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Singh v. Hancock Natural Resources Group, Inc.

United States District Court, E.D. California

May 24, 2017

DHILLON SINGH, et al., Plaintiffs,
HANCOCK NATURAL RESOURCES GROUP, INC., et al., Defendants. Date Attorney/Staff Task(s) Time Date Attorney Task(s) Time Date Attorney Task(s) Time $


          Jennifer L. Thurston, UNITED STATES MAGISTRATE JUDGE

         Defendant Goose Pond Ag, Inc. seeks an award of attorneys' fees and costs related to this action, “pursuant to the attorneys' fees clause in the Real Estate Purchase Agreement … upon which Plaintiffs based their Complaint.” (Doc. 81-1 at 2) Plaintiffs oppose the motion, asserting Defendants are not entitled to fees and costs because they were not a prevailing party on the contract. (Doc. 94)

         For the following reasons, the Court finds Defendant is a prevailing party, and recommends the motion for fees be GRANTED in part.

         I. Background

         This action concerns a dispute arising from the negotiations for a real estate purchase of farmland between Plaintiffs Randeep Dhillon, also known as Dhillon Singh, and Kern Lerdo Nuts (“Plaintiffs”) and Goose Pond Ag, Inc. (See generally Doc. 29) Dhillon asserted that in May 2015, he “became aware of a marketing brochure that stated that Goose Pond was selling approximately 2, 470 acres of farmland, primarily consisting of an almond farm …, which included the existing irrigation systems and twenty three water wells in working condition, by requesting bids to potential buyers.” (Id. at 4, ¶ 6) According to Plaintiffs, Dhillon contacted Goose Pond's agent and, in his capacity as the Director and President of Lerdo Nuts, signed a confidentiality agreement regarding the farmland. (Id. at 5, ¶¶ 7-8) Plaintiffs alleged that Dhillon reviewed information regarding the farmland, and received an opportunity to tour the property. (Id., ¶¶ 9-10)

         Plaintiffs alleged they submitted a bid on June 6, 2015, including “an offer to purchase” the farmland, the 2015 almond crop, irrigation symptoms, 23 water wells, “and all water rights to all related properties that had separate APN numbers.” (Doc. 29 at 6, ¶ 11) Plaintiffs asserted that Goose Pond informed Dhillon he had “been accepted as one of the top bidders” on June 30, and a “best and final offer” with proof of funds was “due Thursday, July 9th by 2pm EST.” (Id. at 7, ¶ 12, emphasis omitted) However, the bid deadline was later extended to July 16. (Id., ¶ 13) Plaintiffs alleged Dhillon submitted “a new bid in the amount of $62, 100, 000 … with proof of funds” on July 16, 2015. (Id., ¶ 16)

         According to Plaintiffs, their agent received an e-mail on July 20, 2015, which stated in relevant part: “After review of best and final bids on Kern Lerdo, we would like to proceed with the offer submitted by your client, Dr. Randeep Dhillon, for $62, 100, 000, which is inclusive of the land, equipment, and 2015 almond crop.” (Doc. 29 at 8, ¶ 18) In addition, Plaintiffs alleged the e-mail addressed cultural costs reimbursement, financial statements, and stated a real estate purchase contract would be provided for their review and comment by July 21. (Id.) Plaintiffs asserted that once the Purchase and Sales Agreement was received, Dhillon signed and returned the document on August 4, which was incorporated into the complaint by reference.[1] (Id. at 4, ¶ 5; see also Id. at 10, ¶ 27)

         Plaintiffs alleged, “Dhillon took steps to liquidate his assets by selling 93 acres of real estate property that he owned, and selling five gas stations that he owned” after submitting the signed agreement. (Doc. 29 at 10, ¶ 28) However, Plaintiffs asserted that on August 17, 2015, Dhillon was informed “Goose Pond was cancelling the Agreement and that all communications were being terminated.” (Id. at 13, ¶ 38)

         Based upon the foregoing allegations, Plaintiffs stated the following causes of action against Goose Pond: (1) breach of written agreements, (2) intentional misrepresentation, (3) negligent misrepresentation, (4) breach of the implied covenant of good faith and fair dealing, (5) violation of California Business and Professions Code § 17200, (6) specific performance, (7) promissory estoppel, and (8) common count for goods and services. (See Doc. 29 at 14-27) Plaintiffs included a prayer “[f]or reasonable attorney's fees and costs” related to the breach of contracts claim. (Id. at 27)

         Defendant filed an answer to the first amended complaint on April 19, 2016, asserting that Goose Pond “terminated… negotiations before any [Real Estate Purchase Contract] was finalized or executed.” (Doc. 30 at 2, ¶ 5) Defendant maintained that the parties “had not even reached an agreement of the form of any such agreement” regarding the sale of the farmland, and that “the only binding agreement between the parties was the Confidentiality Agreement.” (Id. at 8, ¶ 39) Further, Goose Pond asserted the company never “received a signed copy” of the Purchase and Sale Agreement. (Id. at 6, ¶ 27)

         The Court issued a Scheduling Order governing the deadlines in the action on July 25, 2016. (Doc. 35) Thereafter, the parties engaged in discovery in the action. However, Plaintiffs failed to produce requested discovery and the Court ordered Plaintiffs to produce email communications with corresponding metadata, including the Purchase and Sale Agreement of August 4, 2015. (Doc. 62) Plaintiffs failed to comply with the Court's order, and Defendant requested the imposition of sanctions. In addition, Defendant produced significant evidence that Plaintiffs falsified documents that were produced in the course of discovery. (See Doc. 72 at 9-11)

         The Court determined Plaintiffs had “demonstrated their willingness to ignore deadlines imposed by the Court, disrupt the course of the litigation, and prepare falsified documents to respond to discovery requests.” (Doc. 72 at 13) Further, the Court found that “Plaintiffs' discovery violations make it impossible for [the] court to be confident that the parties will ever have access to the true facts, ” and as a result it was “appropriate to reject lesser sanctions.” (Doc. 78 at 5, citing Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 482 F.3d 1091, 1097 (9th Cir. 2007)). Accordingly, the recommendation for terminating sanctions was adopted on April 17, 2017, and the action was dismissed with prejudice. (Id. at 6)

         On April 25, 2017, Defendant filed the motion for attorney fees and costs now pending before the Court, asserting the award was appropriate pursuant to California Civil Code Section 1717, Local Rule 293, and Rule 54 of the Federal Rules of Civil Procedure. (Doc. 81) According to Defendant, the motion was made “on the grounds that Plaintiff's eight contract-related claims were premised on the existence of a [Real Estate Purchase Agreement] that contained an attorneys' fees provision” and Plaintiffs “claimed entitlement to their fees and costs under this provision in their Complaint and would have been entitled to such fees and costs had they prevailed.” (Id. at 2) Further, Defendant asserts it is the prevailing party on the contract claims, because the claims were dismissed with prejudice. (Id.) On May 9, 2017, Plaintiffs filed their opposition to the motion, arguing fees and costs were not appropriate under Section 1717. (Doc. 94) Defendant filed a reply on May 16, 2017. (Doc. 96)

         II. Attorney Fees

         When an action invokes diversity jurisdiction, the Court is “obligated to apply California state law regarding attorneys' fees. Farmers Ins. Exchange v. Law Offices of Conrado Sayas, 250 F.3d 1234, 1237 (9th Cir. 2001). Under California law, attorney fees and costs are recoverable when “expressly authorized by statute or contract.” Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375, 379 (1994); see also Berkla v. Corel Corp., 302 F.3d 909, 919 (2002) (“California permits parties to allocate attorney's fees by contract”).

         The state enacted California Civil Code § 1717 “to establish mutuality of remedy where [a] contractual provision makes recovery of attorney's fees available for only one party [citations], and to prevent oppressive use of one-sided attorney's fees provisions.” Hsu v. Abbara, 9 Cal. 4t h 863, 870 (1995) (citation omitted). Thus, a “prevailing party” for an action on a contract is entitled to an award of attorney' fees and costs, if a contract includes a provision for fees and costs. Cal. Civ.Code § 1717. Specifically, the statute provides:

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 Court must “determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment, ” and the “prevailing party on the contract shall be the party who recovered a greater relief in the contract.” Id. § 1717(b)(1).

         III. Discussion and Analysis

         Defendant's counsel seeks an award of $511, 279.65 in fees related to this action. (Doc. 81-1 at 3) Plaintiffs argue Defendant should not be awarded fees because it “is not the prevailing party ‘on the contract, ” within the meaning of Section 1717. (Doc. 94 at 3, emphasis omitted) Plaintiffs also contend an award of fees and costs would be unjust in light of the terminating sanctions. (Id. at 6) Finally, Plaintiffs assert the amount requested is “excessive and unreasonable.” (Id. at 2)

         A. Whether Defendant is Entitled to Fees and Costs

         It is undisputed that Plaintiffs' claims in this action are based upon an alleged Purchase and Sale Agreement with Defendant, and that the agreement included a provision for attorney fees, stating:

In the event any legal proceeding should be brought to enforce the terms of this Agreement or for breach of any provision of this Agreement, the non-prevailing Party shall reimburse the prevailing party for all reasonable costs and expenses of the prevailing Party (including its attorneys' fees, expert witness' fees and disbursements) at trial or on appeal. For purposes of the foregoing, (i) “prevailing Party” means (A) in the case of the Party initiating the enforcement of rights or remedies, that it recovered substantially all of its claims, and (B) in the case of the Party defending against such enforcement, that it successfully defended substantially all of the claims made against it, and (ii) if no Party is a “prevailing Party” within the meaning of the foregoing, then no Party will be entitled to recover its costs and expenses (including attorney's fees and disbursements) from any other Party.

(Doc. 82-1 at 56) Plaintiffs argue Defendant is not a prevailing party on the contract within the meaning of this provision and, as a result, an award of fees is not appropriate under Section 1717. (Doc. 94 at 3-5)

         1. Prevailing party

         Plaintiffs contend an award is not appropriate because “[t]he Court did not make a ruling on whether or not an agreement existed between the parties.” (Doc. 94 at 4) However, finding that a contract is valid or exists “is not a prerequisite to an award of attorney fees under section 1717.” Hsu, 9 Cal.4th at 870. Rather, “a party is entitled to attorney fees under section 1717 ‘even when the party prevails on grounds the contract is inapplicable, invalid, unenforceable, or nonexistent, if the other party would have been entitled to attorney's fees had it prevailed.'” Id., quoting Bovard v. American Horse Enterprises, Inc., 201 Cal.App.3d 832, 842 (1988); see also Anmaco, Inc. v. Bohlken, 13 Cal.App.4th 891, 902 (1993) (“[a]s long as an action ‘involves' a contract, and one of the parties would be entitled to recover attorney fees under the contract if that party prevails in its lawsuit, the other party should also be entitled to attorney fees if it prevails, even if it does so by successfully arguing the inapplicability, invalidity, unenforceability, or nonexistence of the same contract”). The California Court of Appeal explained the “mutuality of remedy” under Section 1717 as follows:

Where a plaintiff claims breach of a contract containing an attorney fee provision and the defendant asserts there is no contract and wins, it will have established that there is no contract and, hence, no attorney fee provision. Nevertheless, since the plaintiff would have been entitled to attorney fees if the plaintiff had succeeded in proving there was a contract, courts have recognized a right of the defendant to recover attorney fees even if defendant proves there was no contract, in order to further the purposes of Civil Code section 1717.

Dhawliwal v. Singh, Case. 1:13-0484-LJO-SKO, 2013 WL 5477374 at *5 (E.D. Cal. Sept. 30, 2013) (quoting M. Perez Co. v. Base Camp Condominiums Assoc. No. One, 111 Cal.App.4th 456, 467 (2003)).

         In Dhawliwal, this Court determined the defendants were the “prevailing party” under Section 1717 where claims for breach of contract were dismissed with prejudice. Id., 2013 WL 5477374 at *4-5. The Court observed that “California Code of Civil Procedure section 1032(a)(4) defines prevailing party to include ‘a defendant as against those plaintiffs who do not recover any relief against that defendant, ” and because the claims were dismissed with prejudice, the defendants qualified as prevailing parties “[w]ithout doubt.” Id. at *5. Similarly, here, Plaintiffs' claims have been dismissed with prejudice, and Plaintiffs have not recovered any relief from Goose Pond Ag. Thus, there is no question that Defendant is a prevailing party under California law. See Cal. Code Civ. P. § 1032(a)(4).

         2. Claims on the contract

         Section 1717 only applies to a party that prevails “on the contract.” Plaintiffs argue that the eight claims in the First Amended Complaint are not all “on the contract” or “inextricably intertwined” to a contract, and as a result Defendant is not entitled to fees. (Doc. 94 at 4) According to Plaintiffs, their claims “are not all dependent on the existence of a contract, ” and “[m]ore than half of Plaintiffs (sic) claims would have survived even if the Court had found that there was no valid contract between the parties.” (Id.) Plaintiffs assert, “At the very least, Defendant should not recover on noncontract claims.” (Id., citing Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129-30 (1979)).

         In Reynolds, the court explained that “[w]here a cause of action based on the contract providing for attorney's fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney's fees under [Civil Code] section 1717 only as they relate to the contract action. Id., 25 Cal.3d at 129. On the other hand, “joinder of causes of action should not dilute [a] right to attorney's fees” and “fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed.” Id. at 129-30. Consequently, where contract and non-contract claims are “inextricably intertwined, ” making it “impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units, ” apportionment is not necessary. Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1111 (1996).

         Significantly, here, the Court previously observed that in the First Amended Complaint, “Plaintiffs brought eight contract-related claims against Defendant.” (Doc. 78 at 1) Specifically, the claims presented included: intentional misrepresentation, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, violation of California Business and Professions Code § 17200, specific performance, promissory estoppel, and common count for goods and services. (See Doc. 29 at 14-27) Each claim is inextricably intertwined with the breach of the written agreements claim because they are rooted upon the same alleged conduct. For example, Plaintiffs' claims for intentional and negligent misrepresentation rely upon the allegations that Defendant informed Dhillon “it had accepted [his] best and final bid to purchase the Farmland, ” and “it would sell the Farmland to Plaintiffs under the terms and conditions set forth in the Agreement.” (Id. at ¶¶ 54, 66) (emphasis added) Plaintiffs base their claim for a violation of Cal. Bus. & Prof. Code § 17200 upon “the aforementioned false, misleading and deceptive statements, ” evidently related to the acceptance of Dhillon's bid and an agreement to sell. (See Id. at 22, ¶ 84)

         Further, “[u]nder California law, a claim for breach of the implied covenant is necessarily based on the existence of an underlying contractual relationship, and the essence of the covenant is that neither party to the contract will do anything which would deprive the other of the benefits of the contract.” Milne Employees Ass'n v. Sun Carriers, 960 F.2d 1401, 1411 (1991) (emphasis added); see also Chateau Chamberay Homeowners Ass'n v. Associated Int'l Ins. Co., 90 Cal.App.4th 335, 345 (2001) (“the implied covenant imposes upon each party the obligation to do everything that [a] contract presupposes they will do to accomplish its purpose”). As a result, Plaintiffs would be required to demonstrate the existence of a contract to claim a breach of the implied covenant, and this claim is inextricably intertwined to the claim for a breach of the agreement. See Mosten Mgmt. Co. v. Zurich-American Ins. Group, 62 Fed.App'x 175, 178 (9th Cir. 2003) (find a claim for a breach of the implied contract was “inextricably intertwined” with the plaintiff's “claim to obtain… contract benefits”).

         Likewise, Plaintiffs would be required to show the existence of a contract for the “claim” for specific performance, which is “not an independent cause[] of action” but rather “a remedy for a breach of contract where there is no adequate remedy at law.” Billingsley v. MV Transp., Inc., 2017 U.S. Dist. LEXIS 38991 at *16 (E.D. Cal. Mar. 17, 2017) (citing Wilkinson v. Wiederkehr, 101 Cal.App.4th 822, 833 (2002)). As a remedy, the request for specific performance is “dependent upon [the] contract claims, ” and thus inextricably intertwined with the existence of the alleged purchase and sale agreement. See Id. The same is true of Plaintiffs' request for a common count. See Batt v. City and County of San Francisco, 155 Cal.App.4th 65, 82 (2007) (explaining a common count “is not an independent cause of action but merely a type of remedy” under California law).

         Because Plaintiffs' claims and remedies are all inextricably intertwined to the alleged Purchase and Sale Agreement with Goose Pond Ag, no apportionment of ...

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