This case was last updated from Los Angeles County Superior Courts on 12/18/2021 at 00:33:15 (UTC).

BEHNAM HESHEJIN ET AL VS RAMI ROSTAMI ET AL

Case Summary

On 02/07/2018 BEHNAM HESHEJIN filed a Contract - Other Contract lawsuit against RAMI ROSTAMI. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are PATRICIA D. NIETO and YVETTE M. PALAZUELOS. The case status is Other.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****3226

  • Filing Date:

    02/07/2018

  • Case Status:

    Other

  • Case Type:

    Contract - Other Contract

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

PATRICIA D. NIETO

YVETTE M. PALAZUELOS

 

Party Details

Petitioners, Plaintiffs and Appellants

THE HESHFAM TRUST

HESHEJIN BEHNAM

ANVARI ERIC

ENZMANN DAVID A.

Defendants, Respondents and Not Classified By Court

ROSTAMI RAMIN

BAGHERZADEH RAMIN

ROSTAMI RAMI

AMERICAN INVESTMENT GROUP LLC

AVALON COLD STORAGE LLC

MAZKAT VENTURES L.P.

AMERICAN LOGISTICS INTERNATIONAL LLC

AMERICAN LOGISTICS INTERNATIONAL COLD

AMERICAN LOGISTICS INTERNATIONAL

DOES 1-50

EV MANAGEMENT LLC FKA OPX LOGISTICS LLC

VAHDAT BABAK AKA BOBBY VAHDAT

AMERICAN LOGISTICS INTERNATIONAL WAREHOUS

VAHDAT BABAK

OPX LOGISTICS

VAHDAT BOBBY

3 More Parties Available

Attorney/Law Firm Details

Petitioner and Plaintiff Attorneys

WILSON JOHN D. ESQ.

JOHN D. WILSON LAW OFFICES OF

WILSON JOHN DAVID

WILSON JOHN D

Defendant and Respondent Attorneys

NOVIAN & NOVIAN LLP

MURPHY THOMAS

MURPHY & EFTEKHARI

MURPHY LLOYD THOMAS JR

NOVIAN FARHAD

1801 Century Park E #1201

Los Angeles, CA 90067

 

Court Documents

1ST AMENDED COMPLAINT REQUEST FOR ENTRY OF DEFAULT

7/17/2018: 1ST AMENDED COMPLAINT REQUEST FOR ENTRY OF DEFAULT

FIRST AMENDED COMPLAINT FOR: 1. CONSPIRACY TO COMMIT FRAUD; ETC.

3/22/2018: FIRST AMENDED COMPLAINT FOR: 1. CONSPIRACY TO COMMIT FRAUD; ETC.

Request for Dismissal

6/4/2021: Request for Dismissal

Appeal - Remittitur - Affirmed - APPEAL - REMITTITUR - AFFIRMED B297037

12/18/2020: Appeal - Remittitur - Affirmed - APPEAL - REMITTITUR - AFFIRMED B297037

Stipulation and Order - STIPULATION AND ORDER STIPULATION OF PLAINTIFFS BEHNAM HESHEJIN, THE HESHFAM TRUST AND ERIC ANVARI AND DEFENDANTS BABAK VAHDAT, EV MANAGEMENT, LLC FKA OPX LOGISTICS LLC TO CONT

1/22/2021: Stipulation and Order - STIPULATION AND ORDER STIPULATION OF PLAINTIFFS BEHNAM HESHEJIN, THE HESHFAM TRUST AND ERIC ANVARI AND DEFENDANTS BABAK VAHDAT, EV MANAGEMENT, LLC FKA OPX LOGISTICS LLC TO CONT

Notice - NOTICE OF ENTRY OF ORDER ON STIPULATION OF PLAINTIFFS BEHNAM HESHEJIN, THE HESHFAM TRUST AND ERIC ANVARI AND DEFENDANTS BABAK VAHDAT, EV MANAGEMENT, LLC FKA OPX LOGISTICS LLC TO CONTINUE TRIA

1/26/2021: Notice - NOTICE OF ENTRY OF ORDER ON STIPULATION OF PLAINTIFFS BEHNAM HESHEJIN, THE HESHFAM TRUST AND ERIC ANVARI AND DEFENDANTS BABAK VAHDAT, EV MANAGEMENT, LLC FKA OPX LOGISTICS LLC TO CONTINUE TRIA

Declaration - DECLARATION OF RAMIN ROSTAMI IN SUPPORT OF AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1717

1/27/2021: Declaration - DECLARATION OF RAMIN ROSTAMI IN SUPPORT OF AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1717

Declaration - DECLARATION OF FARHAD NOVIAN IN SUPPORT OF AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1717

1/27/2021: Declaration - DECLARATION OF FARHAD NOVIAN IN SUPPORT OF AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1717

Motion for Attorney Fees

1/27/2021: Motion for Attorney Fees

Memorandum of Costs (Summary)

1/27/2021: Memorandum of Costs (Summary)

Objection - OBJECTION TO PORTIONS OF DECLARATION OF RAMIN ROSTAMI IN SUPPORT OF DEFENDANT AVALON COLD STORAGE, LLC'S MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE

2/26/2021: Objection - OBJECTION TO PORTIONS OF DECLARATION OF RAMIN ROSTAMI IN SUPPORT OF DEFENDANT AVALON COLD STORAGE, LLC'S MOTION FOR ATTORNEYS' FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE

Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE FILED IN OPPOSITION TO DEFENDANT AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1

2/26/2021: Request for Judicial Notice - REQUEST FOR JUDICIAL NOTICE FILED IN OPPOSITION TO DEFENDANT AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE SECTION 1

Memorandum of Points & Authorities - MEMORANDUM OF POINTS & AUTHORITIES IN OPPOSITION TO DEFENDANT AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE S

2/26/2021: Memorandum of Points & Authorities - MEMORANDUM OF POINTS & AUTHORITIES IN OPPOSITION TO DEFENDANT AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CODE OF CIVIL PROCEDURE S

Declaration - DECLARATION SUPPLEMENTAL DECLARATION OF FARHAD NOVIAN IN SUPPORT OF AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CIVIL CODE SECTION 1717

3/4/2021: Declaration - DECLARATION SUPPLEMENTAL DECLARATION OF FARHAD NOVIAN IN SUPPORT OF AVALON COLD STORAGE, LLCS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CIVIL CODE SECTION 1717

Reply - REPLY IN SUPPORT OF ITS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CIVIL CODE SECTION 1717

3/4/2021: Reply - REPLY IN SUPPORT OF ITS MOTION FOR ATTORNEYS FEES AND COSTS PURSUANT TO CIVIL CODE SECTION 1717

Objection - OBJECTION EVIDENTIARY OBJECTIONS

3/4/2021: Objection - OBJECTION EVIDENTIARY OBJECTIONS

Notice of Ruling

3/11/2021: Notice of Ruling

Minute Order - MINUTE ORDER (HEARING ON MOTION FOR ATTORNEY FEES)

3/11/2021: Minute Order - MINUTE ORDER (HEARING ON MOTION FOR ATTORNEY FEES)

107 More Documents Available

 

Docket Entries

  • 12/16/2021
  • Docketat 09:30 AM in Department 24; Final Status Conference - Not Held - Vacated by Court

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  • 06/04/2021
  • DocketRequest for Dismissal; Filed by Eric Anvari (Plaintiff); Behnam Heshejin (Plaintiff); The Heshfam Trust (Plaintiff)

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  • 03/22/2021
  • Docketat 10:00 AM in Department 24; Jury Trial - Not Held - Continued - Stipulation

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  • 03/11/2021
  • Docketat 09:30 AM in Department 24; Final Status Conference - Not Held - Continued - Stipulation

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  • 03/11/2021
  • Docketat 08:30 AM in Department 24; Hearing on Motion for Attorney Fees - Held - Motion Denied

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  • 03/11/2021
  • DocketNotice of Ruling; Filed by Avalon Cold Storage, LLC (Defendant)

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  • 03/11/2021
  • DocketOrder Appointing Court Approved Reporter as Official Reporter Pro Tempore

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  • 03/11/2021
  • DocketMinute Order ( (Hearing on Motion for Attorney Fees)); Filed by Clerk

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  • 03/04/2021
  • DocketObjection (EVIDENTIARY OBJECTIONS); Filed by Avalon Cold Storage, LLC (Defendant)

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  • 03/04/2021
  • DocketReply (IN SUPPORT OF ITS MOTION FOR ATTORNEYS? FEES AND COSTS PURSUANT TO CIVIL CODE SECTION 1717); Filed by Avalon Cold Storage, LLC (Defendant)

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184 More Docket Entries
  • 03/22/2018
  • DocketSummons Issued; Filed by Behnam Heshejin (Plaintiff); The Heshfam Trust (Plaintiff); David A. Enzmann (Plaintiff) et al.

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  • 03/22/2018
  • DocketFIRST AMENDED COMPLAINT FOR: 1. CONSPIRACY TO COMMIT FRAUD; ETC.

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  • 03/22/2018
  • DocketFirst Amended Complaint; Filed by Behnam Heshejin (Plaintiff); The Heshfam Trust (Plaintiff); David A. Enzmann (Plaintiff) et al.

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  • 03/22/2018
  • DocketFIRST AMENDED SUMMONS

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  • 02/26/2018
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 02/26/2018
  • DocketNOTICE OF CASE MANAGEMENT CONFERENCE

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  • 02/07/2018
  • DocketSummons; Filed by Behnam Heshejin (Plaintiff); The Heshfam Trust (Plaintiff); David A. Enzmann (Plaintiff) et al.

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  • 02/07/2018
  • DocketComplaint; Filed by Behnam Heshejin (Plaintiff); The Heshfam Trust (Plaintiff); David A. Enzmann (Plaintiff) et al.

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  • 02/07/2018
  • DocketSUMMONS

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  • 02/07/2018
  • DocketCOMPLAINT FOR: 1. CONSPIRACY TO COMMIT FRAUD ;ETC

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Tentative Rulings

Case Number: BC693226    Hearing Date: March 11, 2021    Dept: 24

Defendant Avalon Cold Storage, LLC’s motion for attorneys’ fees is DENIED.

On February 7, 2018, Plaintiffs Behnam Heshejin, The Heshfam Trust, David A. Enzmann, Trustee, and Eric Anvari (“Plaintiffs”) filed this action against Defendants Rami Rostami, American Investment Group, LLC, and Avalon Cold Storage, LLC, also naming other defendants. The operative Second Amended Complaint (“SAC”) names additional defendants and alleges twelve causes of action for: 1) conspiracy to commit fraud, 2) fraud by concealment, 3) breach of fiduciary duties, 4) breach of loyalties, 5) declaratory relief, 6) conversion, 7) accounting, 8) breach of stock purchase agreement, 9) specific performance of stock purchase agreement, 10) accounting, 11) conversion, and 12) accounting.

The SAC alleges that Plaintiffs are limited partners in Mazkat Ventures, LP (“Mazkat”), with an aggregate minority ownership interest. Bagherzadeh is also a limited partner, and Mazkat is managed and controlled by its general partner, American Logistics Advisors, LLC (“ALA”). Mazkat wholly owns American Logistics International, LLC (“ALI”). Bagherzadeh is also a member and manager of ALI and ALA, and Rostami is a managing member, officer, and director of AIG. In 2013, AIG jointly invested in a cold storage warehousing facility with ALI. At that time, AIG invested approximately $6,000,000 in the venture. Because of the mismanagement of the cold storage facility by ALI and its principal manager Mahdavi, AIG was forced to make an infusion of capital to the cold storage project to keep it afloat in February 2015, in the approximate amount of $7,500,000. In connection with this infusion, which AIG negotiated with ALI’s other principal, Bagherzadeh, because of Mahdavi’s fraud and wrongdoing, AIG obtained a membership interest in the entity which owned the cold storage facility. Plaintiffs allege that the transactions in February 2015 were a fraudulent conspiracy and secret agreement among and between certain defendants to divest ALI of all its partnership interests and rights in the joint venture between AIG and ALI. As a result, Plaintiffs contended they were entitled to 50% ownership in the cold storage facility, Avalon.

On December 21, 2021, the Court sustained Rostami, AIG, and Avalon’s demurrer to the entirety of the SAC without leave. On April 15, 2019, Plaintiffs filed a notice of appeal. On September 22, 2020, the Court of Appeal affirmed the dismissal. On December 18, 2020, the Court of Appeal issued a remittitur.

On January 27, 2021, Avalon filed a memorandum of costs and motion for attorneys’ fees. On February 26, 2021, Plaintiffs filed an opposition. On March 4, 2021, Avalon filed a reply.

Legal Standard

With respect to attorney fees and costs, unless they are specifically provided for by statute (e.g., CCP §§ 1032, et seq.), the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties.¿(CCP § 1021.) The prevailing party on a contract, which specifically provides for attorney fees and costs incurred to enforce the agreement, is entitled to reasonable attorney fees in addition to other costs.¿(Civ. Code § 1717(a); CCP §§ 1032, 1033.5(a)(10)(A).)¿The court, upon notice and motion by a party, shall determine the prevailing party and shall fix, as an element of the costs of suit, the reasonable attorney fees.¿(Civ. Code § 1717(a), (b).)¿Any notice of motion to claim attorney fees as an element of costs under shall be served and filed before or at the same time the memorandum of costs is served and filed; if only attorney fees are claimed as costs, the notice of motion shall be served and filed within the time specified in CRC 3.1700 for filing a memorandum of costs.¿(CRC 3.1702; Gunlock Corp. v. Walk on Water, Inc. (1993) 15 Cal.App.4th 1301, 1303, fn. 1.)

“It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court, whose decision cannot be reversed in the absence of an abuse of discretion. [Citation.]” (Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623 624.) The fee setting inquiry in California ordinarily “begins with the ‘lodestar’ [method], i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate.” (Graciano v. Robinson Ford Sales, Inc. (2006) 144 Cal.App.4th 140, 154.) “[A] computation of time spent on a case and the reasonable value of that time is fundamental to a determination of an appropriate attorneys’ fee award.” (Margolin v. Reg’l Planning Comm’n (1982) 134 Cal.App.3d 999, 1004.) The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. (See Serrano v. Priest (1977) 20 Cal.3d 25, 49 [discussing factors relevant to proper attorneys’ fees award].) Such an approach anchors the trial court’s analysis to an objective determination of the value of the attorney’s services, ensuring that the amount awarded is not arbitrary. (Id. at 48, fn. 23.) The factors considered in determining the modification of the lodestar include “(1) the novelty and difficulty of the questions involved, (2) the skill displayed in presenting them, (3) the extent to which the nature of the litigation precluded other employment by the attorneys, (4) the contingent nature of the fee award.” (Mountjoy v. Bank of Am. (2016) 245 Cal.App.4th 266, 271.)

In challenging attorney fees as excessive because too many hours of work are claimed, it is the burden of the challenging party to point to the specific items challenged, with a sufficient argument and citations to the evidence.¿(Premier Medical Management Systems, Inc. v. California Ins. Guaranty Assoc. (2008) 163 Cal.App.4th 550, 564.)¿General arguments that fees claimed are excessive, duplicative, or unrelated do not suffice. (Ibid.  

Objections

Plaintiffs’ objection to the Rostami Declaration is OVERRULED.

Avalon’s objection to the Wilson Declaration are OVERRULED.

Request for Judicial Notice

Plaintiffs’ request for judicial notice is GRANTED.

Fees Under the Unit Repurchase Agreement

Avalon moves for attorneys’ fees in the amount of $208,254.94. This requested fee amount reflects the total attorney hours spent multiplied by the market rates charged by counsel to the AIG Defendants. (Novian Decl., ¶¶ 8-19.) Avalon contends that it is entitled to fees because: 1) Avalon was sued on a contract containing an attorneys’ fee provision (the Unit Repurchase Agreement, the “URA”); 2) Avalon would have been subject to Plaintiffs’ demand for attorneys’ fees had they prevailed under the substantial benefit doctrine; and 3) ALI is a third party beneficiary to the URA, and thus would be subject to the attorneys’ fees provision.

As to Avalon’s first point, the Court would not find that Avalon was sued on the URA. “[T]o invoke [Civil Code] section 1717 and its reciprocity principles a party must show: (1) he or she was sued on a contract containing an attorney fee provision; (2) he or she prevailed on the contract claims and (3) the opponent would have been entitled to recover attorney fees had the opponent prevailed.” (Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 820 [citation omitted].) Civ. Code section 1717 states 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. ‘

(Emphasis Added.)

California courts construe the term “on a contract” liberally. (Turner v. Schultz (2009) 175 Cal.App.4th 974, 979–980.) As long as the action “involves” the contract, it is on the contract within the meaning of section 1717. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 894.) Where an attorney fee clause provides for an award of fees incurred in enforcing the contract, the prevailing party is entitled to fees for any action “on the contract,” whether incurred offensively or defensively. (Shadoan v. World Savings & Loan Assn. (1990) 219 Cal.App.3d 97, 107 [only pertains to the specific contract at issue].) An action for declaratory relief may be an action “on a contract” under this standard. (Turner, supra, 175 Cal.App.4th at 980.)

Here, the SAC does not bring any cause of action to enforce the cited contract, the URA. Avalon reasons that because two defendants signed the URA, an agreement related to Avalon’s ownership, and Avalon’s ownership is central to this lawsuit, the attorneys’ fees provision provided in the URA would apply to Plaintiffs through ALI. However, none of the relevant parties (Plaintiffs, Mazkat, or ALI) were parties to the URA. Only Avalon and ALIWD were parties to URA. (Rostami Decl., ¶ 2, Ex. A.) Plaintiffs (either in their derivate or individual capacities) did not seek to enforce or defend against the URA. The SAC does not mention the URA. Plaintiffs did not seek to hold Avalon liable for fees through the URA. The prayer alleges an entitlement to fees on all causes of action, pursuant to the Agreement (the Joint Venture agreements for the cold storage joint venture, which eventually became Avalon) and for the benefit of the partnership under the common fund doctrine. Avalon does not demonstrate that Avalon would have had to pay fees through those alleged joint venture agreements, instead relying solely on the URA.

Case law shows that the specific contract with the attorneys’ fees provision needs to be involved. For example, in Turner, the plaintiff sought declaratory and injunctive relief to avoid enforcement of an agreement's arbitration provision prior to any order compelling arbitration. The Court of Appeal concluded that the action was “on the contract” for purposes of an award of attorney fees. (Id.) In Berge, an unsuccessful creditor-plaintiff in repossession suit owed fees to defendant-consumer where the creditor based its claim on its rights under the sales contract, and where, had it prevailed, its recovery would have been based on the contract and would have included attorney fees. (Berge v. International Harvester Co. (1983) 142 Cal.App.3d 152, 164.) An award of attorney fees was required to effectuate the legislative intent underlying section 1717, which is to protect consumers against one-sided attorney fee clauses. (Id.) Avalon’s cited cases are in accord, as they involve actions on breaches of contracts directly containing an attorneys’ fees provision, and the plaintiffs sought fees against the defendants on those contracts. (See Turner, supra, 175 Cal.App.4th at 980; City and County of San Francisco v. Union Pacific R.R. Co. (1996) 50 Cal.App.4th 987, 1000 [“In its complaint, the City quoted the lease language and sought declaratory relief, alleging that a disagreement has arisen over whether the American Savings case is binding on the parties. The precedential effect of that earlier case was the moving force behind the lease, which contract language set forth the parties' understanding as to its effect on their instant dispute. To contend, as the City does, that its action for declaratory relief to determine the rights of the parties under that lease language is not “on the contract” is patently absurd.”]; Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 707 [“Exxess requested that the trial court determine the parties' rights and duties under the lease [that contained an attorneys’ fees clause]. Such a claim is “on a contract” for purposes of section 1717.”].)

Avalon notes that where non-signatory plaintiff sues a signatory defendant in an action on the contract, and the signatory defendant prevails, courts may award attorneys’ fees to the prevailing signatory defendant. (See Brusso v. Running Springs Country Club, Inc. (1991) 228 Cal.App.3d 92, 111; Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 382.) However, the non-signatory plaintiffs still needed to pursue the action on that contract. Avalon cites to Brusso, a derivative suit by minority shareholders in a corporation, which involved a breach of contract on a lease/purchase agreement that contained an attorneys’ fees clause. The analysis there does not support fees here. In discussing non-signatory plaintiffs’ liability on fees, Brusso elaborated on the equity principles underlying section 1717:

The remaining plaintiffs did not sign the contracts or the warranties. Nonetheless, they can still be held liable as nonsignatory plaintiffs for the payment of fees to signing defendants. (See Jones v. Drain (1983) 149 Cal.App.3d 484, 488–490, 196 Cal.Rptr. 827; Manier v. Anaheim Business Center Co. (1984) 161 Cal.App.3d 503, 508, 207 Cal.Rptr. 508.) In Jones, signatory defendants prevailed in a cause of action for breach of contract. The plaintiffs, not signatories to the contract argued that they should not be held liable for defendants' fees on the grounds that they were not parties to the contract and therefore they could not have recovered under the contract had they won. [Citations.] In holding the losing, non-signatory plaintiffs liable to defendants for attorney's fees under the contract, the court noted that had plaintiff prevailed, he would have been entitled to attorney's fees on the contract. [Citations.] The court then declared, “courts have consistently held that the award of Civil Code section 1717 contractual attorney's fees is to be governed by equitable principles. [Citations] We believe that it is extraordinarily inequitable to deny a party who successfully defends an action on a contract, which claims attorney's fees, the right to recover its attorney's fees and costs simply because the party initiating the case has filed a frivolous lawsuit.... [W]e find that a prevailing defendant sued for breach of contract containing an attorney's fees provision and having had to defend the contract cause of action is entitled to recover its own attorneys’ fees and costs therefor, even though the trial court finds no contract existed.” [Citations.] Defendants here were sued on contracts containing attorney's fees provisions and were forced to defend the contract causes of action. It would be “extraordinarily inequitable” to deny them attorney's fees because plaintiffs who are not signatories chose to sue on the contracts in an action on behalf of the corporation when the corporation would not bring suit itself.

(Brusso, supra, 228 Cal.App.3d at 110, emphasis added.)

Unlike Brusso, Avalon was not sued on the URA or forced to defend under the URA. Instead, it was sued under Plaintiffs’ alleged rights through separate agreements and tort theories. Simply because the URA is in the universe of documents involving Avalon’s divisions of interest does not mean that Plaintiffs sued on that contract, or that the attorneys’ fees provision would apply to ALI, Mazkat, or Plaintiffs.

Plaintiff contends that Avalon is not a party to the declaratory relief action, or any cause of action. Plaintiffs assert that Avalon is not even a defendant, despite them being listed as such on the SAC. The Court finds that Plaintiffs do assert causes of actions against Avalon. At the very least, the declaratory relief action certainly involved Avalon as party. The central dispute of that cause of action was the control of Avalon. The SAC alleges that a dispute arose between the parties as to AIG’s ownership interest in the cold storage business (i.e., Avalon). (SAC ¶ 100.) Plaintiffs, though Mazkat and ALI, asserted that AIG is only a 50% owner of Avalon. Plaintiffs may have omitted Avalon from the body and title of the cause of action (and every cause of action), but there is no doubt that the declaratory relief would have necessarily determined Avalon’s relative interests: whether ALI and AIG owned Avalon, or only AIG owned Avalon. Avalon would be a necessary and indispensable party to this dispute. If Avalon was not a defendant, then what is it? How did it demur? How did it win an appeal on a sustained demurrer? Plaintiffs did not oppose Avalon’s demurrer on the grounds that it was not a party to the cited causes. Thus, the Court does not find this position persuasive. The Court would find that Avalon was a party to the declaratory relief action, based on the substantive allegations of the SAC. The issue is that the URA is not the basis of the declaratory relief action or for Plaintiffs’ requested fees.

If the declaratory relief action “involved” the URA in some material aspect, Avalon would still need to show that Plaintiff would have recovered fees pursuant to the URA. As Avalon observes, the declaratory relief action may have required the court to at least consider the URA as a part of the relative rights of the parties regarding the cold storage joint venture (Avalon). However, Avalon misses the mark with this point. The above case law requires that if Plaintiffs won, they would have been entitled to recover attorney fees. Avalon has not explained how Plaintiffs would have been entitled to recover fees through the URA. If Plaintiffs prevailed on the declaratory relief action, then the URA would have had to be deemed invalid, since ALI would keep its 50% interest in Avalon. Thus, Plaintiffs would not have been able to recover any fees from any party under the URA’s attorneys’ fees provision. For one, they did not seek fees under that provision or to enforce any rights under the URA, especially attorneys fees. Instead, alternative sources of fees are alleged. Therefore, if plaintiffs prevailed, Plaintiffs would not have been entitled to fees under the URA, but through some other means. Considering these facts, the Court is hard pressed to hold that Plaintiffs maintained an action against Avalon “on” the URA, or that Plaintiffs would have been entitled to collect those fees under the URA. (See Civ. Code § 1717.) Avalon notes that ALI was an intended third-party beneficiary. The Court rejects this argument, as discussed below. Avalon cites no other contractual basis for attorneys’ fees in their favor.

Avalon observes that contract claims relying on an alter ego theory are still claims on a contract, and a party who successfully prevails against such a claim may recover attorneys’ fees under Civil Code section 1717. (Brown Bark III, L.P., supra, 219 Cal.App.4th at 823.) Plaintiffs alleged that Rostami is liable as the alter ego of AIG and Avalon for disregarding and dominating Avalon’s corporate form and divesting ALI of its ownership of Avalon. (SAC ¶¶ 36-50.) This theory does not change the analysis. Plaintiffs did not bring any alter ego claims against Avalon on the URA. Further, Avalon has the analysis backwards. The alter ego theory would have allowed Plaintiffs to (potentially) pierce the corporate veil and collect from Rostami directly. Even under a successful alter ego theory, Avalon would not have owed fees that Rostami allegedly owed, absent some direct basis for fees with Avalon. If such a basis existed, any fees that would be good as to Avalon would be good as to Rostami, but not vice-versa. Avalon’s suggestion that it would owe fees because Rostami would owe fees would be reverse veil piercing, which has been rejected by California courts. (See Wise v. DLA Piper LLP (US) Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1518-1524.)

Avalon parrots the equitable principles above in support of their request. However, the critical principle at play is that when plaintiffs instigate a suit on a contract with an attorneys’ fees provision, and would be entitled to fees based on their theory of the contract, then unsuccessful plaintiffs should equitably be required to pay defendants’ fees. While the Court is concerned that Plaintiffs did demand attorneys’ fees “against all defendants” which would naturally include Avalon, Avalon has the burden to show that attorneys’ fees are proper here. As a part of this, Avalon needs to show that Plaintiffs (in their individual or derivative capacities) would have been able to recover fees from Avalon. Avalon has not done so. Plaintiffs here would not have been entitled to attorney's fees by operation of the URA. Thus, the Court is not inclined to invoke the equitable principles of section 1717 here.

Substantial Benefit Doctrine

Avalon’s second presented basis, the alleged substantial benefit doctrine, is also unsupported. First, Plaintiffs assert that since they did not have standing to bring suit, the substantial benefit doctrine does not apply. As noted by above case law, even where the contract failed, the prevailing defendants could still enforce the provision, since if the plaintiffs had prevailed, they would have gotten fees through the contract at issue. The substantial benefit doctrine is therefore relevant to show whether Plaintiffs would have been entitled to fees from Avalon if Plaintiffs prevailed. Thus, the Court must assume that Plaintiffs had standing for this analysis.

This doctrine¿permits the court to award attorney’s fees to a party which confers a substantial benefit on an ascertainable third party, e.g., a corporation in a derivative suit. (Serrano v. Unruh (1982) 32 Cal. 3d 621, 629-630.) The doctrine is based upon the principle of preventing unjust enrichment, i.e., those that obtain a benefit from litigation should share the burden of paying for the litigation. (Id.) The beneficiaries could even be the defendants in the case. (Id.) The doctrine arose from corporate litigation, in which shareholder derivative actions were deemed to have conferred a benefit on the corporations against which they were directed. (Id.) The substantial-benefit doctrine serves important considerations of public policy because it encourages stock stockholders to exercise their right to seek redress for corporate mismanagement. (Id.)

The common fund doctrine applies only to pecuniary benefits; the substantial benefit doctrine applies to both pecuniary and nonpecuniary benefits. (Smith v. Szeyller substantial benefit’ theory in a wide variety of circumstances’ when the benefit is nonpecuniary.” (Id.)

Brusso also noted this as a basis for fees in that case, contrasting other caselaw with Jones:

Leach v. Home Savings & Loan Assn. (1986) 185 Cal.App.3d 1295, 230 Cal.Rptr. 553, disapproved of the holding in Jones and offers an alternative basis for charging nonsignatory plaintiffs for defendants' fees. There, prevailing defendants, signatories on two promissory notes, sought attorney's fees from a nonsignatory plaintiff. The court refused to direct the plaintiff to pay the fees, not because she was not a party to the contract, but because under the California rule, “one may only recover attorney's fees pursuant to section 1717 if one ‘would have been liable’ for such fees had the opposing party prevailed.” [Citations.] In Leach, plaintiff did not fit into that rule as she would not have been entitled to attorney's fees by operation of the contract had she prevailed. [Citations.] Here, however, the nonsignatory plaintiffs would have had a right to receive fees under the substantial benefit doctrine had they prevailed. [Citations.] That is, had defendants lost, they would have been liable to plaintiffs for damages and fees under the contract, thereby creating a benefit to the corporation in the form of a common fund from which all plaintiffs could have recovered their fees. Therefore, under [above noted case law], the trial court correctly awarded fees to the signatory defendants from the nonsignatory plaintiffs under the mutuality theory of Civil Code section 1717, doing so on the grounds that, had plaintiffs prevailed, they would have been entitled to attorney's fees pursuant to the substantial benefit doctrine.

(Brusso, supra, 228 Cal.App.3d at 111.) Thus, where a corporate defendant can show that the plaintiff bringing a derivative shareholder action would have obtained a substantial benefit to the corporation had it prevailed, the corporate defendant (and individuals sued in their capacity as officers, etc.) may use the mutuality principles of Civil Code section 1717 to obtain attorneys’ fees as the prevailing party.

Indeed, Plaintiffs do allege an entitlement to fees on such a basis as to all defendants. (Prayer, ¶ 2.) However, this does not mean the allegation is legally correct, or that the substantial benefit doctrine allows the Court to grant Avalon’s fees. Under the substantial benefit doctrine, the beneficiary of the action (here, ALI, or perhaps Mazkat) would owe the fees to the plaintiff. Conversely, an unsuccessful derivative plaintiff would owe fees to their corporation, here ALI. Thus, ALI would have owed the fees to Plaintiffs if Plaintiffs prevailed. ALI is not Avalon, despite them being co-defendants. Avalon therefore needs to show how it would have owed those same fees to ALI (or Plaintiffs directly) if Plaintiffs prevailed under the substantial benefit doctrine. The Court does not find that Avalon has demonstrated as such.

Third Party Beneficiary

Avalon argues that ALI is a third-party beneficiary under the URA, and therefore the URA’s attorneys’ fees provision applies to it. As ALI is the real party in interest, the derivative plaintiffs would therefore be on the hook for fees.

In Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, the Supreme Court set forth a three-part test to determine whether a non-contracting party is a third-party beneficiary of a contract between others.

[A] review of this court’s third party beneficiary decisions reveals that our court has carefully examined the express provisions of the contract at issue, as well as all of the relevant circumstances under which the contract was agreed to, in order to determine not only (1) whether the third party would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party to bring its own breach of contract action against a contracting party is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third-party action to go forward.

(Id. at 829–830, fn. omitted.)

“The test for determining whether a contract was made for the benefit of a third person is whether an intent to benefit a third person appears from the terms of the contract.” (Prouty v. Gores Technology Group (2004) 121 Cal.App.4th 1225, 1232 [internal quotation marks and citations omitted].) “Whether a third party is an intended beneficiary or merely an incidental beneficiary involves construction of the intention of the parties, gathered from reading the contract as a whole in light of the circumstances under which it was entered.” (Id. at 1233 [internal quotation marks and citations omitted].) A contract need not name the intended beneficiary for the third-party doctrine to apply. (Kaiser Eng’rs, Inc. v. Grinnell Fire Prot. Sys. Co. (1985) 173 Cal.App.3d 1050, 1055.) Where a third-party beneficiary to a contract containing an attorneys’ fee provision would be entitled to attorneys’ fees as a prevailing party on an action based on the contract, Civil Code section 1717 makes that right reciprocal. (See Real Property Services, supra, 25 Cal.App.4th at 383.)

Avalon argues, without evidence, that the URA, along with unsubstantiated capital infusions by AIG, were executed solely to keep the Cold Storage Venture afloat, i.e. Avalon and ALI and AIG’s investment in Avalon. There is no evidence that this was a motivating purpose of the contracting parties (ALIDW and Avalon). The only evidence presented as to this issue is the URA itself. (Rostami Decl., Ex. A.) Avalon points to no language in the URA that suggests this was the case. While ALI purportedly gained this benefit from the agreement (and Plaintiffs obviously disagree, considering that URA apparently helped defendants drain ALI of its assets), any benefit conferred to ALI appears to be an incidental benefit. Importantly, would Avalon be able to sue ALI (or Mazkat, or Plaintiffs directly) under the URA? Would ALI be able to sue Avalon or ALIDW for a breach of the URA? If so, would this be consistent with the objectives of the contract and the reasonable expectations of the contracting parties? Avalon gives no argument or evidence that this would be the case. Avalon merely asserts that the URA is signed by ALI’s principal, Mahdavi. However, Mahdavi signed explicitly as manager of ALIWD, not ALI. The fact that Mahdavi is a principal of ALI, but did not sign in such a capacity, does not weigh heavily in favor of finding ALI is an intended third-party beneficiary. Without any evidence showing that ALI is an intended third-party beneficiary, Avalon’s motion fails on this point.

Conclusion

Equitably, the Court would find it unfair that two defendants can sign an agreement with an attorneys’ fees provision amongst themselves, without Plaintiffs’ knowledge or participation, and use that as a basis for fees against Plaintiffs when Plaintiffs brought a suit on related issues and obligations, but not based on that contract. Essentially, Defendant Avalon reasons that since its own independent, contractual relationship with Defendant ALIDW (the URA) provided for attorneys’ fees, and that Plaintiffs generically allege that they are owed fees under some contract and might have recovered fees against someone, Plaintiffs should pay for Avalon’s fees per the URA. This is not in line with the reciprocity principles discussed infra. Courts used section 1717’s equitable principles to impose fees on unsuccessful plaintiffs only when those plaintiffs sought to enforce rights under a contract with a fee provision and sought such fees pursuant to that provision. Here, Plaintiffs may have sought attorneys’ fees against Avalon under “written agreements” or the substantial benefit doctrine. However, Plaintiffs did not seek to enforce the fees provision of the URA. Avalon has not shown that, if Plaintiffs prevailed, they would have obtained fees from Avalon through the URA or substantial benefit doctrine. Therefore, there is no section 1717 reciprocity as to the URA.

Accordingly, Avalon’s motion is DENIED. Moving party is ordered to give notice.

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