Court Opinion

ID: 4663481
Source: CourtListenerOpinion
Date Created: 2021-02-27 00:00:33.400583+00
Date Added: 2024-06-11T09:10:38.101829
License: Public Domain

NOT FOR PUBLICATION                              FILED
                                                                             FEB 26 2021
                                                                   SUSAN M. SPRAUL, CLERK
                                                                        U.S. BKCY. APP. PANEL
                                                                        OF THE NINTH CIRCUIT

          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

 In re:                                              BAP No. CC-20-1223-GFL
 TOWER PARK PROPERTIES, LLC,
             Debtor.                                 Bk. No. 2:08-bk-20298-BR

 SUNSET COAST HOLDINGS, LLC,                         Adv. No. 2:20-ap-01010-BR
              Appellant,
 v.                                                  MEMORANDUM 1
 HUGHES INVESTMENT
 PARTNERSHIP, LLC, ET. AL.,
              Appellees.

               Appeal from the United States Bankruptcy Court
                    for the Central District of California
                 Barry Russell, Bankruptcy Judge, Presiding

Before: GAN, FARIS, and LAFFERTY, Bankruptcy Judges.

                                 INTRODUCTION

      This appeal arises out of litigation involving the foreclosure of the

157-acre parcel of residential real estate (the “Property”) at issue in In re

Tower Park Properties LLC, Case No. 2:08-bk-20298-BR (“Tower Park

      1  This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
                                            2
Bankruptcy Case”), and a purported right of redemption provided for by

the confirmed chapter 11 2 plan.

      Appellant Sunset Coast Holdings, LLC (“Sunset”) filed an action in

state court seeking to enforce the right of redemption against Appellees

Hughes Investment Partnership, LLC, MH Holdings II H, LLC, MH Land

Holdings I-A, LLC, MH Land Holdings I-B, LLC, MH Land Holdings I-C,

LLC, and MH Land Holdings I-D, LLC (collectively “Hughes”). Sunset also

filed and recorded a Notice of Pendency of Action (Lis Pendens) (the “Lis

Pendens”) regarding the Property.

      After Hughes removed the action to the bankruptcy court, it filed a

motion to dismiss the complaint and a motion to expunge the Lis Pendens.

The bankruptcy court granted both motions and awarded Hughes its

reasonable attorneys’ fees and costs incurred in connection with the motion

to expunge the Lis Pendens, pursuant to California Code of Civil Procedure

(“CCP”) § 405.38.

      Sunset opposed Hughes’s requested fees of $54,877 and argued that

both the hourly rates and the time spent were unreasonable. The

bankruptcy court disagreed and awarded Hughes the full requested

amount. Sunset has not demonstrated that the bankruptcy court abused its

discretion by approving the application. We AFFIRM.

      2Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532.
                                            3
                                   FACTS

A.    The Tower Park Bankruptcy

      In April 2010, the bankruptcy court confirmed the plan in the Tower

Park Bankruptcy Case. Under the plan, Hughes agreed to modify the terms

of its existing liens and provide additional exit financing. The plan

provided that Tower Park Properties, LLC (“Tower Park”), Hughes, and

creditor La Jolla Capital Investors, LLC (“LJCI”) would enter into an

Intercreditor and Subordination Agreement, under which LJCI would

subordinate its existing lien to the Hughes liens and receive partial

payment from the exit financing and a right of redemption if certain

conditions were satisfied.

      After Tower Park defaulted in January 2011, LJCI assigned its rights

to Secured Capital Partners, LLC (“SCP”). Tower Park later transferred the

Property to SCP, which filed a chapter 11 petition to stay foreclosure. After

SCP’s case was dismissed as a bad faith filing, it transferred the property

back to Tower Park. Ultimately, the bankruptcy court permitted Hughes to

foreclose on the Property in August 2019.

B.    The State Court Case And Adversary Proceeding

      In December 2019, Sunset filed suit in the California Superior Court

against Hughes, seeking to enforce a right of redemption. Sunset asserted

that it acquired LJCI’s right of redemption from SCP in December 2019.

Within a few days of filing the complaint, Sunset filed and recorded the Lis

Pendens regarding the Property.

                                      4
      In January 2020, Hughes removed the action to the bankruptcy court.

It then filed a motion to dismiss the complaint with prejudice and a motion

to expunge the Lis Pendens under state law.

      Sunset filed a motion to remand the proceeding to state court in

February 2020. After a hearing, the bankruptcy court denied Sunset’s

motion to remand and scheduled a hearing on Hughes’s motion to dismiss

and motion to expunge.

      Hughes argued that Sunset did not file or serve the Lis Pendens in

compliance with CCP § 405.22 and the complaint did not establish the

probable validity of a real property claim pursuant to CCP § 405.31.

Hughes further argued that pursuant to CCP § 405.38, it was entitled to

attorneys’ fees and costs in bringing the motion to expunge and Sunset

could not demonstrate that it was substantially justified in recording the Lis

Pendens.

      Sunset did not oppose the motion to expunge. However, prior to the

hearing on the motion to expunge in July 2020, Sunset attempted to

withdraw the Lis Pendens. At the hearing, Hughes argued that the

attempted withdrawal was ineffective under California law.

      The bankruptcy court reasoned that even if Sunset did voluntarily

withdraw the Lis Pendens, an award of attorneys’ fees was still possible.

The court entered an order granting the motion to expunge, awarding

Hughes its reasonable attorneys’ fees and costs, and setting a hearing on

the amount and reasonableness of fees and costs.

                                      5
C.   The Fee Application

     Hughes filed an application for attorneys’ fees incurred in connection

with the motion to expunge the Lis Pendens in the total amount of $54,877.

Hughes argued that the extent of the work performed by counsel was

largely a consequence of the multiple ways in which the Lis Pendens was

improperly served, improperly filed, and improperly attempted to be

withdrawn. Hughes asserted that Sunset’s failures to comply with service

and recording requirements forced it to spend time and resources finding

the Lis Pendens, then identifying the various defects and determining how

to address those defects in the motion to expunge.

     Hughes contended that its counsel’s hourly rates were commensurate

with similar law firms in the market. It supported its application with a

declaration of attorney Rolf Woolner, who attached time entries for work

performed in connection with the Lis Pendens. Mr. Woolner stated that time

entries which included both activities related to the Lis Pendens and tasks

related to other aspects of the case, such as removal or the motion to

dismiss, were not included in the application. He asserted that his firm set

hourly rates annually based on employee experience and legal industry

information of rates charged by peer firms, including the 2020

PricewaterhouseCoopers Survey of Los Angeles Legal Rates. Although Mr.

Woolner was not permitted to make the survey public, he attached a

publicly available brochure indicating hourly rates and a recent case in

                                      6
which the district court determined that his firm’s rates were consistent

with the prevailing market rates.

      Sunset opposed the application and argued no fees should be

awarded because it acted with substantial justification, and an award of

fees would be unjust under the circumstances because it did not oppose the

motion to expunge and attempted to withdraw the Lis Pendens. Sunset also

maintained that the requested fees were unreasonable and excessive for a

simple motion to expunge. It argued that the hourly rates were excessive

and cited Barkett v. Sentosa Properties LLC, No. 1:14-cv-01698-LJO, 2015 WL

5797828 (E.D. Cal. Sep. 30, 2015) for the proposition that the prevailing

market rate should be $285 per hour.

      Sunset further argued that the requested fees included work

performed by partners which should have been delegated to associates or

non-billable assistants. It also claimed that several entries were for

conferences or communications between attorneys involved in the case

without any explanation of why the motion to expunge would require such

extensive communication and strategizing. Sunset asserted that counsel

spent between 20 and 28 hours drafting the motion, which was

substantially more time than was required. Finally, Sunset objected to

block billing by one partner and $12,444 in fees incurred after the motion to

expunge was filed.

      Hughes filed a reply and argued that Sunset waived any argument

that it was substantially justified in recording the Lis Pendens or that an

                                       7
award of fees would be unjust under the circumstances because Hughes

asserted its right to an award of fees in the motion to expunge and Sunset

did not oppose the motion. Hughes reiterated that the motion to expunge

was not a typical motion given the history of the case, the significance of

the Property, and the multiple defects involved in the Lis Pendens. It argued

that it was reasonable to hire a national law firm with experience with the

Property and its history, and the cases cited by Sunset did not involve rates

at the high end of the Los Angeles legal market. Hughes noted that the

bankruptcy court routinely reviews fee applications in Los Angeles

bankruptcy cases and is familiar with the legal market there.

      The bankruptcy court held a hearing on the application for fees in

August 2020. Neither party made an argument at the hearing and each

relied on the written pleadings. The bankruptcy court approved the fee

request and stated:

      I’ve read the papers and so forth, but . . . I am satisfied. This is
      not your usual motion to expunge a lis pendens given the
      history of this case, so it’s a little unusual but I’m going to grant
      the application in full . . . . And basically I just stated on the
      record that I agree with all the arguments of the applicant and
      the order should just state for the reasons stated on the record
      that . . . good cause has been shown. The application will be
      approved.

Hr’g Tr. 4:15-19; 4:25-5:3, Aug. 11, 2020. The court entered a written order

on August 24, 2020 and Sunset timely appealed.

                                        8
                                JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b). We have jurisdiction under 28 U.S.C. § 158.

                                      ISSUE

      Did the bankruptcy court abuse its discretion by awarding Hughes

reasonable fees under CCP § 405.38 in the amount of $54,877?

                          STANDARDS OF REVIEW

      We review a bankruptcy court’s award of attorneys’ fees to a

prevailing party for an abuse of discretion. Fry v. Dinan (In re Dinan), 448

B.R. 775, 783 (9th Cir. BAP 2011). A bankruptcy court abuses its discretion

if it applies an incorrect legal standard or if its factual findings are illogical,

implausible, or without support in the record. TrafficSchool.com v. Edriver

Inc., 653 F.3d 820, 832 (9th Cir. 2011).

      “We review the factual determinations underlying an award of

attorneys’ fees for clear error.” Ferland v. Conrad Credit Corp., 244 F.3d 1145,

1147-48 (9th Cir. 2001) (per curiam).

                                 DISCUSSION

      Sunset argues that the bankruptcy court erred by failing to provide

its reasoning for approving the fees and by determining that the requested

fees were reasonable.

      In a bankruptcy proceeding, a prevailing party may be entitled to

fees under applicable state law if state law governs the substantive issues

in the proceeding. Bertola v. N. Wis. Produce Co., Inc. (In re Bertola), 317 B.R.

                                           9
95, 99 (9th Cir. BAP 2004). The Lis Pendens was expunged pursuant to state

law, so attorneys’ fees were awardable under state law.

      Under CCP § 405.38, 3 “a prevailing party on a motion to expunge a

lis pendens is entitled to recover attorney fees.” Castro v. Super. Ct., 116

Cal. App. 4th 1010, 1018 (2004). The attorneys’ fee provision was originally

enacted to “mitigate against and control misuse of the lis pendens

procedure.” Trapasso v. Super. Ct., 73 Cal. App. 3d 561, 569 (1977). The

statute was later revised to make an award of fees mandatory unless the

court finds that the other party acted with “substantial justification” or

circumstances would make the award of fees unjust. Castro, 116 Cal. App.

4th at 1018. The party opposing expungement bears the burden of proving

it acted with substantial justification or that an award of fees would be

unjust. See Sharp v. Nationstar Mortg. LLC, Case No. 14-cv-00831-LHK, 2016

WL 6696134, *8 (N.D. Cal. Nov. 15, 2016); Doan v. Singh, No. 1:13-cv-531-

LJO-SMS, 2014 WL 3867418, *3 (E.D. Cal. Aug. 4, 2014).

      Hughes sought an award of attorneys’ fees as part of its motion to

expunge and argued that Sunset was not substantially justified in

      3   CCP § 405.38 provides:

            The court shall direct that the prevailing party on any motion
      under this chapter be awarded the reasonable attorney’s fees and costs of
      making or opposing the motion unless the court finds that the other party
      acted with substantial justification or that other circumstances make the
      imposition of attorney’s fees and costs unjust.

                                         10
recording the Lis Pendens. After the bankruptcy court granted the motion to

expunge, CCP § 405.38 required it to award fees unless Sunset provided

sufficient evidence that it acted with substantial justification and that an

award of fees would be unjust. However, Sunset did not oppose the

motion.

      Although Sunset suggests that we should determine that no fees

should be awarded, it waived the issue of whether an award of fees was

required under the statute. See In re Mercury Interactive Corp. Sec. Litig., 618

F.3d 988, 992 (9th Cir. 2010) (“[A]n issue will generally be deemed waived

on appeal if the argument was not raised sufficiently for the trial court to

rule on it.” (citation and quotations marks omitted)). Additionally, we see

nothing in the record that indicates Sunset was substantially justified or

that an award of fees would be unjust. Sunset did not attempt to withdraw

the Lis Pendens until the week of the hearing on the motion to expunge, and

the record does not indicate that the attempted withdrawal was effective.

      The order granting the motion to expunge established Hughes’s

entitlement to fees under CCP § 405.38. The court set a further hearing to

determine only the amount and reasonableness of the award, and we

review only whether the bankruptcy court erred in determining whether

the amount of fees requested was reasonable.

                                       11
A.    The Bankruptcy Court Provided A Sufficient Explanation For Its
      Award Of Fees

      CCP § 405.38 does not specify the method to determine “reasonable

attorney’s fees” but “the fee setting inquiry in California ordinarily begins

with the ‘lodestar,’ i.e., the number of hours reasonably expended

multiplied by the reasonable hourly rate.” PLCM Grp. v. Drexler, 22 Cal. 4th

1084, 1095 (2000). This is consistent with awards of reasonable attorneys’

fees in federal court.

      There is a “strong presumption” that the lodestar figure represents a

reasonable fee. Jordan v. Multnomah Cty., 815 F.2d 1258, 1262 (9th Cir. 1987).

Despite its presumptive reasonableness, the bankruptcy court may adjust

the lodestar figure if circumstances warrant. Camacho v. Bridgeport Fin., Inc.,

523 F.3d 973, 978 (9th Cir. 2008) (citing Ferland, 244 F.3d at 1149 n.4).

      The fee applicant bears the burden of submitting evidence

supporting the hours expended. Gates v. Deukmejian, 987 F.2d 1392, 1397

(9th Cir. 1992) (citing Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). In

determining the reasonable hours expended, the court “must examine

detailed time records to determine whether the hours claimed are

adequately documented and whether any of them are unnecessary,

duplicative, or excessive.” Gonzalez v. Aurora Loan Servs. LLC, No. EDCV

11-00143 VAP (FFMx), 2011 WL 13224852, *2 (C.D. Cal. Feb. 25, 2011)

(citing Chalmers v. City of L.A., 796 F.2d 1205, 1210 (9th Cir. 1986), amended

on other grounds, 808 F.2d 1373 (9th Cir. 1987)). The party opposing the fee

                                        12
application “has a burden of rebuttal that requires submission of

evidence . . . challenging the accuracy and reasonableness of the hours

charged.” Gates, 987 F.2d at 1397-98 (citing Blum v. Stenson, 465 U.S. 886,

892 n.2 (1984)).

      Reasonable hourly rates should be determined according to “the

prevailing market rates in the relevant community.” Sam K. ex rel Diane C.

v. Haw. Dep’t of Educ., 788 F.3d 1033, 1041 (9th Cir. 2015) (quoting Van Skike

v. Dir., Office of Workers’ Comp. Programs, 557 F.3d 1041, 1046 (9th Cir.

2009)). The fee applicant has the burden to produce evidence of the

prevailing market rates, but the court may consider fees awarded by others

in the same locality for similar cases and may rely on its “own knowledge

of customary rates and [its] experience concerning reasonable and proper

fees.” Id. (quoting Ingram v. Oroudjian, 647 F.3d 925, 928 (9th Cir. 2011)).

“Affidavits of the [party’s] attorney and other attorneys regarding

prevailing fees in the community . . . are satisfactory evidence of the

prevailing market rate.” United Steelworkers of Am. v. Phelps Dodge Corp., 896

F.2d 403, 407 (9th Cir. 1990).

      The bankruptcy court has “a great deal of discretion” in its decision

about the reasonableness of the fee. Gates, 987 F.2d at 1398 (citing Hensley,

461 U.S. at 437). However, the court must give “some indication of how it

arrived at the amount . . . to allow for meaningful appellate review.” Id.; see

also Hensley, 461 U.S. at 437 (the court must provide a “concise but clear

explanation of its reasons for the fee award.”).

                                       13
      The bankruptcy court is not required to provide “an elaborately

reasoned, calculated, or worded order . . . [and] a brief explanation of how

the court arrived at its figures will do.” Gates, 987 F.2d at 1398 (quoting

Chalmers, 796 F.2d at 1211 n.3). If there is a large difference between the

amount requested and the bankruptcy court’s award, “a more specific

articulation of the court’s reasoning is expected,” but where the difference

is relatively small, “a somewhat cursory explanation will suffice.” Moreno

v. City of Sacramento, 534 F.3d 1106, 1111 (9th Cir. 2008).

      Here, the bankruptcy court gave a very cursory explanation for its

decision. It merely stated that it agreed with Hughes’s arguments and after

reviewing the papers, it would grant the full amount requested based on

the history of the case. But under these circumstances, the bankruptcy

court’s explanation is sufficient to permit meaningful appellate review.

      The bankruptcy court awarded the full amount requested by Hughes

without making any adjustment. When the court accepts the lodestar

amount without adjustment, it need only determine that the hourly rates

and the hours expended by counsel were reasonable. See Pennsylvania v.

Del. Valley Citizens’ Council for Clear Air, 478 U.S. 546, 564 (1986) (“[The

lodestar] is more than a mere ‘rough guess’ or initial approximation of the

final award to be made . . . . ‘[w]hen . . . the applicant for a fee has carried

his burden of showing that the claimed rate and number of hours are

reasonable, the resulting product is presumed to be the reasonable fee’ to

which counsel is entitled.” (quoting Blum, 465 U.S. at 897)).

                                        14
      By awarding the full amount requested in the application, the

bankruptcy court satisfied the minimum requirement that it “set forth the

number of hours compensated and the hourly rate applied.” Chalmers, 796

F.2d at 1211 n.3. Although it did not state on the record that the rates and

hours were reasonable, it necessarily concluded so by considering

Hughes’s time entries and evidence of the prevailing market rate and by

stating that it agreed with Hughes’s arguments.

B.    The Bankruptcy Court Did Not Clearly Err By Determining The
      Fees Were Reasonable

      Sunset argues that the hours spent by Hughes’s attorneys were

excessive based on several decisions in which courts determined that a

motion to expunge a lis pendens is not a complex matter. We agree that a

typical motion to expunge a lis pendens should not require substantial

attorney time. But in an exceptional case, a bankruptcy court may find

substantial attorney time to be reasonable. See Baptiste v. Spizzirri, No.

SACV 18-00084 AG, 2018 WL 6074525, *1-2 (C.D. Cal. May 31, 2018)

(awarding approximately two thirds of requested fees of $80,182 for 156

hours billed by multiple attorneys based on “exceptional features” of the

case); see also Perdue v. Kenny A. ex rel Winn, 559 U.S. 542, 553 (2010)

(“novelty and complexity of a case . . . presumably [are] fully reflected in

the number of billable hours recorded by counsel.” (citation and quotation

marks omitted)).

                                       15
      If we were determining what fee would be reasonable in the first

instance, our calculation might differ from that of the bankruptcy court,

“but that does not mean that the court abused its discretion.” Vargas v.

Howell, 949 F.3d 1188, 1198 (9th Cir. 2020). “Reasonable people may differ

as to what number of hours was reasonable to spend on this case. But once

we are satisfied that the [bankruptcy] court has considered the appropriate

factors for the appropriate reasons, our reviewing function is finished.”

Cunningham v. Cty. of L.A., 879 F.2d 481, 486 (9th Cir. 1988).

      The bankruptcy court reviewed the time entries submitted by

Hughes and considered Sunset’s objections. It determined that the motion

was not a usual motion to expunge given the history of the case. In

awarding fees, “trial courts may take into account their overall sense of a

suit . . . [a]nd appellate courts must give substantial deference to these

determinations, in light of ‘the [bankruptcy] court’s superior

understanding of the litigation.’” Fox v. Vice, 563 U.S. 826, 838 (2011)

(quoting Hensley, 461 U.S. at 437).

      Finally, Sunset argues that the evidence submitted by Hughes was

not relevant to support the prevailing market rate in the relevant

community because the fee survey involved only large firms engaged in

complex litigation. But, in addition to the evidence submitted by Hughes,

the bankruptcy court can rely on its own knowledge and experience in

determining the prevailing market rate. Sam K. ex rel. Diane C., 788 F.3d at

1041. Sunset cites several cases in which a court determined a lesser hourly

                                       16
rate, but these cases arose in the Eastern District of California and none

involved the relevant community at issue in this case.

      Sunset has not demonstrated that the bankruptcy court clearly erred

in finding the hours expended and the hourly rate reasonable. The court

did not abuse its discretion in approving the attorneys’ fees awarded to

Hughes.

                              CONCLUSION

      Based on the foregoing, we AFFIRM the bankruptcy court’s order

approving Hughes’s application for attorneys’ fees.

                                      17