WENBIN WEI, ET AL. VS SLS TRANCHE 1 LENDER, LLC

Tentative Rulings

Case Number: *******7446    Hearing Date: January 29, 2021    Dept: 30

Dept. 30

Calendar No.

Wei, et. al. vs. SLS Tranche 1 Lender, LLC, et. al., Case No. *******7446

Tentative Ruling re: Defendant’s Motion for Attorney’s Fees

Defendant SLS Tranche 1 Lender, LLC (Defendant) moves for attorney fees in the amount of $71,541.50. The motion is granted in part.

“[A]s a general rule, attorney fees are not recoverable as costs unless they are authorized by statute or agreement.” (People ex rel. Dept. of Corporations v. Speedee Oil Change Systems, Inc. (2007) 147 Cal.App.4th 424, 429.)

California Civil Code ; 1717(a) states:

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.

“The usual rules of contract interpretation apply to attorney’s fee clauses.” (Royster Construction Co. v. Urban West Communities (1995) 40 Cal.App.4th 1158, 1170.)

The attorney bears the burden of proof as to “reasonableness” of any fee claim. (Code Civ. Proc., ; 1033.5(c)(5).) This burden requires competent evidence as to the nature and value of the services rendered. (Martino v. Denevi (1986) 182 Cal.App.3d 553, 559.) “Testimony of an attorney as to the number of hours worked on a particular case is sufficient evidence to support an award of attorney fees, even in the absence of detailed time records.” (Ibid.)

An attorney’s verified billing invoices are prima facie evidence that the costs, expenses, and services listed were necessarily incurred. (See Hadley v. Krepel (1985) 167 Cal.App.3d 677, 682.) “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. General arguments that fees claimed are excessive, duplicative, or unrelated to not suffice.” (Lunada Biomedical v. Nunez (2014) 230 Cal.App.4th 459, 488, quoting Premier Med. Mgmt. Sys., Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564.)

In determining whether the requested attorney’s fees are “reasonable,” the Court’s

first step involves the lodestar figure—a calculation based on the number of hours reasonably expended multiplied by the lawyer’s hourly rate. The lodestar figure may then be adjusted, based on consideration of facts specific to the case, in order to fix the fee at the fair market value for the legal services provided.

(Gorman v. Tassajara Development Corp. (2008) 162 Cal.App.4th 770, 774 [internal citations omitted].) In determining whether to adjust the lodestar figure, the Court may consider the nature and difficulty of the litigation, the amount of money involved, the skill required and employed to handle the case, the attention given, the success or failure, and other circumstances in the case. (EnPalm LLC v. Teitler (2008) 162 Cal.App.4th 770, 774; PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.)

“‘The reasonable market value of the attorney’s services is the measure of a reasonable hourly rate. [Citations.] This standard applies regardless of whether the attorneys claiming fees charge nothing for their services, charge at below-market or discounted rates, represent the client on a straight contingent fee basis, or are in-house counsel. [Citations.]’”

(Center For Biological Diversity v. County of San Bernardino (2010) 188 Cal.App.4th 603, 619.)

As an initial matter, Plaintiff spends much of the opposition asking the Court to invalidate the contract and the arbitration agreement. The Court previously considered Plaintiff’s arguments and evidence and did not agree with Plaintiff. Plaintiff has not complied with the requirements of Code of Civil Procedure section 1008 because no request was made within 10 days of the order and because Plaintiff’s request for reconsideration is not based upon new or different facts, circumstances, or law. (Code Civ. Proc., ; 1008, subd. (a).)

Defendant argues that it is the prevailing party under Code of Civil Procedure Sections 1032 and 1033.5.

Plaintiff voluntarily dismissed this action on October 20, 2020. Ordinarily, “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of [section 1717].” Marina Glencoe, L.P. v. Neue Sentimental Film AG (2008) 168 Cal.App.4th 874, 877.)

In cases where there has been a voluntary dismissal, “ ‘prevailing party’ has no settled technical meaning....” (Coltrain v. Shewalter (1998) 66 Cal.App.4th 94, 101 (Coltrain).) Thus, “the trial court must determine who is the prevailing party” by “analyz[ing] which party had prevailed on a practical level.” (Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574.)

Our Supreme Court explained that when a party succeeds in obtaining its litigation objective, they are the prevailing party for the purposes of recovering attorney fees. (Santisas v. Goodin (1998) 17 Cal.4th 599, 609 (Santisas)). A defendant can be the prevailing party “on the tort claims under the contractual attorney’s fee provision and under Code of Civil Procedure sections 1032 and 1033.5, subdivision (a)(10).” (Coltrain, supra, 66 Cal.App.4th at p. 103.)

Defendant obtained its litigation objective since the entire action was dismissed on October 20, 2020. “A defendant in whose favor a dismissal is entered” is a prevailing party pursuant to Code Civ. Proc., ; 1032, subd. (a)(4).

Here, section 10.9 of the Operating Agreement provides that the “prevailing party . . . in any enforcement or other court proceedings, shall be entitled to reimbursement from the other party for all of the prevailing party’s costs . . ., expenses, and attorneys’ fees.” (Huang Decl., Ex. 1 at p. 38.) Accordingly, Defendant may recover its reasonable fees.

Defendant’s counsel testifies to their rates and to their reasonableness.

The breakdown is as follows:

(Ybarra Decl., ¶¶ 4, 5, Exs. A-B.)

Defendant’s counsel also consulted Mr. Kingston, who served as outside general counsel and who charges an hourly rate of $350. (Kingston Decl., ¶ 2, 6, Ex. E.)

The Court finds these hourly rates to be reasonable.

Plaintiff argues that billing for multiple different attorneys and paralegals is unreasonable. The Court disagrees. California courts have recognized that multiple counsel is permissible when the demands of the case warrant more than one attorney. In such cases, some duplication of work is both expected and compensable. (Margolin v. Regional Planning Comm’n (1982) 134 Cal.App.3d 999, 1006-1007.)

In opposition, Plaintiff’s general and conclusory assertion that the fees incurred are excessive is insufficient to overcome the prima facie evidence of counsel’s billing invoices. Plaintiff provides no authority or evidence to support his contention that the attorney fees incurred by Defendant are unreasonable or excessive. (See Premier Medical Management Systems, Inc. v. California Insurance Guarantee Association (2008) 163 Cal.App.4th 550, 560 [emphasizing that opposing parties “submitted no evidence that the hours claimed by counsel were excessive,” and declining to “declare as a matter of law that the hours were unreasonable”]; Villanueva v. City of Colton (2008) 160 Cal.App.4th 1188, 1204 [opposing party “offered no evidence of any kind which might have warranted a reduced fee award.”].)

The only specific entry that Plaintiff contests is an entry for January 21, 2020, regarding counsel filing the CMC statement. (Luan Decl., ¶ 5.) Plaintiff’s counsel does not present evidence rebutting the Defendant’s prima facie evidence. This billing entry does not appear to be unreasonable.

However, the Court does find the total hours worked in connection with instant motion excessive. It appears to the Court that Defendant’s counsel billed more than 80 hours for the opening brief and reply brief on this fee motion at a total cost of over $30,000.00. The Court will reduce the fees awarded for this motion by $15,000.00.

Finally, Plaintiff argues that the Court should not grant the motion and should dramatically reduce the award because Plaintiff cannot pay. (Wei Decl., ¶ 30.) However, “a losing party’s financial condition should not be considered in setting the amount of such an award.” (Walker v. Ticor Title Co. of California. (2012) 204 Cal.App.4th 363, 373.) Furthermore, Plaintiff offers no details on his income or assets and instead relies on his self-serving statement that he cannot pay.

The Court grants the motion in the reduced amount of $56,541.50.

Defendant filed a memorandum of costs on 11/03/2020 seeking $1,120.26 in total costs. Plaintiff objects to these costs, arguing that the costs for electronic filing are unreasonable. However, Defendant filed a memorandum of costs which is prima facie evidence of their reasonableness. Plaintiff did not file any motion to tax costs. (Cal. Rules of Court, rule 3.1700(b).) Nor has Plaintiff produced evidence showing that these fees, which are expressly allowed by statute, are unreasonable. (See Code Civ. Proc., ; 1033.5(a)(14).)

Costs are awarded in the amount of $1,120.26.

Case Number: *******7446    Hearing Date: September 11, 2020    Dept: 30

Dept. 30

Calendar No.

Wei, et al. vs SLS Tranche 1 Lender, LLC, et. al., Case No. *******7446

Tentative Ruling re: Defendant’s Motion to Compel Arbitration

Defendant SLS Tranche 1 Lender, LLC (Defendant) moves to submit the issue of arbitrability to the arbitrator, or in the alternative, compel arbitration of Plaintiff’s claims. The Court finds that the question of arbitrability is properly reserved for the arbitrator. The Court orders these proceedings stayed.

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the plaintiff and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: (a) The right to compel arbitration has been waived by the plaintiff; or (b) Grounds exist for the revocation of the agreement.” (Code Civ. Proc. ;1281.2, subds. (a), (b).)

A proceeding to compel arbitration is in essence a suit in equity to compel specific performance of a contract. (Freeman v. State Farm Mutual Auto Insurance Co. (1975) 14 Cal.3d 473, 479.) Such enforcement may be sought by a party to the arbitration agreement. (Code Civ. Proc., ; 1280, subd. (e)(1).)

The petition to compel arbitration functions as a motion and is to be heard in the manner of a motion, i.e., the facts are to be proven by affidavit or declaration and documentary evidence with oral testimony taken only in the court’s discretion. (Code Civ. Proc., ;1290.2; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413–414.) The petition to compel must set forth the provisions of the written agreement and the arbitration clause verbatim, or such provisions must be attached and incorporated by reference. (Cal. Rules of Court, rule 3.1330; see Condee v. Longwood Mgmt. Corp. (2001) 88 Cal.App.4th 215, 218 (Condee).)

Once petitioners allege that an arbitration agreement exists, the burden shifts to respondents to prove the falsity of the purported agreement, and no evidence or authentication is required to find the arbitration agreement exists. (See Condee, supra, 88 Cal.App.4th at p. 219.)

Plaintiff does not dispute that the arbitration agreement exists. Rather, he argues that he was not presented with the Operating Agreement and that the Operating Agreement is unenforceable. Thus, because there was no meeting of the minds, the agreement is void and rescinded. The Court disagrees.

Plaintiff’s authorized agent, Caiyun She (Caiyun) signed the Amended and Restated Operating Agreement (the Operating Agreement) on behalf of Plaintiff, which contains a broad arbitration provision requiring arbitration with JAMS of: “Any controversy, dispute, or claim between the parties to this Agreement arising out of, in connection with, or in relation to the formation, negotiation, interpretation, performance or breach of this Agreement.” (Huang Decl., Exh. 1 at ; 10.9.)

Plaintiff executed a power of attorney granting Caiyun the power to sign and execute all documents on behalf of Plaintiff in Caiyun’s sole discretion. (See Huang Decl., ¶ 4, Exh. 2.) The discretion provision is broad and gives Caiyun the power to make all decisions without the need to seek out Plaintiff’s prior approval. Because of this, it is irrelevant whether Plaintiff was provided with the Operating Agreement, because it was Caiyun who reviewed and signed the documents on Plaintiff’s behalf. Plaintiff does not present any evidence of what Caiyun reviewed.

Regardless, the signature page clearly incorporates the arbitration provision by reference and explicitly points to section 10.9 of the Operating Agreement. Plaintiff admits that he was presented with this page. (Wei Decl., ¶ 7.) Parties who sign contracts are presumed to have read and understood them. “Reasonable diligence requires the reading of a contract before signing it. A party cannot use his own lack of diligence to avoid an arbitration agreement.” (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, 1674.) Both Plaintiff and Caiyun, as the authorized agent who signed on behalf of Plaintiff, are presumed to have read and understood the Operating Agreement.

The Court will typically decide threshold issues of enforceability of the arbitration agreement and the scope of threshold issues. (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 891.) An exception to this general rule applies when the parties unmistakably and clearly delegate threshold issues of arbitrarily to the arbitrator. (Pinela v. Neiman Marcus Group, Inc. (2015) 238 Cal.App.4th 227, 239–240.)

“When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue.” (Henry Schein, Inc. v. Archer & White Sales, Inc. (2019) 139 S.Ct. 524, 528–529 (Schein). The Supreme Court in Schein held that “a court may not ‘rule on the potential merits of the underlying’ claim that is assigned by contract to an arbitrator, ‘even if it appears to the court to be frivolous.’ [Citations.]” (Id. at p. 529.) In Schein, the arbitration provision expressly provided that the arbitration would be conducted pursuant to the rules of AAA. (Id. at p. 528) The AAA rules delegated all questions of arbitrability to the arbitrator. (Ibid.) Thus, the parties had unmistakably delegated the questions of arbitrability to the arbitrator. (Ibid.)

Moreover, California courts have held that where, as here, “parties explicitly incorporate rules that empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator.” (Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1442 (Greenspan).) In Greenspan, the arbitration provisions incorporated the rules of JAMS, which delegate questions of arbitrability to the arbitrator. (Id. at pp. 1442–1443.)

The arbitration provision in the Operating Agreement here expressly incorporates JAMS Comprehensive Arbitration Rules, which provide that “[j]urisdictional and arbitrability disputes, including disputes over the formation, existence, validity, interpretation or scope of the agreement under which Arbitration is sought . . . shall be submitted to and ruled on by the Arbitrator.” (Ybarra Decl., Exh. A.)

Plaintiff argues that the Operating Agreement as a whole should be void because

there is a risk of inconsistent rulings and because the Operating Agreement is unconscionable.

However, where an arbitrator might later decide that the arbitration clause is unconscionable, “courts have separately enforced an enforceable delegation clause” and held that “whether the arbitration agreement as a whole is ultimately held to be unenforceable will have no bearing on the enforcement of the delegation clause itself.” (Malone v. Superior Court (2014) 226 Cal.App.4th 1551, 1559 (Malone).) The Malone court further held:

For this reason, when a party is claiming that an arbitration agreement is unenforceable, it is important to determine whether the party is making a specific challenge to the enforceability of the delegation clause or is simply arguing that the agreement as a whole is unenforceable. If the party’s challenge is directed to the agreement as a whole--even if it applies equally to the delegation clause--the delegation clause is severed out and enforced; thus, the arbitrator, not the court, will determine whether the agreement is enforceable. In contrast, if the party is making a specific challenge to the delegation clause, the court must determine whether the delegation clause itself may be enforced (and can only delegate the general issue of enforceability to the arbitrator if it first determines the delegation clause is enforceable).

(Id. at pp. 1559–1560.)

Here, the Court has found that the parties have unmistakably delegated questions of arbitrability to the arbitrator. Plaintiff’s opposition does not address this point or argue that the delegation clause itself is unenforceable or unconscionable. Therefore, the arbitrator must decide the issue of unconscionability.