Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_94-cv-05414/USCOURTS-caed-1_94-cv-05414-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1332 Diversity-Property Damage

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

NATIONAL UNION FIRE )

INSURANCE COMPANY OF )

PITTSBURGH, PA, )

)

)

)

Plaintiff, )

)

vs. )

)

)

CHESTER GARBER, et al., )

)

)

Defendant. )

)

)

No. CV-F-94-5414 REC

ORDER GRANTING IN PART AND

DENYING IN PART PLAINTIFF'S

UPDATED MOTION FOR

ATTORNEYS' FEES (Doc. 312)

On March 10, 2003, the court heard plaintiff's Updated

Motion for Attorneys' Fees. By Order filed on June 17, 2003, 

the court ordered National Union to respond to the merits the

Garbers’ contention that California Code of Civil Procedure §§

685.070 and 685.090 preclude an award of attorneys’ fees incurred

in this action seeking to enforce the judgment against the

Garbers in No. CV-F-88-088 REC and to provide the court with an

explanation of a gap in the billings between February 26, 1999

and July 13, 1999. 

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Upon due consideration of the written and oral arguments of

the parties and the record herein, the court grants this motion

in part and denies it in part as set forth herein.

National Union Fire Insurance Company of Pittsburgh, PA has

filed an Updated Motion for Attorneys’ Fees, seeking an award of

attorneys’ fees against Chester Garber and his wife, Emilia Ting

Garber (hereinafter referred to as the Garbers), and against

Betty Ting. 

The attorneys’ fees sought by this motion are categorized in

one of the following four matters: (1) the Fraudulent Conveyance

Action; (2) the Garbers’ Bankruptcy; (3) Betty Ting’s bankruptcy;

and (4) appeals. National Union submits the following chart

outlining the attorneys’ fees incurred by each firm with respect

to each matter through May 31, 2000:

Law Firm Fraud Convy

Action

Garber

Bkrtcy

Ting Bkrtcy Appeals Totals

McCormick $113,894.50 $38,943.50 $61,089.50 $32,828.50 $246,756.00

D’Amato $30,468.00 $21,198.00 $4,48.75 $6,612.50 $62,767.25

Wilson $5,119.75 $329.25 $5,449.00

Ericksen $312.50 $1,187.50 $2,200.00

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The Garbers have filed a motion for Rule 11 sanctions against 1

National Union to the extent that the Update Motion seeks an award

of fees attributable to these appellate fees. The Garbers’ Rule 11

motion will be resolved in a separate order.

3

Totals $149,794.75 $62,358.25 $65,578.25 $39,441.00 $317,172.25

These amounts were increased in a Supplemental Declaration by

Scott M. Reddie filed on August 28, 2000 setting forth attorneys

fees incurred by McCormick, Barstow from June 1, 2000 through

August 14, 2000 of an additional award of $28,085 attributed by

National Union to the Fraudulent Conveyance Action, an additional

$135 attributed to the Garber Bankruptcy, and an additional

$1,260 attributed to the Ting Bankruptcy. In its Updated Motion,

National Union is seeking to be awarded the following additional

amounts as attorneys’ fees: $32,797 attributable to the

Fraudulent Conveyance Action; an additional $2,025 attributable

to the Garber Bankruptcy; an additional $13,631.50 attributable

to the Ting Bankruptcy; and an additional $53,165.50 attributable

to appellate fees. 

1

With these additional amounts, National Union is requesting

that the court award it attorneys’ fees in the amount of

$448,451.25 (Fraudulent Conveyance Action: $210,676.75; Garber

Bankruptcy: $64,698.25; Ting Bankruptcy: $80,469.75; Appellate

Fees: $92,606.50).

A. Background.

On December 28, 1984, the Garbers invested approximately

$50,000 in a limited partnership known as Hambrose Leasing, Ltd.

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by making a down payment of $6,200 and executing three promissory

notes to make annual payments of $14,600. National Union acted

as surety in the event the Garbers defaulted on the promissory

notes. The Garbers did default. National Union filed an action

for reimbursement that was eventually transferred to this court

and prosecuted as National Union v. Garber, No. CV-F-88-088 REC

(hereafter referred to as the Bond Case). On March 6, 1992, this

court entered summary judgment for National Union in the amount

of $51,031.40 in principal, $30,906.91 in interest accrued as of

November 15, 1991, and awarded attorneys’ fees in the amount of

$69,389.08. The court’s judgment and fee award were affirmed by

the Ninth Circuit on August 30, 1993. On January 11, 1994, the

Ninth Circuit awarded National Union’s attorneys’ fees on appeal

in the amount of $4,310.

In May, 1993, National Union conducted a debtor’s

examination of the Garbers. National Union learned for the first

time that the Garbers had either pledged or transferred all of

their assets, both business and personal, to Emilia Ting Garber’s

sister, Betty Ting, and that some of the Garbers’ assets were

encumbered by liens in favor of Betty Ting.

On April 29, 1994, National Union filed its Complaint to Set

Aside Fraudulent Conveyance, No. CV-F-94-5414 REC (hereinafter

referred to as the Fraudulent Conveyance Action) against the

Garbers and Betty Ting. 

On June 24, 1994, the Garbers, then proceeding in pro per,

filed a Counterclaim and Third Party Complaint for Damages in the

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Fraudulent Conveyance Action against National Union and others,

alleging causes of action for negligence, intentional infliction

of emotional distress, declaratory relief, civil conspiracy, and

violation of RICO. A motion to dismiss the Counterclaim and

Third Party Complaint was filed by a number of the parties,

including National Union. This motion to dismiss was set to be

heard on September 26, 1994 and had been fully briefed. However,

just prior to oral argument, the Garbers filed a bankruptcy

petition. Therefore, the court, by order filed on November 2,

1994, stayed all proceedings by National Union and stayed the

Garbers’ Counterclaim and Third Party Complaint pending decision

by the Chapter 7 Trustee concerning further proceedings with

respect to the Counterclaim and Third Party Complaint.

Following the filing by the Garbers of their bankruptcy

petition, National Union filed an adversary proceeding in the

Bankruptcy Court to determine the dischargability of National

Union’s claim and to deny the Garbers a discharge. The adversary

proceeding alleged that the Garbers had submitted false

information to National Union in order to obtain the financial

guarantee bond and that the Garbers had made fraudulent transfers

to Betty Ting of avoid National Union’s judgment against the

Garbers. The bankruptcy court ruled that the adversary

proceeding was a “core” proceeding. By stipulation approved by

the Bankruptcy Court on May 5, 1995, the parties stipulated that

the Garbers could prosecute their Counterclaim and Third Party

Complaint and to abate any prosecution of the Fraudulent

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Conveyance Action against Betty Ting pending prosecution of the

Counterclaim and Third Party Complaint. 

This court thereupon heard the motions to dismiss the

Garbers’ Counterclaim and Third Party Complaint in the Fraudulent

Conveyance Action on June 12, 1995. At the hearing, the Garbers

filed a “special appearance” in which they challenged this

court’s ability to proceed with the motions to dismiss,

contending that no relief from the automatic stay had been

requested or obtained and that, therefore, this court could not

proceed notwithstanding the stipulation. This court rejected 

this argument in its Order re Motions to Dismiss Counterclaim and

Third Party Complaint filed on September 12, 1995. At oral

argument on June 12, 1995, the Garbers asserted for the first

time that National Union’s Complaint in the Fraudulent Conveyance

Action is a “core” proceeding, that the Garbers’ Counterclaim and

Third Party Complaint are “related” proceedings, and that,

therefore, the Fraudulent Conveyance Action should be heard by

the Bankruptcy Court. While National Union conceded that its

Complaint in the Fraudulent Conveyance Action is a “core”

proceeding and that the Garbers’ Third Party Complaint is a

“related” proceeding, because National Union’s action against

Betty Ting was not, National Union argued that the court should

not transfer the Fraudulent Conveyance Action to the Bankruptcy

Court. In the September 12, 1995 Order, the court withdrew the

reference of the adversary proceeding filed by National Union in

the Bankruptcy Court to this court. The court then ruled on the

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merits of the motions to dismiss the Garbers’ Counterclaim and

Third Party Complaint. The court rejected the Garbers’ meritless

challenges to this court’s subject matter jurisdiction over

National Union’s Complaint and dismissed the Third Party

Complaint against D’Amato & Lynch for lack of personal

jurisdiction and improper service of process (which motion was

unopposed by the Garbers). The court further ruled that, with

the exception of the counterclaim for declaratory relief, all of

the counterclaims were compulsory and barred by res judicata

because of the allegations and rulings in the Bond Case, which

was conceded by the Garbers. However, the Garbers attempted to

overcome this concession by arguing that they did not know all

the facts during the Bond Case. The court rejected this

argument, noting that there was no allegation that National Union

fraudulently concealed these alleged facts and further noting the

absence of any authority that a party’s alleged ignorance of

certain facts has any relevance to a determination whether a

counterclaim should be considered compulsory for purposes of Rule

13(a). The court also dismissed the Third Party Complaint in the

September 12, 1995 Order, ruling that the Garbers, by their

failure to oppose the motion, had conceded its dismissal and

further ruling that the Third Party Complaint failed

substantively as well. In the September 12, 1995 Order, the

court did not dismiss the Garbers’ counterclaim for declaratory

relief against National Union because the limited basis for that

portion of the motion was not applicable. However, by Order

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filed on November 13, 1995, the court granted National Union’s

motion to dismiss the counterclaim for declaratory relief by

which the Garbers prayed for a declaration that the judgment in

the Bond Case was obtained by fraud. In the November 13, 1995

Order, the court ruled that the allegations in the Garbers’

counterclaim for declaratory relief pertained to the bringing of

the Fraudulent Conveyance Action, not the Bond Case, challenged

the merits adjudicated in the Bond Case, or involved allegations

of fraud in other unrelated cases. This court also ruled that

the counterclaim for declaratory relief involved an allegation

concerning the failure to provide in discovery in the Bond Case

the original investor application, which the Garbers admitted at

oral argument had not been the subject of a motion to compel in

the Bond Case, admitted that their suspicion that the investor

application had been altered was not brought to the court’s

attention in the Bond Case even though the Garbers had this

information prior to summary judgment in the Bond Case, and

admitted that the introduction of the original investor

application in the Bond Case would not have resulted in a

different conclusion in the Bond Case. The court’s dismissal of

the Garbers’ Counterclaim and Third Party Complaint in the

Fraudulent Conveyance Action was affirmed on appeal. National

Union v. Garber, 1998 WL 30810 (9 Cir. 1998). th

On June 18, 1996, the Bankruptcy Court granted relief from

the automatic stay in the Garbers’ bankruptcy. The Garbers

appealed the Bankruptcy Court’s order to this court in In re

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Garber, No. CV-F-96-5858 REC, and then to the Ninth Circuit,

where this court’s ruling was affirmed. In re Garber., 2000 WL

674749 (9 Cir. 2000). th

Even though the Garbers appealed this court’s ruling

affirming the Bankruptcy Court’s relief from the automatic stay,

the Garbers failed to seek a stay of the Fraudulent Conveyance

Action pending appeal. National Union filed a Motion for Summary

Judgment in the Fraudulent Conveyance Action. By Order filed on

September 24, 1998 (hereinafter referred to as the September 24

Order), the court granted summary judgment for National Union,

ruling that the Garbers’ execution of five demand notes secured

by deeds of trust on five parcels of real property in favor of

Betty Ting on March 27, 1991 were fraudulent transfers within the

meaning of California Civil Code §§ 3439.04(b) and 3439.05. The

court also ruled that the Garbers’ assignments of the stock of

Golden Valley Aero, Inc. and Emilia Ting, M.D., Inc. to Betty

Ting on January 10, 1988 were fraudulent transfers within the

meaning of Sections 3439.04(b) and 3439.05. The court further

ruled in the September 24 Order in pertinent part:

2. Avoidance to Transfers and Money

Judgment.

California Civil Code § 3439.07(a)(1)

provides that a creditor, subject to the

limitations of Section 3439.08, may obtain

‘[a]voidance of the transfer or obligation to

the extent necessary to satisfy the

creditor’s claim.’ Section 3439.08 provides

in pertinent part as follows:

(b) Except as otherwise provided in

this section, to the extent a

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transfer is voidable in an action

by a creditor under paragraph (1)

of subdivision (a) of Section

3439.07, the creditor may recover

judgment for the value of the asset

transferred, as adjusted under

subdivision (c), or the amount

necessary to satisfy the creditor’s

claim, whichever is less. The

judgment may be entered against the

following:

(1) The first transferee of the

asset or the person for whose

benefit the transfer was made.

...

(c) If the judgment under

subdivision (b) is based upon the

value of the asset transferred, the

judgment shall be for an amount

equal of the value of the asset at

the time of the transfer, subject

to adjustment as the equities may

require.

National Union seeks avoidance of the

transfers of the stock of Golden Valley Aero,

Inc. and Emilia Ting, M.D., Inc. to Betty and

of the issuance to Betty of the deeds of

trust on the five parcels of real property. 

Additionally, National Union seeks a money

judgment as compensatory damages against the

Garbers and from Betty for the amount that is

owed to National Union pursuant to its

judgment in the Bond Case plus interest and

attorneys’ fees in this action. National

Union seeks these compensatory damages

pursuant to a conspiracy theory. National

Union argues that Betty was the first

transferee and that the transfers were made

for the benefit of the Garbers because the

transfers allowed the assets to be kept in

the family as [sic] the expense of ‘noninsider creditors’. National Union contends

that all defendants participated in this

fraudulent scheme and, therefore, equities

mandate that a money judgment be entered

against Betty as well as the Garbers.

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The court agrees. Betty’s assertion that

National Union is not entitled to a money

judgment against her is not supported by the

case upon which she relies, Ackerman v.

Merle, 137 Cal. 168, 171 (1902). 

Furthermore, the statute supports National

Union’s position.

ACCORDINGLY, IT IS ORDERED that National

Union Fire Insurance Company of Pittsburgh,

Pa’s Motion for Summary Judgment is granted.

IT IS FURTHER ORDERED that the parties appear

before the Magistrate Judge for further

proceedings in connection with proof of the

value of the assets subject to the voided

transfers at the time of the transfers in

order to determine the judgment to be entered

pursuant to California Civil Code § 3439.08. 

On March 25, 1999, the court heard National Union’s Motion

for Sanctions Against Betty Ting for Spoliation of Evidence. By

this motion, National Union sought an order entering a default

money judgment against Betty Ting as a sanction on the ground

that she had destroyed documents and evidence that was integral

for National Union to prove the amount of its damages in the

Fraudulent Conveyance Action. 

After National Union’s motion for sanctions against Betty

Ting for spoliation of evidence was filed and briefed, Betty

Ting, on May 3, 1999, filed a Chapter 13 bankruptcy petition in

the Northern District of California and filed a Notice of

Automatic Stay with this court. Additionally, several weeks

prior to the filing of the bankruptcy petition, Betty Ting filed

a homestead declaration with respect to the Pacific Grove

property. Ting filed three plans in the bankruptcy. After a

trial, the bankruptcy court denied plan confirmation and ordered

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Ting to dismiss the bankruptcy or convert it to a Chapter 7 on or

before April 14, 2000. Ting ultimately requested the Bankruptcy

Court to convert the bankruptcy to a Chapter 7 on June 23, 2000. 

In the meantime, the Bankruptcy Court lifted the automatic stay

on October 14, 1999. 

On June 7, 2000, the court issued its Order Granting

Plaintiff’s Motion for Sanctions Against Betty Ting for

Spoliation of Evidence and Directing Clerk of Court to Enter

Default Money Judgment Against Betty Ting (hereinafter referred

to as the June 7 Order). In the June 7 Order, the court ordered

that a default money judgment in the amount of $203,984.70 plus

$19.29 per day from February 1, 1999 be entered by the Clerk of

the Court against Betty Ting. A Default Money Judgment was

entered on June 8, 2000, whereby judgment was entered for

plaintiff and against defendant Betty Ting in the amount of

$203,984.70 plus $19.29 per day from February 1, 1999.

On June 19, 2000, National Union filed a Motion to Alter or

Amend Default Money Judgment Entered on June 8, 2000. In its

Order Granting in Part and Denying in Part Plaintiff’s Motion to

Alter or Amend Default Monetary Judgment Entered on June 8, 2000

and Deferring Resolution of Plaintiff’s Motion for Attorneys’

Fees filed on February 12, 2001, the court granted National

Union’s motion to alter or amend by amending the default money

judgment to include the specific descriptions and deeds of trust

for the five properties the transfers of which were voided by the

September 24 Order, by amending the judgment to award National

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Union $203,984.70 plus $19.29 per day from February 1, 1999

through June 8, 2000, with post-judgment interest to be

determined pursuant to 28 U.S.C. § 1961, and by rejecting the

arguments made by the Garbers and/or Betty Ting concerning right

to jury trial, that the Complaint alleged no privity of contract

between National Union and Betty Ting, that no duty was owed to

National Union by Betty Ting, that any bookkeeping she did was as

the agent and/or employee of the Garbers or their corporations,

that California law imposes no personal liability for such agency

and/or employment, that a civil conspiracy does not give rise to

a cause of action in California, that Betty Ting is entitled to

full procedural due process and a jury trial, that the court has

never heard any defendant testify as a witness and that the court

should reverse the September 24 Order and the June 7 Order, that

National Union did not give notice of its motion to alter or

amend the default money judgment to the trustees in either Betty

Ting’s or the Garbers’ bankruptcies, and that the bankruptcy

court’s order lifting the automatic stay in the Garbers’

bankruptcy did not include entering a judgment or enforcing a

judgment.

National Union also filed a Motion for Attorneys’ Fees. In

the February 12 Order, the court ruled that National Union was

entitled to attorneys’ fees incurred in the Fraudulent Conveyance

Action against the Garbers because the contract in the Bond Case

provided for attorneys’ fees and because of the application 

California Code of Civil Procedure § 685.040. The court further

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ruled in the February 12 Order that National Union was entitled

to attorneys’ fees from the Garbers and Betty Ting because of bad

faith, holding in pertinent part:

In asserting that it is entitled to

attorneys’ fees against the Garbers and Betty

Ting on this ground, National Union notes

that the court found that the Garbers and

Ting engaged in a conspiracy to defraud and

did defraud National Union in an effort to

prevent National Union from collecting its

judgment in the Bond Case.

However, as defendants note, the Ninth

Circuit in Association of Flight Attendants

v. Horizon Air rejected the contention that

an order shifting attorneys’ fees can be

based solely upon a finding of bad faith as

an element of the cause of action presented

in the underlying suit. 976 F.2d at 550-551. 

Therefore, that this action involved

fraudulent conveyances cannot form the basis

for an award of attorneys’ fees under the bad

faith exception to the American rule. 

National Union must show additional facts to

justify application of the bad faith

exception to the American Rule. 

In this regard, National Union asserts that

the bad faith of the Garbers and Betty Ting

is predicated on the facts and circumstances

supporting court’s conclusion in the Order

Granting Plaintiff’s Motion for Sanctions

Against Defendant Betty Ting for Spoliation

of Evidence that “[t]he record in this action

establishes to the court’s satisfaction that

Betty Ting, in concert with the Garbers, has

used every tactic, abusive and otherwise, to

prevent National Union from collecting its

judgment.” 

Defendants respond that, other than the

destruction of documents by Betty Ting,

National Union has made no attempt to show

that there was any vexatious, wanton or

oppressive conduct, other than the fact that

the Garbers and Ting defended themselves in

this action. 

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With respect to the destruction of documents

by Ting, defendants concede that this act

could be construed as falling within the bad

faith doctrine. However, defendants argue,

the court has already sanctioned Ting heavily

for this by entering a default money judgment

against her. Furthermore, it is contended

that the amount of attorney time focused on

that particular incident is small relative to

the total amount of the attorneys’ fees

sought by this motion, noting that the court

may award attorneys’ fees with respect to a

single act. See 10 Moore’s Federal Practice

3d § 54.171[2][c][v].

The court concludes that National Union has

not shown that an award against Betty Ting of

the attorneys’ fees incurred by National

Union in the Fraudulent Conveyance Action or

in the Garbers’ bankruptcy should be imposed

under the bad faith exception. This court

cannot award attorneys’ fees merely on the

ground that this action involved fraudulent

conveyances. Furthermore, the court is not

persuaded that it can award attorneys against

Betty Ting for fees incurred by National

Union in connection with the Garbers’

bankruptcy. As this court has previously

held, the court is persuaded from the record

in this action that the Garbers have taken

every conceivable delaying tactic in

attempting to prevent National Union from

collecting its judgment and completing the

prosecution of this action. Many of the

arguments made by the Garbers, especially in

connection with the motion to dismiss the

counterclaim and third party complaint and

the subsequent appeal, were frivolous. 

However, Betty Ting was not a party to the

counterclaim and third party complaint. The

court is persuaded that Betty Ting has

already been sanctioned for the destruction

of documents. Therefore, the court will not

impose fees incurred in the Fraudulent

Conveyance Action or in the Garbers’

bankruptcy against Betty Ting under the

court’s inherent powers. 

However, the court concludes for the reasons

set forth herein and in the record of this

action that the attorneys’ fees incurred in

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the Fraudulent Conveyance Action and in the

Garbers’ bankruptcy should be imposed against

the Garbers because of their bad faith,

vexatious conduct. The record in these

actions are replete with frivolous arguments

and delaying tactics. 

The court further ruled that National Union is entitled to an

award of the attorneys’ fees against the Garbers for fees 

incurred in the Fraudulent Conveyance Action and the Garbers’

bankruptcy and to an award of the attorneys’ fees incurred in

connection with the Ting bankruptcy from Betty Ting under the

“substantial benefit” doctrine. Finally, in the February 12

Order, the court addressed National Union’s evidence that the

amount of the attorneys’ fee award is reasonable, stating that it

appeared from the record before the court that National Union had

complied with the requirements for establishing the lodestar. 

The court further ruled:

Finally, defendants assert that National

Union has presented a massive amount of

paperwork, most of which would be completely

irrelevant if this court rules that National

Union is not entitled to an award of

attorneys’ fees or that National Union is

entitled to only part of the attorneys’ fees

sought, depending on which proceeding the

fees were incurred in. Defendants contend

that it would be appropriate for the court to

bifurcate its decision, before requiring

defendants to analyze in detail all of the

bills which have been submitted, noting that

Rule 54(d)(2)(C) provides that “[t]he court

may determine issues of liability for fees

before receiving submissions bearing on

issues of evaluation of services for which

liability is to be imposed by the court.” 

Should the court determine that attorneys’

fees are allowable, defendants request

additional time to analyze the fees. 

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Given the history of this action, the court

cannot help but look upon this request as

anything other than a further and improper

attempt by defendants to delay the resolution

of this action. Nonetheless, because of the

substantial amount of money involved and

because of the legal issues discussed above,

the court will allow the requested

bifurcation. 

The parties subsequently filed further declarations and

pleadings in connection with the Motion for Attorneys’ Fees. 

However, in the meantime, defendants appealed the September 24

Order and the June 7 Order to the Ninth Circuit. Therefore, no

further ruling was made with respect to National Union’s Motion

for Attorneys’ Fees pending the outcome of this appeal. 

In National Union v. Garber, 2002 WL 1968376 (2002), the

Ninth Circuit affirmed this court’s grant of summary judgment on

National Union’s fraudulent transfer claim relating to the

transfers of real property in 1991. However, the Ninth Circuit

further ruled:

The district court erred in granting summary

judgment on National Union’s stock transfer

claim under Cal.Civ.Code § 3439.04(a) because

the court improperly weighed the credibility

of the evidence before it in deciding that

the Garbers and Ting acted with fraudulent

intent in making the transfers. The court

described a number of facts which suggest

that the Garbers acted with fraudulent intent

but the Garbers also presented evidence that

the transfers were made because of Ting’s

lawsuit and the resulting agreement settling

those claims ... Thus, we reverse the

district court’s grant of summary judgment on

the 1988 stock transfer claim.

...

The district court’s findings of fact

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supporting the Ting sanction order were not

clearly erroneous. However, the district

court improperly entered a default money

judgment for $213,494.67 against Ting without

considering less severe sanctions. Whether a

district court properly considered the

adequacy of less drastic sanctions before

dismissing a party’s case requires us to

consider findings in which the district court

(1) discusses the feasibility of less drastic

sanctions and explains why such alternate

sanctions would be inappropriate; (2)

implements alternative sanctions before

ordering dismissal; and (3) warns the party

of the possibility of dismissal before

imposing the sanction ... In this case, the

order imposing sanctions does not reflect an

express consideration of lesser sanctions, or

the imposition of alternate sanctions prior

to entry of default. A conclusory statement

that lesser sanctions would be inappropriate

is insufficient in itself to demonstrate that

the district court actually considered lesser

sanctions ... We also note (1) National Union

was unable to articulate at oral argument why

lesser sanctions, such as the imposition of a

lesser monetary sanction, would not be

appropriate; and (2) that much of the

evidence supporting sanctions related to the

destruction of records relevant to the 1988

stock transfers, rather than to the transfers

of real property that were properly avoided

in the court’s order granting summary

judgment.

We vacate the default judgment against Ting

and remand to the district court for

reconsideration in light of the evidence

presented to support the sanctions motion and

the factors relevant to imposing a sanction

of default judgment.

...

The district court’s order awarding an

unspecified amount of attorneys fees is not a

final appealable order under 28 U.S.C. § 1291

... We lack appellate jurisdiction to

consider the issue.

...

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At oral argument, National Union told us that

the bankruptcy court has placed sufficient

funds in the possession of National Union to

satisfy the judgment against the Garbers,

subject to some conditions on the final

release of those funds. As such, it appears

to us that the Garber litigation, apart from

attorneys fees, may be moot. However, the

relevant records are not part of this appeal,

nor otherwise before us.

We vacate and remand this case with the

instruction that the district court first

determine whether the Garber litigation is

moot and appropriate for dismissal. If not,

it may confirm the judgment against the

Garbers for the fraudulent transfers. We

vacate the Ting judgment and remand it for

further proceedings consistent with this

disposition.

While this latest appeal was pending with the Ninth Circuit,

the respective trustees of the Garbers and Betty Ting’s

bankruptcies proceeded with the administration of the respective

estates. An asset in each estate was a residence located in

Pacific Grove, California, which was jointly owned by the Garbers

and Betty Ting. One of the deeds of trust avoided by this court

was a $350,000 deed of trust that the Garbers transferred to

Betty Ting on their interest in the Pacific Grove property. The

two bankruptcy estates agreed to sell the Pacific Grove property

and split the proceeds between the two estates. The Pacific

Grove property was sold for $1,310,000. After payment of the

remaining mortgage and costs associated with the sale, each

estate received net proceeds of approximately $500,000. On

October 5, 2001, the bankruptcy court in the Garbers’ bankruptcy

allowed the release to National Union of $218,095.70, which

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At the time of this distribution, it was subject to a court 2

order that National Union would have to return the money to the

Garbers’ bankruptcy estate if the Ninth Circuit reversed this

court’s avoidance of Betty Ting’s deed of trust on the Pacific

Grove residence. However, as noted, the Ninth Circuit affirmed the

court’s grant of summary judgment in this regard.

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distribution represents the full amount of National Union’s

underlying judgment plus interest in the Bond Case.2

B. Mootness. 

The Garbers and Betty Ting (now represented by attorney

Thomas H. Armstrong) argue that the satisfaction of National

Union’s judgment in the Bond Case moots this Fraudulent

Conveyance Action and requires its dismissal. 

A case is moot if it has lost its character as a present

live controversy. Aguirre v. S.S. Sohio Intrepid, 801 F.2d 1185,

1189 (9 Cir. 1986). th

The Complaint to Set Aside Fraudulent Conveyance filed in

this action prayed for judgment voiding the transfers of stock

and the transfers or encumbrances of real property from the

Garbers to Betty Ting and for judgment

5. Awarding National Union compensatory

damages including interest from the date of

judgment and attorneys fees against all

defendants above and beyond the previous

award of $155,637.39 against the Garbers, as

a result of their participation and

activities in conspiring to prevent

enforcement of the previous judgment against

the Garbers.

6. Granting National Union such other and

further relief as this court deems just and

equitable, including an award of attorneys

fees in the pursuit of this matter in an

amount to be determined by the Court.

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In arguing that this action is now moot, defendants rely on

the fact that National Union’s judgment in the Bond Case has now

been paid in full and refer the court to Allard v. DeLorean, 884

F.2d 464 (9 Cir. 1989). th

In DeLorean, the trustee of the bankruptcy estate of

DeLorean Motor Company filed an action in federal court against

John DeLorean and his attorney Weitzman to set aside as

fraudulent under California law a conveyance of real property by

DeLorean to Weitzman in payment of legal fees on behalf of

DeLorean in criminal proceedings. After a trial, the district

court ruled that the conveyance was not a fraudulent conveyance

and entered judgment in favor of DeLorean and Weitzman. The

trustee appealed to the Ninth Circuit. Before judgment was

entered, however, the trustee and DeLorean negotiated a

settlement of their dispute wherein DeLorean agreed to pay money

to the trustee. Thereafter, the district court, pursuant to a

stipulation between the trustee and DeLorean, dismissed the

trustee’s suit with prejudice and vacated the judgment in favor

of defendants. Weitzman did not sign the stipulation and the

district court’s dismissal order did not address the trustee’s

claim against Weitzman. DeLorean then paid the trustee the

amount agreed to in the settlement agreement and the trustee

executed a satisfaction of judgment. The trustee continued his

appeal to the Ninth Circuit with respect to the judgment in favor

of Weitzman that the conveyance of the real property was not a

fraudulent conveyance. Weitzman successfully argued that the

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trustee’s appeal should be dismissed as moot because the trustee

was no longer a creditor within the meaning of California’s

Uniform Fraudulent Conveyance Act because the trustee executed a

full satisfaction of judgment after DeLorean paid the trustee

pursuant to the settlement agreement. 

Defendants argue: “In the present case, as in DeLorean, the

judgment holder by its own act has satisfied the claim which

rendered it a judgment creditor and which was the basis for the

fraudulent transfer case in the first place. There being no

further debt, the remainder of this case must be dismissed as

moot.” Defendants further argue:

Dismissal for mootness does not impact the

judgment which avoided the transfer of real

property from the [Garbers] to Ting in 1991. 

That, after all, was the decision by the

Ninth Circuit, upholding this avoidance. 

However, the remainder of the case - for

example, any attempt to avoid the transfers

of the stock to Ting in 1988 - is moot ...

So, too, would be further attempts by NU to

recover money against Ting under Cal.Civ.Code

Section 3439.08(a) (right to recover judgment

for money against transferee). NU must be a

‘creditor’ with a ‘claim’ as defined under

Cal.Civ.Code Section 3439.01. NU no longer

has such a claim because it has been paid in

full.

National Union responds that DeLorean is not controlling

because this Fraudulent Conveyance Action is not just a

proceeding to enforce its judgment in the Bond Case, but also

seeks compensatory damages and attorneys’ fees and costs. 

To the extent that National Union is concerned that a

finding of mootness would negate its ability to seek attorneys

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The court’s research indicates that the California Uniform 3

Fraudulent Transfers Act does not allow an award of damages. See

Forum Insurance Company v. Devere Limited, 151 F.Supp.2d 1145

(C.D.Cal. 2001). 

23

fees, National Union’s concern is misplaced. As noted by

defendants, “[n]o Article III case or controversy is needed with

regard to attorneys’ fees as such, because they are but an

ancillary matter over which the district court retains equitable

jurisdiction even when the underlying case is moot.” Zucker v.

Occidental Petroleum Corp., 192 F.3d 1323, 1329 (9 Cir. 1999), th

cert. denied, 529 U.S. 1066 (2000). The same is true with

respect to a determination of the amount of sanctions to be

imposed on Betty Ting because of her spoliation of evidence. See

Cooter & Gell v. Hartmarx Corporation, 496 U.S. 384, 395-396

(1990). 

However, to the extent that National Union seeks to avoid a

finding of mootness in order to recover “compensatory damages”,

National Union conceded at oral argument that the only

“compensatory damages” sought in the Fraudulent Conveyance Action

are attorneys’ fees and costs incurred by National Union in

setting aside the fraudulent conveyances and obtaining the

wherewithal therefrom to fully satisfy the judgment in the Bond

Case.3

Therefore, the court concludes that the satisfaction of the

judgment in the Bond Case moots all issues in this action except

those issues relating to the sanction to be imposed on Betty Ting

because of her spoliation of evidence and those issues relating

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to National Union’s request for an award of attorneys’ fees and

costs against the Garbers and Ting.

C. Betty Ting’s Bad Faith.

Instead of the default money judgment, National Union

proposes as an alternative sanction against Ting an award to

National Union of the attorneys’ fees attributable to her bad

faith conduct as outlined in National Union’s initial motion for

attorneys’ fees.

Ting argues that the court should not consider National

Union’s request because National Union did not appeal the

February 12 Order declining to impose award attorneys’ fees

against Betty Ting for bad faith and did not request

reconsideration of the issue under Rules 59(e) or 60(b), Federal

Rules of Civil Procedure, when the February 12 Order was filed.

However, as the Ninth Circuit ruled, the February 12 Order

was not a final appealable order. Therefore, National Union

could not have appealed this court’s decision not to award

attorneys’ fees against Betty Ting under the bad faith exception.

Rule 59(e) has no application to this motion because the February

12 Order was not a judgment. Rule 60(b) has no application for

the same reason, i.e., the February 12 Order was not a final

order. 

Ting further argues that the law of the case doctrine

precludes this court from revisiting its prior ruling that

attorneys’ fees would not be awarded against Betty Ting under the

bad faith exception. 

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However, the law of the case doctrine does not apply to a

district court’s reconsideration of its own rulings if those

rulings have not been appealed. See United States v. Cote, 51

F.3d 178, 181 (9 Cir. 1995)(“‘The law of the case doctrine th

states that the decision of an appellate court on a legal issue

must be followed in all subsequent proceedings in the same

case.’”). Furthermore, because the sanction imposed by this

court against Ting for spoliation of evidence has been reversed

by the Ninth Circuit and the issue of an appropriate sanction

remanded, circumstances have changed. This court is not

precluded from the examination of an award of attorneys fees

under the bad faith doctrine against Betty Ting as a sanction for

the destruction of evidence.

Federal courts have equitable power to award attorneys’ fees

under the bad faith exception to the American Rule. Association

of Flight Attendants v. Horizon Air, 976 F.2d 541, 548 (9 Cir. th

1992). As explained in Dogherra v. Safeway Stores, Inc., 679

F.2d 1293, 1298 (9 Cir. 1982): th

A court may assess attorneys’ fees ‘when the

losing party has “acted in bad faith,

vexatiously, wantonly, or for oppressive

reasons.”’ ... ‘Bad faith may be found, not

only in the actions that led to the lawsuit,

but also in the conduct of the litigation.’

... An award of attorneys’ fees for bad faith

‘is punitive and the penalty can be imposed

“only in exceptional cases and for dominating

reasons of justice.”’

In Primus Automotive Financial Services v. Batarse, 115 F.3d 644,

648-649 (9 Cir. 1997), the Ninth Circuit further explained: th

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The February 12 Order awards the attorneys fees incurred to 4

the date of that Order on the Garbers based on their bad faith.

The Ninth Circuit in its Memorandum ruled that “[t]he 5

district court’s findings of fact supporting the Ting sanction

order were not clearly erroneous.” Therefore, contrary to

defendants’ assertion, the facts found by the court in the June 7

Order do not need to be revisited. 

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Before awarding sanctions under its inherent

powers, however, the court must make an

explicit finding that counsel’s conduct

‘constituted or was tantamount to bad faith.’

... Such a finding is especially critical

when the court uses its inherent powers to

engage in fee-shifting ....

A finding of bad faith is warranted when an

attorney ‘knowingly or recklessly raises a

frivolous argument, or argues a meritorious

argument for the purpose of harassing an

opponent.’ ... A party also demonstrates bad

faith by ‘delaying or disrupting the

litigation or hampering enforcement of a

court order.’ ... The bad faith requirement

sets a high threshold ....

...

We recognize that the district court is

intimately familiar with the course of the

litigation and occupies the best position

from which to determine whether to award

sanctions. However, there are ‘factual and

legal prerequisites’ to the district court’s

exercise of its broad power ... We insist on

the finding of bad faith because it ensures

that ‘restraint is properly exercised,’ ..

and it preserves a balance between protecting

the court’s integrity and encouraging

meritorious arguments ....

National Union argues that the court should award the full

amount of the $448,451.25 in attorneys’ fees that it is

requesting jointly against the Garbers and Betty Ting based on

Betty Ting’s bad faith.4

In so arguing, National Union refers to the June 7 Order. 

5

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The factual basis of the June 7 Order was that Betty Ting

intentionally destroyed financial records of Golden Valley Aero,

Inc. and Emilia Chua Ting, M.D., Inc. needed by National Union to

establish the value of the two corporations as of 1988 and that

Betty Ting consciously disregarded her obligation to preserve the

financial records of the two corporations after the Fraudulent

Conveyance Action was filed by National Union. 

Defendants argue that the reversal by the Ninth Circuit of

this court’s grant of summary judgment to National Union with

respect to the stock transfers negates any finding of bad faith

or sanctionable conduct by Betty Ting in destroying or failing to

preserve the financial records of the two corporations.

As noted, the Ninth Circuit reversed because of an issue of

fact concerning the Garbers’ intent in making the stock transfers

to Betty Ting. The Garbers argue: 

On the facts, the only rational basis for

finding that Ting destroyed the tax records

is based on a finding that she was involved

in an intentionally fraudulent enterprise -

for which there is now no decisional record,

given the reversal of the Summary Judgment

Order’s findings of actual fraud. Moreover,

the ‘misconduct penalized must relate to

matters in controversy in such a way as to

interfere with the rightful decision of the

case.’ Halaco Eng’g Co. v. Costle, 843 F.2d

376, 381 (9 Cir. 1988). That would have th

been true only with respect to transfers void

in 1988, and neither the avoidable transfer

of stock (the property to be valued) or the

intent to defraud by such transfer can be

found on the present record ... At most, this

Court can rule that the tax records might

have been of some consequence and ought not

to have been destroyed. It can sanction for

the amount actually expended by NU in

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bringing the motion which resulted in the

Sanctions Order. Anything beyond that would

be excessively punitive, given particularly

that NU was paid on the Bond Case judgment in

full, which was the purpose of the original

sanction.

At issue before the court is the appropriate sanction to be

imposed on Betty Ting for spoliation of evidence (given that the

Ninth Circuit has reversed the sanction previously imposed). 

That the Ninth Circuit subsequently found an issue of fact

concerning the Garbers’ intent in transferring the stock of the

two corporations to Betty Ting does not detract from the court’s

findings that Betty Ting deliberately destroyed or failed to

conserve financial records that would have assisted National

Union in valuing that stock for purposes of the Fraudulent

Conveyance Action. As noted, even defendants recognize this.

However, there is no basis for imposing on Betty Ting as a

sanction for the spoliation of evidence joint liability for all

attorneys’ fees incurred by National Union in prosecuting this

fraudulent conveyance action. In the February 12 Order, the

court stated:

The court concludes that National Union has

not shown that an award against Betty Ting of

the attorneys’ fees incurred by National

Union in the Fraudulent Conveyance Action or

in the Garbers’ bankruptcy should be imposed

under the bad faith exception. This court

cannot award attorneys’ fees merely on the

ground that this action involved fraudulent

conveyances. Furthermore, the court is not

persuaded that it can award attorneys [fees]

against Betty Ting for fees incurred by

National Union in connection with the

Garbers’ bankruptcy. As this court has

previously held, the court is persuaded from

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the record in this action that the Garbers

have taken every conceivable delaying tactic

in attempting to prevent National Union from

collecting its judgment and completing the

prosecution of this action. Many of the

arguments made by the Garbers, especially in

connection with the motion to dismiss the

counterclaim and third party complaint and

the subsequent appeal, were frivolous. 

However, Betty Ting was not a party to the

counterclaim and third party complaint. The

court is persuaded that Betty Ting has

already been sanctioned for the destruction

of documents. Therefore, the court will not

impose fees incurred in the Fraudulent

Conveyance Action or in the Garbers’

bankruptcy against Betty Ting under the

court’s inherent powers.

The court is not persuaded to rule any differently except to

impose a sanction against Betty Ting for the spoliation of

evidence. Imposition of the entire attorneys’ fees award against

Betty Ting under the bad faith doctrine because of the spoliation

of evidence would, in the court’s opinion, be improper and 

unfair. The court concludes that the appropriate sanction is to

award National Union its attorneys’ fees and costs incurred in

bringing and arguing the spoliation of evidence motion in this

court. However, this sanction will not include fees incurred by

National Union in connection with the appeal of the June 7 Order

because, as noted, Betty Ting was partially successful in that

appeal.

National Union further argues that the court should impose

on Betty Ting the attorneys’ fees incurred by National Union in

connection with Betty Ting’s bankruptcy, contending that this

bankruptcy is evidence of Ting’s participation in the scheme to

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prevent or delay National Union’s satisfaction of its judgment in

the Bond Case. 

As noted supra, Betty Ting filed a Chapter 13 bankruptcy

petition in the Northern District of California after the court

had granted summary judgment to National Union and after National

Union’s motion for spoliation of evidence was filed and briefed. 

According to National Union, Betty Ting admitted under oath that

the reason she filed the bankruptcy petition was to prevent

National Union from foreclosing on the Pacific Grove property in

satisfaction of its judgment in the Bond Case. Additionally,

several weeks prior to the filing of the bankruptcy petition,

Betty Ting filed a homestead declaration on the Pacific Grove

property. After objecting to Ting’s initial Chapter 13 plan and

two amended plans, the Bankruptcy Court, after a two day trial, 

ordered Ting to either dismiss the bankruptcy or convert the

bankruptcy to a Chapter 7. National Union asserts that “[i]n

light of Ting’s antics and the fact that the bankruptcy was filed

in the Northern District, National Union incurred a substantial

amount of attorneys’ fees with respect to her bankruptcy.”

This court did not previously impose attorneys’ fees against

Betty Ting incurred by National Union in Betty Ting’s bankruptcy

proceedings. Nothing has changed (other than the reversal of the

sanction for spoliation of evidence). Therefore, there is no

basis before the court to reconsider its prior ruling. 

Consequently, the court concludes that the only attorneys’

fees to be imposed on Betty Ting under the bad faith exception

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are those fees incurred by National Union in bringing and arguing

the motion for a sanction for spoliation of evidence. 

D. Reconsideration of February 12 Order.

The February 12 Order ruled that National Union is entitled

to reasonable attorneys’ fees against the Garbers and/or Betty

Ting on (1) the underlying judgment theory; (2) the bad faith

exception; and (3) the substantial benefit theory. As National

Union notes, the only issue that was not resolved by the February

12 Order was the reasonableness of the fee award and that issue

was not resolved when the February 12 Order was filed because

defendants utterly failed to address the reasonableness of the

attorneys’ fees sought by National Union.

In responding to this Updated Motion for Attorneys Fees, the

Garbers and Betty Ting essentially request reconsideration by

this court of its rulings made in the February 12 Order with

respect to National Union’s entitlement to attorneys’ fees.

Because of the importance of the arguments made by the

parties herein and the amount of attorneys’ fees at issue, the

court exercises its discretion and addresses the arguments made

by the Garbers in seeking reconsideration of the February 12

Order. As noted above, the court specifically required National

Union to address the merits of one of the claimed grounds for

reconsideration.

1. Underlying Judgment.

In the February 12 Order, the court ruled in pertinent part

that National Union is entitled to an award of its attorneys’

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fees incurred in the Fraudulent Conveyance Action from the

Garbers:

The Garbers respond that the fact that there

was an attorneys’ fee provision in the

underlying bond agreement is irrelevant

because National Union’s action in this case

is based upon its judgment against the

Garbers, not the underlying bond agreement. 

They assert that the contractual obligations

of the Garbers merged into the judgment in

the Bond Case and were extinguished. In so

asserting, they refer the court to

Restatement, Judgments 2d, § 18 (1980):

Judgment for Plaintiff - the

General Rule of Merger

When a valid and final personal

judgment is rendered in favor of

the plaintiff:

(1) The plaintiff cannot thereafter

maintain an action on the original

claim or any part thereof, although

he may be able to maintain an

action upon the judgment ....

Comment k to Section 18 provides that “[w]hen

the judgment is that of a federal court,

federal law in general governs its effects.” 

Relying on these provisions, defendants

assert that because the judgment in the Bond

Case was a federal judgment, federal law

controls the question of whether attorneys’

fees can be awarded with respect to that

judgment.

The court does not agree. The present action

is an action to set aside fraudulent

conveyances pursuant to the Uniform

Fraudulent Transfer Act, California Civil

Code §§ 3439 et seq. The basis for this

court’s subject matter jurisdiction is

diversity. As noted above, California law

determines whether and the extent to which

National Union is entitled to attorneys’ fees

in this action. The question is whether

California law allows National Union to

predicate an award of attorneys’ fees in this

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action on a contract provision which supplied

the basis for liability and attorneys’ fees

in a prior judgment which this action is

seeking to enforce.

In this regard, National Union refers the

court to California Code of Civil Procedure §

685.070(a)(6):

(a) The judgment creditor may claim

under this section the following

costs of enforcing a judgment:

...

(6) Attorney’s fees, if allowed by

Section 685.040.

California Code of Civil Procedure § 685.040

provides:

The judgment creditor is entitled

to the reasonable and necessary

costs of enforcing a judgment. 

Attorney’s fees incurred in

enforcing a judgment are not

included in costs collectible under

this title unless otherwise

provided by law. Attorney’s fees

incurred in enforcing a judgment

are included as costs collectible

under this title if the underlying

judgment includes an award of

attorney’s fees to the judgment

creditor pursuant to subparagraph

(A) of paragraph (10) of

subdivision (a) of Section 1033.5.

The Garbers argue that National Union cannot

rely on these statutory provisions because

they were not effective until January 1,

1993, well after the Bond Case judgment

entered by this court was final and well

after the transfers to Ting were made. 

Noting that “[a]s a general rule of

construction, statutes are not given

retroactive effect unless the intent of the

Legislature cannot be otherwise satisfied”

and that “‘when [the Legislature] intends a

statute to operate retroactively it uses

clear language to accomplish that purpose’”,

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Balen v. Peralta Junior College Dist., 11

Cal.3d 821, 828 (1974), defendants argue that

National Union cannot rely on these statutes

as a basis for an award of attorneys’ fees in

this action.

In reply, National Union refers the court to

Miller v. Givens, 30 Cal.App.4th 18 (1994). 

In Miller, Miller sued Buchignani and Levy on

an agreement containing an attorneys’ fees

clause. Buchignani and Levy prevailed at

trial and a judgment was entered in their

favor for costs and attorneys’ fees in July,

1989. Buchignani assigned all of his right,

title and interest to Givens in November,

1992. On September 1, 1993, Givens filed a

memorandum of costs, seeking, among other

items, postjudgment attorneys’ fees. Miller

opposed this memorandum of costs, asserting

in pertinent part that at the time the

judgment was entered Section 685.040 did not

allow for such fees. The trial court

determined that an award of postjudgment

attorneys’ fees would require an

impermissible retroactive application of the

amendment of Section 685.040. The Court of

Appeals held:

In 1989, at the time the judgment

was entered, section 685.040

provided: ‘The judgment creditor is

entitled to the reasonable and

necessary costs of enforcing a

judgment. Attorney’s fees incurred

in enforcing a judgment are not

included in costs collectible under

this title unless otherwise

provided by law.’

The section was amended in 1992 to

add the following sentence:

‘Attorney’s fees incurred in

enforcing are included as costs

collectible under this title if the

underlying judgment included an

award of attorney’s fees to the

judgment creditor pursuant to

subparagraph (A) of paragraph (10)

of subdivision (a) of Section

1033.5.’ Subdivision (a)(10)(A) of

section 1033.5 allows attorney fees

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to be recoverable as costs when

authorized by contract.

The effective date of the amendment

was January 1, 1993 ... It is

undisputed that the amendment

should not be applied

retroactively. The only question

presented to us by the parties is

whether an award for fees incurred

after the effective date of the

amendment constitutes a retroactive

application.

Miller cites Helm v. Bollman (1959)

176 Cal.App.2d 838, 841 ... for the

proposition that ‘”A statute will

not be given a retroactive

construction by which it will

impose liabilities not existing at

the time of its passage, or which

will affect an existing liability

to the detriment of defendant ....”

...’.

But the amendment, as Givens seeks

to apply it here, had no

retroactive effect on Miller’s

existing liabilities. Givens is

not claiming the right to fees

incurred in an effort to collect

the judgment prior to the effective

date of the amendment. Givens’s

application of the amendment is

prospective only. He relies on

events that occurred after the

effective date: Miller’s failure to

pay the judgment and Givens’s

efforts to collect. That the

judgment existed prior to the

amendment does not mean Givens is

seeking a retroactive application

of the amendment. ‘A statute does

not operate retroactively merely

because some of the facts or

conditions upon which its

application depends came into

existence before the enactment.’

....

The source of the presumption that

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a statute will not be retroactively

applied is the general consensus

that notice of a rule should be

given in advance of the actions to

be judged ... ‘Application of a

statute is retroactive only when it

gives a different and potentially

unfair legal effect to actions

taken in reliance on the

preenactment law.’ ... Here the

amendment gives no different or

potentially unfair legal effect to

Miller’s prior actions. It is

Miller’s subsequent action in

failing to pay the judgment from

which the fees incurred here flow.

Chelios v. Kaye (1990) 219

Cal.App.3d 75 ... is of no help to

Miller. There the court held that

an attorney fees clause in a

contract was merged with the

judgment, and thus could not be the

basis for the imposition of

postjudgment attorney fees. But

Chelios was decided under section

685.040 prior to the 1992

amendment. The 1992 amendment was

obviously intended to change the

rule applied in Chelios.

30 Cal.App.4th at 21-22.

In the court’s opinion, Miller disposes of

the Garbers’ argument that, because the Bond

Case judgment was final before the effective

date of the amendment to Section 685.040,

National Union cannot rely on these statutes

as a basis for an award of attorneys’ fees in

this case. As noted above, all of the

attorneys’ fees at issue in this motion were

incurred in connection with the Fraudulent

Conveyance action and related proceedings,

which action was not filed until 1994. 

In moving for reconsideration of this ruling in the February

12 Order, the Garbers contend that attorneys fees for enforcing a

judgment must be sought in the action in which the judgment was

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The Garbers further argue that, even if the motion for 6

attorneys fees in this case is deemed to be a memorandum pursuant

to the California Code of Civil Procedure, National Union would

only be entitled to fees incurred in 1998 to 2000.

37

obtained, i.e., the Bond Case, and not in the Fraudulent

Conveyance Action to recover properties in order to satisfy that

judgment. 

In so arguing, the Garbers refer the court to Section

685.070, which provides in pertinent part:

(a) The judgment creditor may claim under

this section the following costs of enforcing

a judgment:

...

(6) Attorneys’ fees, if 

allowed by Section 685.040.

(b) Before the judgment is fully satisfied

but not later than two years after the costs

have been incurred, the judgment creditor

claiming costs under this section shall file

a memorandum of costs with the court clerk

and serve a copy on the judgment debtor ....

Section 685.090(a)(2) provides that costs are added to and become

part of the judgment “[i]f a memorandum of costs is filed

pursuant to Section 685.070 ....” The Garbers assert that this

memorandum of costs must be filed in the Bond Case and, because

National Union has never done so, National Union is not entitled

to recover any attorneys’ fees from the Garbers incurred in order

to enforce the Bond Case judgment.6

In opposing the Garbers’ contention, National Union refers

the court to California Code of Civil Procedure § 685.080, which

provides in pertinent part:

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(a) The judgment creditor may claim costs

authorized by Section 685.040 by noticed

motion. The motion shall be made before the

judgment is satisfied in full, but not later

than two years after the costs have been

incurred. The costs claimed under this

section may include, but are not limited to,

costs that may be claimed under Section

685.070 and costs incurred but not approved

by the court or referee in a proceeding under

Chapter 6 (commencing with Section 708.010)

of Division 2.

(b) The notice of motion shall describe the

costs claimed, shall state their amount, and

shall be supported by an affidavit of a

person who has knowledge of the facts stating

that to the person’s best knowledge and

belief the costs are correct, are reasonable

and necessary, and have not been satisfied. 

The notice of motion shall be served on the

judgment debtor. Service shall be made

personally or by mail.

(c) The court shall make an order allowing or

disallowing the costs to the extent justified

under the circumstances of the case.

National Union argues that there is no specific requirement in

the statute that the motion described in Section 685.080 be filed

in the same action in which the judgment was entered, i.e., in

the Bond Case. Therefore, National Union argues, there is

nothing in the California statutory scheme preventing National

Union from filing the motion for attorneys’ fees described in

Section 685.080 in the Fraudulent Conveyance Action brought to

enforce the judgment in the Bond Case.

The Garbers respond that nothing in California’s statutory

scheme supports National Union’s construction. In so arguing,

the Garbers note that a judgment debtor is not normally made a

party to a fraudulent conveyance action. See TWM Homes, Inc. v.

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Atherwood Realty & Inv. Co., 214 Cal.App.2d 826, 848 (1963)(“The

transferrees ... are necessary parties defendant in an action to

set aside a fraudulent conveyance ... The transferor ..., though

a proper party defendant is not a necessary one.” The Garbers

further note both Sections 685.070(b) and 685.080(b) require

service of the memorandum or motion upon the judgment debtor. 

The Garbers contend:

[T]he argument that one can use CCP Section

685.080 as a means of taxing costs against a

judgment debtor in a fraudulent conveyance

case conveniently skips the point that

normally such judgment debtors are not even

defendants in such cases. Knowing this, the

legislature therefore could not have

contemplated the use of such a procedure in a

fraudulent transfer case. In fact, there is

no procedure available in California to

subject the judgment debtor to an award of

any costs, including attorneys fees, other

than by adding them to the judgment under CCP

Sections 685.040 and 685.090. No court other

than the entering the judgment in the

proceeding giving rise to the judgment may

add to the judgment.

The Garbers refer the court to Imperial Bank v. Pim Electric,

Inc., 33 Cal.App.4th 540 (1995) and to Mollola Holdings, Inc. v.

Akers, 100 Cal.App.4th Supp. 6 (2002) in contending that the

California courts strictly apply the statutory procedural

requirements for obtaining attorneys in judgment enforcement

cases. Thus, in Imperial Bank, the Court of Appeal held in

pertinent part:

[T]he Bank seeks an award of attorney fees on

appeal on the ground that this appeal

involves the enforcement of a money judgment

based upon a contract providing for attorney

fees. (Civ.Code, § 1717.)

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Attorney fees on appeal are ordinarily

recoverable only if authorized by statute ... 

Statutory authorization for the recovery of

attorney fees incurred in trial court

proceedings necessarily includes attorney

fees incurred on appeal unless the statute

specifically provides otherwise ... The

relevant statutes regarding recovery of

attorney fees in enforcing a judgment are

sections 685.040 and 685.070, subdivision

(a)(6). Section 685.040 provides as follows: 

‘The judgment creditor is entitled to the

reasonable and necessary costs of enforcing a

judgment. Attorney’s fees incurred in

enforcing a judgment are not included as

costs collectible under this title unless

otherwise provided by law. Attorney’s fees

incurred in enforcing a judgment are included

as costs collectible under this title if the

underlying judgment includes an award of

attorney’s fees to the judgment creditor

pursuant to subparagraph (a) of paragraph

(10) of subdivision (a) of section 1033.5.’

....

Section 685.070 provides in relevant part:

‘(a) The judgment creditor may claim under

this section the following costs of enforcing

a judgment; [¶] ... [¶ (6) Attorney’s fees,

if allowed by Section 685.040.’ 

Although it appears the underlying judgment

was based upon a note and guarantees which

provided for recovery of attorney fees, the

judgment itself does not award attorney fees

and there is nothing in the record to

indicate that the trial court awarded

attorney fees pursuant to Civil Code section

1717 or any other statute. The absence of

any fee award in the underlying judgment

precludes the recovery of fees as costs in

the trial court for enforcing the money

judgment, and necessarily precludes an award

of attorney fees on this appeal.

33 Cal.App.4th at 557-558. In Mollala Holdings, the judgment

creditor who had obtained a default judgment on a contract which

included attorneys’ fees and costs, moved the court for an award

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of postjudgment attorney fees. The trial court denied the

motion, which denial was affirmed:

In the case at bar, the court clerk awarded

attorney fees [pursuant to the schedule set

forth in a rule of court allowing the clerk

to award attorney fees in a default

judgment]. While appellant’s default

judgment obtained from the court clerk below

was based upon contract, the attorney fees

were awarded in accordance with the court’s

schedule following the default judgment, and

not as a cost item pursuant to the contract

at issue. Appellant could have obtained a

judgment through a court hearing, and not

simply through a clerk’s judgment by default. 

In securing the clerk’s judgment by default,

appellant implicitly accepted an attorney

fees award pursuant to local rule 6.1.1, thus

eschewing the section 1033.5, subdivision

(a)(10) alternative. Appellant’s election of

that procedure, therefore, precludes postjudgment attorney fees. 

100 Cal.App.4th Supp. at 8.

National Union further argues that the Garbers’ contention

is belied by federal procedural rules. In so arguing, National

Union notes that “‘federal courts sitting in diversity

jurisdiction apply state substantive law and federal procedural

law.’” Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9 Cir. th

2003)(quoting Gasperini v. Ctr. for Humanities, Inc., 518 U.S.

415, 427 (1996). National Union cites Rule 69(a), Federal Rules

of Civil Procedure, which provides in pertinent part:

Process to enforce a judgment for the payment

of money shall be by a writ of execution,

unless the court directs otherwise. The

procedure on execution, on proceedings

supplementary to and in aid of a judgment,

and in proceedings on and in aid of execution

shall be in accordance with the practice and

procedure of the state in which the district

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court is held, existing at the time the

remedy is sought, except that any statute of

the United States governs to the extent that

it is applicable.

National Union reasons that, because the Federal Rules of Civil

Procedure have the force of a federal statute, see Sibbach v.

Wilson & Co., Inc., 312 U.S. 1, 13 (1941), Rule 54(d), Federal

Rules of Civil Procedure, governs the award of attorneys fees

requested by these motions. Rule 54(d)(2), Federal Rules of

Civil Procedure, provides in pertinent part:

(A) Claims for attorneys’ fees and related

non-taxable expenses shall be made by motion

unless the substantive law governing the

action provides for the recovery of such fees

as an element of damages to be proved at

trial.

(B) Unless otherwise provided by statute or

order of the court, the motion must be filed

no later than 14 days after entry of

judgment; must specify the judgment and the

statute, rule, or other grounds entitling the

moving party to the award; and must state the

amount or provide a fair estimate of the

amount sought. If directed by the court, the

motion shall also disclose the terms of any

agreement with respect to fees to be paid for

the services for which claim is made.

National Union further notes that the Note to the 1993 amendments

to Rule 54 state that “[f]ee awards should be made in the form of

a separate judgment under Rule 58 since such awards are subject

to review in the court of appeals.” National Union then contends

that the “only remaining question ... is whether the Rule 54

motion must be brought in the action in which the judgment was

entered, rather than in a supplementary proceeding being pursued

to enforce that judgment.” National Union argues that, because

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the Bond Case and the Fraudulent Conveyance Action involve the

same parties, the same court, and the same district court judge,

“it would be an elevation of form over substance to require that

a motion be made in the Bond Case.”

However, as ruled in the February 12 Order, federal courts

are required to apply state law in diversity actions with regard

to the allowance or disallowance of attorneys’ fees. Schultz v.

Lamb, 591 F.2d 1268, 1273 (9 Cir. 1978). In addition, state th

law controls the calculation of attorneys’ fees in diversity

cases. Mangold v. California Public Utilities Com’n, 67 F.3d

1470, 1478-1479 (9 Cir. 1985). Furthermore, as explained in th

Sibbach, in cases involving a choice between the Rules of Civil

Procedure and a state law, the Rules Enabling Act and cases

construing it constitute the relevant standard. Under the Rules

Enabling Act, a federal rule of decision is valid if it really

regulates procedure and does not abridge, enlarge or modify any

substantive right. 312 U.S. at 14. A rule promulgated under the

Rules Enabling Act may be invalid even if it does regulate

procedure, if it also operates to affect a substantive right. 

Huff v. Shumate, 360 F.Supp.2d 1197, 1201 (D.Wyo. 2004). Because

the Ninth Circuit has ruled that state law applies to the

determination and calculation of attorneys’ fees in diversity

cases, National Union’s attempt to circumvent the Garbers’

arguments by reference to Rules 54 and 69, Federal Rules of Civil

Procedure, is unavailing.

National Union further argues that, even if it must proceed

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by filing a motion for an award of attorneys’ fees in the Bond

Case, the time for filing that motion has not yet elapsed. In so

arguing, National Union refers to the Garbers’ contention that

the National Union would have violated the automatic stay if it

filed a memorandum of costs in the Bond Case in accordance with

California Code of Civil Procedure § 685.070(b).

The Garbers contended in their initial opposition to the

updated motion for attorneys’ fees that, even if National Union

had filed a memorandum in the Bond Case after the Garbers had

filed their Chapter 7 bankruptcy petition, that filing would have

violated the automatic stay set forth in 11 U.S.C. § 362(a)(1),

(2) and (6). The Garbers concede that National Union moved for

and obtained relief from the automatic stay in 1996 but contend

that relief from stay covered only proceedings in this Fraudulent

Conveyance Action and in Adversary Proceeding No. 94-1361, which

Adversary Proceeding had been withdrawn to this court. 

National Union concedes that it never sought or obtained

relief from the automatic stay to proceed with any action in the

Bond Case because National Union believed that it was appropriate

to seek an award of all of its attorneys’ fees under any

available theories in this Fraudulent Conveyance Action. 

National Union also concedes that the automatic stay remains in

effect. 

National Union then refers the court to 11 U.S.C. § 108(c),

which provides in pertinent part:

Except as provided in section 524 of this

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title, if applicable nonbankruptcy law, an

order entered in a nonbankruptcy proceeding

or an agreement fixes a period for commencing

or continuing a civil action in a court other

than a bankruptcy court on a claim against

the debtor ..., and such period has not

expired before the date of the filing of the

petition, then such period does not expire

until the later of -

(1) the end of such period,

including any suspension of such

period occurring on or after the

commencement of the case; or

(2) 30 days after notice of the

termination or expiration of the

stay under section 362, 922, 1201,

or 1301 of this title, as the case

may be with respect to such claim.

Relying on Section 108(c), National Union argues that the

Garbers’ contention that the time for National Union to filed a

motion for award of attorneys’ fees pursuant to California Code

of Civil Procedure § 685.050 in the Bond Case has expired because

the judgment in the Bond Case has already been satisfied and it

has been over two years since some of the costs were incurred in

the Bond Case is incorrect. National Union contends that it

would be precluded from filing a motion in the Bond Case only if

the time for doing so set forth in Section 685.050 ran before the

Garbers filed their bankruptcy petition in September, 1994. 

National Union further asserts that “[t]he time period would have

run if the Bond Case judgment was satisfied before the bankruptcy

filing or if any of the fees requested pursuant to the motion for

attorneys’ fees were incurred more than two years before the

bankruptcy filing.” Referring to the Declaration of Leslie

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Beatus, National Union contends that the earliest fees sought in

connection with the motion are for acts on February 24, 1993,

which is less than two years prior to the filing by the Garbers

of their bankruptcy petition. 

Although the Garbers do not dispute that the tolling

provision in Section 108(c) is applicable, they contend that it

does not salvage National Union’s request for attorneys’ fees

because the underlying judgment in the Bond Case has been

satisfied.

With regard to the issue of satisfaction of the underlying

judgment in the Bond Case, National Union contends that the fees

incurred by it in enforcing that judgment may be added to the

principal amount of the judgment as post-judgment interest. 

Therefore, National Union argues, the amount of the Bond Case

judgment “remains fluid” and cannot be “fully satisfied” unless

and until all of the post-judgment interest and the costs of

enforcement (including attorneys’ fees) to the date of

satisfaction have been paid. 

In so arguing, National Union contends that interim

distribution by the bankruptcy trustee on October 24, 2001 in the

amount of $222,212.45 did not satisfy in full the Bond Case

judgment. As noted above, the trustees of the Garber and Ting

bankruptcies jointly sold property owned by the Garbers and Ting

in Pacific Grove. Each estate received approximately $500,000

net proceeds from this sale. National Union had a lien on the

Pacific Grove property as a result of its abstract of judgment

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from the Bond Case judgment. As part of the sale, the Bankruptcy

Court ordered the trustee to set aside the amount of National

Union’s lien in an interest bearing account pending further order

of the Bankruptcy Court. Thereafter, National Union filed a

motion in the Bankruptcy Court for release of the funds held by

the trustee, which motion was granted. However, the Garbers

filed a motion for reconsideration, requesting the Bankruptcy

Court modify its order to make clear that the distribution of

funds to National Union was merely an early distribution and

would not have preclusive effect on any action that might be

brought in the future to recover those funds from National Union. 

The Bankruptcy Court granted the Garbers’ motion for

reconsideration in part, ruling:

The order allowing release of the funds is

not intended to have any preclusive effect

whatsoever on the obligations of NATIONAL

UNION to return the funds, not return the

funds on the happening of some subsequent

event. It is not intended to require them to

return the funds, it is not intended to give

them an argument that they don’t have to

return the funds. It is intended to be

entirely neutral on that subject.

National Union contends that the Garbers’ motion for

reconsideration filed in the Bankruptcy Court is evidence of

their intention to sometime attempt to force National Union to

return the $222,212.45 distribution to the bankruptcy estate. 

Furthermore, as of the time National Union’s supplemental brief

was filed, the trustee of the Garber’s estate had not made a

final report and filed a final account of the administration of

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the estate with the Bankruptcy Court. Because the bankruptcy

case is not closed until this happens, see In re Wade, 991 F.2d

402 (7 Cir.), cert. denied, 510 U.S. 870 (1993), National Union th

argues that a risk remains that it might have to return the

distributed proceeds to the Garbers’ bankruptcy estate. 

Consequently, National Union contends, the Bond Case judgment

cannot be considered to have been satisfied in full by that

distribution.

National Union further argues that the distribution of

$222,212.45 did not fully satisfy the Bond Case judgment. As

noted above, judgment was entered on March 6, 1992 in favor of

National Union in the Bond Case in the total amount of

$151,327.39. An additional judgment in the amount of $4,310 was

entered by the Ninth Circuit on January 14, 1994. Pursuant to 28

U.S.C. § 1961, interest accrued on the judgment entered on March

6, 1992 at the rate of 4.55% per annum and on the judgment

entered on January 14, 1994 at the rate of 3.67% per annum. 

Furthermore, National Union notes, the trustee’s letter dated

October 24, 2001 enclosing the estate’s check in the amount of

$222,212.45 required that National Union hold the funds in trust

pending the outcome of the Garbers’ motion for reconsideration

set for hearing on November 21, 2001. Therefore, National Union

contends, through October 24, 2001, the total amount of the Bond

Case judgment was $223,211.99, approximately $1,000 more than was

distributed by the trustee to National Union. National Union

further contends, through November 21, 2001, an additional

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$540.12 in interest accrued. Finally, National Union notes, no

satisfaction of judgment has been filed in the Bond Case. 

Therefore, National Union argues, the judgment in the Bond Case

has not been fully satisfied for purposes of CCP § 685.080. 

The Garbers respond that the satisfaction of the Bond Case

judgment is “law of the case” or that National Union should be

judicially estopped from contending to this court that the

judgment in the Bond Case has not been satisfied.

In so arguing, the Garbers refer to the statement in

National Union’s brief filed on December 20, 2002 (Doc. 312) at

page 4:

Because the Ninth Circuit has affirmed the

avoidance of the deed of trust on the Pacific

Grove property, NATIONAL UNION is entitled to

keep the proceeds from the sale. As a

result, NATIONAL UNION’S original judgment

has now been paid. However, the attorneys’

fees to which this Court has determined that

NATIONAL UNION is entitled (although the

amount has not yet been determined) have not

been paid.

The Garbers further refer to the Ninth Circuit’s statement in its 

Amended Memorandum, 2002 WL 1968376 (2002):

At oral argument, National Union told us that

the bankruptcy court has placed sufficient

funds in the possession of National Union to

satisfy the judgment against the Garbers,

subject to some conditions on the final

release of those funds. As such, it appears

to us that the Garber litigation, apart from

attorneys’ fees, may be moot. However, the

relevant records are not part of this appeal,

nor otherwise before us.

The “law of the case” doctrine is explained in United States

v. Cote, supra, 51 F.3d at 181:

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‘The law of the case doctrine states that the

decision of an appellate court on a legal

issue must be followed in all subsequent

proceedings in the same case.’ ... Because

the purpose of the doctrine is to promote

judicial finality, it necessarily follows

that the law of the case acts as a bar only

when the issue in question was actually

considered and decided by the first court ...

Although the doctrine applies to a court’s

‘explicit decisions as well as those issues

decided by necessary implication,’ ... it

‘clearly does not extend to issues an

appellate court did not address,’ ....

Given this standard, that National Union orally made a

representation to the Ninth Circuit that the Bankruptcy Court had

set aside sufficient funds to satisfy the Bond Case judgment

cannot be viewed as law of the case because the Ninth Circuit did

not expressly or impliedly reach a decision concerning the

consequent mootness of the Fraudulent Conveyance Action, leaving

the resolution of the mootness issue to this court. See

discussion supra. 

More compelling is the Garbers’ assertion of judicial

estoppel. “Judicial estoppel, sometimes known as the doctrine of

preclusion of inconsistent positions, precludes a party from

gaining an advantage by taking one position, and then seeking a

second advantage by taking an incompatible position.” Rissetto

v. Plumbers and Steamfitters Local 343, 94 F.3d 597, 600-601 (9th

Cir. 1996). “The policies underlying preclusion of inconsistent

positions are general considerations of the orderly

administration of justice and regard for the dignity of judicial

proceedings ... Judicial estoppel is intended to protect against

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a litigant playing fast and loose with the courts ... Because it

is intended to protect the dignity of the judicial process, it is

an equitable doctrine invoked by the court at its discretion.” 

Russell v. Rolfs, 893 F.2d 1033, 1037 (9 Cir. 1990), cert. th

denied, 501 U.S. 1260 (1991). 

Here, the court notes that National Union did not respond to

the Garbers’ arguments on the merits against National Union’s

Updated Motion for Attorneys’ Fees. Rather, National Union’s

initial reply contended that the Garbers were not entitled to

reconsideration of the February 12 Order. It was not until after

the court issued its Order on June 17, 2003 directing National

Union to address the Garbers’ contention that California Code of

Civil Procedure §§ 685.070 and 685.090 preclude an award of

attorneys’ fees incurred in the Fraudulent Conveyance Action in

seeking to enforce the judgment in the Bond Case that National

Union asserted that the judgment in the Bond Case had not been

fully satisfied by the trustee’s distribution on October 24,

2001. Therefore, it is clear that National Union changed its

position concerning the satisfaction of the Bond Case judgment in

an attempt to avoid the consequences resulting to it by the

application of the California statutory provisions. 

Consequently, the court concludes that National Union is

judicially estopped from contending that the distribution by the

Bankruptcy Court did not fully satisfy the Bond Case judgment.

That the judgment in the Bond Case has been satisfied is

further evidenced, the Garbers contend, because the trustee

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tendered the amount then owed to National Union on October 24,

2001. In so arguing, the Garbers refer the court to California

Code of Civil Procedure § 685.030(d)(2). 

Section 685.030 provides in pertinent part:

...

(b) If a money judgment is satisfied in full

other than pursuant to a writ under this

title, interest ceases to accrue on the date

the judgment is satisfied in full.

(c) If a money judgment is satisfied pursuant

to a writ under this title or is otherwise

partially satisfied, interest ceases to

accrue as to the part satisfied on the date

the part is satisfied.

(d) For the purposes of subdivisions (b) and

(c), the date a money judgment is satisfied

in full or in part is the earliest of the

following times:

...

(1) The date satisfaction is actually

received by the judgment creditor.

(2) The date satisfaction is tendered to the

judgment creditor or deposited in court for

the judgment creditor.

(3) The date of any other performance that

has the effect of satisfaction.

The Garbers argue that the trustee’s distribution to National

Union pursuant to the Order of the Bankruptcy court constitutes a

tender of satisfaction, notwithstanding that the distributed

funds were to be held in trust by National Union until the

Bankruptcy Court resolved the Garbers’ motion for

reconsideration. The Garbers further contend that the Bankruptcy

Court found that the purpose of the distribution was to satisfy

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the judgment in the Bond Case.

The record before the court is persuasive that National

Union moved for and received the distribution of the proceeds of

the sale of the Pacific Grove property to satisfy the Bond Case

judgment. Therefore, the court concludes that National Union

considered that the judgment in the Bond Case had been satisfied

when it received that distribution, a conclusion that is

consistent with National Union’s representations to the Ninth

Circuit and to this court.

The Garbers argue that the California Uniform Fraudulent

Transfer Act, California Civil Code §§ 3439 et seq., does not

provide for attorneys’ fees and “does not even provide for an

award of damages against the judgment debtor, although it does

provide for an award of damages against the transferee in certain

instances.” In so asserting, the Garbers refer to Section

3439.08(c)(“If the judgment under subdivision (b) is based upon

the value of the asset transferred, the judgment shall be for an

amount equal to the value of the asset at the time of the

transfer, subject to adjustment as the equities may require.”). 

The Garbers contend that the judgment debtor is not usually a

party to an action under the Uniform Fraudulent Transfer Act and

contend that “if attorneys fees could be recovered against

judgment debtors in such fraudulent transfer actions, then the

time requirements under Section 685.070(b) could arguably be

evaded, even though the California legislature specifically

included such requirements as a condition and quid pro quo to the

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simplified method for establishing judgment enforcement costs

against the debtor.” 

The provision in Section 3439.08(c), “subject to adjustment

as the equities may require”, might be construed to allow an

award of attorneys’ fees against the Garbers. However, Section

3439.08 pertains to the transferee only and not the debtor. 

There is no basis to impose attorneys’ fees on Betty Ting under

this section of National Union’s motion and, in fact, National

Union conceded in the February 12 Order that this ground for

award of attorneys’ fees did not apply to Betty Ting. 

The court concludes that the Garbers’ arguments for

reconsideration of the ruling in the February 12 Order are welltaken. National Union was required as a matter of California law

to have sought an award of attorneys fees incurred in enforcing

the judgment in the Bond Case by filing such a motion in the Bond

Case. Because National Union did not do so, National Union

cannot obtain attorneys fees based on the underlying judgment in

this action.

2. The Garbers Bad Faith.

The Garbers argue that the court should reconsider its

conclusion that National Union is entitled to attorneys’ fees

against the Garbers under the bad faith exception, contending

that they have not been otherwise sanctioned in this action and

contending that the court cannot base its decision on the

findings of fraudulent intent set forth in the Summary Judgment

Order given the reversal by the Ninth Circuit. The Garbers note

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that this court cannot base an award of fees under the bad faith

exception solely on the fact that this action was one based on

fraudulent conveyances and further note that National Union must

show additional facts to justify application of the bad faith

exception. The Garbers contend:

... [T]he only basis for avoiding the

transfer of real property security interests

was Cal.Civ.Pro. Section 3439.05, which,

unlike Section 3439.04, includes no findings

of intent, fraud, or other specifically

improper dealing. The decision of this

Court, as limited by the Memorandum [of the

Ninth Circuit], is that the transfers of

additional security were for inadequate

consideration by debtors insolvent in 1991

and therefore void.

On the decisional record before this Court at

the present time, Defendants defended

themselves vigorously but unsuccessfully. 

Summary judgment was entered against them on

the basis of inadequate consideration and

insolvency only. Although in the Sanctions

Order, this Court referred to ‘every tactic,

abusive and otherwise, to prevent National

Union from collecting its judgment,’ ...,

neither NU nor the Court can point to any

instance during the course of this litigation

where the Defendants were sanctioned, apart

from the attorneys fee award in the Fee

Order. The Court states that ‘[m]any of the

arguments made by the Garbers, especially in

connection with the motion to dismiss the

counterclaim and third party complaint and

the subsequent appeal, were frivolous.’ ...

However, no sanction was imposed on the

Garbers either in this court or on appeal

with regard to arguments they may have made,

and it should be recalled that at the time

they were in pro per before this Court and on

appeal ... Even assuming such conduct was

sanctionable, the fees normally should be

limited to those incurred in response to the

abusive conduct, unless bad faith extends to

the entire case ... The only other instance

which can be pointed to was the Garbers’

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declining to sign a document voluntarily in

connection with the issue involving corporate

records. It was suggested that the court

order them to sign the document, and the

court declined to do so. They nowhere

refused to obey any court order and did not

violate rules of court.

At bottom, this Court’s excoriation of the

Garbers is based on findings of fraudulent

intent in the Summary Judgment Order. Those

findings cannot be relied upon now. 

Defendants have a right to demonstrate that

they entered into the settlement agreement

with Ting in 1988 for reasons which had

nothing to do with NU. That was the position

which they have always taken. Because this

Court’s judgment under Cal.Civ. Code Section

3439.05 was upheld, those issues are now

basically moot. Awarding attorneys fees for

‘bad faith’ requires a sound evidentiary

basis for taking that extraordinary step.

National Union responds that the court must keep the Ninth

Circuit’s reversals in context:

The Ninth Circuit did not, e.g., conclude

that any of the Court’s factual findings were

erroneous. Additionally, the Ninth Circuit

did not reverse any of the other findings by

the Court. The only portion of this Court’s

summary judgment order which was reversed was

this Court’s actual avoidance of the stock

pledges. The Court’s findings regarding,

e.g., bad faith, dilatory conduct in

connection with National Union’s enforcement

efforts, including this litigation, remain

the Court’s findings, and the Court is free

to continue to rely on these findings in

future matters. The only matter which this

Court cannot do is once again enter summary

judgment on the same issue based on the same

findings. The Ninth Circuit simply found

that it was not proper to enter summary

judgment because of the disputed facts

regarding intent. The Court’s June 7, 2000

order granting the motion for sanctions is a

perfect example. Although the Ninth Circuit

reversed this Court’s ultimate ruling, the

Ninth Circuit went on to specifically state

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that the Court’s findings of fact are not

clearly erroneous.

The Garbers’ broad unfounded assertion that

‘there exist no findings ... of fraudulent

intent’ in the record here is irrelevant and

misleading. The record indicates that all of

the prior findings regarding the defendants’

conduct in this litigation remain the

findings of this Court. That includes

findings of bad faith and conspiracy which

were expressly preserved by the Ninth

Circuit’s conclusion that the factual

findings in the Court’s June 7, 2000 order

are not clearly erroneous. Although the

ultimate judgment against Ting was vacated

and remanded, the following findings from the

order remain in effect:

Moreover, as National Union argues,

the record before the court

establishes that Betty Ting

consciously disregarded her

obligation to preserve the records

after the fraudulent transfer

action was filed. The court

concurs with National Union’s

contention: ... [T]he only

reasonable conclusion is that Ting

in fact consciously disregarded her

obligation to maintain the records

as part of the scheme to defraud

National Union.

... As National Union contended at

oral argument, ... it is not a far

leap to infer that Ting destroyed

these documents as part of the

scheme to defraud National Union of

its ability to collect its judgment

... [T]he court views with great

skepticism any representation by

the Garbers or Ting that they were

acting independently of each other

in this litigation and that they

are not acting in concert to delay

and frustrate National Union’s

ability to prosecute this action in

a timely and efficient manner. 

Therefore, the court concludes from

the record before it that Ting

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acted willfully or in bad faith in

destroying the business records

....

The fact that the Garbers were not previously sanctioned

does not negate any finding by this court of their bad faith. 

The fact that the Garbers were, at some time in this litigation,

proceeding in pro per, also does not negate their bad faith. 

However, the Ninth Circuit’s reversal of summary judgment on the

stock transfers because of the contested evidence on the intent

to defraud National Union persuades the court that it cannot

impose all attorneys’ fees incurred in the Fraudulent Conveyance

Action on the Garbers under the bad faith exception. It can

hardly be bad faith to successfully defend a summary judgment

motion. 

However, the court has no doubt whatsoever that the Garbers

acted deliberately and in bad faith to obstruct and delay

National Union’s attempt to prosecute this action and obtain

satisfaction of the judgment in the Bond Case by asserting

meritless arguments and prosecuting a meritless appeal. 

In reaching this conclusion, the court relies on the 

standards governing such an award. See discussion supra. 

The court concludes that the filing by the Garbers on June

24, 1994 of their Counterclaim and Third Complaint for Damages

against National Union and others, alleging causes of action for

negligence, intentional of emotional distress, declaratory

relief, civil conspiracy, and violation of RICO, was in bad

faith, as was their opposition to the motions to dismiss the

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Counterclaim and Third Party Complaint for Damages. As noted

supra, the court rejected the Garbers’ meritless challenges to

this court’s subject matter jurisdiction over National Union’s

complaint, dismissed the Third Party Complaint against D’Amato &

Lynch for lack of personal jurisdiction and improper service of

process (which motion was unopposed by the Garbers), and ruled

that, with the exception of the counterclaim for declaratory

relief, all of the counterclaims alleged by the Garbers were

compulsory and barred by res judicata because of the allegations

and rulings in the Bond Case, which was conceded by the Garbers. 

The Garbers attempted to overcome this concession by arguing that

they did not know all of the facts during the Bond Case. In

rejecting this argument, the court noted that there was no

allegation that National Union fraudulently concealed these

alleged facts and the absence of any authority that a party’s

alleged ignorance of certain facts has any relevance to a

determination of whether a counterclaim should be considered

compulsory for purposes of Rule 13(a). The court also dismissed

the Third Party Complaint, ruling that the Garbers, by their

failure to oppose the motion, had conceded dismissal and ruling

that the Third Party Complaint failed substantively as well. The

court dismissed the Garbers’ counterclaim for declaratory relief

by which the Garbers prayed for a declaration that the judgment

in the Bond Case was obtained by fraud. The court ruled that the

allegations in the counterclaim for declaratory relief pertained

to the bringing of the Fraudulent Conveyance Action, not the Bond

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Case, improperly challenged the merits adjudicated in the Bond

Case, or involved allegations of fraud occurring in other

unrelated cases. The court also ruled that the counterclaim

involved an allegation concerning the failure to provide in

discovery in the Bond Case the original investor application,

which the Garbers admitted had not been the subject of a motion

to compel in the Bond Case, admitted that their suspicion that

the investor application had been altered was not brought to the

court’s attention in the Bond Case even though they had this

information prior to summary judgment, and admitted that the

introduction of the original investor application in the Bond

Case would not have resulted in a different conclusion in the

Bond Case. The Garbers then appealed the dismissal of their

Counterclaim and Third Party Complaint, which dismissal was

affirmed on appeal.

Therefore, the court awards under the bad faith exception

the attorneys’ fees incurred by National Union in moving for

dismissal of the Garbers Counterclaim and Third Party Complaint,

attending oral argument in connection with those motions, and for

defending the court’s rulings on appeal. This award includes

those attorneys’ fees incurred by the New York law firm of 

D’Amato & Lynch, which acts as general counsel to National Union

in lawsuits and which performed legal services in defending

itself against the Garbers’ Counterclaim and Third Party

Complaint for Damages and for National Union in this litigation. 

This award also includes those attorneys fees incurred by the New

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York law firm of Wilson, Elser, Moskowitz, Edelman & Dicker,

which was retained by National Union to assist in prosecuting

this lawsuit. This award also includes those attorneys’ fees

incurred by the Fresno, California law firm of McCormick,

Barstow, Sheppard, Wayte & Carruth, which was retained by

National Union to prosecute this litigation because of its

bankruptcy expertise. 

Otherwise, the court concludes, National Union is not

entitled to attorneys’ fees from the Garbers under the bad faith 

exception to the American Rule.

3. Substantial Benefit Exception.

In the February 12 Order, the court ruled that National

Union is entitled to an award of the attorneys fees incurred in

the Fraudulent Conveyance Action and the Garbers’ bankruptcy

action against the Garbers and to an award of the fees incurred

in connection with the Ting bankruptcy from Betty Ting under the

“substantial benefit” exception to the American Rule.

The defendants argue that this ruling is invalid because

National Union’s request for attorneys’ fees under this exception

violates the automatic stay and should be addressed to the

respective bankruptcy courts. The defendants contend that this

court’s ruling that is disruptive to the bankruptcy process

because claims of substantial benefit to a bankruptcy estate

amount to a claim for an administrative expense. The Garbers

note that, on September 11, 2002, National Union filed a Request

for Payment of Administrative Expense for Attorneys’ Fees (11

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U.S.C. § 503) in the Garber Bankruptcy, wherein National Union

requested that the trustee pay National Union “a chapter 7

administrative expense claim in the total amount of $359,185.36,

representing attorneys’ fees and costs incurred in connection

with an action to avoid various transfers as fraudulent, which

had the effect of bringing in excess of $500,000 into this

otherwise no-asset estate.” The Garbers note that National

Union’s Motion for Attorneys’ Fees filed in the Fraudulent

Conveyance Action in 2000 was filed without notice to either

bankruptcy estate. The Garbers contend that the Motion for

Attorneys’ Fees “certainly constituted an ‘act to ... exercise

control over property of the estate,’ even though there was no

authority from the bankruptcy court to do so.” 

National Union responds that it obtained relief from the

automatic stays in both bankruptcy cases in order to pursue the

Fraudulent Conveyance Action to judgment. National Union notes

that the Complaint in the Fraudulent Conveyance Action prays for

attorneys’ fees. Furthermore, there is no evidence that National

Union is relying on attorneys’ fees order in this action in order

to obtain some advantage in either of the bankruptcy proceedings.

However, since these motions were argued and taken under

submission, National Union has received attorneys’ fees from the

Bankruptcy Court in the Garbers’ bankruptcy in the amount of

$139,015.25 as an administrative expense pursuant to 11 U.S.C. §

503. The Garbers appealed the award of this administrative

expense to this court in No. CV-F-04-6040 REC. By Opinion filed

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on January 24, 2006, the award by the Bankruptcy Court was

affirmed. Therefore, the court concludes that National Union’s

request for attorneys’ fees incurred in the Garbers’ bankruptcy

in the instant action is no longer appropriate because National

Union has been awarded the attorneys’ fees by the Bankruptcy

Court.

The court further concludes that National Union should move

for attorneys’ fees incurred in connection with the Ting

bankruptcy from the Bankruptcy Court. 

Therefore, the court does not award attorneys’ fees incurred

by National Union in connection with these bankruptcies

E. Reasonableness of Fees.

The calculation of the attorneys’ fees award is governed by

state law, a point made by National Union. California applies

the “lodestar” method for determining reasonable attorneys’ fees. 

See PLCM Group, Inc. v. Drexler, 22 Cal.4th 1084, 1095-1096

(2000)(citing cases from 1985 and 1995).

Rule 54-293(b)(4), Local Rules of Practice requires an

affidavit of counsel in support of the motion showing “the

information pertaining to each of the criteria set forth in

subsection (c) of this Rule ....” Rule 54-293(c) provides:

(c) Criteria for Award. In fixing an award

of attorneys’ fees in those actions in which

such an award is appropriate, the Court will

consider the following criteria:

(1) the time and labor required of counsel;

(2) the novelty and difficulty of the

questions presented;

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(3) the skill requisite to perform the legal

service properly;

(4) the preclusion of other employment by

counsel because of the acceptance of the

action;

(5) the customary fee charged in matters of

the type involved;

(6) whether the fee contracted between the

attorney and the client is fixed or

contingent;

(7) any time limitations imposed by the

client or the circumstances;

(8) the amount of money, or the value of the

rights involved, and the results obtained;

(9) the experience, reputation and ability of

counsel;

(10) the ‘undesirability’ of the action;

(11) the nature and length of the

professional relationship between the

attorney and the client;

(12) awards in similar actions; and 

(13) such other matters as the Court may deem

appropriate under the circumstances.

In Hensley v. Eckerhart, 461 U.S. 424 (1983), the Supreme Court

stated that "[t]he most useful starting point for determining the

amount of a reasonable fee is the number of hours reasonably

expended on the litigation multiplied by a reasonable hourly

rate." Id. at 433. This resulting figure is known as the

lodestar. Although there is a strong presumption that the

lodestar represents a reasonable fee, Burlington v. Dague, 505

U.S. 557, 562 (1992), the district court has the discretion to

exclude from the initial fee calculation hours that were not

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reasonably expended, for example, cases that are overstaffed. 

Furthermore, the Supreme Court in Hensley held:

Counsel for the prevailing party should make

a good faith effort to exclude from a fee

request hours that are excessive, redundant,

or otherwise unnecessary, just as a lawyer in

private practice ethically is obligated to

exclude such hours from his fee submission. 

'In the private sector, "billing judgment" is

an important component in fee setting. It is

no less important here. Hours that are not

properly billed to one's client also are not

properly billed to one's adversary pursuant

to statutory authority.' ....

Id. at 434. The fee applicant bears the burden of documenting

the appropriate hours expended in the litigation and must submit

evidence in support of those hours worked. Id. at 433, 437. The

party opposing the fee application has a burden of rebuttal that

requires submission of evidence to the district court challenging

the accuracy and reasonableness of the hours charged or the facts

asserted by the prevailing party in its submitted affidavits. 

Blum v. Stenson, 465 U.S. 886, 892 n.5 (1984); Toussaint v.

McCarthy, 826 F.2d 901, 904 (9th Cir. 1987).

1. Betty Ting.

As discussed supra, the court awards attorneys’ fees

incurred by National Union in bringing and arguing the motion for

a sanction for spoliation of evidence. 

From the court’s review of the billing records submitted

with the Declaration of Scott M. Reddie of McCormick, Barstow

filed on July 7, 2000 the amount of attorneys’ fees incurred by

National Union in bringing and arguing the motion for spoliation

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of evidence is $1,635.00. From the court review of the

Declaration of Laurie Beatus of D’Amato & Lynch filed on July 7,

2000, the amount of attorneys’ fees incurred by National Union in

bringing and arguing the motion for spoliation of evidence is

$471.50. Therefore, the total amount of attorneys’ fees incurred

by National Union with regard to the motion for spoilation of

evidence in $2,106.50.

The court concludes that National Union has appropriately

documented the hours expended by counsel. Ting argues that the

court should not award attorneys’ fees for work done by D’Amato &

Lynch because of its supervisory role in this litigation and

because of duplication of effort. In this litigation, however,

the court rules that the supervision and consultation between

D’Amato & Lynch and McCormick, Barstow was necessary given the

complexity and duration of the litigation, particularly with

regard to the delay in hearing the motion because of Ting’s

intervening bankruptcy. The court further concludes that number

of hours expended in connection with the motion for spoliation of

evidence was reasonable.

The court further rules that the hourly rates charged by the

various attorneys and paralegals who worked on the motion for

spoliation of evidence are reasonable and reflect the hourly

rates generally charged in the Eastern District of California by

attorneys of similar experience and background. 

b. The Garbers.

As discussed supra, the court awards under the bad faith

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exception the attorneys’ fees incurred by National Union in

moving for dismissal of the Garbers Counterclaim and Third Party

Complaint, attending oral argument in connection with those

motions, and for defending the court’s rulings on appeal. 

From the court’s review of the Declarations of Scott Reddie

and Laurie Beatus filed on July 7, 2000, the amount of these

attorneys’ fees are as follows: (1) Wilson, Elser, Moskowitz,

Edelman & Dicker - $4,496.25; (2) D’Amato & Lynch - $7,954.50;

(3) McCormick, Barstow - $14,001.50. The total amount of

attorneys’ fees incurred by National Union with these matters was

$26,452.25.

The court concludes that these fees are appropriately

documented and again rejects the contention that the award should

be reduced to the extent that D’Amato & Lynch acted in a

supervisory role. The supervision and consultation between

D’Amato & Lynch and McCormick, Barstow was necessary given the

complexity and duration of the litigation, particularly seeing

that the Garbers named D’Amato & Lynch in their Counterclaim and

Third Party Complaint for Damages. The court further rules that

the hourly rates charged by the various attorneys and paralegals

who worked on the motion for spoliation of evidence are

reasonable and reflect the hourly rates generally charged in the

Eastern District of California by attorneys of similar experience

and background. 

ACCORDINGLY:

1. National Union’s Updated Motion for Attorneys’ Fees is

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granted in part and denied in part.

2. National Union is awarded attorneys’ fees against Betty

Ting in the amount of $2,106.50.

3. National Union is awarded attorneys’ fees against

Chester Garber and Emilia Garber in the amount of $26,452.25.

IT IS SO ORDERED.

Dated: July 13, 2006 /s/ Robert E. Coyle 

668554 UNITED STATES DISTRICT JUDGE

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