commenced on February 8, 2012, when plaintiff Frank DuFour filed a complaint in Los Angeles County Superior Court. Plaintiff filed the operative Fourth Amended Complaint (“FAC”) on December 27, 2013, also in Superior Court. See Dkt. No. 1-2. The FAC names as defendants Robert Allen, Enlightened Wealth Institute International, L.C., Enlightened Wealth Institute, L.C., Prosper, Inc., Green Planet Services, Opteum Financial Services, Midland Mortgage Company, Aurora Loan Services, Sherson Lehman, Millennium Home Loans, Charlie Payne, and Giddens & Giddens, as well as other Doe defendants. Id. ¶¶ 2-26. On February 28, 2014, the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver of defendant Millennium Bank, N.A., a failed bank.[2] See Dkt. 1. On July 19, 2014, the FDIC removed this action to federal court because, where the FDIC is a party, a case is deemed to arise under the laws of the United States. Id. The case was transferred to the undersigned on July 25, 2014. Dkt. 10. A number of defendants have been dismissed pursuant to prior orders of this Court.

         In brief, plaintiff alleges in the FAC that defendants schemed to induce plaintiff to enroll in a fraudulent real estate investment course offered by Allen and Prosper to buy fraudulently marketed properties, from which defendants profited through undisclosed relationships with management and financing companies. Plaintiff alleges that Allen is the co-founder of entities which offer real estate investment instruction. Plaintiff contends that Allen, through multiple incarnations of the same business model, deceptively promoted risky and illegal investment techniques, and fraudulently induced him to pay thousands of dollars to enroll in a real estate investment course. According to plaintiff, Prosper is a corporation affiliated with Allen and other defendants, and after plaintiff was referred to Prosper by Allen, Prosper employees provided plaintiff with training materials and coaching and eventually connected plaintiff with other players in the alleged scheme. Plaintiff asserts that Freedom employees fraudulently induced plaintiff to make a series of real estate investments in Mississippi. Plaintiff also alleges that Allen and other defendants breached an implied contractual duty of good faith and fair dealing by failing to disclose that Freedom and other defendants “were all doing business together” with Prosper, which was “associated with, affiliated and involved in a joint venture business arrangement with . . . Allen.”[3]

         On December 23, 2013, just prior to the filing of the FAC, Prosper filed a cross-complaint for breach of contract against plaintiff. Dkt. No. 153 Ex. 1 (“Cross-Complaint”). Prosper alleged in this Cross-Complaint that plaintiff breached an Enrollment Agreement he purportedly entered into with Prosper by failing to fulfill his obligations as an enrollee in the course and refusing to mediate or arbitrate this dispute. Id. ¶ 10. Plaintiff filed a demurrer to the Cross-Complaint in the Superior Court, which was overruled. Plaintiff subsequently filed a so-called “Cross-Cross-Complaint, ” (“CCC”) which this Court dismissed on September 15, 2014, on the ground that it impermissibly duplicated claims already raised in the FAC. Dkt. 46. Plaintiff appealed the order dismissing the CCC to the Court of Appeals for the Ninth Circuit. On March 19, 2015, the Court granted Prosper's motion for voluntary dismissal without prejudice of its Cross-Complaint. Dkt. 160.

         In May 2014, before this case was removed to federal court, the Superior Court granted summary judgment in favor of defendants Freedom Home Mortgage Corporation (“Freedom”), as well as defendants Allen, Prosper, Inc., Prosper Holdings, Inc., Education Success, Inc., R.A.H.A.D., Inc., and D.A.H.A.R., Inc. (collectively the “Prosper Defendants”). On November 21, 2014, this Court entered judgment in favor of Freedom and the Prosper Defendants. Dkt. 90. On December 19, 2014, plaintiff appealed to the Court of Appeals for the Ninth Circuit the entry of judgment in favor of Freedom and the Prosper Defendants. Dkt. 110.

         On April 20, 2017, the Court granted the Prosper Defendants' motion for attorneys' fees on the basis of the indemnity provision of the Enrollment Agreement. Dkt. 288. The Court ordered the Prosper Defendants to submit a supplemental request for attorneys' fees, specifying the amount of costs and fees they seek to recover, documenting the hours expended and the hourly rates of their counsel, and demonstrating that those rates are consistent with those prevailing in the community given the skill, experience, and reputation of the Prosper Defendants' counsel. Id. at 17.

         On April 24, 2017, the Prosper Defendants filed their supplemental motion for attorneys' fees and costs. Dkt. 289 (“Motion”). On May 8, 2017, plaintiff filed his opposition. Dkt. 290 (“Opp'n”). On May 17, 2017, the Prosper Defendants filed a reply in support of their motion. Dkt. 291. On the same day, plaintiff filed an objection to the reply. Dkt. 292.

         Having carefully considered the parties' arguments, the Court finds and concludes as follows.


         To determine reasonable attorneys' fees, the starting point is “the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate.” Hensley v. Eckerhart, 461 U.S. 424, 433. This is called the “lodestar” method. The fee applicant must submit evidence of the hours worked and the rates claimed. Id. Once the fee applicant has done so, “[t]he party opposing the fee application has a burden of rebuttal that requires submission of evidence to the district court challenging the accuracy and reasonableness of the hours charged or the facts asserted by the prevailing party in its affidavits.” Gates v. Deukmejian, 987 F.2d 1392, 1397-98 (9th Cir. 1992). All hours that are not reasonably expended, or that are excessive or redundant, should be excluded. Hensley, 461 U.S. at 434. “[T]here is a strong presumption that the lodestar represents a reasonable fee.” Gates, 987 F.2d at 1397.

         “Although in most cases, the lodestar figure is presumptively a reasonable fee award, the district court may, if circumstances warrant, adjust the lodestar to account for other factors which are not subsumed within it.” Camacho v. Bridgeport Financial, Inc., 523 F.3d 973, 978 (9th Cir. 2008) (quoting Ferland v. Conrad Credit Corp., 244 F.3d 1145, 1149 n. 4 (9th Cir. 2001)). In such cases, a district court may make upward or downward adjustments to the presumptively reasonable lodestar based on the factors set out in Kerr v. Screen Extras Guild, Inc., 526 F.2d 67, 69-70 (9th Cir. 1975): (1) the time and labor required; (2) the novelty and difficulty of the questions presented; (3) the necessary skill required; (4) the preclusion of other employment by the attorney; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation and ability of the ...

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