Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-01591/USCOURTS-casd-3_11-cv-01591-8/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

JOHN T. HARDISTY, 

 Plaintiff, 

Case No. 11-cv-01591-BAS(BLM) 

ORDER DENYING PLAINTIFF’S 

MOTION FOR ATTORNEYS’ 

FEES AND COSTS 

(ECF No. 215) 

 v. 

MELANIE MOORE, ET AL.,

 Defendants. 

AND RELATED COUNTERCLAIM 

Presently before the Court is a motion for attorneys’ fees and costs pursuant to 

California Civil Code section 1717 and Federal Rule of Civil Procedure 54(d)(1) filed 

by plaintiff John Hardisty (“Plaintiff” or “Hardisty”). (ECF No. 215.) Defendants 

Elaine K. Moore aka Melanie Moore (“Melanie Moore”), Harold M. Moore (“Hal 

Moore”),1

 State Insulation, LLC, an Arizona limited liability company (“State 

Insulation-Arizona”), State Insulation, LLC, a Nevada limited liability company 

 

1

 Melanie Moore, in her capacity as the executrix and the party 

representative of the estate of Harold M. Moore, has been substituted as a defendant 

and a counterclaimant in this action in place of Harold M. Moore. (See ECF No. 231.)

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(“State Insulation-Nevada”) (collectively “State Insulation”), The 1998 Harold M. 

Moore Revocable Trust (the “Trust”), and Mark Peluso (collectively “Defendants”) 

oppose. (ECF No. 221.) 

The Court finds this motion suitable for determination on the papers submitted 

and without oral argument. See Civ. L.R. 7.1(d)(1). For the following reasons, 

Plaintiff’s motion for attorneys’ fees and costs (ECF No. 215) is DENIED. 

I. BACKGROUND2

A. Procedural History 

In the operative Third Amended Complaint (“TAC”), in 107 pages, Plaintiff 

alleges “massive and systemic financial fraud” by Defendants during the construction 

of an apartment project funded by the Department of Housing and Urban 

Development in Knoxville, Tennessee and asserts ten causes of action. (See ECF No. 

34 at p. 1.) On October 9, 2012, the Court granted Hal Moore’s motion to dismiss the 

first and tenth causes of action with prejudice, and also granted a motion by 

Defendants to strike any RICO allegations. (ECF No. 39.) On November 14, 2012, 

Hal Moore filed a Counterclaim against Hardisty for fraud and negligent 

misrepresentation. (ECF No. 40.) On March 18, 2014, the Court granted Defendants’ 

motion for summary judgment with respect to the fifth cause of action for quiet title, 

the eighth cause of action for abuse of process, as well as partial summary judgment 

on the remaining causes of action. (ECF No. 80.) On September 9, 2014, Hal Moore 

filed a Notice of Acceptance of Offer of Judgment. (ECF No. 130.) Pursuant to 

Federal Rule of Civil Procedure 68, Counter-Plaintiff Hal Moore accepted CounterDefendant Hardisty’s offer to allow entry of judgment on the Counterclaim. (Id.) 

The following remained for trial: (1) the second cause of action for aiding and 

abetting intentional torts against Melanie Moore, State Insulation, the Moore Trust, 

and Mark Peluso; (2) the third cause of action for fraud against Hal Moore, Melanie 

 

2

 The Court incorporates its Amended Findings of Fact and Conclusions of 

Law filed on October 22, 2015 (ECF No. 236) for purposes of this motion. 

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Moore, State Insulation, and the Moore Trust; (3) the fourth cause of action for 

constructive fraud against Hal Moore and Melanie Moore; (4) the sixth cause of action 

for securities fraud under California Business and Professions Code § 25401 et seq. 

against Hal Moore; (5) the seventh cause of action for conversion against Hal Moore, 

Melanie Moore, State Insulation, and the Moore Trust; and (6) the ninth cause of 

action for conspiracy against Hal Moore, Melanie Moore, State Insulation, and the 

Moore Trust. Each of the remaining causes of action was limited to allegations arising 

from Hardisty’s transfer of his 27% membership interest in Legacy Pointe to Hal 

Moore. In a supplemental ruling on Defendants’ motion for summary judgment, the 

Court agreed to also consider allegations arising from Hardisty’s additional transfer 

of his 5% ownership interest as a 50% owner of Munson-Hardisty, LLC, as well as an 

amount of $380,000 allegedly owed by Hal Moore to Hardisty upon completion of the 

Project. 

This matter was set for a bench trial. Trial took place on September 16-19, 

2014, December 9, 2014, and January 27-29, 2015. In its Findings of Facts and 

Conclusions of Law, the Court ruled in favor of Defendants on the fourth cause of 

action for constructive fraud, the sixth cause of action for securities fraud, and the 

seventh cause of action for conversion. (ECF Nos. 208, 236.) The Court further ruled 

in favor of defendants Mark Peluso and the Moore Trust on all causes of action alleged 

against them. (Id.) After reconsideration, the Court also ruled in favor of defendant 

State Insulation-Nevada on all causes of action alleged against the company. (ECF 

No. 236.) The Court found the Purchase and Sale Agreement was void, and awarded 

a measure of tort damages against Hal Moore, Melanie Moore, and State InsulationArizona in the amount of $675,101.66 for the fraud. (Id. at pp. 22-27.) Based on the 

settlement of the Counterclaim, the Court also entered judgment against Hardisty and 

in favor of Hal Moore in the amount of $750,000, the sum to be paid from the funds 

deposited in the Interpleader Action. (Id. at p. 29; ECF No. 236 at pp. 28-29.) 

/// 

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II. LEGAL STANDARD 

Federal courts follow the “American Rule,” under which each party to a lawsuit 

bears his or her own attorney’s fees, regardless of the outcome, unless there is express 

statutory authorization to the contrary. See Hensley v. Eckerhart, 461 U.S. 424, 429 

(1983); Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008). 

California also follows the “American Rule,” which is codified in California Code of 

Civil Procedure section 1021. Musaelian v. Adams, 45 Cal. 4th 512, 516 (2009); Cal. 

Code Civ. Proc. § 1021. The parties agree California law should be used to interpret 

the contractual fees provision in this case. See Resolution Trust Corp., v. Midwest 

Fed. Sav. Bank of Minot, 36 F.3d 785, 800 (9th Cir. 1993); see also Exhibit 93 at ¶ 10. 

Section 1717(a) of the California Civil Code provides: 

In any action on a contract, where the contract specifically provides that 

attorney’s fees and costs, which are incurred to enforce that contract, 

shall be awarded either to one of the parties or to the prevailing party, 

then the party who is determined to be the party prevailing on the 

contract...shall be entitled to reasonable attorney’s fees in addition to 

other amounts. 

Cal. Civ. Code § 1717(a). Three conditions must be met before section 1717 applies. 

In re Penrod, No. 13-16097, ---F.3d----, 2015 WL 5730425, at *3 (9th Cir. Oct. 1, 

2015). “First, the action in which the fees are incurred must be an action ‘on a 

contract,’ a phrase that is liberally construed.” Id. (citation omitted). “Second, the 

contract must contain a provision stating that attorney’s fees incurred to enforce the 

contract shall be awarded either to one of the parties or to the prevailing party.” Id. 

“And third, the party seeking fees must be the party who ‘prevail[ed] on the contract,’ 

meaning . . . ‘the party who recovered a greater relief in the action on the contract.’” 

Id. (quoting Cal. Civ.Code § 1717(b)(1)). 

 “Ordinarily, in an action on a contract providing for an award of attorney fees, 

Civil Code section 1717 entitles the prevailing party to attorney fees, even when the 

party prevails on the ground that the contract is inapplicable, invalid, unenforceable, 

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or nonexistent, if the other party would have been entitled to attorney fees had it 

prevailed.” Yuba Cypress Hous. Partners, Ltd. v. Area Developers, 98 Cal. App. 4th 

1077, 1081 (2002) (citing Hsu v. Abbara, 9 Cal. 4th 863, 870 (1995)). “This general 

rule ‘serves to effectuate the purpose underlying section 1717,’ which was enacted to 

establish mutuality of remedy where a contractual attorney fee clause makes recovery 

of fees available for only one party.” Id. (quoting Hsu, 9 Cal. 4th at 870)). California 

courts recognize an exception to this rule where the contract is held unenforceable 

because of illegality. Id. at 1081-82 (citing Geffen v. Moss, 53 Cal. App. 3d 215, 227 

(1975); Bovard v. Am. Horse Enters., Inc., 201 Cal. App. 3d 832, 843 (1988)). 

III. DISCUSSION 

 A. California Civil Code Section 1717 

1. Attorney’s Fees Provision 

The Purchase and Sale Agreement contains the following provision: 

If it shall be necessary for Buyer or Seller to institute legal proceedings 

regarding this Agreement, the party prevailing in any such proceeding 

shall be entitled . . . to a reasonable sum for attorney’s fees. 

(Exhibit 93 at ¶ 11.) The Court finds this attorney’s fee provision is subject to section 

1717, and turns to examine whether this is an “action on a contract.” 

2. Action “On A Contract” 

Section 1717(a) only applies to an “action on a contract.” Cal. Civ. Code § 

1717(a); see also In re Penrod, ---F.3d----, 2015 WL 5730425, at *3; Topanga & 

Victory Partners v. Toghia, 103 Cal. App. 4th 775, 780 (2002). “[A]n action founded 

solely in contract which determines the enforceability of a contract is an ‘action on a 

contract’ within the purview of section 1717.” Star Pac. Invs., Inc. v. Oro Hills Ranch, 

Inc., 121 Cal. App. 3d 447, 460 (1981). A tort action for fraud arising out of a contract, 

however, is “not an ‘action on a contract’ within the meaning of section 1717 so as to 

permit an award of attorney fees.” Id. (citing Stout v. Turner, 22 Cal. 3d 718, 730 

(1978)); see also Super 7 Motel Assocs. v. Wang, 16 Cal. App. 4th 541, 549-50 (2003) 

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(action for fraud seeking damages sounds in tort even though the underlying 

transaction in which the fraud occurred involved a contract containing an attorney fee 

clause). 

“Fraud (in the form of intentional misrepresentation) may provide a basis for a 

remedy in either a tort action or in a contract action.” Star Pac. Invs., Inc., 121 Cal. 

App. 3d at 461. When a plaintiff contracts in reliance upon the fraud of a defendant, 

the plaintiff “may elect either the contract remedy, consisting of restitution based on 

rescission or the tort remedy, by affirming the contract and seeking damages.” Id. 

Thus, “where the plaintiff’s claim . . . seeks rescission based on fraud, the courts have 

concluded such claim does sound in contract and permits the award of fees,” Super 7 

Motel Assocs., 16 Cal. App. 4th at 549, but where a plaintiff seeks money damages 

for the fraud, courts have concluded such a claim does not sound in contract and no 

fee award is permitted, In re Baroff, 105 F.3d 439, 443 (9th Cir. 1997). “An action to 

avoid or rescind an agreement because of fraudulent inducement . . . is an action on a 

contract within the meaning of section 1717.” In re Baroff, 105 F.3d at 443 (citing 

Star Pac. Invs., Inc., 121 Cal. App. 3d at 461); see also In re Penrod, ---F.3d----, 2015 

WL 5730425, at *3 (an action is “on a contract” when a party seeks to “avoid 

enforcement” of the provisions of the contract); Exxess Electronixx v. Heger Realty 

Corp., 64 Cal. App. 4th 698, 710-11 (1998) (an action “that seeks to establish the 

parties’ rights under a contract is an action sounding in contract”). 

California courts construe the term “on a contract” liberally. Eden Twp. 

Healthcare Dist. v. Eden Med. Ctr., 220 Cal. App. 4th 418, 426 (2013); see also In re 

Tobacco Cases I, 193 Cal. App. 4th 1591, 1601 (2011) (interpreting section 1717 

narrowly “is impermissible under California law and antithetical to the Legislature’s 

intent of ensuring reciprocity of remedy”). “The phrase ‘action on a contract’ includes 

not only a traditional action for damages for breach of a contract containing an 

attorney fees clause, but also any other action that ‘involves’ a contract under which 

one of the parties would be entitled to recover attorney fees if it prevails in the action.” 

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Id. (internal citations omitted). 

In determining what actions and causes of actions are deemed to be “on a 

contract” for purposes of section 1717, the following factors are relevant: “the pleaded 

theories of recovery, the theories asserted and the evidence produced at trial, if any, 

and also any additional evidence submitted on the motion in order to identify the legal 

basis of the prevailing party’s recovery.” Hyduke’s Valley Motors v. Lobel Fin. Corp., 

189 Cal. App. 4th 430, 435 (2010) (citation omitted). “Whether an action is based on 

contract or tort depends upon the nature of the right sued upon, not the form of the 

pleading or relief demanded. If based on breach of promise it is contractual; if based 

on breach of a noncontractual duty it is tortious. If unclear the action will be 

considered based on contract rather than tort.” Kangarlou v. Progressive Title Co., 

Inc., 128 Cal. App. 4th 1174, 1178–79 (2005) (citations omitted); see also Eden Twp. 

Healthcare Dist., 220 Cal. App. 4th at 426 (“[T]he proper focus is not on the nature 

of the remedy, but on the basis of the cause of action.”); Hyduke’s Valley Motors, 189 

Cal. App. 4th at 436 (mere fact a complaint pleads a breach of contract is not 

dispositive). 

 a. Relief Sought By Plaintiff

The TAC, in 107 pages, alleges “massive and systemic financial fraud” by 

Defendants comprising a series of transactions and involving a variety of written 

contracts, oral agreements, alleged duties, and broken promises. Plaintiff asserts the 

following causes of action: (1) breach of specific promise to answer for the debt of 

another; (2) aiding and abetting intentional torts; (3) fraud; (4) constructive fraud; (5) 

quiet title; (6) material misrepresentation in purchase and sale of a security; (7) 

conversion; (8) abuse of process; (9) conspiracy; and (10) federal securities fraud. In 

the TAC, Plaintiff seeks money damages for the alleged fraud, rescission of several 

contracts in order to undue the sale of Plaintiff’s 27% membership interest in Legacy 

Pointe, to quiet title to that 27 percent interest, as well as Munson-Hardisty, LLC’s 

10% interest in Legacy Pointe, in Plaintiff and Munson-Hardisty, LLC, an accounting, 

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a constructive trust in connection with the proceeds of Defendants’ ill-gotten gains 

and unjust enrichment, exemplary damages, and “such other and further relief as the 

Court deems just and proper.” (TAC at pp. 105-106 (Prayer).) 

Plaintiff alleges fraud with respect to several contracts, but the Purchase and 

Sale Agreement contains the relevant attorney’s fees provision, therefore the Court 

will only look at causes of action involving that contract. In the TAC, Plaintiff alleges 

Defendants fraudulently induced Plaintiff into entering the Purchase and Sale 

Agreement by means of material misrepresentations or omissions.3

 Plaintiff further 

alleges that Hal Moore breached a promise to Plaintiff and wrongfully deprived him 

of his 27% membership interest in Legacy Pointe by means of the fraudulent Purchase 

and Sale Agreement, and seeks to quiet title over the ownership of his 27% 

membership interest, which he alleges was obtained by virtue of Defendants’ fraud.4

 

Lastly, Plaintiff alleges Defendants abused the judicial process by initiating the Bond 

Action, which was made possible by virtue of the Purchase and Sale Agreement.5

 

For purposes of determining whether Plaintiff is entitled to attorney’s fees under 

section 1717, the Court must disregard Plaintiff’s tort claims. See Brown Bark III, 

L.P. v. Haver, 219 Cal. App. 4th 809, 820 (2013) (“The court must disregard any tort 

claims included in the action when determining whether section 1717 applies.”). In 

the TAC, Plaintiff seeks tort damages with respect to his fraud causes of action, as 

well as his aiding and abetting, conspiracy, abuse of process, conversion, and breach 

of specific promise causes of action. (See TAC at ¶¶ 190, 204, 242-244, 255-256, 

306, 312-314.) However, Plaintiff seeks to rescind the Purchase and Sale Agreement 

with respect to his securities fraud causes of action. (See id. at ¶¶ 292-293, 339-340, 

 

3

 See TAC at ¶¶ 128-139; 229-234, 237-241 (fraud); ¶¶ 251-253 

(constructive fraud); ¶¶ 286-291 (California securities fraud); ¶¶ 333-338 (federal 

securities fraud); ¶¶ 192-203 (aiding and abetting); ¶¶ 308-10 (conspiracy). 

4

 See TAC at ¶ 189 (breach of specific promise to answer for the debt of 

another); ¶¶ 295-297 (conversion); ¶¶ 128-135, 259, 265-267, Prayer (quiet title).

5

 See TAC at ¶¶ 304-306. 

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Prayer.) 

In his motion for attorney’s fees, Plaintiff asserts that this is an action “on a 

contract” because he sought rescission of the Purchase and Sale Agreement in his 

TAC, as well as “such other and further relief as the Court deems just and proper.” 

(ECF No. 215-1 at p. 10.) In response, Defendants argue this is not an “action on a 

contract” because Plaintiff “did not assert a claim for breach of contract, but rather 

asserted a cause of action for fraud and related tort claims.” (ECF No. 221 at pp. 7-

8.) Defendants also argue that because Plaintiff “ultimately elected not to pursue 

rescission of the Purchase and Sale Agreement and instead sought and obtained an 

award of monetary damages for fraud, . . . the nature of Plaintiff’s claim is in tort.” 

(Id. at p. 8, lines 12-20.) 

If the Court were to rely solely on the pleaded theories of recovery in the TAC, 

because Plaintiff sought to rescind the Purchase and Sale Agreement with respect to 

his securities fraud causes of action, these causes of actions would be deemed to be 

“on a contract” for purposes of section 1717. See Super 7 Motel Assocs., 16 Cal. App. 

4th at 549; In re Davison, 289 B.R. 716, 723-24 (B.A.P. 9th Cir. 2003). However, if 

the Court were to look at the pleaded theories of recovery, as well as the theories 

asserted and the evidence produced at trial, as well as all additional evidence submitted 

on motion or trial brief, the Court would have to agree with Defendants that Plaintiff 

ultimately sought only tort remedies and not contract remedies. At all times, Plaintiff 

sought damages on Defendants’ fraud. Although Plaintiff asserted at various times 

that he wanted to rescind the Purchase and Sale Agreement, among other agreements, 

as a result of the fraud, he did not want nor seek return of his 27% membership interest 

in Legacy Pointe, which he claimed was transferred by virtue of that agreement, only 

its value in unjust enrichment or rescission damages,6

 nor did he want to return any of 

 

6

 See Cal. Corp. Code § 25501 (“Upon rescission, a seller may recover the 

security, upon tender of the consideration paid for the security plus interest at the legal 

rate, less the amount of any income received by the defendant on the security.”); ECF 

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the consideration given for the transfer his 27% membership interest.7 

In light of our obligation to construe the phrase “on a contract” liberally, 

however, the Court finds that Plaintiff’s securities fraud claims are “on a contract” for 

purposes of section 1717(a). See Eden Twp. Healthcare Dist., 220 Cal. App. at 426; 

Kangarlou, 128 Cal. App. 4th at 1178; In re Tobacco Cases I, 193 Cal. App. 4th at 

1601. The Court further finds that Plaintiff’s quiet title cause of action is based “on a 

contract” because Plaintiff sought in the TAC to quiet title to the 27% membership 

interest in Legacy Pointe, which he alleged was wrongfully obtained by virtue of the 

fraudulently entered Purchase and Sale Agreement. See Kachlon v. Markowitz, 168 

Cal. App. 4th 316, 348 (2008) (cause of action for quiet title was “on a contract” 

because the claim was based on a contract containing the attorney’s fees provision). 

With respect to Plaintiff’s fraud cause of action, although Plaintiff sought 

damages on a fraud in the inducement theory, the Court found that Plaintiff established 

there was fraud in the inception of the Purchase and Sale Agreement, and therefore 

found the contract to be void and “disregarded without the necessity for rescission.” 

(See ECF No. 236 at p. 22, lines 12-13.) While Plaintiff’s damages theories were 

varied and imprecise, Plaintiff’s arguments and presentation of evidence at trial 

resulted in the Court declaring it void. Accordingly, in light of its obligation to 

construe the phrase “on a contract” liberally, the Court finds Plaintiff’s fraud cause of 

action is also a claim “on a contract” for purposes of section 1717(a). See Eden Twp. 

Healthcare Dist., 220 Cal. App. at 426; Kangarlou, 128 Cal. App. 4th at 1178; In re 

Tobacco Cases I, 193 Cal. App. 4th at 1601; Super 7 Motel Assocs., 16 Cal. App. 4th 

at 549. The Court therefore turns to the question of whether Plaintiff was the 

 

No. 152 at p. 7 (“Thus, to the extent rescission would apply under this count, the Court 

should utilize its discretion, as a matter of equity, to award a rescissionary measure of 

damages instead.”). 

7

 Plaintiff argued that he did not give any consideration for the transfer of 

his 27% membership interest in Legacy Pointe. After a bench trial, the Court 

disagreed. 

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prevailing party on these claims. 

3. Prevailing Party 

Pursuant to section 1717(b)(1), “[t]he court, upon notice and motion by a party, 

shall determine who is the party prevailing on the contract for purposes of this 

section.” Cal. Civ. Code § 1717(b)(1). “[T]he party prevailing on the contract shall 

be the party who recovered a greater relief in the action on the contract. The court 

may also determine that there is no party prevailing on the contract for purposes of 

[section 1717].” Id. 

“Typically, a determination of no prevailing party results when both parties 

seek relief, but neither prevails, or when the ostensibly prevailing party receives only 

a part of the relief sought.” Hsu, 9 Cal. 4th at 875 (quoting Deane Gardenhome Ass’n. 

v. Denktas, 13 Cal. App. 4th 1394, 1398 (1993)). “By contrast, when the results of 

the litigation on the contract claims are not mixed—that is, when the decision on the 

litigated contract claims is purely good news for one party and bad news for the 

other—the Courts of Appeal have recognized that a trial court has no discretion to 

deny attorney fees to the successful litigant. Thus, when a defendant defeats recovery 

by the plaintiff on the only contract claim in the action, the defendant is the party 

prevailing on the contract under section 1717 as a matter of law.” Id. at 875-76. 

“Similarly, a plaintiff who obtains all relief requested on the only contract claim in the 

action must be regarded as the party prevailing on the contract for purposes of attorney 

fees under section 1717.” Id. at 876. 

In Hsu, the California Supreme Court held that: 

in deciding whether there is a “party prevailing on the contract,” the 

trial court is to compare the relief awarded on the contract claim or 

claims with the parties’ demands on those same claims and their 

litigation objectives as disclosed by the pleadings, trial briefs, opening 

statements, and similar sources. The prevailing party determination is 

to be made only upon final resolution of the contract claims and only 

by “a comparison of the extent to which each party ha[s] succeeded and 

failed to succeed in its contentions.” 

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Id. at 876 (citation omitted); see also Berkla v. Corel Corp., 302 F.3d 909, 920 (9th 

Cir. 2002) (“[A] court is entitled to look at more than the issue of liability in 

determining prevailing party status, and to evaluate litigation success in light of the 

party’s overall demands and objectives.”). 

Determination of prevailing party for purposes of contractual attorney fees is to 

be made “without reference to the success or failure of noncontract claims.” Id. at 

873-74. Here, the Court will only look to the success or failure of Plaintiff’s claims 

for fraud, securities fraud, and quiet title, which are the claims the Court has 

determined are “on a contract” for purposes of section 1717. 

On October 9, 2012, the Court granted Hal Moore’s motion to dismiss 

Plaintiff’s federal securities fraud cause of action with prejudice. (ECF No. 39.) On 

March 18, 2014, the Court granted Defendants’ motion for summary judgment on 

Plaintiff’s quiet title cause of action. (See ECF No. 80 at p. 25.)8

 After a bench trial, 

the Court found against Plaintiff and for defendant Hal Moore on Plaintiff’s California 

securities fraud cause of action. (See ECF No. 208 at p. 15; ECF No. 236 at p. 15.)9

 

Following the Court’s order on Defendants’ motion for summary judgment, 

Plaintiff’s fraud claim with respect to the transfer of Plaintiff’s 27% membership 

interest in Legacy Pointe remained for trial. After a bench trial, the Court found 

against defendants Hal Moore and Melanie Moore and in favor of State Insulation and 

the Moore Trust on Plaintiff’s cause of action for fraud. (ECF No. 236 at pp. 11, n. 8, 

12.)10 As to damages, the Court found there was fraud in the inception of the Purchase 

 

8

 The Court also granted Defendants’ motion for summary judgment on 

Plaintiff’s abuse of process claim. (ECF No. 80 at p. 30.) 

9

 The Court also found against Plaintiff and in favor of Defendants on 

Plaintiff’s conversion and constructive fraud claims. (ECF No. 236 at pp. 14, 17.) 

10 The Court further found that Plaintiff demonstrated State InsulationArizona conspired with the Moores to commit the fraud, but that Plaintiff failed to 

demonstrate that the Moore Trust or State Insulation-Nevada conspired with the 

Moores. (ECF No. 236 at p. 19.) The Court similarly found in favor of Plaintiff and 

against defendants Melanie Moore and State Insulation-Arizona on Plaintiff’s aiding 

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and Sale Agreement, and therefore declared it void and disregarded without the 

necessity for rescission. (Id. at p. 22.) The Court also awarded tort damages in the 

amount of $380,000 and attorney’s fees incurred in defending the Bond Action and 

Interpleader Action in Tennessee in the amount of $148,036.45 as a result of the fraud. 

(Id. at pp. 24-26.) Altogether, because of the fraud, the Court entered judgment in 

favor of Plaintiff in the amount of $675,101.66. (Id. at p. 27.) 

In his motion for attorney’s fees, Plaintiff argues he is the prevailing party 

because “the relief requested by Plaintiff was that the [Purchase and Sale Agreement] 

would be extinguished or rendered unenforceable against him” and “the Court ruled 

that the [Purchase and Sale Agreement] lacked mutual assent and thus could be 

disregarded.” (ECF No. 215-1 at p. 11.) Defendants argue Plaintiff is not the 

prevailing party “considering his demands and his litigation objectives.” (See ECF 

No. 221 at p. 13, line 5-7.) 

For the following reasons, the Court agrees with Defendants and finds that 

Plaintiff is not the prevailing party on his contract claims. First, Plaintiff was not the 

prevailing party on his securities fraud causes of action, in which he sought rescission 

of the Purchase and Sale Agreement in the TAC, or on his quiet title claim. Second, 

as laid out below, Plaintiff, while ostensibly the prevailing party on his fraud cause of 

action, only received a fraction of the relief sought. 

 a. Relief Sought and Obtained on Plaintiff’s Fraud Claim

In his initial Trial Brief, Plaintiff, arguing the occurrence of a fraudulent 

property transaction, sought out-of-pocket damages under California Civil Code 

section 3343, in the amount of $4,527,200, and consequential damages, including lost 

profits and/or lost enterprise value in the Hardisty Entities. (ECF No. 139 at ¶¶ 152-

165.) Plaintiff also sought tort damages under California Civil Code sections 3333 

 

and abetting the fraud claim, but against Plaintiff and in favor of defendants Mark 

Peluso, State Insulation-Nevada, and the Moore Trust on the aiding and abetting claim. 

(ECF No. 236 at p. 19.) 

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and 1709, arguing defendant Hal Moore had a fiduciary relationship with Plaintiff. 

(Id. at ¶¶ 166-174.) Under section 3333, Plaintiff argued he was entitled to damages 

as follows: “(1) the lost value of his membership interests in the amount of $4,527,200, 

as evidenced by the testimony of Plaintiff’s expert; (2) all costs and expenses incurred 

by Plaintiff in the Tennessee and Federal District Court actions relating to the Bond; 

(3) damages for Plaintiff’s emotional distress; (4) damages for Plaintiff’s line of credit, 

which was taken from him along with the lost the wages that were promised to be paid 

to him; and (5) damages for the lost profits or enterprise value of the Hardisty 

Entities.” (Id. at ¶ 175.) Plaintiff also sought punitive damages, arguing Defendant 

Moore engaged in intentional fraud. (Id. at ¶ 185.) Thus, at a minimum, prior to trial, 

Plaintiff sought $4,527,200 in damages on his fraud claim. 

Post-bench trial, Plaintiff filed a brief addressing only the issue of damages. 

(ECF No. 152.) Plaintiff argued that he established at trial that he was entitled to 

$4,024,295 as out-of-pocket losses on his fraud claims, which includes prejudgment 

interest, as well as $611,793 for the line of credit and lost wages in the amount of 

$154,077.26, for a total of $4,790,165. (Id. at pp. 1-2; ECF No. 154 at 5-6.) Plaintiff 

asserted the figure would be the same under California Civil Code section 3333 or 

section 3343. (Id. at p. 4.) In the alternative, Plaintiff argued he established he was 

entitled to restitution or unjust enrichment damages which “would equate to (i) to all 

profits accrued; (ii) the current value of the membership interest, and (iii) the value of 

the surplus cash note received by Defendant Hal Moore.” (Id. at p. 5.) Plaintiff 

calculated this amount to be $10,178,214. (Id.; ECF No. 154 at 8; ECF No. 160.) 

Lastly, Plaintiff sought punitive damages on the fraud in an amount “at least nine times 

the amount of compensatory damages awarded.” (Id. at p. 14.) Plaintiff elected both 

of these remedies, in the alternative, again in his post-trial reply brief. (ECF No. 163 

at p. 5.) He stated: 

Plaintiff elects rescission of: the $750,000 Note, the Incentive 

Agreement, the PSA, the Assignment of Plaintiff’s 27 percent 

membership interest in the LPA; provided, however, Plaintiff seeks 

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unjust enrichment damages rather than restoration of the interest, 

because Moore has tainted the LPA by his misrepresentations to HUD. 

To the extent unjust enrichment is not awarded, Plaintiff will affirm the 

contract and receive damages under Cal. Civ. Code §3333. 

(ECF No. 163 at p. 5.) 

 In his subsequent post-trial briefs on damages, Plaintiff again elected the 

remedy of “rescission of the transaction in its entirety and restitution,” unless the Court 

determined that rescission and restitution damages were not available to Plaintiff, in 

which case he elected to affirm “the contract(s) for the transfer of his Equity Interest 

and receiv[e] compensatory damages.” (ECF No. 202 at p. 2.) When Plaintiff 

discussed rescinding the transaction “in its entirety” or, in the alternative, to affirm 

“the contract(s),” he was asking the Court to either rescind the $750,000 Note, the 

Incentive Agreement, the Purchase and Sale Agreement, and the Assignment of 

Plaintiff’s 27% membership interest in Legacy Pointe because of the alleged fraud, or 

affirm all of these contracts. Plaintiff argued that he “was the victim of coercion and 

merely ‘walked away’ from his Equity Interest, as the price for a false promise that 

the unlawful extortion would cease, with no consideration given for its significant 

value.” (Id. at p. 3.) He asked the Court to “render judgment of liability for 

promissory fraud” and “make a finding that duress and coercion were the substantial 

basis for the fraud.” (Id. at p. 34.) 

 In its Amended Findings of Fact and Conclusions of Law, the Court awarded 

Plaintiff tort damages on his fraud claim in the total amount of $675,101.66 pursuant 

to California Code sections 3333 and 1709, and declined to award punitive damages. 

(ECF No. 236.) The Court did not rescind or award damages on the $750,000 Note, 

as it was not an issue at the time of trial. The Court found the Incentive Agreement to 

be a valid contract and held that Plaintiff failed to establish promissory fraud with 

respect to the agreement or that he was coerced into signing the agreement. 

Furthermore, because the Court found that Plaintiff transferred his 27% membership 

interest in Legacy Pointe pursuant to the Incentive Agreement, the Court determined 

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that Plaintiff was not entitled to rescission or unjust enrichment damages, nor was he 

entitled to out-of-pocket damages under California Civil Code section 3343. 

Therefore, although the Court found that the Purchase and Sale Agreement was void, 

Plaintiff was not awarded the vast majority of relief he sought on the legal theories he 

advanced. (See ECF No. 218.) The crux of Plaintiff’s fraud claim remaining for trial 

was that he was fraudulently induced to transfer his 27% membership interest in 

Legacy Pointe by virtue of the Purchase and Sale Agreement. Following trial, the 

Court did not agree. 

 Based on the foregoing, upon comparison of the relief awarded on the contract 

claims with Plaintiff’s demands on those claims and his litigation objectives as 

disclosed by the pleadings and multiple trial briefs, the Court finds Plaintiff is not the 

prevailing party for purposes of California Civil Code section 1717. See Hsu, 9 Cal. 

4th at 876; Berkla, 302 F.3d at 920 (finding district court did not abuse its discretion 

in denying the plaintiff attorney’s fees where it recovered only $23,502 in 

compensatory damages, although he sought more than $1.2 million). Plaintiff did not 

recover greater relief on the contract causes of action. See Cal. Civ. Code § 

1717(b)(1). There was no prevailing party. See id. Because Plaintiff is not the 

prevailing party, he is not entitled to attorney’s fees under section 1717. 

 B. Federal Rule of Civil Procedure 54(d)(1) 

Pursuant to Rule 54(d)(1), the “clerk may tax costs [other than attorney’s fees] 

on 14 days’ notice” to the “prevailing party.” Fed. R. Civ. P. 54(d)(1). Local Civil 

Rule 54.1 specifies that “[w]ithin fourteen (14) days after entry of judgment, the party 

in whose favor a judgment for costs is awarded or allowed by law, and who claims 

costs, must file with the clerk the bill of costs, together with a notice of when the clerk 

will hear the application.” Civ. L.R. 54.1(a). The local rule further states that “[t]he 

determination of the prevailing party will be within the discretion of the court in all 

cases except where such determination is inconsistent with statute or the Fed. R. Civ. 

P. or the rules of the appellate courts.” Civ. L. R. 54.1(f). 

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In his motion, Plaintiff seeks a determination that he is the prevailing party for 

purposes of determining entitlement to costs under Federal Rule of Civil Procedure 

54(d)(1). “[A] ‘prevailing party’ is one who has been awarded some relief by the 

court.” Buckhannon Bd. & Care Home, Inc. v. West Virginia Dept. of Health & 

Human Resources, 532 U.S. 598, 603 (2001). More specifically, it is one who obtains 

some form of relief that creates a “material alteration of the legal relationship of the 

parties.” Id. at 604 (citations omitted). “In the event of a mixed judgment, however, 

it is within the discretion of a district court to require each party to bear its own costs.” 

Amarel v. Connell, 102 F.3d 1494, 1524 (9th Cir. 1996); see also Slane v. Mariah 

Boats, Inc., 164 F.3d 1065, 1068 (7th Cir. 1999) (“[W]hen one party gets substantial 

relief it ‘prevails’ even if it doesn’t win on every claim.”); Testa v. Village of 

Mundelein, Ill., 89 F.3d 443, 447 (9th Cir. 1996) (“[T]he ‘prevailing party’ is the party 

who prevails as to the substantial part of the litigation.”). 

Here, where judgment was entered in favor of both parties, the Court does not 

find that Plaintiff is the prevailing party. As laid out above, an evaluation of Plaintiff’s 

claims and litigation objectives and the outcome of the trial demonstrates Plaintiff 

arguably lost more than he won. Two of Plaintiff’s causes of action were dismissed 

with prejudice early in the case on Hal Moore’s motion to dismiss. The Court 

dismissed another two causes of action on Defendants’ motion for summary judgment 

and greatly limited the remaining claims for trial. After trial, the Court entered 

judgment entirely in favor of Defendants on three causes of action, and partially in 

favor of Defendants on the remaining three causes of action. There was no cause of 

action on which judgment was entered entirely in favor of Plaintiff. Moreover, on 

Plaintiff’s fraud claim, as discussed above, Plaintiff recovered a mere fraction of the 

relief he sought. Lastly, Plaintiff, as Counter-Defendant, made a Federal Rule of Civil 

Procedure 68 Offer of Judgment on Hal Moore’s Counterclaim, which was accepted, 

and judgment was entered against him in an amount more than he was awarded on his 

own claims. 

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Therefore, the Court does not find that Plaintiff obtained substantial relief or 

prevailed on a substantial part of the litigation and is not the prevailing party for 

purposes of this case. The parties are to bear their own costs. 

IV. CONCLUSION 

 For the foregoing reasons, Plaintiff’s motion for attorneys’ fees and costs (ECF 

No. 215) is DENIED. 

IT IS SO ORDERED. 

DATED: November 2, 2015 

 

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