Reudy v. Clear Channel Outdoors, Inc., C-06-5409 SC

• Decision Date: 02 February 2010
• Docket Number: C-02-5438 SC.,No. C-06-5409 SC,C-06-5409 SC
• Citation: 693 F. Supp.2d 1091
• Parties: Raymond REUDY and Kevin Hicks dba Advertising Display Systems, Plaintiffs, v. CLEAR CHANNEL OUTDOORS, INC., a Delaware corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of California

693 F. Supp.2d 1091

Raymond REUDY and Kevin Hicks dba Advertising Display Systems, Plaintiffs, v. CLEAR CHANNEL OUTDOORS, INC., a Delaware corporation, et al., Defendants.

Nos. C-06-5409 SC, C-02-5438 SC.

United States District Court, N.D. California.

February 2, 2010.

Gerald Michael Murphy, Luce Forward Hamilton & Scripps LLP, San Francisco, CA, for Plaintiff.

Scott D. Baker, James A. Daire, Michele D. Floyd, Reed Smith LLP, Christine Marie Morgan, Crosby, Heafey, Roach & May, San Francisco, CA, for Defendants.

ORDER RE: SPECIAL MASTER'S REPORT AND RECOMMENDATIONS RE: ATTORNEY'S FEES

SAMUEL CONTI, District Judge.

The Special Master in the above matter has rendered his Report and Recommendations dated January 28, 2010 and filed February 2, 2010.

The Court after having read, reviewed, and considered said report and recommendations, hereby approves and accepts the recommendations in the following particulars:

CBS Corporation is granted attorney's fees in the amount of $331,757.00 and costs in the amount of $8,324.00.

Miller Starr Regalia is granted attorney's fees in the amount of $167,571.14 and costs in the amount of $1,412.68.

Powell Goldstein is granted attorney's fees in the amount of $21,433.50 and costs in the amount of $19,863.25.

IT IS SO ORDERED.

REPORT AND RECOMMENDATION BY SPECIAL MASTER RE: ATTORNEYS FEES

EUGENE F. LYNCH (Ret.), Special Master.

INTRODUCTION

On December 11, 2007, the Federal District Court (Northern District of California) entered judgment in favor of Defendants CBS Corporation (CBS) and Patrick Roche (Roche) ("Defendants") and against Plaintiffs Raymond Reudy and Kevin Hicks dba Advertising Display Systems and ADS-1 ("Plaintiffs.") Defendant Roche thereafter moved for an order for attorneys' fees and costs pursuant to Federal Rules of Civil Procedure, rule 54(d), Northern District Local Rules, Rule 54-6, California Code of Civil Procedure Section 1021, and California Civil Code Section 1717.

Roche originally filed his motion for attorneys' fees on December 21, 2007, to comply with the timing requirements of the Federal Rules of Civil Procedure (Rule 54(d)(2)(B)) (claim for attorneys' fees must be filed no later than 14 days after entry of judgment.) CBS joined in the motion on December 26, 2007. However, on January 3, 2008, Plaintiffs filed a Notice of Appeal. On July 8, 2009, the Ninth Circuit affirmed the District Court's judgment, and the matter was transferred back to the District Court to address the issue of attorneys' fees. The parties thereafter filed supplemental briefing on the attorneys' fees issue.

At present, CBS seeks $331,757.00 in attorneys' fees and $8,324.00 in costs. Roche requested separate counsel, and retained Miller Starr Regalia to generally handle the case, and Powell Goldstein to specifically address the antitrust issues. Miller Starr Regalia seeks $263,968.20 in attorneys' fees and $1,412.68 in costs and Powell Goldstein seeks $125,361.74 in attorneys' fees and $19,863.25 in costs.

Defendants' motion is based on Paragraph 14.4 of the Parties' 2003 Purchase and Sale Agreement ("Agreement") and their alleged status as prevailing party¹ pursuant to the District Court's judgment. Paragraph 14 states: "The parties hereto agree that they shall pay directly any and all legal costs, which they have incurred on their own behalf in the preparation of this Agreement and other agreements pertaining to this transaction, and that such legal costs shall not be part of the closing costs. If either party is found in default of this Agreement and a final, non-appealable judgment is issued against said party for its default, then said party in default agrees to pay any and all costs arising as a result of said default, including reasonable attorneys' fees."

The other paragraph applicable to the parties' dispute is Paragraph 15 of the Agreement, which included a "Release" and "Covenant not to Sue." The provision specifically provided that Plaintiffs would not "commence any litigation, arbitration or other proceeding" against CBS "that is similar in any way to the action instituted by Plaintiffs . . . against Clear Channel."

A hearing was held on these issues at the JAMS offices in San Francisco, California on November 5, 2009, before the Honorable Eugene F. Lynch (Ret.), appointed as Special Master in this matter.

Plaintiffs raised essentially three objections as to why fees should not be granted:

(1) Plaintiffs sued Defendants in "tort" and therefore if Defendants believe they are entitled to attorneys' fees under the Agreement, they must bring a separate action in "contract." This first objection raises issues regarding the scope of the fee provision-i.e. the fee provision in the parties' Agreement provides for fees and costs when judgment is entered against a party based on a "default" and here judgment was entered based on Plaintiffs failure to state a cause of action, not default.

(2) Roche is not entitled to fees because he was not a party or signatory to the Agreement which contains the attorneys' fee provision; and

(3) Even assuming Defendants are entitled to attorneys' fees pursuant to the parties' Agreement, Plaintiffs' complaint included causes of action for public nuisance and antitrust, and because the statutes relating to these claims do not provide for an award of attorneys' fees to a prevailing defendant, these statutes "trump" any private contract, and thus Defendants may not recover fees allocated to the defense of these causes of action.

Finally, assuming Defendants are entitled to fees and costs, Plaintiffs argue the amounts requested are "outrageous and entirely unreasonable."

FACTS²

On December 15, 2003, Plaintiffs and CBS entered into a Purchase and Sale Agreement ("Agreement") whereby CBS purchased seven billboards from Plaintiffs for $2 million dollars. Paragraph 14.4 addressed "Legal Costs" and provided that "if either party is found in default of this Agreement and a final, non-appealable judgment is issued against said party for its default, then said party in default agrees to pay any and all costs arising as a result of said default, including reasonable attorneys' fees." (Emphasis added.)

Also, as part of the Agreement, the parties entered into a "Release" and "Covenant not to Sue." Paragraph 15 stated that in further consideration of the execution of the Agreement, Plaintiffs released CBS and its' employees³ "from any and all causes of action" relating to the maintenance and operation of its' outdoor advertising business in the San Francisco/Oakland Bay Area. The provision also specifically provided that Plaintiffs would not "commence any litigation, arbitration or other proceeding" against CBS "that is similar in any way to the action instituted by Plaintiffs . . . against Clear Channel." Plaintiffs had previously sued Clear Channel pertaining to the operation and maintenance of Clear Channel's advertising signs in the San Francisco area.

However, Plaintiffs did subsequently sue Defendants (as it had Clear Channel) alleging causes of action for intentional interference with prospective economic advantage, antitrust violations, public and private nuisance, and unjust enrichment. Each of Plaintiffs' claims related to CBS's operation and/or maintenance of its' outdoor advertising displays located in and around San Francisco. Defendants moved to dismiss based upon the release language in the parties' Agreement. The Court upheld the validity of the parties' Agreement, Plaintiffs' action was dismissed, and the dismissal was confirmed on appeal.

DISCUSSION

I.

Defendants are entitled to Attorneys Fees & Costs pursuant to the Parties' Purchase & Sale Agreement.

Plaintiffs argue judgment was not entered for a "default" pursuant to the Agreement, and therefore Defendants are not entitled to attorneys' fees pursuant to Civil Code Section 1717. Specifically, Plaintiffs argue that they brought an action against Defendants in tort, not breach of contract, and in order to collect fees and costs a legal action must be brought to enforce the Agreement.

In other words, Plaintiffs' argument goes to the scope of the Agreement and the fact that Section 1717 provides for fees only in actions on a contract. Section 1717 authorizes an award of fees "in any action on a contract, where the contract specifically provides that attorneys' fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party." At the hearing, Plaintiffs argued that what Defendants achieved in this matter was "equitable" relief—i.e. specific performance of the Release and/or declaratory relief regarding the meaning of the Release. Citing Stockton Theatres v. Palermo (1954) 124 Cal.App.2d 353, 268 P.2d 799, Plaintiffs argue that Defendants' reliance on the fee provision is limited by what the provision provides, and here it is limited to fees in legal actions in which a default is found.

Defendants argue that Plaintiffs' assertion, that they are required to file a separate action based on breach of the Agreement to recover their fees, has no legal support. Defendants argue the language of the fee provision controls a fee award, and this provision is subject to the ordinary rules of contractual interpretation. Specifically, they argue that Plaintiffs "defaulted" on the Agreement by violating the Release and Covenant not to sue, and in support cite to the definition of "default" in Black's Law Dictionary.⁴ Black's Law Dictionary defines default as "the omission or failure to perform a legal or contractual duty . . . or to observe a promise." Defendants claim that here Plaintiffs "defaulted" when they failed to observe a promise not to sue Defendants as they had Clear Channel.

Defendants also argue that California courts permit the application of section 1717 when a party uses the agreement containing the fees provision as a defense to the underlying action, whether the action is based in...