CDC San Francisco v. Webcor Construction CA1/1 ( 2023 )

Filed 1/11/23 CDC San Francisco v. Webcor Construction CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
CDC SAN FRANCISCO LLC,
Plaintiff and Appellant,
A163751
v.
WEBCOR CONSTRUCTION, L.P. (San Francisco City and County
et al., Super. Ct. No. CGC-17-559707)
Defendants and Respondents.
Appellant CDC San Francisco LLC (CDC) challenges the trial court’s
award of attorney fees to respondents Webcor Construction, L.P. and
Obayashi Corporation (Webcor) following CDC’s unsuccessful appeal of an
adverse judgment in a disgorgement action. Webcor had sought more than
$1.5 million in attorney fees it claimed it incurred in defending against CDC’s
appeal. After imposing a 45 percent reduction, the trial court awarded
Webcor $855,438. Despite the reduction, CDC contends the award is
excessive, asserting that the court abused its discretion by making an
arbitrary “across-the-board cut.” We affirm.
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I.
FACTUAL AND PROCEDURAL BACKGROUND
This case arose from the construction of CDC’s InterContinental Hotel
San Francisco by Webcor, which was completed in 2009. (San Francisco CDC
LLC v. Webcor Construction L.P. et al. (2021) 62 Cal.App.5th 266, 272
(CDC I).) In 2015, CDC filed a lawsuit against Webcor for alleged defects in
the construction of the hotel. (Id. at p. 273.) The parties later settled, and
the lawsuit was dismissed in August 2017. (Ibid.)
In June 2017, CDC filed another lawsuit against Webcor that stated a
single claim for disgorgement under Business and Professions Code
section 7031, subdivision (b), alleging that Webcor built the hotel while
unlicensed. (CDC I, supra, 62 Cal.App.5th at p. 273.) Webcor demurred.
(Ibid.) CDC responded by filing a first amended complaint, and Webcor again
demurred and moved to strike. The trial court sustained the demurrer with
leave to amend. (Id. at pp. 273–274.) CDC filed a second amended
complaint, leading Webcor to file another demurrer and a motion to strike.
The court again sustained the demurrer with leave to amend. (Id. at
pp. 274–275.) CDC then filed a third amended complaint and Webcor filed a
demurrer. The court sustained the demurrer without leave to amend, and
later awarded Webcor $231,834 in contractual attorney fees. (Id. at pp. 275–
276.) In March 2021, we issued our opinion affirming the judgment and the
fee award. (Id. at pp. 271–272.)
In June 2021, Webcor filed a motion seeking $1,555,342 in attorney
fees and costs incurred in defending the appeal.1 The $1,555,342 figure
1Attorneys from each of Webcor’s three law firms submitted supporting
declarations. The declarations included billing statements describing each
attorney task performed, the date the task was performed, the time spent on
the task, the attorney who performed the task, the attorney’s hourly rate, and
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included $58,230 for approximately 120 hours of work by Webcor’s trial
counsel, $102,307 for approximately 300 hours of work by Webcor’s in-house
counsel, and $1,386,033 for approximately 1,290 hours of work by appellate
counsel Gibson, Dunn & Crutcher LLP. Webcor’s trial counsel charged
hourly rates of $310 to $380. Webcor’s in-house counsel charged hourly rates
of $400 to $575. Gibson, Dunn & Crutcher charged hourly rates of $655 to
$1,390.2
Webcor argued that it was entitled to the full amount requested
because the parties’ contract entitled the prevailing party to all of its “ ‘actual
costs and expenses.’ ” Alternatively, Webcor argued that the fees sought were
“fair and reasonable” under the lodestar method and were necessarily
incurred “to adequately address each of the numerous issues raised by CDC
on appeal.” Webcor also suggested the fees were fair because the underlying
matter was a “ ‘bet the company’ type lawsuit.” In opposing the motion, CDC
urged the trial court to deny the motion in its entirety or to “find an alternate
method to determine reasonability.”
Following a hearing, the trial court issued its order rejecting Webcor’s
argument that it was entitled to the entirety of its fees under the parties’
contract. Instead, the court determined that Civil Code section 1717,
subdivision (a), applied, entitling Webcor to its “reasonable attorney’s fees”
only. After describing the applicable law, the court characterized appellate
counsel’s hourly rates as “excessive and unreasonable by any measure.”
Describing the rates as “off the charts,” the court observed that “[t]hese are
by far the highest rates that this court has ever seen requested (much less
the amount charged for the task, along with the total hours worked by each
attorney and the total amounts charged for each attorney.
2Gibson, Dunn & Crutcher’s billing also included paralegal hours billed
at between $460 and $505 per hour.
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awarded to) any counsel in any type of case, in innumerable fee applications,
and far above those awarded in any reported California law.” The court
found the rates were, “at a minimum,” at least 20 percent above the
prevailing market rates for similar services in the Bay Area. The court also
observed that the hours for which Webcor was seeking compensation were
“grossly inflated.” The court pointed out that on appeal Webcor sought
“nearly seven times the amount that its trial counsel charged to brief the very
same issues and litigate the case in the trial court.” The court also rejected
Webcor’s assertion that the appeal involved “ ‘bet-the-company’ ” litigation.
Citing to these factors, the court reduced Webcor’s “claimed lodestar” by
45 percent, for a total award of $855,438. This appeal followed.
II.
DISCUSSION
A. Applicable Legal Principles
Civil Code section 1717, subdivision (a), provides that in any action on
a contract that provides for an award of fees and costs to the prevailing party,
“the party prevailing on the contract . . . shall be entitled to reasonable
attorney’s fees.” In ruling on a motion for attorney fees, “[t]he trial court has
broad discretion to determine the amount of a reasonable fee, and the award
of such fees is governed by equitable principles.” (EnPalm, LLC v. Teitler
(2008) 162 Cal.App.4th 770, 774.)
Contractual attorney fees in California are ordinarily calculated using
the lodestar method. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084,
1095.) “Under the lodestar method, attorney fees are calculated by first
multiplying the number of hours reasonably expended on the litigation by a
reasonable hourly rate of compensation.” (Chacon v. Litke (2010)
181 Cal.App.4th 1234, 1259, italics added.) Once the trial court has fixed the
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lodestar, “ ‘it may increase or decrease that amount by applying a positive or
negative “multiplier” to take into account a variety of other factors, including
the quality of the representation, the novelty and complexity of the issues,
the results obtained, and the contingent risk presented.’ ” (Laffitte v. Robert
Half Internat. Inc. (2016) 1 Cal.5th 480, 489.) If the court determines that
the lodestar amount is excessive, it “ ‘shall reduce the [Civil Code]
section 1717 award so that it is a reasonable figure.’ ” (PLCM, at p. 1096.)
“The abuse of discretion standard governs our review of the trial court’s
determination of a reasonable attorney fee.” (Syers Properties III, Inc. v.
Rankin (2014) 226 Cal.App.4th 691, 697.) Under this standard, we presume
the attorney fees award is correct, and “[t]he appellant challenging the award
‘bear[s] the burden of affirmatively establishing that the trial court abused
its discretion.’ ” (In re Marriage of Minkin (2017) 11 Cal.App.5th 939, 954.)
“ ‘ “The ‘experienced trial judge is the best judge of the value of professional
services rendered in [the judge’s] court, and while [that] judgment is of course
subject to review, it will not be disturbed unless the appellate court is
convinced that it is clearly wrong.’ ” ’ ” (Ibid.)
B. Analysis
CDC argues that this case requires “ ‘heightened scrutiny,’ ” asserting
the trial court’s order is “arbitrary and unreviewable” on appeal because the
trial court failed to properly apply the lodestar method. It contends the court
“should have run the lodestar analysis to completion, rather than just
stop[ping] and apply[ing] an overall percentage reduction without
explanation.” As its primary authority, CDC relies on Kerkeles v. City of San
Jose (2015) 243 Cal.App.4th 88 (Kerkeles). That case is distinguishable.
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Kerkeles addressed attorney fees awarded under 42 United States Code
section 1988 (section 1988) in a civil rights case.3 The trial court in Kerkeles
had calculated the lodestar and then made an “ ‘across the board 50%
reduction in the claimed hours billed’ ” without providing further
explanation. (Kerkeles, supra, 243 Cal.App.4th at p. 101.) The appellate
court rejected this sweeping cut as inadequately supported. It noted that
federal courts reviewing fees awarded under section 1988 apply “ ‘heightened
scrutiny’ ” to “percentage cuts to large fee requests.” (Kerkeles, at p. 102.)
This level of scrutiny is required because courts “ ‘must strike a balance
between granting sufficient fees to attract qualified counsel to civil rights
cases [citation] and avoiding a windfall to counsel [citation]. The way to do so
is to compensate counsel at the prevailing rate in the community for similar
work; no more, no less.’ ” (Id. at p. 100.) Examining several cases, the
appellate court concluded that “when imposing a reduction greater than
10 percent, the [lower] court ‘must explain why it chose to cut the number of
hours or the lodestar by the specific percentage it did.’ ” (Id. at p. 103.)
The heightened scrutiny used in Kerkeles has no application here
because the underlying case was not brought under federal law. (See Morris
v. Hyundai Motor America (2019) 41 Cal.App.5th 24, 37, fn. 6 [“Kerkeles
concerned an award of attorney fees under . . . section 1988 that is subject to
the more stringent federal standard requiring . . . courts to ‘ “provide a
reasonably specific explanation for all aspects of a fee determination” ’ ”].) In
contrast, under California law “the trial court has no sua sponte duty to make
3 Subdivision (b) of section 1988 permits awards of reasonable attorney
fees to persons deprived of their civil rights in violation of 42 United States
Code section 1983. It provides, in pertinent part, “In any action or proceeding
to enforce a provision of . . . [section 1983] . . . the court, in its discretion, may
allow the prevailing party, other than the United States, a reasonable
attorney’s fee as part of the costs.”
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specific factual findings explaining its calculation of the fee award and the
appellate courts will infer all findings exist to support the trial court’s
determination.” (California Common Cause v. Duffy (1987) 200 Cal.App.3d
730, 754–755.)
Our courts hold that, absent a party’s request, a trial court is not
required to provide specific factual findings to support its fee award. When a
ruling on attorney fees does not identify the manner in which the court
calculated the fee award, “it is incumbent on the party who is dissatisfied
with the court’s calculation of the number of allowable hours to request
specific findings.” (California Common Cause v. Duffy, supra, 200 Cal.App.3d
at p. 755.) “California courts have stated a disinclination to review the
amount of an award when specific findings were not requested.” (Ibid.)
Instead, “the appellate courts will infer all findings exist to support the trial
court’s determination.” (Id. at p. 754; see Ketchum v. Moses (2001) 24 Cal.4th
1122, 1140–1141 [although record did not indicate whether trial court
employed the lodestar method, appellant’s claim that attorney fees award
was wrongly calculated must be resolved against him, because appellant
failed to request and furnish adequate record of trial court’s reasoning].)
CDC did not request specific findings at the hearing on Webcor’s motion, and
we therefore must infer that the trial court made the necessary findings to
support its determination.
CDC next asserts that the trial court’s 45 percent reduction was
arbitrary and “was not based on a legitimate basis for determining a
reasonable attorney fee award.” In so arguing, CDC relies on Mountjoy v.
Bank of America, N.A. (2016) 245 Cal.App.4th 266, 272, which reversed an
attorney fee order where the trial court reduced by 70 percent the applicant’s
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total hours billed after finding that 70 percent of the billing entries were
flawed. CDC’s reliance is misplaced.
In Mountjoy, the trial court reduced the total hours claimed by the
plaintiffs’ attorneys largely because the court found that over 70 percent of
the attorneys’ billing entries were flawed, for reasons such as excessive time
spent on the stated task, duplicative billing, or fees for unreasonable tasks.
The appellate court found this reduction arbitrary because “there appear[ed]
to be no reasonable basis for the conclusion that the total hours included in
the 70 percent-plus time entries that were flawed in one or more ways was
even reasonably close to 70 percent of the total time claimed. For example, it
[was] possible that the hours included in the flawed time entries amounted to
only 50 percent of total hours claimed, in which case the [plaintiffs] would
have suffered a 20 percent reduction in compensable hours for hours that
were actually included in time entries that were not flawed.” (Mountjoy v.
Bank of America, N.A., supra, 245 Cal.App.4th at pp. 280–281, italics
omitted.) Under those circumstances, “[a]n across-the-board reduction in
hours claimed based on the percentage of total time entries that were flawed,
without respect to the number of hours that were actually included in the
flawed entries, [was] not a legitimate basis for determining a reasonable
attorney fee award.” (Id. at p. 282, italics omitted.) Mountjoy has no
application here, as the trial court’s reduction was not directly tied to any
perceived discrepancies in the attorneys’ billing records.
CDC also asserts that the award must be overturned because it would
“result in a windfall nearly 10 times greater than the work actually
required.” (Emphasis omitted.) CDC arrives at this assertion by noting that
Webcor’s trial counsel was awarded the equivalent of $77,000 in attorney fees
for each round of briefing in three contested demurrers, reasoning that a
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$77,000 order for appellate fees “would have been reasonable based on the
efforts spent on a single round of briefing the same issues for the fourth
time.” CDC also asserts that the trial court should have reduced by
75 percent the fees claimed by Webcor’s appellate attorneys based on the
rates Webcor’s trial attorney indicated were reasonable for such specialty and
locale. We disagree.
The trial court properly rejected CDC’s suggestion that the award
should be based on the fees charged by trial counsel in litigating the
demurrers, correctly observing that “the process of preparing an appellate
brief necessarily involves more than simply shoveling words that were
already presented in the trial court into an appellate brief.” We also note
that CDC did not provide the court with either the rates it paid its own
counsel on appeal or the amount of time its counsel spent on the appeal. An
opposing party’s rates and time spent on a case have probative value when
contesting a fee award. (See In re Tobacco Cases I (2013) 216 Cal.App.4th
570, 584.)
CDC next argues that the trial court erred in failing to determine the
reasonable hours billed by Webcor. CDC notes the court explained that
“Webcor’s assertion that it needed 11 attorneys to spend over 1,700 hours to
achieve the result that it did is unreasonable on its face, and reflects a great
deal of inefficiency, overstaffing, and duplication of effort.” The court also
referenced the attorney fees that were previously awarded to trial counsel,
observing the disconnect presented by Webcor’s assertion that “on those
basically bare legal issues, it somehow takes one-and-a-half million dollars,
more than seven times that amount, to file two briefs in the Court of Appeal.”
While the court did not state how many hours would have been reasonable, it
was not asked to provide a statement of decision. (See, e.g., Ketchum v.
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Moses, supra, 24 Cal.4th at pp. 1140–1141.) Nor was the court required to
“otherwise detail its fealty to the law, which we presume.” (Christian
Research Institute v. Alnor (2008) 165 Cal.App.4th 1315, 1323, citing Evid.
Code, § 664 [“It is presumed that official duty has been regularly
performed”].) As one appellate court stated after considering a similar
argument: “Because the record shows that the court acted for legitimate
reasons, we cannot find an abuse of discretion simply because it failed to
make its arithmetic transparent.” (Save Our Uniquely Rural Community
Environment v. County of San Bernardino (2015) 235 Cal.App.4th 1179,
1190.)
CDC further complains that the trial court’s approach “denies parties
any meaningful appellate review of the attorney fee award,” again relying on
Kerkeles and other cases that discuss the federal standard. As we have
already explained, that standard does not apply here. In any event, the trial
court did explain its reasoning for reducing the requested fees. First, the
court stated that it found “excessively high hourly rates on the part of
appellate counsel.” For example, the court observed that two appellate
partners had “staggering” hourly rates near $1,400. The court also made
clear its view that Webcor’s hours were “grossly inflated,” especially
considering that “this was hardly an unusually complicated or difficult
appeal.”
Importantly, CDC does not argue that the award is so high as to shock
the conscience, and we do not find that the award meets that standard. It is
established that “[t]he only proper basis of reversal of the amount of an
attorney fees award is if the amount awarded is so large or small that it
shocks the conscience and suggests that passion and prejudice influenced the
determination.” (Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th
101127, 1134; see In re Tobacco Cases I, supra, 216 Cal.App.4th at p. 578 [“We
are required to uphold a reasonable ruling even if we might not have ruled
the same way and a contrary ruling would also be sustainable”]; see also
J.B.B. Investment Partners, Ltd. v. Fair (2014) 232 Cal.App.4th 974, 993 [“If
the court’s ruling is correct on any legal theory, the judgment will be
affirmed”].)
“Trial judges are entrusted with this discretionary determination
because they are in the best position to assess the value of the professional
services rendered in their courts.” (Ellis v. Toshiba America Information
Systems, Inc. (2013) 218 Cal.App.4th 853, 882.) Here, “[t]he award granted
was significantly reduced from the original request as a result of the trial
court’s indication that it did not look favorably on the full request. Thus, it
clearly appears that the trial court exercised its discretion. In these
circumstances, we cannot conclude that the award of attorney fees shocks the
conscience or suggests that passion and prejudice had a part in it. As such,
we conclude that the trial court did not abuse its discretion in awarding the
attorney fees that it did.” (Akins v. Enterprise Rent-A-Car Co., supra,
79 Cal.App.4th at p. 1134.)
In sum, we find no reason to disturb the trial court’s ruling.
III.
DISPOSTION
The order awarding attorney fees to Webcor is affirmed. Webcor is to
recover its costs on appeal.
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_________________________
Humes, P.J.
WE CONCUR:
_________________________
Margulies, J.
_________________________
Banke, J.
CDC San Francisco LLC v. Webcor Construction, L.P. A163751
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