Court Opinion

ID: 9941677
Source: CourtListenerOpinion
Date Created: 2024-02-16 18:01:56.48387+00
Date Added: 2024-06-11T13:46:53.905280
License: Public Domain

NOT FOR PUBLICATION                       FILED
                        UNITED STATES COURT OF APPEALS                      FEB 16 2024
                                                                      MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
                                 FOR THE NINTH CIRCUIT

In re: TEA STATION INVESTMENT,                  No.    22-60051
INC.; et al.,
                                                BAP No. 22-1031
                   Debtors,

------------------------------                  MEMORANDUM*

TEA STATION INVESTMENT, INC.; et
al.,

                   Appellants,

  v.

ZHOU BAODI,

                   Appellee.

                            Appeal from the Ninth Circuit
                             Bankruptcy Appellate Panel
                Spraker, Gan, and Taylor, Bankruptcy Judges, Presiding

                        Argued and Submitted December 14, 2023
                                 Pasadena, California

Before: TASHIMA, WALLACH,** and CHRISTEN, Circuit Judges.
Dissent by Judge TASHIMA.

       *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
       **
            The Honorable Evan J. Wallach, United States Circuit Judge for the
U.S. Court of Appeals for the Federal Circuit, sitting by designation.
      Appellants appeal from a decision of the Bankruptcy Appellate Panel

(“BAP”) affirming the bankruptcy court’s order awarding attorney’s fees to

Appellee. Because the parties are familiar with the facts, we do not recount them

here. We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1), and we affirm.

      We review decisions of the BAP de novo. In re Bennett, 298 F.3d 1059,

1063 (9th Cir. 2002). “The bankruptcy court’s attorneys’ fee determination will

only be reversed if the court abused its discretion or erroneously applied the law.”

Id. Under that standard, we “affirm unless the [bankruptcy] court applied the

wrong legal standard or its findings were illogical, implausible, or without support

in the record.” Johnson v. MGM Holdings, Inc., 943 F.3d 1239, 1241 (9th Cir.

2019) (citation omitted).

      Under California law, a prevailing plaintiff in an action for unpaid minimum

wages or overtime compensation may recover reasonable attorney’s fees. Cal.

Lab. Code § 1194(a); see also Kirby v. Immoos Fire Prot., Inc., 274 P.3d 1160,

1164 (Cal. 2012). The parties agree that Appellee prevailed on her individual

claims but did not prevail on her class action claims. They also agree that Hensley

v. Eckerhart, 461 U.S. 424 (1983) provides the proper framework for determining

reasonable attorney’s fees under § 1194(a). See, e.g., Gunther v. Alaska Airlines,

Inc., 287 Cal. Rptr. 3d 229, 251-52 (Ct. App. 2021) (applying Hensley to

                                          2
“determin[e] the amount of a prevailing party’s attorney fees” for a wage statement

claim under Cal. Lab. Code § 226).

      Under Hensley, a court begins by multiplying “the number of hours

reasonably expended on the litigation . . . by a reasonable hourly rate” to determine

a lodestar. Hensley, 461 U.S. at 433. Where “a plaintiff prevails on only some of

his claims for relief or achieves ‘limited success,’” a court next proceeds to

Hensley’s two-pronged approach. Ibrahim v. U.S. Dep’t of Homeland Sec., 912

F.3d 1147, 1172 (9th Cir. 2019) (en banc) (citation omitted). “[F]irst, the court

must deduct from the lodestar hours spent exclusively on unrelated unsuccessful

claims . . . .” Muniz v. United Parcel Serv., Inc., 738 F.3d 214, 224 (9th Cir.

2013).1 Second, the court evaluates whether the plaintiff achieved a level of

success that makes the remaining hours “a satisfactory basis for making [the] fee

award.” See Hensley, 461 U.S. at 434; Muniz, 738 F.3d at 224. The Supreme

Court has emphasized that “[t]here is no precise rule or formula for these

determinations” and that “[t]he court necessarily has discretion in making this

equitable judgment.” Hensley, 461 U.S. at 436-37.

1
 Generally, claims are related if they “involve a common core of facts or are based
on related legal theories.” Ibrahim, 912 F.3d at 1172 (citation omitted); see also
Harman v. City & County of San Francisco, 69 Cal Rptr. 3d 750, 765 (Ct. App.
2007).

                                          3
      The bankruptcy court conducted the proper Hensley analysis, and its

conclusions were not illogical, implausible, or without support in the record. It

began by considering whether the total fees sought by Appellee for her individual

claims were properly documented, non-duplicative, and the product of reasonable

hourly billing rates. This adequately took account of “the number of hours

reasonably expended on the litigation multiplied by a reasonable hourly rate.” Id.

at 433.

      Recognizing that Appellee had prevailed on only some of her claims, the

bankruptcy court next proceeded to Hensley’s two-pronged approach. On the first

prong, the bankruptcy court examined the record as a whole and concluded that “a

significant portion of the factual and legal issues relevant to Ms. Zhou’s individual

claim [were] also relevant to, and intertwined with, her putative class claim,” such

that the individual and class claims were “closely intertwined factually and

legally.” It provided several examples of common issues, including Appellants’

written policies and policies in practice. Thus, the bankruptcy court found that the

individual and class claims were related within the meaning of Hensley.

      As to the second prong, the bankruptcy court concluded that although

Appellee’s individual and class claims were related, Appellee’s limited success

warranted a substantial reduction in fees. It therefore reduced Appellee’s

requested fees by 75%. This analysis correctly “focus[ed] on the significance of

                                          4
the overall relief obtained by the plaintiff” and “reduce[d] the award to account for

the limited success.” Id. at 435-37; see also Chavez v. City of Los Angeles, 224

P.3d 41, 54 (Cal. 2010) (“Although fees are not reduced when a plaintiff prevails

on only one of several factually related and closely intertwined claims, ‘under state

law as well as federal law, a reduced fee award is appropriate when a claimant

achieves only limited success.’” (citations omitted)).2

      The bankruptcy court correctly applied the law and its findings were not

illogical, implausible, or without support in the record.

      AFFIRMED.

2
  The dissent posits that Hensley does not permit disproportionately large fee
awards absent extraordinary or unusual circumstances. To the contrary, there is no
rule that limits a plaintiff’s fees to some proportion of damages. Harman, 69 Cal.
Rptr. 3d at 762-63. Instead, a plaintiff is entitled to “recovery of all attorney fees
reasonably expended, without limiting the fees to a proportion of her actual
recovery.” See Graciano v. Robinson Ford Sales, Inc., 50 Cal. Rptr. 3d 273, 293
(Ct. App. 2006). Otherwise, individuals with meritorious claims with relatively
small potential damages would find it difficult to obtain legal services. Id. (citing
City of Riverside v. Rivera, 477 U.S. 561, 576-78 (1986)); see also Cruz v. Fusion
Buffet, Inc., 271 Cal. Rptr. 3d 269, 285 (Ct. App. 2020) (noting that the fee-shifting
provision in § 1194 was “intended to provide a needed disincentive to violation of
minimum wage laws” (cleaned up)).

                                          5
                                                                              FILED
Tea Station Investment, Inc. v. Zhou Baodi (In re Tea Station Investment, Inc.),
No 22-60051                                                                 FEB 16 2024
                                                                           MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS
TASHIMA, Circuit Judge, dissenting:

      We all agree that this case is governed by Hensley v. Eckerhart, 461 U.S.

424 (1983). And under Hensley, as the majority observes, we must “reduce the

lodestar to the extent the party’s limited success cannot justify the fees expended.”

Maj. Dispo. at 10 (citing Hensley, 461 U.S. at 436). Hensley further emphasizes

that “the most critical factor is the degree of success obtained.” Id. at 436–37.

Yet, besides giving lip service to this factor, the majority elides analysis and

consideration of this “most critical factor.” There certainly is no showing that this

is an unusual or extraordinary case.

      Here, plaintiff succeeded on her individual wage claim only to the tune of

$4, 674.08. Plaintiff did not succeed on her class claims – indeed, no class was

certified. It is apparent that virtually all of plaintiff’s counsel’s time was expended

in his unsuccessful attempt to get the putative class certified. The Bankruptcy

Court nonetheless awarded plaintiff $168.766.25 in attorney’s fees. A simple

calculation shows that this fee is more than 36 times the amount of plaintiff’s

recovery. Because I cannot agree with the majority’s unstated assumption that

Hensley permits such a disproportionately large award in light of the results

achieved, absent extraordinary or unusual circumstances, I dissent from its

affirmance of the fee award.