Sarria v. Ja, LLC (In re Sarria)
| Decision Date | 27 October 2020 |
| Docket Number | Bankr. Case No. 18-00572-JMM,Case No. 1:19-cv-00422-DCN,Adv. Case No. 18-06019-JMM |
| Parties | IN RE: Eduardo L. SARRIA, Debtor, Eduardo L. Sarria, Defendant-Appellant, v. JA, LLC d/b/a Leku Ona, an Idaho limited liability company, Plaintiff-Appellee |
| Court | U.S. District Court — District of Idaho |
Alex P. McLaughlin, Jack Widener Relf, Michael O. Roe, Givens Pursley LLP, Boise, ID, for Plaintiff.
Matthew George Bennett, Patrick John Geile, Foley Freeman, PLLC, Meridian, ID, for Defendant.
The matter before the Court is Defendant-Appellant Eduardo L. Sarria's appeal from the United States Bankruptcy Court for the District of Idaho's determination that JA, LLC d/b/a Leku Ona ("Leku Ona") was the prevailing party in the adversary proceeding and award of attorney fees. Dkt. 8. The appeal is fully briefed and ripe for the Court's review. Having reviewed the record herein, the Court finds the parties have adequately presented the facts and legal arguments in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court finds that the decisional process would not be significantly aided by oral argument, the Court decides this appeal without oral argument. Dist. Idaho Loc. Civ. R. 7.1(d)(1)(B). For the reasons set forth below, the Court hereby AFFIRMS both of the Bankruptcy Court's orders.
On May 2, 2018, Eduardo and Heather Sarria filed a joint petition for relief under Chapter 7 of the Bankruptcy Code. Due to allegations of fraud against Eduardo, Leku Ona thereafter filed an adversary proceeding against both Eduardo and Heather pursuant to 11 U.S.C. § 523(a)(2)(A). Leku Ona sought a non-dischargeable judgment against Eduardo for payments he fraudulently obtained from Leku Ona by billing the restaurant for food and wine he did not deliver.1 Dkt. 9-4, at 2–3.
Arduous discovery and pretrial motion practice ensued, and a two-day trial was held. Ultimately, the Bankruptcy Court concluded that Eduardo had committed fraud and awarded Leku Ona a judgment of $2,490. Id. at 7. Leku Ona then sought an award of attorney fees in the amount of $223,076.50 for the adversary proceeding. Id. Eduardo contested the motion, arguing that Leku Ona was not the prevailing party and that the amount Leku Ona sought was not reasonable.
The Bankruptcy Court concluded that fees were available under Idaho Code § 12-120(3). Id. at 8. The court then determined that Leku Ona was the prevailing party under Idaho law, citing various cases and Idaho Rule of Civil Procedure 54(d)(1)(B). The court discussed the single claim in the underlying case and the dismissal of Heather from the action. Id. at 8–14. The court went on to analyze whether the fee request was reasonable under the factors listed in Idaho Rule of Civil Procedure 54(e)(3) and Idaho caselaw. Id. at 15–29. The court's analysis was thorough and included consideration of each of the 54(e)(3) factors. After reviewing the circumstances of the case, the court deemed that the requested amount was unreasonable and reduced the amount by $107,923.50, ultimately awarding Leka Ona $125,153.00. Id. at 31.
On January 27, 2020, Eduardo timely appealed (Dkt. 8); Leku Ona responded (Dkt. 10); and Eduardo replied (Dkt. 11). This Court has jurisdiction under 28 U.S.C. § 158.
On appeal, Eduardo raises two issues. The first issue is whether the Bankruptcy Court erred in determining the prevailing party, which is reviewed for an abuse of discretion. See In re Brosio , 505 B.R. 903, 909 (B.A.P. 9th Cir. 2014).
The second issue is whether the Bankruptcy Court erred in awarding Leku Ona attorney fees and costs. A bankruptcy court's determination of attorney fees and costs is also reviewed for an abuse of discretion. In re Schwartz-Tallard , 473 B.R. 340, 346 (B.A.P. 9th Cir. 2012). This involves reviewing "whether the bankruptcy court applied the correct rule of law" and "whether the court's application of that rule was illogical, implausible, or without support" from the record.2 Id.
As a preliminary matter, there is no general right to attorney fees under the Bankruptcy Code. Id. at 347. To recover attorney fees, a party must be able to recover them under state or federal law. Id. (). Here, the Bankruptcy Court identified Idaho Code § 12-120(3) as a means for Leku Ona to recover fees because the court determined that Leku Ona was the prevailing party and Leku Ona's claim was fundamentally commercial. Dkt. 9-4, at 8–9, 14. Accordingly, the Court must review whether the Bankruptcy Court abused its discretion in its application of Idaho law.
Eduardo first argues that the Bankruptcy Court erred in determining that Leku Ona was the prevailing party because it "used a claim-by-claim analysis when it should have used an overall view analysis" due to the multiple parties involved. Dkt. 8, at 5. The Court disagrees. The Bankruptcy Court correctly applied the claim-by-claim analysis due to the single claim in this case.
Under Idaho law, courts have discretion to determine the prevailing party, but they must exercise that discretion in a manner consistent with applicable legal standards. Clarke v. Latimer , 165 Idaho 1, 437 P.3d 1, 5 (2018). " Eighteen Mile Ranch, LLC v. Nord Excavating & Paving, Inc. , 141 Idaho 716, 117 P.3d 130, 133 (2005) (emphasis added).
Conversely, where there is only one claim and no counterclaims, courts must focus their inquiry on a party's success on that single claim. For instance, in Clarke , the Idaho Supreme Court held that the plaintiffs were the prevailing party, as a matter of law, because the trial court found in their favor on their only claim. 437 P.3d at 6. The Clarke court emphasized that the plaintiffs Id. (cleaned up). And, in Daisy Manufacturing Co. v. Paintball Sports, Inc. , 134 Idaho 259, 999 P.2d 914 (Idaho Ct. App. 2000), the court of appeals similarly held that the defendant was the prevailing party because the case was dismissed and there "were not multiple claims or issues, but a single claim." Id. at 917.
Here, the Bankruptcy Court correctly applied the law and pointed out the difference in these approaches. It then explained that Leku Ona was the prevailing party because "only a single claim and no counterclaims were litigated among the parties, and [Leku Ona] sought and obtained a judgment against [Eduardo] on that claim." Dkt. 9-4, at 11. The court then clarified that the dismissal of Heather was not probative on who the prevailing party was because Leku Ona "stated from the outset that [Heather] was only named as a defendant out of an excess of caution" because the bankruptcy petition was filed jointly. Id. Indeed, the complaint specified that Heather was "being named solely because this is a joint petition." Id. at 11 n.8. Moreover, the complaint's prayer for relief reiterated that judgment was solely sought against Eduardo. The Bankruptcy Court highlighted each of these points in determining Leku Ona prevailed on its single claim against Eduardo.3 Accordingly, the Bankruptcy Court was correct in adopting a claim-by-claim analysis.
Notwithstanding these points, Eduardo maintains that he was the prevailing party, or at least each party prevailed, for two reasons: the $2,490 judgment Leku Ona received was much less than the damages sought and codebtor Heather was dismissed entirely during trial. Dkt. 8, at 6–7. Eduardo's argument is not sound.
First, the dismissal of Heather in the adversary proceeding had little impact on which party prevailed for the reasons state above: Eduardo was the primary defendant in the adversary proceeding and Heather's inclusion was merely a cautionary step. Further, Heather is not the one claiming she prevailed, so her dismissal is inapposite as to whether Eduardo was the prevailing party.
Second, the damages received were in fact not significantly less than the damages sought in this case. The complaint indicated that Leku Ona sought damages "in an amount to be proven at trial," not $50,000. Dkt. 9-4, at 11. Eduardo's hang up on $50,000 in damages comes from Leku Ona's supplemental discovery responses in which Leka Ona suggested that damages might be that high. However, at a hearing two weeks later, Leku Ona indicated that damages would likely be far less than $50,000, and that problems of proof made it difficult for Leku Ona to assert damages as a sum certain. And, in its pretrial brief, Leku Ona indicated that it was seeking between $3,260 and $10,000 in damages. After judgment, the Bankruptcy Court noted that it was "not a surprise" that damages were low because it was "represented by [Leku Ona] pretty early on that this was a low damage case." Dkt. 10, at 2. The court also recognized that Leku Ona was "candid throughout the proceedings that problems of proof" made the amount of damages difficult to determine. Dkt. 9-4, at 13. Thus, the record makes abundantly clear that the difference between the damages sought and the judgment of $2,490 was not as significant as Eduardo suggests.
Moreover, even if $50,000 were the amount sought by Leku Ona, the disparity would still not be enough to preclude a conclusion that Leku Ona prevailed under Idaho law, much...
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