Chief Judge Roger L. Efremsky • Clerk of Court Edward Emmons
UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA
CENTURY 21 HERD AND CO. REALTORS INC.,
a California Corporation, Debtor.
ROBERT M. DAMIR, Chapter 7 Trustee, Plaintiff,
A.P. No. 97-3498DM
MELANIE HILDEBRAND, NIEL HILDEBRAND,
CHARLES COLLIVER, CENTURY 21 ALLIANCE, A California
Corporation, and DOES 1 through 20 inclusive, Defendants.
On May 13, 1999, this court entered a judgment in favor of Robert M. Damir, Chapter 7 Trustee ("Plaintiff") against Melanie Hildebrand, Niel Hildebrand and Century 21 Alliance (collectively, "Defendants"). On May 14, 1999, Plaintiff filed a bill of costs, requesting costs in the amount of $10,263.94. Defendants have filed an objection to the bill of costs. On May 21, 1999, Plaintiff filed a motion to fix amount of attorneys' fees under California Civil Code section 1717. Defendants oppose this motion as well. On June 18, 1999, this court held a hearing on the motion to fix attorneys' fees and on the bill of costs. Michael B. Bassi, Esq. and Dena M. Roche, Esq. appeared on behalf of Plaintiff; James S. Mori, Esq. appeared on behalf of Defendants. Counsel for Plaintiff filed a supplemental declaration in support of the motion to fix attorneys' fees on July 1, 1999; Defendants filed their supplemental reply memorandum on July 16, 1999. The court then took the matters under submission. For the reasons stated below, the court will reduce the requested costs by $691.07 and allow Plaintiff to recover $9,572.87 on his bill of costs. The court will also fix the attorneys' fees allowable under California Civil Code section 1717 at $5,797.22.
I. Bill of Costs
Pursuant to B.L.R. 1001-2(a)(49) (incorporating Civil L.R. 54-1 through 54-4), the burden of proof is on the Defendants to establish that Plaintiff's bill of costs is "incorrectly stated, unnecessary or unreasonable." See Civil L.R. 54-1(c). With two exceptions, Defendants have not met their burden here. Defendants objected to the validity of the costs, but Plaintiff has produced invoices to support the charges. All of the costs are allowable under the local rules, except for the following:
Reproduction Costs to Robert A. Cook & Staff (5 entries totalling $394.44): Plaintiff has not established that these copying costs related to government records, formal discovery documents, or trial exhibits. Pursuant to Civil L.R. 54-3(d)(1), (2), or (5), these costs are therefore not allowable.
Reproduction Costs to Copy Corps for Expert Witness Copies (2 entries totalling $296.63): While Civil L.R. 54-3(d)(2) allows cost of reproducing discovery when used for any purpose, the rule contemplates one copy of discovery - not multiple copies of the same discovery copied for the convenience of a witness. Plaintiff can recover the cost of duplicating the discovery once, not twice. The court will therefore disallow $296.63.
The court will therefore allow Plaintiff to recover $9,572.87 on his bill of costs, after deducting the foregoing costs totalling $691.07.
II. Motion to Fix Attorneys' Fees
California Civil Code section 1717 allows a party prevailing on an action on a contract to recover reasonable attorneys' fees in addition to other costs. Plaintiff is seeking $17,008.75 in fees, even though he recovered only $17,391.66 on his breach of contract claim (which he did not even plead until after the trial, when he filed a motion to amend the complaint). The court will not allow Plaintiff to recover these fees, because he has not demonstrated that they are attributable to formulating and prosecuting a breach of contract claim, because the fee calculation offered by Plaintiff's counsel is without adequate foundation, and because the fees are not reasonable. Because Plaintiff's counsel has not offered credible and sufficient grounds for asserting that it expended 20 percent of its total time in prosecuting the breach of contract claim and because its time records do not support its calculations, the court will treat the claim as though it were prosecuted on a contingency basis and fix the "reasonable" fee at one-third of the amount recovered on the breach of contract claim: $5,797.22.
Plaintiff's counsel did not initially plead a breach of contract claim against Defendants. Plaintiff did not argue or assert a breach of contract claim in his trial brief. Plaintiff did not present this claim until he filed a post-trial motion to amend his complaint to assert the contract claim. Instead, the focus of Plaintiff's case and the trial was his fraudulent transfer theory of recovery. Any work performed by Plaintiff's counsel on the contract claim was - until after the trial - de minimus. Plaintiff's counsel nevertheless asserts that its work on the contract claim was "inextricably intertwined" with the work it billed for the work performed on the fraudulent transfer claims. Plaintiff's counsel therefore estimates that twenty percent of its total fees relate to the contract claim. The court doubts the validity of this calculation. The court sat through this trial and is aware of the work done by Plaintiff's counsel vis-a-vis the breach of contract claim. The court finds it implausible that Plaintiff's counsel spent twenty percent of its total time on this claim, when Plaintiff did not even plead the claim until after the trial and at the court's suggestion. Plaintiff's counsel focused almost exclusively on its fraudulent transfer theory of recovery at trial and in its brief filed with the court. Civil Code section 1717 does not apply to fraudulent transfer claims; it applies to attorneys' fees incurred with respect to a contract claim. See Rothery v. Marshack (In re Rothery), 200 B.R. 644 (9th Cir. BAP 1996) (Chapter 7 trustee's successful fraudulent transfer proceeding was not an action "on a contract" entitling the trustee to fees under California Civil Code section 1717); Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4th 698, 75 Cal.Rptr.2d 376, 383 (1998) ("This distinction between contract and tort claims flows from the fact that a tort claim is not "on a contract" and is therefore outside the ambit of section 1717."). Based on its experience and observations before, during and after trial, this court cannot accord credence to Plaintiff's estimation of time expended on the contract claim. See Niederer v. Ferreira, 189 Cal.App.3d 1485, 1507, 234 Cal.Rptr. 779 (1987) (in setting reasonable fee under section 1717, "the trial court may rely on its own experience and knowledge in determining the reasonable value of the attorney's services"). The court therefore finds that the requested fee is unreasonable and will fix the fee in an amount which would have ben recoverable in a contingency fee case: one-third of the recovery on the contract claim. Attorneys' fees for Plaintiff under California Civil Code section 1717 is therefore set at $5,797.22.
Based on the foregoing, it is hereby
ORDERED that Plaintiff recover from Defendants $9,572.87 for his bill of costs; it is further
ORDERED that Plaintiff recover from Niel Hildebrand and Melanie Hildebrand $5,797.22 as his attorneys' fees under California Civil Code section 1717.
Dated: August __, 1999 ______________________________ Dennis Montali United States Bankruptcy Judge