Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02490/USCOURTS-cand-3_05-cv-02490-7/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

BRAE ASSET FUNDING, L.P.,

Plaintiff,

 v.

APPLIED FINANCIAL, LLC and APPLIED

FINANCIAL OF MICHIGAN, L.P.,

Defendants &

Counterclaimants,

 v.

BRAE ASSET FUNDING, L.P. and

GREATER BAY EQUIPMENT FINANCE, 

Counterclaim Defendants. /

No. C 05-02490 WHA

ORDER GRANTING MOTION

FOR ATTORNEY’S FEES AND

VACATING HEARING

INTRODUCTION

In this contract dispute, by prior order dated August 14, 2006, summary judgment was

entered in favor of plaintiff and counterclaim defendants and against defendants and

counterclaimants. Plaintiff and counterclaim defendant Brae Asset Funding, L.P. and

counterclaim defendant Greater Bay Equipment Finance now move for attorney’s fees and

costs. For the reasons stated below, the motion is GRANTED.

STATEMENT

The August 14 order detailed the factual and procedural background of this action. See

Brae Asset Funding, L.P. v. Applied Fin., LLC, No. C 05-02490 WHA, 2006 WL 2355474, at

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For the Northern District of California

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*1–*4 (N.D. Cal. Aug. 14, 2006). The action arose out of a fraud perpetrated by corporate

officers at Cyberco Holdings, Inc. Cyberco executives had fraudulently misrepresented

Cyberco’s financial condition to various lenders. Defendants Applied Financial, LLC

(“Applied Financial”) and Applied Financial of Michigan, through a predecessor, had leased

computer hardware to Cyberco. In February 2003, the lease and property were transferred to

counterclaim defendant Greater Bay Equipment Finance, with Applied Financial of Michigan

representing in a security agreement that the property had been delivered to and accepted by

Cyberco. Furthermore, Applied Financial unconditionally guaranteed the accuracy and

completeness of Applied Financial of Michigan’s representations and warranties. 

Greater Bay attempted to inspect the assets several times. The assets were never found. 

Greater Bay sold its interest in the agreements to plaintiff Brae Asset after initiation of the

instant action. The complaint contended that Applied Financial and Applied Financial of

Michigan breached their agreements and guaranty, which had vouched for the existence of the

leased property. The complaint also included claims of intentional misrepresentation, negligent

misrepresentation, fraudulent non-disclosure, and recission. Defendants counterclaimed that

Greater Bay and Brae Asset had not used reasonable care to preserve collateral, and that

defendants were entitled to payments from Greater Bay and Brae Asset under the contract.

The August 14 order disposed of several simultaneous motions for summary judgment

filed by the parties. Plaintiff moved for summary judgment on its breach-of-contract claims. 

Plaintiff also moved for summary judgment on the counterclaims. Those motions were granted. 

Defendant Applied Financial moved for summary judgment on the complaint’s claims, but not

the counterclaims. That motion was denied. Plaintiff’s claims for intentional

misrepresentation, fraudulent non-disclosure, and negligent misrepresentation were dismissed

by subsequent stipulation of the parties. Also by stipulation of the parties, judgment was

entered on September 15. The judgment required defendants Applied Financial, LLC and

Applied Financial of Michigan, L.P. to pay plaintiff Brae Asset Fund $282,685.92 in general

damages. The stipulated judgment reserved the parties’ rights to appeal of the substance of the

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For the Northern District of California

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order granting plaintiff’s motions for summary judgment and denying defendant’s motion. 

Defendants’ appeal is now pending before the Ninth Circuit.

Plaintiff and counterclaim defendants now move for attorney’s fees pursuant to the

security agreement and guaranty entered into by the parties. 

ANALYSIS

The parties’ agreements and the guaranty have choice-of-law provisions providing that

they are governed by Utah state law. “An award of attorneys’ fees incurred in a suit based on

state substantive law is generally governed by state law.” Champion Produce, Inc. v. Ruby

Robinson Co., 342 F.3d 1016, 1024–25 (9th Cir. 2003). In Utah, parties are entitled to

attorney’s fees and costs only if authorized by statute or by contract. See Dixie State Bank v.

Bracken, 764 P.2d 985, 988 (Utah 1988). 

Paragraph 5 of the security agreement entered into by Greater Bay and Applied

Financial of Michigan states: “[Greater Bay Equipment Finance] shall be entitled to obtain

reimbursement for all reasonable costs, attorneys’ fees and legal expenses incurred by it in

repairing the Property, in collecting the Indebtedness and otherwise exercising such rights and

remedies under this Agreement and the Note, which shall be considered additional Indebtedness

hereunder” (June 22 Garecht Exh. A at 3). The guaranty made by Applied Financial also states:

“In the event of any action to enforce this Guaranty, the prevailing party shall be entitled to

recover all costs and expenses, including attorneys fees” (June 22 Garecht Exh. B at 2).

Plaintiff and counterclaim defendants are plainly entitled to attorney’s fees because they

prevailed on their claims of (1) breach of the security agreement by Applied Financial of

Michigan and (2) breach of the guaranty by Applied Financial. Defendants contend that

plaintiff was only “partially successful” and, therefore, that the request for fees is unreasonable

(Opp. 7). This is untrue. The August 14 order ruled against defendants on the contract claims. 

It left for trial plaintiff’s claims for intentional misrepresentation, fraudulent nondisclosure, and

negligent misrepresentation. Those claims were ultimately dropped. That plaintiff eliminated

certain claims for relief from its complaint does not mean plaintiff was only partially successful. 

As of January 10, 2005, there was $258,022.25 remaining due on the lease (June 22 Garecht

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Decl. ¶ 12). Judgment in the amount of $282,685.92 was awarded against defendants in favor

of plaintiff (Docket No. 81). It is clear that for Brae Asset, which recovered all of the

outstanding amount due on the lease, victory in this action was complete.

Defendants claim that movants filed their motion in violation of Civil Local Rule 54-1. 

Rule 54-1 requires parties seeking costs to file a bill of costs within fourteen days of entry of

judgment. The instant motion for attorney’s fees, however, was filed pursuant to Civil Local

Rule 54-6 and Federal Rule of Civil Procedure 54(d)(2), which govern motions for attorney’s

fees. Plaintiffs correctly point out that defendant’s own authority supports the conclusion that

seeking recovery of costs under a contractual attorney’s fees provision is an alternative means

to recover costs. See LeBlanc-Sternberg v. Fletcher, 143 F.3d 748, 763 (2d Cir. 1998)

(“[A]ttorney’s fees awards include those reasonable out-of-pocket expenses incurred by

attorneys and ordinarily charged to their clients.”). The request for inclusion of costs in the

motion for attorney’s fees is appropriate. 

Moreover, it appears that it was in fact defendants who violated the local rules. Under

Civil Local Rule 54-6, “[c]ounsel for the respective parties must meet and confer for the

purpose of resolving all disputed issues relating to attorney’s fees before making a motion for

award of attorney’s fees.” By letter dated August 15, 2006, plaintiff’s counsel informed defense

counsel of its intent to seek attorney’s fees. No response was received. Plaintiff’s counsel

followed up with another letter on August 25. Defense counsel responded by e-mail on

August 30, indicating a willingness to meet and confer but requesting that plaintiff’s counsel set

a date for the meeting. Plaintiff’s counsel’s attempts to reach defense counsel to set a mutually

convenient date and time were apparently “fruitless.” By e-mail dated October 11, 2006,

plaintiff’s counsel again informed defense counsel that “the District Court’s guidelines require

that we attempt to meet and confer.” By reply e-mail dated October 12, counsel for defendants

responded: “At this point, my client has advised that they are instructing me to oppose the

amount of the fees and costs as disproportionate and unreasonable. Other than that they haven’t

had too much else to add” (Tiemstra Decl. ¶¶ 21–24; Tiemstra Exhs. C–F). 

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Despite plaintiffs’ repeated attempts to meet and confer, it is clear that defendants and

their counsel unreasonably stonewalled plaintiffs. It is remarkable that defendants and their

counsel, whom this Court already described as having “blatantly sandbagged” plaintiff, would

engage in further dilatory litigation tactics. See Brae Asset Funding, L.P., 2006 WL 2355474,

at *4–*5. Defendants and defense counsel’s unwillingness to follow the Court’s rules will

likely end up costing them more in attorney’s fees than they would have paid had they simply

played fair.

This order finds that movants are entitled to attorney’s fees pursuant to the terms of the

security agreement and guaranty. 

CONCLUSION

Accordingly, plaintiff and counterclaim defendants motion for attorney’s fees is

GRANTED. An accompanying order will explain the procedure for determining the amount of

fees awarded. The hearing on this motion, currently scheduled for December 7, 2006, is hereby

VACATED.

IT IS SO ORDERED.

Dated: December 4, 2006 

WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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