Roth Grading, Inc. v. Martin Bros. Constr.

• Decision Date: 09 February 2022
• Docket Number: 2:20-cv-00336-KJM-CKD
• Citation: 562 F.Supp.3d 1094
• Parties: ROTH GRADING, INC., Plaintiff, v. MARTIN BROTHERS CONSTRUCTION, Defendants.
• Court: U.S. District Court — Eastern District of California

562 F.Supp.3d 1094

ROTH GRADING, INC., Plaintiff,

v.MARTIN BROTHERS CONSTRUCTION, Defendants.

No. 2:20-cv-00336-KJM-CKD

United States District Court, E.D. California.

Signed February 9, 2022

Filed February 10, 2022

Illya Hooshang Broomand, Mark Posard, Gordon Rees Scully Mansukhani, LLP, Sacramento, CA, Aaron F. Smeall, PHV, Pro Hac Vice, Smith Slusky Pohren & Rogers, LLP, Omaha, NE, for Plaintiff.

Gregory Alan Meredith, Martin Brothers Construction, James R. Kirby, II, Lanny T. Winberry, Nageley, Kirby & Winberry, LLP, Sacramento, CA, for Defendants.

ORDER

Kimberly Mueller, CHIEF UNITED STATES DISTRICT JUDGE

Martin Brothers Construction moves for an award of its attorneys’ fees following judgment in its favor in this breach-of-contract dispute with Roth Grading, Inc. See Mot., ECF No. 43; Order (October 6, 2020) (Prev. Order) at 1, ECF No. 41. As explained in more detail below, the motion is granted : the contract in question includes an enforceable attorneys’ fees provision, and the requested fees are reasonable.

I. BACKGROUND

Roth sells heavy construction equipment, including "impactors." Prev. Order at 1. This litigation arose after Roth sent a contract purchase order to Martin for purchase of an impactor. See First Am. Compl. (FAC) ¶ 10, ECF No. 34; Roth Contract Purchase Order (Roth Form), Mot. Ex. 1 at 9,¹ ECF No. 43-1. Martin returned the purchase order with some additional terms, one of which provided that Roth could accept by beginning performance. FAC ¶¶ 12–14; Martin Construction Purchase Order (Martin Terms), Mot. Ex. 1 at 9–12, ECF No. 43-1. While Roth was "making preparations to ship the impactor," Martin cancelled the order. FAC ¶ 16.

Roth sued Martin in Nebraska state court for breach of contract, but that court determined it lacked personal jurisdiction over Martin, and Martin successfully defended the resulting dismissal on appeal. See Roth Grading, Inc. v. Martin Bros. Constr. , 25 Neb.App. 928, 916 N.W.2d 70, 81–82 (2018). Roth then sued Martin in the United States District Court for the District of Nebraska, which transferred the case to this court. Order at 1–2 (February 13, 2020), ECF No. 12. Woods Aitken, LLP, represented Martin in the Nebraska courts. Mot. at 8. Nageley, Kirby & Winberry, LLP, represents Martin in this court. Id. at 9.

Roth amended its complaint after the transfer, see ECF Nos. 28, 34, and Martin moved for judgment on the pleadings, ECF No. 30. The court granted the motion. Prev. Order at 1. Roth and Martin had formed a contract because Martin's additional terms were a counteroffer under the California Commercial Code and because Roth had accepted the counteroffer by beginning to perform. Id. at 4–6. These additional terms included a one-year limitations period, and Roth's complaint was filed after that limitations period, so the complaint was untimely. Id. at 7–8.

Martin's additional terms also included a provision about attorneys’ fees:

12. Disputes. ... In the event that either party becomes involved in litigation or arbitration arising out of this Agreement, the prevailing party shall be compensated for the cost of its participation in such proceedings, including the cost incurred for reasonable attorneys’ fees and experts’ fees.

Martin Terms at 12. Martin moves for an award of attorneys’ fees under that provision. Mot. at 4, 7. Roth argues the contract did not include this fees provision, but it does not contest the reasonableness of the fees Martin requests. See generally Opp'n, ECF No. 44. Briefing is complete, and the court submitted the matter without hearing. See Reply, ECF No. 48; Minute Order, ECF No. 50.

II. LEGAL STANDARD

Federal district courts sitting in diversity apply the substantive law of the state in which the court is located. See First Intercontinental Bank v. Ahn , 798 F.3d 1149, 1153 (9th Cir. 2015). In this matter, the parties agree California substantive law governs, including the California Commercial Code. See Prev. Order at 4.

In California, "[u]nder the American rule, each party to a lawsuit ordinarily pays its own attorney fees." Mountain Air Enter. LLC v. Sundowner Towers, LLC , 3 Cal. 5th 744, 751, 220 Cal.Rptr.3d 650, 398 P.3d 556 (2017). Parties can contract out of this general rule and agree that if litigation ensues, the prevailing party will be awarded attorneys’ fees. Id. (citing Cal. Civ. Proc. Code § 1021 ). Thus, when presented with a motion for attorneys’ fees, the court must determine whether the parties made such an agreement. R.W.L. Enter. v. Oldcastle, Inc. , 17 Cal. App. 5th 1019, 1025, 226 Cal.Rptr.3d 677 (2017) (citing Mountain Air , 3 Cal. 5th at 752, 220 Cal.Rptr.3d 650, 398 P.3d 556 ).

If the court finds such an agreement, it must determine the appropriate amount of attorneys’ fees to award the prevailing party. In performing this task, California courts use the lodestar approach: multiplying the number of hours reasonably expended by a reasonable hourly rate. Ketchum v. Moses , 24 Cal. 4th 1122, 1132, 104 Cal.Rptr.2d 377, 17 P.3d 735 (2001). To determine whether the number of hours is reasonable, the court considers a number of factors, including "the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case." PLCM Grp. v. Drexler , 22 Cal. 4th 1084, 1096, 95 Cal.Rptr.2d 198, 997 P.2d 511 (2000) (quoting Melnyk v. Robledo , 64 Cal. App. 3d 618, 623–24, 134 Cal.Rptr. 602 (1976) ). A reasonable hourly rate is "that prevailing in the community for similar work." Id. at 1095, 95 Cal.Rptr.2d 198, 997 P.2d 511. Generally, the relevant community is the one "in which the district court sits." Schwarz v. Sec'y of Health & Human Servs. , 73 F.3d 895, 906 (9th Cir. 1995) (citation omitted). The court may also adjust the lodestar rate upward or downward to account for the unique circumstances of the case, such as novel and difficult questions or counsel's skill. See Ketchum , 24 Cal. 4th at 1132, 104 Cal.Rptr.2d 377, 17 P.3d 735.

III. ANALYSIS

As described above, the court must determine (A) whether the parties’ contract included the attorneys’ fee provision, and if so (B) whether the requested fee is reasonable.

A. Whether the Contract Included an Attorneys’ Fees Provision

When, as here, contracting parties have exchanged conflicting forms, "[s]ection 2207 of the California Commercial Code controls contract interpretation." Textile Unlimited, Inc., A.BMH and Co. , 240 F.3d 781, 787 (9th Cir. 2001) (footnote omitted); accord Diamond Fruit Growers, Inc. v. Krack Corp. , 794 F.2d 1440, 1443 (9th Cir. 1986) ("If the offeror assents, the parties have a contract and the additional terms are a part of that contract."). Section 2207 replaces the "mirror image rule" in the commercial context. Prev. Order at 4 (citing Steiner v. Mobil Oil Corp. , 20 Cal. 3d 90, 99, 141 Cal.Rptr. 157, 569 P.2d 751 (1977) ). "Under § 2207(1), an acceptance will operate to create a contract even if additional or different terms are stated unless the acceptance is expressly conditioned on assent to the new terms." Textile Unlimited , 240 F.3d at 787 (emphasis in original). "[I]f the acceptance is expressly conditioned on the offeror's assent to the new terms, the acceptance operates as a counteroffer. If the counteroffer is accepted, a contract exists and the additional terms become part of the contract." Id. (citing Diamond , 794 F.2d at 1443 ).

As this court explained in its previous order, Martin's additional terms acted as a counteroffer, Roth began to perform, and performance was unequivocal acceptance under the counteroffer's express terms. Prev. Order at 6. Roth and Martin thus formed a contract based on that counteroffer, which included the attorneys’ fees provision. Because their contract included an attorneys’ fee provision, they agreed to an exception from the general rule against fee awards, and Martin is entitled to its reasonable fees.

This conclusion—which results from the Ninth Circuit's binding interpretation of California law—likely forecloses any argument that the contract had no fee provision. See Jones–Hamilton Co. v. Beazer Materials & Servs., Inc. , 973 F.2d 688, 696 n.4 (9th Cir. 1992) (noting Ninth Circuit's interpretation of state law is "binding in the absence of any subsequent indication from the California courts that [its] interpretation was incorrect" (citation and quotation marks omitted)). Roth argues, however, that the addition of a contract term awarding attorneys’ fees "materially altered" the contract's terms, which, if true, would prevent those terms from becoming part of the contract under California Commercial Code section 2207(2)(b), if that provision is applicable. See Opp'n at 4–6. This argument draws on this court's previous order, which considered whether the limitations period in the counteroffer materially altered the agreement. See Prev. Order at 6–8.²

Even if section 2207(2)(b) were to apply, the result here would be the same. Section 2207(2) states that, between merchants, additional terms in an acceptance "become part of the contract unless ... [t]hey materially alter it." Cal. Com. Code § 2207(2)(b).³ An additional term materially alters a contract when it "result[s] in surprise or hardship if incorporated without express awareness by the other party." C9 Ventures v. SVC–W., L.P. , 202 Cal. App. 4th 1483, 1506, 136 Cal.Rptr.3d 550 (2012) (alterations in original) (citation omitted).

It is undisputed here that the parties are "merchants" and that the fee provision in question is "additional." What remains, then, is to decide whether that provision "materially alter[ed]" the contract under section 2207(2)(b). Several California federal district courts and at least one California appellate court have held that, as a rule, attorneys’ fees provisions do not "materially alter" an agreement under section 2207(2)(b). See Exp. Dev. Can. v. E.S.E. Elec. , No. 16-02967, 2017 WL 3868795,...