Gorman v. Tassajara Development Corp.

• Decision Date: 06 October 2009
• Docket Number: No. H031196.,H031196.
• Citation: 178 Cal.App.4th 44,100 Cal. Rptr. 3d 152
• Court: California Court of Appeals Court of Appeals
• Parties: JOHN C. GORMAN et al., Plaintiffs and Appellants, v. TASSAJARA DEVELOPMENT CORPORATION et al., Defendants and Respondents.

178 Cal.App.4th 44

100 Cal. Rptr. 3d 152

JOHN C. GORMAN et al., Plaintiffs and Appellants, v. TASSAJARA DEVELOPMENT CORPORATION et al., Defendants and Respondents.

No. H031196.

Court of Appeals of California, Sixth District.

October 6, 2009.

Bowman & Brooke, Daniel J. Smith; Gorman & Miller, John C. Gorman and Charles J. Stiegler for Plaintiffs and Appellants.

Archer Norris, W. Eric Blumhardt, William H. Staples, William L. Coggshall; Selman Breitman, Lincoln V. Horton and Elaine F. Harwell for Defendants and Respondents.

OPINION

RUSHING, P. J.—

I. INTRODUCTION

In this appeal, plaintiffs assert that the trial court did not award them enough attorney fees and costs against their former general contractor and that the court should have explained its awards.

In November 1999, defendant Tassajara Development Corporation (usually contractor) promised by written contract to serve as general contractor for the construction of a residence for plaintiffs John C. Gorman and Jennifer Cheng (collectively plaintiffs), husband and wife. The contract provided in part: "In the event of litigation between the parties, or if a party becomes involved in litigation because of wrongful acts of the other party, the prevailing party will be entitled to recover reasonable attorneys' fees."

Gorman is an attorney who is the chief executive officer, chief financial officer, president, and secretary of the law firm of Gorman & Miller, PC, a professional corporation (usually the Gorman firm). In December 2003, Gorman initiated this lawsuit by filing a complaint on behalf of plaintiffs against numerous defendants, including contractor, alleging the defective construction of the residence. In May 2006, plaintiffs entered into a global settlement with a number of defendants, including contractor. Part of that settlement provided, "it is agreed that Plaintiffs shall be deemed to be the `prevailing parties' in the Action solely for the purpose of invoking plaintiffs' rights to recover attorneys' fees and costs pursuant to the terms of the Construction Contract and that plaintiffs are entitled to recover costs as authorized by law as if they were prevailing parties in the Action."

Plaintiffs ultimately requested attorney fees of $1,350,538.83¹ and costs in excess of $266,561.96, including the fees and costs for filing their motion. Almost half these fees were billed by Gorman personally. After a contested hearing on their motion, in a 27-word order the trial court awarded plaintiffs "reasonable attorneys' fees of $416,581.37 and reasonable costs of $142,432.46." The trial court subsequently denied plaintiffs' request for a statement of decision and their motions for a new trial and for reconsideration of its order. Plaintiffs have appealed from the resulting judgment. As we will explain below, despite close study of the record, including the motion and opposition, we are unable to surmise a reasonable explanation for either of the amounts awarded. Given the apparent arbitrariness of the awards, we will reverse the judgment and remand for further proceedings.

II. PROCEDURAL HISTORY

A. The Litigation and Settlement

On November 17, 1999, plaintiffs entered into a contract signed by James Simmons on behalf of contractor whereby contractor would serve as a general contractor and construct a residence for plaintiffs in Los Altos Hills at a cost of $1,501,520, subject to increases or decreases specified in written change orders.

During the construction, plaintiffs expressed their concerns to contractor about the lack of progress and the materials used. After they took occupancy of the house on December 27, 2002, they discovered a number of problems with the construction. On December 13, 2003, Gorman and the Gorman firm filed a complaint in the Santa Clara County Superior Court on behalf of himself and his wife alleging defective construction, naming as defendants contractor and 23 other businesses and individuals who allegedly served as general contractors, subcontractors, and suppliers of material for the construction of the residence.

On March 2, 2004, contractor filed a cross-complaint seeking indemnity from the other defendants in the case. It also alleged that plaintiffs had breached the construction contract by not paying what they owed.

A first amended complaint was filed on May 19, 2004, by Gorman. This complaint expanded plaintiffs' claims to include professional malpractice by David Takamoto, the architect plaintiffs hired on February 2, 1999, and by Shawn Massihpour and A.S.E. Consulting, structural engineers employed by Takamoto.

In July 2004, the Gorman firm associated the law firm of Bowman and Brooke LLP (the Bowman firm), with Daniel Smith doing much of the subsequent work of that firm.

A stipulation filed July 26, 2004, agreed to a special master to coordinate discovery and conduct settlement conferences. Upon the death of the special master, the parties agreed to a new special master by stipulation filed September 22, 2004. The special masters eventually issued 14 pretrial orders, each approved by Judge Elfving. The first order, filed July 26, 2004, provided, among other things, that all defendants were deemed to have filed cross-complaints for indemnity and contribution against each other. It also provided for creation of a document depository, and "[c]opying services will be at each party's expense."

In July 2005, at Smith's recommendation, plaintiffs retained Attorney Semha Alwaya to render opinions about insurance coverage.

A 50-page second amended complaint was filed on November 29, 2005, by Gorman and Smith, naming the original 24 defendants and about 26 more.

In May 2006, Attorney Bruce Janke appeared at several depositions on behalf of plaintiffs.

After four settlement conferences, on October 15, 2004, May 13, 2005, July 13, 2005, and July 27, 2005, and mediation on March 6, 2006, March 17, 2006, and May 15, 2006, plaintiffs reached a settlement with 36 of the defendants, including contractor, in a written agreement dated May 15, 2006. The agreement is 13 pages, not including signatures. Under the settlement, contractor agreed to make an initial payment to plaintiffs of $2,430,000 (not including discovery sanctions ordered against one defendant) by June 26, 2006, in exchange for a mutual release of all claims.

As stated in the introduction, the agreement provided that plaintiffs were deemed the prevailing parties for purposes of recovering attorney fees under the construction contract and costs.² The agreement also provided that it "does not include or constitute an admission of any fact, or of liability or fault by any Party regarding any fact, claim, allegation, issue of law or violation of law. . . . This agreement may not be used as evidence of any wrongdoing, misconduct or liability by any Party or anyone else."

An exhibit attached to the settlement agreement and incorporated into it by reference reflected that contractor's contribution to the settlement is $994,000 (41 percent of the total), with 17 other sets of defendants paying to contractor the balance to be paid plaintiffs.³

B. The Motion for Attorney Fees and Costs

To avoid repetition, we will summarize the procedural history in this part and will summarize their arguments later. On July 31, 2006, plaintiffs filed a "Motion for Attorneys' Fees and Costs" from contractor. The notice of motion and accompanying memorandum of points and authorities sought recovery of attorney fees and costs of $1,729,391.35, without breaking down this total. The motion was accompanied by a memorandum of costs (signed by Craig Hansen, an associate attorney in the Gorman firm) that itemized costs of $266,561.96, while an attached declaration, the first by Hansen, explained that plaintiffs were seeking total costs of $343,516.72.⁴ The declaration further explained that this total included costs of $342,319.23 incurred prior to settling the case in May 2006, and an additional $1,197.49 in postsettlement costs in preparing its motion for fees and costs and in resisting contractor's motion for discovery regarding legal fees. The components of the presettlement costs were $68.74 for Attorney Alwaya, $6,283.76 for the Bowman firm, and $335,966.73 for the Gorman firm.

The hearing, initially set for August 24, 2006, was continued on August 10, 2006, at contractor's request by Judge Elfving to October 3, 2006, with its opposition due by September 19, 2006. Judge Elfving was unavailable on October 3, 2006, so Judge Ward granted the request of the parties to continue the hearing until Judge Elfving could hear it on October 19, 2006.

On September 19, 2009, contractor filed a document entitled "Tassajara Development Corporation's opposition to plaintiff's [sic] motion for attorney's fees and costs; or in the alternative motion to tax fees and costs."⁵ (Capitalization omitted.) Plaintiffs filed a response to this opposition.

At the hearing on October 19, 2006, which lasted less than an hour, the court took the motion under submission without asking any questions of the parties or expressing any agreement or disagreement with any of the points made in the motion or opposition.⁶ The following day it issued the 27-word order awarding fees and costs described in the introduction above (see ante, at p. 53).⁷ The trial court did not expressly disapprove of any particular components of plaintiffs' claims as unreasonable or unnecessary.

On October 30, 2006, plaintiffs submitted a written request for a statement of decision asking the court to answer 29 questions, which was opposed by contractor. On November 6, 2006, without a hearing on plaintiffs' request, the court issued an order denying the request without stating any reasons.

Meanwhile, on November 3, 2006, plaintiffs filed a notice of intention to move for a new trial on the attorney fee award and a motion to reconsider, modify, or clarify the court's award. Contractor filed opposition. After a hearing on November...