Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. CGC-00-310997.
RIVERA, J.
We are familiar with the background of this case through our review of a related appeal, Khazan v. Braynin (Mar. 30, 2009, A113035) [nonpub. opn.] (Khazan I), which is filed concurrently with this opinion. As we explain there, Larisa Khazan (Khazan) and Boris Khazan (collectively plaintiffs) brought this action against Felix Braynin (Braynin), Vera Braynin, Vladislav Chernoguz (Chernoguz), and Biana Chernoguz (collectively defendants). Plaintiffs sought judicial foreclosure of a deed of trust, alleging that defendants had defaulted on a promissory note secured by the deed of trust. The complaint included claims that defendants had defaulted on a second promissory note and had committed fraud. Defendants cross-complained for slander of title and cancellation of cloud on title. Plaintiffs prevailed on their causes of action for judicial foreclosure, declaratory relief, and default on the second promissory note. In Khazan I, defendants appealed that judgment, and we have affirmed.
The trial court awarded plaintiffs attorney fees in the amount of $1,370,604. In this appeal, defendants challenge that award. We shall reverse the award and direct the trial court to reconsider plaintiffs’ request for attorney fees in accordance with the views we express in this opinion.
II. BACKGROUND
We quote at length from our recitation of the facts in Khazan I:
Brackets enclosing material denote additions to the opinion in Khazan I.
A. The Loan and Deed of Trust
Braynin and Chernoguz operated a real estate business known as Crown Real Estate and Investment (Crown), and together defendants owned a property on Hayes Street in San Francisco. Braynin asked plaintiffs for a loan to fund construction on the Hayes Street property. Plaintiffs agreed to loan them $300,000, with the loan secured by a deed of trust. In February 1995, Braynin gave plaintiffs a $300,000 promissory note and deed of trust, payable within one year. The parties dispute how much money plaintiffs gave in return. Plaintiffs took the position that they gave defendants checks totaling $140,000, and the remainder of the promissory note represented unpaid amounts defendants had previously borrowed from plaintiffs. According to defendants, all previous loans had been paid off, and Khazan gave Braynin checks totaling $119,000, promising him the balance of $181,000 within about two weeks.
B. Defendants’ Version of Events
The parties gave dramatically different versions of the events that took place next. According to defendants, within a few days of lending the money, Khazan told defendants that plaintiffs no longer wanted to continue with the loan, and instead asked them to transfer the money to another company, A and A Financial Management (A&A). Chernoguz told A&A’s owner, Alexander Lushtak, to transfer the $119,000, plus interest, from Crown’s account at A&A to the Khazans’ account, and Khazan was aware of the transfer. Braynin asked Khazan to return the note and deed of trust. At first she told him she was too busy to look for them. Later she said she had torn them up and thrown them away.
Defendants had introduced plaintiffs to A&A, which apparently specialized in arbitrage investments.
Braynin had a deed of reconveyance prepared, which recited that the indebtedness secured by the deed of trust had been fully paid and satisfied. He explained to plaintiffs that he wanted the deed of reconveyance executed so he could record it in the event the deed of trust and promissory note turned up. Plaintiffs signed the deed of reconveyance. However, although Braynin asked them to come to Crown’s office to have it notarized, they did not do so. Braynin eventually forgot about the deed of reconveyance.
Defendants presented evidence that the Khazans’ signatures on the deed of reconveyance were genuine.
Plaintiffs made no demands on the note for at least two years, and defendants made no payments. In approximately April or May 1997, however, A&A collapsed, and plaintiffs lost money they had invested with A&A. In late May 1997, Khazan recorded the $300,000 deed of trust.
Lushtak was later indicted for wire fraud (18 U.S.C. § 1343) and money laundering (id., § 1956(a)(1)(A)(i)) in connection with his operation of A&A. He pled guilty to money laundering. It appears that some of the clients whom defendants had introduced to A&A—and who held A&A notes cosigned by Lushtak, Braynin, and Chernoguz—held Braynin and Chernoguz responsible for the losses they suffered in A&A’s collapse. According to defendants, in order to forestall lawsuits by these clients, Braynin and Chernoguz issued promissory notes to the clients to replace the A&A notes, and they indicated they would pay the note amounts if they earned enough money from their other business operations. Although the balance in Khazan’s A&A account was $357,000, she told Braynin to prepare a note for $57,000, and Braynin and Chernoguz did so.
C. Plaintiffs’ Version of Events
Plaintiffs’ version of the events relevant to this appeal is irreconcilable with defendants’. Khazan testified that she did not have an account with A&A, that she never intended to loan money to A&A, and that the $300,000 note was fully funded by a combination of “new money” she gave defendants and “old money” rolled over from previous loans. Khazan did not immediately record the deed of trust because Braynin asked her not to do so, so that he could borrow more money against the property. She never told Braynin plaintiffs wanted to withdraw from the loan, did not ask him to have her money transferred to A&A, and did not tell him she had torn up the note and deed of trust. Khazan had no memory of signing the deed of reconveyance, although she agreed that the signatures on the document looked like plaintiffs’. She received numerous interest payments on the loan before April 1997, often in the form of cash and checks from Crown or A&A, but it appears that she did not keep records of the payments. When the note came due, she asked Bryanin and Chernoguz when it would be paid, and they told her they would pay very soon. She decided to record the note after Braynin told her, in around April 1997, that he had lost his money. After the note was recorded, Khazan again asked defendants when they would repay the amounts due on the $300,000 note. They said they would repay the loan, and Braynin indicated the payment would be made within a year.
She believed A&A was defendants’ company and that checks to A&A went to defendants.
The funding included the $119,000 paid to defendants, and an additional $21,000 check made out to A&A, at Braynin’s request.
D. The Litigation
Plaintiffs brought this action, seeking judicial foreclosure of the deed of trust and alleging fraud and other causes of action, and defendants cross-complained for slander of title and cancellation of cloud on title. A jury first heard the evidence and rendered its verdict. Responding to the special verdict form’s questions regarding breach of the $300,000 note, the jury found that defendants had executed and delivered the note, that plaintiffs had fully funded the note with checks and the rolling over of an existing indebtedness, that plaintiffs had not instructed Braynin and Chernoguz to cancel the $300,000 promissory note and deed of trust and to transfer their money to A&A, and that the interest rate on the note was usurious. On the cause of action for breach of the $57,000 note, the jury found that Braynin and Chernoguz had executed and delivered the note to Khazan, and that it was supported by $57,000 consideration. The jury found against plaintiffs on the other causes of action submitted to it. [In particular, the jury rejected the allegations that Braynin and Chernoguz committed fraud by telling plaintiffs that it was unnecessary to record the $300,000 deed of trust because there was sufficient equity in the Hayes Street property and that they would take no actions to endanger the value of the deed of trust; that Braynin and Chernoguz falsely promised to repay the notes for $300,000 and $57,000 without intending to do so; and that Braynin and Chernoguz committed two “predicate acts” under the Racketeer Influenced and Corrupt Organizations Act, 18 United States Code section 1961 et seq. (RICO). [¶]]
Because the jury found plaintiffs had not instructed Braynin and Chernoguz to cancel the note and deed of trust and to transfer their money to A&A, it did not reach the question of whether the money had in fact been transferred to A&A. Based on these findings, the jury similarly did not reach the cross-complaint’s cause of action for slander of title. The issue of whether the interest rate was usurious is not germane to this appeal.
The trial court later issued a statement of decision ruling in plaintiffs’ favor on their first cause of action for judicial foreclosure of the deed of trust—finding that plaintiffs were entitled to the unpaid balance on the note, plus interest and attorney fees, and indicating its intent to issue a judgment of foreclosure directing the sale of the Hayes Street property—and the seventh cause of action for declaratory relief. The court entered judgment in plaintiffs’ favor on their causes of action for judicial foreclosure, declaratory relief, and default on the $57,000 note, as well as on the cross-complaint. [We end our quotation from our opinion in Khazan I.]
The court declared plaintiffs’ deed of trust in second position for purposes of disposition of the proceeds of the sale of the property.
E. Attorney Fees
The February 1995 note for $300,000 provided: “Should suit be commenced to collect this note or any portion thereof, such sum as the Court may deem reasonable shall be added hereto as attorney’s fees.” The promissory note for $57,000, dated June 1, 1997, contained nearly identical language.
In ruling for plaintiffs on their causes of action for judicial foreclosure and declaratory relief, the trial court awarded plaintiffs their attorney fees in an amount to be determined. Plaintiffs brought a motion seeking a lodestar amount of $944,952 for the legal services of one of their attorneys, Arthur Brunwasser, and an additional $94,506 for the services of another attorney, Robert S. Rivkin, and asked to have the lodestar amount enhanced by a factor of 1.5.
The trial court found that plaintiffs incurred lodestar attorney fees of $850,732 for Brunwasser’s services, and applied a 1.5 multiplier for those services, for an award of $1,276,098. It also awarded $94,506 for Rivkin’s services, for a total attorney fee award of $1,370,604. It used a rate of $400 per hour as the prevailing rate in the community for similar services for Brunwasser’s work, and $285 per hour for Rivkin’s work. The court awarded no fees for the time spent on the failed RICO claim, but declined to apportion the fees incurred for the contract and fraud causes of action, concluding they arose from a common nucleus of facts.
Defendants argue that the award of attorney fees was made under only the $300,000 note, and not the $57,000 note. It is true that the judgment provides for an award of attorney fees in connection with the first and seventh causes of action, which were related to the $300,000 note, and not in connection with the eighth cause of action for breach of the $57,000 note. However, the order awarding attorney fees makes clear that fees were awarded for the successful pursuit of all three causes of action.
II. DISCUSSION
A. Scope of Attorney Fee Provision
Plaintiffs brought their motion for attorney fees under Civil Code section 1717, which provides as pertinent here: “(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. [¶] . . . [¶] Reasonable attorney’s fees shall be fixed by the court, and shall be an element of the costs of suit.” Where a contract provides for attorney fees, a prevailing party may recover attorney fees under section 1717 only as they relate to the contract claim. (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129 (Reynolds).)
Plaintiffs now claim that they are not bound by the limitations of Civil Code section 1717, but may instead recover under the broader provisions of Code of Civil Procedure section 1021, which provides: “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .” As our Supreme Court has stated, “If a contractual attorney fee provision is phrased broadly enough . . ., it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims: ‘[P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.’ ” (Santisas v. Goodin (1998) 17 Cal.4th 599, 608 (Santisas), quoting Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341 (Xuereb).) Plaintiffs contend the language of the promissory notes was broad enough to encompass their causes of action based on fraud, as well as those based on contract.
We reject this contention. We first note that, as they acknowledge, plaintiffs did not rely on this theory below. Under the doctrine of theory of the case, they are not entitled to raise it on appeal. (See Planned Protective Services, Inc. v. Gorton (1988) 200 Cal.App.3d 1, 12-13, disapproved on another ground in Martin v. Szeto (2004) 32 Cal.4th 445, 451, fn. 7.)
Because the question of the basis for attorney fees may arise again on remand, however, we will address the matter on the merits. Courts have interpreted attorney fee provisions to encompass tort as well as contract claims when they contained broad language. For instance, in Santisas, a provision for attorney fees incurred in any action “ ‘arising out of the execution of th[e] agreement or the sale’ ” of real estate was deemed broad enough to encompass both contract and tort claims. (Santisas, supra, 17 Cal.4th at p. 608.) Similarly, the court in Xuereb held an agreement that the prevailing party would recover its attorney fees in any “ ‘lawsuit or other legal proceeding’ to which ‘this Agreement gives rise[]’ ” to be broad enough to encompass actions arising both in tort and in contract. (Xuereb, supra, 3 Cal.App.4th at pp. 1342-1343.) A provision for attorney fees to the prevailing party “ ‘[i]n any legal action brought by either party to enforce the terms hereof or relating to the demised premises’ ” was likewise held to encompass any action, whether sounding in contract or in tort, that related to the leased premises. (Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794, 1799; see also Lerner v. Ward (1993) 13 Cal.App.4th 155, 160 [contract providing for attorney fees in “any action or proceeding arising out of the agreement” encompassed fraud claim].) On the other hand, a provision for attorney fees “ ‘to enforce the terms [of a lease] or declare rights hereunder’ ” was held not to encompass a tort claim for constructive fraud and breach of fiduciary duty in Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 702, 708-709; and in Loube v. Loube (1998) 64 Cal.App.4th 421, 429-430, a provision for attorney fees “ ‘[i]f legal action or arbitration is necessary to enforce the terms of this Agreement,’ ” was held not to cover a tort claim for professional negligence.
The attorney fee provisions at issue here are not broad enough to include tort claims. As we have noted, the promissory notes provided that if suit was commenced “to collect this note or any portion thereof, such sum as the Court may deem reasonable shall be added hereto” as attorney fees. This provision is unlike those that allow for fees when actions “ ‘aris[e] out of’ ” a contract, or “ ‘relate to’ ” the subject of a contract. Rather, the provisions are directed narrowly toward actions to collect on the notes. Like the courts in Loube and Exxess Electronixx, we conclude it does not encompass tort causes of action.
B. Apportionment or Reduction of Fees
Defendants contend the trial court should have deducted from the fee award the time plaintiffs spent prosecuting their unsuccessful fraud-based causes of action. They argue that these causes of action were independent of the causes of action to enforce the promissory notes and that there was no basis to award fees for pursuing them. In support of their contention, they draw our attention to various points in the trial at which plaintiffs offered evidence, particularly of Braynin’s and Chernoguz’s dealings with third parties, on the ground that it showed defendants’ fraudulent intent not to repay their obligations under the notes, and argue that this evidence was not relevant to the contract-based causes of action. Plaintiffs, on the other hand, argue that the case pitted the credibility of the parties against each other and that the evidence they presented to show defendants did not intend to honor their obligations under the promissory notes was also relevant to defendants’ credibility.
When we consider the amount of fees awarded, “there is no question our review must be highly deferential to the views of the trial court. [Citation.] As our high court has repeatedly stated, ‘ “ ‘[t]he “experienced trial judge is the best judge of the value of professional services rendered in his [or her] court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong”—meaning that it abused its discretion.’ ” ’ [Citations.]” (Children’s Hospital & Medical Center v. Bontá (2002) 97 Cal.App.4th 740, 777; see also PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095 (PLCM) [trial court has broad authority to determine amount of reasonable fee].)
“Apportionment of a fee award between fees incurred on a contract cause of action and those incurred on other causes of action is within the trial court’s discretion (see Nazemi v. Tseng (1992) 5 Cal.App.4th 1633, 1642 . . . [Nazemi]) . . . . ‘Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under [Civil Code] section 1717 only as they relate to the contract action.’ (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129 . . . .) However, ‘[a]ttorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed.’ (Id. at pp. 129-130.) For example, the holder of a note which provides for payment of fees incurred to collect the balance due is entitled to fees incurred in defending itself against ‘interrelated’ allegations of fraud. (Wagner v. Benson (1980) 101 Cal.App.3d 27, 37 . . . .)” (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111.) Such a result may be proper when a trial court finds that the claims were “ ‘ “inextricably intertwined,” ’ [citation], making it ‘impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units’ [citation].” (Ibid.) Thus, the court in Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1603-1605, concluded that where there was no clear distinction between a breach of contract cause of action and other causes of action that relied on the same factual allegations, the trial court had not abused its discretion in ruling that the legal services for the contract claim could not be separated from those rendered for the lawsuit as a whole.
The trial court here found “that the fraud and contracts claims arose from a common nucleus of facts. . . . [¶] Although the jury rejected plaintiffs’ causes of action for fraud, the court finds that all of the facts relevant to each claim were closely related and can not be separated out from each other. The claims presented at trial arose from the dispute over payment of monies owed on the two promissory notes and the assertion of affirmative defenses in response. The court is persuaded that plaintiffs do not seek compensation for services provided to the pursuit of losing claims. Rather, they seek compensation for services provided on the note claims, which required the presentation of evidence that plaintiffs contended also supported their other claims. The court finds that this evidence was also relevant to enabling the jury and the court to determine the credibility battle between the parties in this case at trial, which was pivotal to any decision made regarding the contractual promissory notes.”
We have no quarrel with the finding that some, or even most, of the services for which plaintiffs sought compensation arose from issues common to the contract and fraud claims. The key questions in connection with the contract causes of action were whether defendants executed and delivered the $300,000 note; whether the note was fully funded; whether plaintiffs instructed defendants to cancel the note and deed of trust and transfer their money to A&A; whether defendants executed and delivered the $57,000 note, whether it was supported by consideration, and the amount of the consideration. The questions the jury was asked to decide in connection with the fraud causes of action were whether Braynin and Chernoguz intended to carry out their promises to repay the $300,000 and $57,000 loans when they made them; and whether they asked plaintiffs not to record the $300,000 deed of trust, and told them that it was unnecessary to do so because there was adequate equity to secure the debt and that they would not endanger the value of the unrecorded deed of trust. Many of the facts pertinent to these causes of action concerned the events immediately surrounding the execution of the notes and the deed of trust, and the trial court could reasonably conclude that they were common to the contract-based and fraud-based causes of action.
Other evidence, however, was not relevant to the contract-based causes of action. At trial, for instance, plaintiffs presented evidence of defendants’ dealings with various third parties. At the outset of trial, defendants sought unsuccessfully to sever the causes of action to be tried by the court, including the judicial foreclosure cause of action, and have them tried first. Plaintiffs opposed the motion, in part on the ground that the evidence of fraud was also relevant to defendants’ credibility and that the claims were “one ball of wax” and depended on Braynin’s credibility.
The evidence of the third party transactions indicated that various people—whom Braynin and Chernoguz had apparently introduced to A&A—lent money in return for notes signed by Lushtak, Braynin, and Chernoguz. After the failure of A&A, Braynin and Chernoguz in 1997 issued promissory notes in their own names to replace these notes. According to defendants, they did so in order to “calm everybody down,” and to forestall lawsuits, believing they would make enough money in business ventures in Russia to pay off the 1997 notes. They testified that their attempt to recoup the losses failed in 1998, when the Russian monetary system collapsed. Braynin denied that they signed the 1997 notes out of fear of potential criminal liability arising out of the federal investigation into the dealings of A&A.
Plaintiffs contended that Braynin and Chernoguz’s dealings with the third parties tended to show that they entered into the 1997 notes because of their fear of their potential civil or criminal liability and that they did not intend to honor the $300,000 and $57,000 notes when they signed them. In this respect, the evidence arguably had some relevance to the fraud-based causes of action. As to the contractual causes of action, however, we see no relevance. Nothing in the digression into defendants’ business dealings with the holders of the other notes would enlighten the fact finders as they decided whether the notes were executed and supported by consideration and whether plaintiffs directed defendants to transfer the money to A&A.
We are aware that the trial court found that the fraud and contract claims arose from a common nucleus of facts and that the evidence on the note claims also supported plaintiffs’ other claims. As we have discussed, some of the evidence surrounding the execution of the note and deed of trust and the events that took place immediately afterward was relevant to both the contract and the fraud claims. But it is clear to us that some of the evidence plaintiffs submitted to support their fraud claims had nothing to do with the issues pertinent to the contractual causes of action, and the trial court abused its discretion in failing to account for that fact in its award of attorney fees.
Plaintiffs also justified the admission of the evidence on the ground that it would call into question the credibility of all of defendants’ testimony, and the trial court stated in its order awarding attorney fees that the evidence that supported both the contractual and fraud-based causes of action was relevant to enabling the jury and the court to resolve the “pivotal” credibility battle between plaintiffs and defendants. As we have discussed, however, a significant portion of the evidence introduced at trial did not support the contractual claims. Moreover, the jury rejected the fraud-based claims, finding unanimously for defendants on all of them. In doing so, it presumably rejected plaintiffs’ argument that defendants’ actions in connection with the third party transactions showed that they committed fraud in forming their agreements with plaintiffs. In the circumstances, the time and fees spent on plaintiffs’ unsuccessful attempt to show that defendants’ activities were fraudulent should not be borne by defendants.
An analogous situation arose in Boquilon v. Beckwith (1996) 49 Cal.App.4th 1697. There, the Court of Appeal concluded the trial court had not abused its discretion in determining that half of the plaintiffs’ counsel’s time had been spent in an unsuccessful effort to portray a defendant as a “bad actor” in order to show the defendant had acted with fraudulent intent. (Id. at p. 1723.) The court rejected the plaintiffs’ evidence on this point, and no such showing was required to establish the violations for which the defendant was found liable. The Court of Appeal, therefore, upheld the trial court’s conclusion that this time was not reasonably spent in pursuit of the legal theories on which plaintiffs had prevailed, and that the plaintiffs were, therefore, not entitled to attorney fees for the time. (Ibid.) Here, we conclude the time spent on issues pertinent only to the unsuccessful fraud-based causes of action was not reasonably spent in pursuit of the successful contractual causes of action, and attorney fees should not have been awarded for that time.
In reaching this result, we recognize that in certain cases, courts have not required apportionment between successful and unsuccessful causes of action. As stated in Wysinger v. Automobile Club of Southern California (2007) 157 Cal.App.4th 413, 431, “ ‘[w]here a lawsuit consists of related claims, and the plaintiff has won substantial relief, a trial court has discretion to award all or substantially all of the plaintiff’s fees even if the court did not adopt each contention raised.’ [Citation.] ‘To reduce the attorneys’ fees of a successful party because he did not prevail on all his arguments, makes it the attorney, and not the defendant, who pays the costs of enforcing’ the plaintiff’s rights. [Citations.]” However, “when a plaintiff has achieved limited success, or has failed with respect to distinct and unrelated claims, . . . a reduction from the lodestar is appropriate. (Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 250 . . . [Sokolow].)” (Hogar Dulce Hogar v. Community Development Com. of City of Escondido (2007) 157 Cal.App.4th 1358, 1369.) Other cases have also applied this principle. (See Korech v. Hornwood (1997) 58 Cal.App.4th 1412, 1415-1416, 1422 (Korech) [attorney fees need not be apportioned where incurred for issues common to both successful causes of action in which fees are proper and unsuccessful causes of action in which they are not allowed]; Nazemi, supra, 5 Cal.App.4th at p. 1642 [in light of close interrelationship between claim on which attorney fees were proper and unsuccessful claims, no need to apportion attorney fees among claims]; Greene v. Dillingham Construction N.A., Inc. (2002) 101 Cal.App.4th 418, 422-423 (Greene) [no need for allocation of fees between successful and unsuccessful claims based on same set of facts and course of conduct]; Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1132-1133 (Akins) [expenses incurred on factual or legal issues common to successful claim on which attorney fees were proper and unsuccessful portion of action need not be apportioned].)
The facts here are distinguishable from those in the cases we have just cited. We have already concluded that, while some of the factual background of the contractual and fraud-based causes of action was related, a significant portion of the background of the fraud causes of action was not pertinent to the contractual causes of action.
Moreover, in several of these cases, the trial court had corrected the attorney fee request to account for the prevailing party’s limited success. After concluding that in light of the close interrelationship of the successful and unsuccessful claims there was “no obvious need or precise methodology apparent to apportion attorney fees,” the court in Nazemi went on to note that it was “not clear that the trial court did not in fact engage in some apportionment in determining the amount of the award,” and that the amount “suggest[ed] some apportionment or discounting.” (Nazemi, supra, 5 Cal.App.4th at p. 1642.) The court in Korech noted that while the trial court was not required to apportion fees for work common to causes of action in which fees were proper and those for which they were not, the trial court had gone through the bills and deducted fees for a separate cause of action for which fees were not available, as well as fees for which there was little factual support. (Korech, supra, 58 Cal.App.4th at p. 1422.) The Court of Appeal in Akins noted that although the trial court was not required to apportion hours formally between claims for which attorney fees were compensable and other hours, the award “was significantly reduced from the original request as a result of the trial court’s indication that it did not look favorably on the full request,” indicating that the trial court had exercised its discretion. (Akins, supra, 79 Cal.App.4th at p. 1134.) Finally, the fee award affirmed in Greene represented a reduced number of hours, including reductions for time spent on unsuccessful claims. (Greene, supra, 101 Cal.App.4th at p. 423.)
Sokolow is instructive. The court there considered an award of attorney fees under title 42 United States Code section 1988 and Code of Civil Procedure section 1021.5 for a sex discrimination action. (Sokolow, supra, 213 Cal.App.3d at pp. 235, 247.) A plaintiff had been denied admission to a mounted patrol, which maintained a close relationship with a county sheriff department, and which restricted its membership to males. (Id. at pp. 236, 238.) She and another plaintiff filed suit, seeking a declaration that the patrol’s bylaws restricting membership to men violated the equal protection clauses of the United States and California Constitutions, an injunction restraining the patrol from excluding qualified women from membership, or in the alternative, an injunction restraining the county from maintaining any affiliation with the patrol. The trial court found the patrol was closely enough involved with the sheriff’s department to subject it to the equal protection clauses, and required it to choose between its relationship with the department and its membership policy excluding women. The patrol chose to sever its relationship with the sheriff’s department rather than admit women. (Id. at pp. 235, 239-241.) The trial court denied the plaintiffs their attorney fees. (Id. at p. 242.)
The Court of Appeal first concluded that the plaintiffs were the prevailing parties, in that they had successfully established that the patrol’s discriminatory membership policy constituted state action in violation of the state and federal equal protection clauses and title 42 United States Codes section 1983, and that even though the patrol had not been forced to admit women, the plaintiffs had achieved their alternative relief of severing the county’s involvement with the patrol. (Sokolow, supra, 213 Cal.App.3d at pp. 244-246.) However, the Court of Appeal also concluded that the plaintiffs were not entitled to the full amount of their attorney fee request, stating that although the plaintiffs were the prevailing parties, “the degree or extent of appellants’ success in obtaining the results which they sought must be taken into consideration in determining the extent of attorney fees which it would be reasonable for them to recover.” (Id. at p. 248.) The court noted that under both federal and state law, “a reduced fee award is appropriate when a claimant achieves only limited success,” (id. at p. 249), and concluded that the plaintiffs had not simply failed in certain legal theories that were ultimately unnecessary to the success of their claims, but that instead they had failed to achieve some of the goals of their action (id. at p. 250). On remand, the trial court was directed to take into consideration the plaintiffs’ limited success when arriving at an award of reasonable attorney fees. (Id. at pp. 250-251.)
The court in Sokolow distinguished an earlier case, Sundance v. Municipal Court (1987) 192 Cal.App.3d 268 (Sundance), on the ground that in Sundance, the plaintiffs had been entirely successful in obtaining their actual objectives—changes to the procedures for the incarceration and treatment of public inebriates—although they had not prevailed on all legal theories at trial. (Sokolow, supra, 213 Cal.App.3d at pp. 249-250; Sundance, supra, 192 Cal.App.3d at pp. 271, 273-274.) The court in Sundance stated that the trial court has discretion “to determine whether time spent on an unsuccessful legal theory was reasonably incurred,” and that “all time reasonably spent should be compensated.” (Sundance, supra, 192 Cal.App.3d at p. 274.)
In this context, we also draw guidance from Harman v. City and County of San Francisco (2007) 158 Cal.App.4th 407 (Harman II). There, Division One of the First Appellate District considered the propriety of an award of attorney fees under title 42 United States Code section 1988, relying on factors articulated in Hensley v. Eckerhart (1983) 461 U.S. 424. (Harman II, supra, 158 Cal.App.4th at pp. 415-418.) The court laid out a two-step analysis to be applied to partially prevailing plaintiffs in such cases. First, the lodestar figure is calculated by multiplying the number of hours expended times a reasonable hourly rate, with adjustments as necessary to fix the fee at the fair market value. (Id. at p. 416.) Hours spent on claims unrelated to those on which a party was successful should be excluded from the lodestar calculation, but fees need not be apportioned if incurred on an issue common to both a cause of action in which fees are proper and one in which they are not allowed, or “ ‘when the issues in the fee and nonfee claims are so inextricably intertwined that it would be impractical or impossible to separate the attorney’s time into compensable and noncompensable units.’ ” (Id. at p. 417.)
If the successful and unsuccessful claims are found to be related, the court proceeds to the second step of the two-part analysis in limited success cases: In that case, the court should “evaluate the ‘significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation.’ (Hensley v. Eckerhart, supra, 461 U.S. 424, 435.) If the plaintiff obtained ‘excellent results,’ full compensation may be appropriate. (Ibid.) If there was only ‘partial or limited success,’ full compensation ‘may be . . . excessive.’ (Id. at p. 436.) Where ‘ “the plaintiff achieved only limited success,” ’ the court ‘ “should award only that amount of fees that is reasonable in relation to the results obtained.” [Citation.] In conducting this analysis, a court “may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success.” [Citation.]’ (Mann v. Quality Old Time Service, Inc. [(2006)] 139 Cal.App.4th 328, 343, italics omitted.) In this step of the Hensley analysis, ‘The trial court “should focus on the significance of the overall relief obtained by the plaintiff in relation to the hours reasonably expended on the litigation.” [Citation.] The court may appropriately reduce the lodestar calculation “if the relief, however significant, is limited in comparison to the scope of the litigation as a whole.” [Citation.] . . . “[T]he most critical factor is the degree of success obtained.” [Citation.]’ [Citation.]” (Harman II, supra, 158 Cal.App.4th at pp. 417-418.)
The reasoning of these cases applies with at least equal force in this case under Civil Code section 1717, where the parties have agreed by contract to an award of fees for the cost of collecting on the notes. With respect to their broader goals, plaintiffs achieved only limited success. They failed in all of their fraud-related causes of action, in which they had sought not only compensatory but also punitive damages. They cannot be said to have achieved all or substantially all of their objectives in the litigation.
We are not persuaded otherwise by plaintiffs’ reliance on Bernardi v. County of Monterey (2008) 167 Cal.App.4th 1379. In considering an award of attorney fees to a party who had been successful in obtaining production of some, but not all, of the documents she had sought under the California Public Records Act (CPRA) (Gov. Code, § 6250 et seq.), the Court of Appeal concluded the trial court had not abused its discretion in declining to reduce the fees in an amount proportionate to the plaintiff’s partial success. (Bernardi, at p. 1395.) The Court of Appeal recognized that a plaintiff’s partial success is a factor the trial court may consider in determining an award of reasonable attorney fees. However, noting that each fee-shifting statute should be construed on its own merits, the court concluded that a rule requiring a fee award in CPRA litigation to be proportionate to the degree of success would have a chilling effect on efforts to enforce the public right of information. (Bernardi, at pp. 1397-1398.) No such policy concerns exist here. We see no likelihood that parties will hesitate to enforce their contracts if they are able to obtain fees only for the causes of action that the parties agreed would carry an entitlement to fees.
In the circumstances, the award of attorney fees must be reversed. On remand, the trial court shall consider whether it is possible to further apportion fees for time spent on issues that were not attributable to the contract-based causes of action. If the court determines that such apportionment is not possible, it shall exercise its discretion to reduce the award to reflect plaintiffs’ limited success.
C. Other Issues on Remand
For the guidance of the trial court on remand, we shall briefly address other matters raised on appeal.
1. Block Billing
Defendants contend that the “block billing” of plaintiffs’ counsel made it impossible for the trial court to break down counsel’s time between tasks related to the various claims. (See Bell v. Vista Unified School Dist. (2000) 82 Cal.App.4th 672, 688-689 (Bell) [counsel made no effort in billings to apportion time between causes of action].) As defendants point out, the billing statements contain entries such as “[t]rial preparation,” and “[r]esearch,” without disclosing the particular tasks carried out or the subjects of the research. A declaration of Brunwasser in support of the fee motion indicated that the time billed as “ ‘trial preparation’ ” was accurately recorded, and was spent in tasks such as organizing the record and the materials; analyzing and responding to motions in limine; reviewing, summarizing, and organizing deposition transcripts; preparing witnesses to testify; reviewing documents generated during discovery; and other tasks involved in preparing a case for trial. The trial court could reasonably accept this explanation. (See Nightingale v. Hyundai Motor America (1994) 31 Cal.App.4th 99, 102-103 [trial court in position to determine that tasks described in billing statements challenged as “ ‘ “block billing” ’ ” required total amount of time billed]; Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 255 (Wershba) [fee awards permitted in absence of detailed time sheets].)
On remand, however, the trial court will be faced with the task of attempting to apportion the time spent on tasks related to the contractual causes of action and those not so related. The court in Bell noted that to the extent counsel could not “further define his billing entries so as to meaningfully enlighten the court” of those related to the different causes of action, the court should exercise its discretion by either assigning a reasonable percentage to the entries or setting them aside. (Bell, supra, 82 Cal.App.4th at p. 689.) Here, the court, in its discretion, should either apportion the fees between the various causes of action, if feasible, or reduce the award to account for plaintiffs’ limited success.
2. RICO Claim
Defendants also contend the trial court acted arbitrarily by attributing only 150 hours to the failed RICO claim. In support of the fee request, Brunwasser submitted a declaration stating that although much of his legal services for successful and unsuccessful claims was closely related, he spent approximately 33.6 hours on work related to the RICO claim that were not directly related to the efforts to enforce the promissory notes, approximately 25 of those hours devoted to research on RICO issues, a subject with which he was familiar from previous work, and the remainder to expert discovery. The trial court found that “aside from services relating exclusively to the unsuccessful pursuit of the RICO claim,” all legal services should be compensated, and found that it was appropriate to attribute 150 hours to the RICO claim. Bearing in mind that “[a]n experienced trial judge is in a position to assess the value of the professional services rendered in his or her court” (Wershba, supra, 91 Cal.App.4th at p. 255), and the evidence that would have supported a smaller number of hours apportioned to the RICO claim, we see no impropriety in this finding.
3. The Hourly Rate
Defendants challenge the hourly rate that the trial court used to calculate the fee award, contending it was excessive and based on improper factors. The trial court awarded fees based on a rate of $400 per hour for Brunwasser’s services. It based this figure on “rates prevailing in the community for similar work,” noting that “during the pendency of this case, the $400.00 figure is in the lower end of the range for market rates.”
Our Supreme Court has stated: “[A] court assessing attorney fees begins with a touchstone or lodestar figure, based on the ‘careful compilation of the time spent and reasonable hourly compensation of each attorney . . . involved in the presentation of the case.” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1131-1132.) The calculation of the fee award begins “with a lodestar figure based on the reasonable hours spent, multiplied by the hourly prevailing rate for private attorneys in the community conducting noncontingent litigation of the same type. [Citation.] . . . [T]he reasonable value of attorney services is variously defined as the ‘ “hourly amount to which attorneys of like skill in the area would typically be entitled.” ’ [Citations.]” (Id. at p. 1133.) Moreover, “ ‘the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.] The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony.’ ” (PLCM, supra, 22 Cal.4th at p. 1096.) The court in PLCM found no error in a calculation of attorney fees based on the number of hours spent by counsel multiplied by the prevailing market rate for comparable legal services in the city where counsel was located. (Ibid.)
The court here did the same thing, and we likewise find no error in its determination of the correct rate. We reject defendants’ contention that the trial court improperly took the complexity of the case into account both in setting the hourly rate and in applying a multiplier. Defendants point out correctly that, in connection with plaintiffs’ fee request, Brunwasser stated that he would generally charge clients in plaintiffs’ financial circumstances $300 per hour, that he stated that he would not have agreed to accept the case for less than $400 per hour if he had been aware of the “dogfight” that would result from the defense strategy, and that he stated in a previous filing that $300 per hour was his customary rate. Furthermore, at the outset of the hearing on the fee request, the trial court indicated that it would take “the expenditure of time” into account in setting the hourly rate. During the course of the hearing, however, plaintiffs’ counsel made clear that the lodestar figure should be based on general hourly rates, and not contingent risk or particular skill. Moreover, as we have noted, the trial court in its order based the rate of $400 solely on the rates prevailing in the community for similar work. This amount was supported by a declaration of Fred H. Altshuler in support of the motion for attorney fees, indicating that the rate of $400 per hour was “well below the range of hourly rates charged by San Francisco attorneys with comparable ability and years of practice.” The trial court did not abuse its discretion in calculating the hourly rate.
4. Hours Reasonably Spent
Defendants contend that plaintiffs’ counsel did not reasonably spend certain hours contained in the lodestar calculation. Plaintiffs concede—and acknowledged below—that their fee request contained duplicative entries for trial preparation on July 25, 2004, and that the trial court should have deducted $6,240 from the fee award. Its failure to do so appears to be an oversight. On remand, that amount should not be included in the fee award.
Defendants also challenge the propriety of awarding fees for two other specific items: (1) The time spent in connection with obtaining a writ of attachment, which plaintiffs later stipulated to have quashed, apparently because defendants had persuaded them such a writ was improper under Code of Civil Procedure section 483.010, subdivision (b); and (2) time spent in connection with summoning and preparing trial witnesses whom plaintiffs were foreclosed from presenting at trial because their names had not been properly disclosed during discovery. While a trial court may properly award compensation for time spent pursuing theories that initially seemed reasonable but ultimately proved unproductive (Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 839; see also Sundance, supra,192 Cal.App.3d at p. 274 [trial court has discretion to determine whether time spent on unsuccessful legal theory was reasonably incurred]), we cannot speculate at this point on whether the trial court will award fees for these items on remand, and we will not comment on them now, except to note that to the extent the fees relate only to the fraud-based causes of action, they are not recoverable for the reasons we have already discussed.
5. Use and Amount of Multiplier
Defendants contend that where contractual attorney fees are awarded pursuant to Civil Code section 1717, the trial court may not adjust the lodestar upward. For two reasons, we will not consider this contention now. First, defendants did not raise the issue below, and have therefore waived it. (Vikco Ins. Services, Inc. v. Ohio Indemnity Co. (1999) 70 Cal.App.4th 55, 66-67.) In any case, the fee award on remand will be based on new briefing and will be expressed in a new decision by the trial court. Accordingly, there is no need for us to consider the propriety of using a multiplier in awarding contractual attorney fees. For the same reason, we need not consider defendants’ challenges to the amount of the multiplier.
III. DISPOSITION
The award of attorney fees is reversed, and the matter is remanded to the trial court for further proceedings consistent with this opinion.
We concur: RUVOLO, P.J., REARDON, J.