Opinion
B166742.
10-28-2003
JOHN C. BEDROSIAN, Plaintiff and Appellant, v. TENET HEALTHCARE CORPORATION, Defendant and Appellant.
Richard E. Hodge, Inc., Richard E. Hodge, Robert W. Woods for Plaintiff and Appellant. Munger Tolls & Olson, Mark H. Epstein, Ted Dane for Defendant and Appellant.
As the trial court aptly observed, this case has entailed "long, bitterly contested litigation."[] The case involves the damages due for breach of the written employment contract of John Bedrosian, the co-founder of a small health care company, National Medical Enterprises (NME), which ultimately became a large company, Tenet Healthcare Corporation (Tenet). Bedrosians employment was terminated without cause, which triggered Tenets obligation under Bedrosians contract to provide, among other benefits, certain company stock benefits.
See Bedrosian v. Barbakow (Apr. 13, 1998, B109771) [nonpub. opn.]; Bedrosian v. National Medical Enterprises, Inc. (Jun. 29, 1999, B114180) [nonpub. opn.], hereinafter, the 1999 opinion; and Bedrosian v. National Medical Enterprises, Inc. (Aug. 12, 2002, B146573) [nonpub. opn.], hereinafter, the 2002 opinion. The parties have incorporated by reference clerks and reporters transcripts in the two latter appeals into the joint appendix in the present appeal.
Bedrosian seeks to modify the latest modified judgment to increase the damages awarded in this round from approximately $ 4.3 million to approximately $148.9 million, exclusive of interest and attorney fees. Bedrosian also complains of the trial courts determination of attorney fees and costs. Tenet cross-appeals and raises several arguments, all but one previously raised and rejected by this court. We affirm but modify the judgment.
FACTUAL AND PROCEDURAL SUMMARY
Bedrosians employment was terminated in September of 1993. He sued, a reference trial was held in the summer of 1994, and judgment was entered awarding Bedrosian some of the relief requested, but denying him certain stock and other benefits. During that time period, the value of Tenets stock varied, for example, from $18 per share on August 26, 1994, to $19.50 per share on September 2, 1994, and then to $14.375 per share on November 4, 1994, the date Bedrosian alleges receipt of the referees tentative statement of decision. Prior to this reference trial, the highest price of Tenets stock was $19 per share.[]
This and other information about the share prices of Tenet stock, as well as stock splits discussed hereafter, were brought to the trial courts attention in the present case by way of Bedrosians request for judicial notice.
Following the reference trial, both parties appealed. Our 1999 opinion addressed several issues, including Bedrosians contractual bonus and benefit rights, the interpretation of performance investment plan options in Bedrosians employment agreement, and the propriety of using a reference judge as provided for in Bedrosians 1990 employment agreement. We found merit to some of the contentions and concluded our opinion, in pertinent part, with the following disposition: "The matter is remanded to the trial court with directions to modify the judgment to: (1) include LTIP [Long Term Incentive Plan compensation program] and SIP [Stock Incentive Plan program] awards for 1994 and 1995; (2) reflect a PIP [Performance Incentive Plan for shares of stock with an] option deadline of December 22, 1995; (3) award Bedrosian appropriate prejudgment interest; and (4) exclude from the judgment $54,252.50 reflecting interest on repayment of loans by Bedrosian and related attorney fees. In view of the above modifications to the judgment, the trial court shall redetermine which party has the net recovery and determine anew the prevailing party at trial for the purposes of costs. In all other respects, the judgment is affirmed."
In November of 1999, Bedrosian moved in the superior court to modify the judgment to comply with the directions of the Court of Appeal and filed a detailed proposed final judgment, spelling out various stock options and other compensation to which he urged he was entitled under his contract. Tenet responded by moving to compel a second reference trial on the ground that there were still matters in dispute to be resolved by a reference, and that our remand "to the trial court" purportedly did not forestall a reference. Bedrosian opposed a second reference trial, urging that the Court of Appeal did not order another reference trial, and that such a trial would be void as not in conformity with our directions and in excess of the trial courts jurisdiction.
The trial court (Judge Valerie Baker) granted Tenets motion for a second trial, which was held before a referee (Justice Campbell Lucas, retired Presiding Justice of the Court of Appeal). In March of 2000, the reference trial commenced. In December of 2000, the trial court entered a modified judgment, reflecting the referees determinations and the trial courts ruling on a motion for a new trial.
In our 2002 opinion, we held the second reference trial was not authorized by our 1999 opinion. We reversed the judgment, and remanded the matter for the trial court to modify its prior judgment consistent with the directions in our 1999 opinion. As we stated in the 2002 opinion, nothing in the 1999 opinion or the ensuing remittitur mentioned anything about a reference trial or any retrial whatsoever. "This court never directed the use of a referee, and never used the word `reversed or directed even a partial reversal such as to warrant a new trial on any issue. As to the matters about which we directed modification of the judgment, neither Bedrosian nor [Tenet] asserted during the prior [1999] appeal any improper preclusion of evidence such that a new trial by any fact finder would be warranted. Although with the passage of time precise figures ripened on some of the monetary issues, the parties never suggested in the prior appeal that the first reference trial was at the time premature or inadequate to resolve all matters." (2002 opinion, p. 10.)
We further observed in the 2002 opinion as follows: "There was adequate evidence at the first reference trial without giving [Tenet] a second bite at the apple with a new reference trial after our remand. In the prior [1999] appeal, we did not modify the judgment ourselves because thorough figures and detailed calculations were not presented in the briefs, and the parties did not request such a remedy. Nonetheless, [on remand to the trial court in 1999] the correct judgment as to stock options and the value of other benefits was capable of being calculated or reasonably projected based on the evidence already adduced. Essentially, all that was required upon remand [in 1999] was to modify the judgment after any appropriate oral argument and submission of points and authorities, based on our prior opinion and the evidence already adduced. We did not [in 1999] direct a remand to the trial court for re-argument of contentions previously raised on appeal or for the creation of new issues after new evidence." (2002 opinion, p. 10.)
Finally, we stated in the 2002 opinion, in response to Tenets assertion that our prior remand to the trial court did not specifically preclude a reference: "This court, however, stated exactly what it meant. It is unnecessary and inappropriate for an appellate court to attempt to envision and to set forth in detail the entire universe of matters prohibited by its directions on remand. In our prior opinion, we remanded the matter not for a reference trial but to the trial court for modification of certain specified aspects of the judgment. Whatever the directions of an appellate court may be, they must be followed `explicitly. [Citation.] [¶] . . . [¶] [T]o the extent trial court actions do not conform to the remand directions of the appellate court, it is well settled that such actions are unauthorized and void as in excess of the trial courts jurisdiction." (2002 opinion, pp. 11, 12.) Accordingly, we reversed the judgment and remanded the matter for the trial court to modify its prior judgment consistent with directions in our prior 1999 opinion.
Meanwhile, after the parties had filed their briefs in the 2002 appeal but before we filed the above quoted decision in that appeal, on June 12, 2002, shares of Tenet stock split three-for-two. The undisputed fact of the stock split became relevant new information, which Bedrosian thereafter brought to the attention of the trial court on remand (Hon. John L. Segal) by way of a request for judicial notice of a document from Tenets investor relations department. Bedrosian also requested judicial notice, in addition to several other items, of documents revealing that from January 1, 1994, through December 31, 1999, Tenet stock reached a high of $40 per share on April 1, 1998, and that soon after our 2002 opinion Tenet stock reached a high of $52.50 per share on October 3, 2002.[]
Among the other items for which Bedrosian sought judicial notice were newspaper articles revealing that Tenets corporate chairman (Jeffrey Barbakow) exercised stock options and sold 2 million shares of Tenet stock for $130 million, and that Tenets chief operating officer (Thomas Makey) exercised his stock options and sold 278,000 shares of Tenet stock at $ 51.50 per share for approximately $14.3 million.
In ruling upon the matter on remand, Judge Segal patiently dealt with counsel, diligently analyzed the issues and in a commendable fashion outlined several alternative methods of calculating damages. Judge Segal, however, felt particularly constrained by language in our 2002 opinion, which observed that we did not in 1999 direct a remand to the trial court for the creation of new issues after new evidence, and that the prior remand could have resolved the matter "[e]ssentially . . . based on our prior opinion and the evidence already adduced" at the 1994 reference trial. (2002 opinion, p. 10.)
Accordingly, in calculating damages Judge Segal acknowledged but did not use the 2002 stock split or the "high water mark" for the value of the stock of either the per share price of $ 40 (the figure used by the referee at the improper second reference trial) or $52.50 (the highest per share price attained by the stock). Judge Segal emphasized that this court had "directed the trial court to modify the judgment based on evidence already adduced in the 1994 reference trial," and remarked that, of course, the two high market prices noted above had not yet occurred and thus could not have been used at the time of the first reference trial.
Judge Segal outlined two possible approaches, opting for the second approach. The first approach, referred to by Judge Segal as the LTIP and SIP damages calculation based on the highest market price theory, used the highest market price before the first reference trial of $19 per share. The evidence at the first reference trial did not support this $19 figure. However, that figure was before the reference trial judge at a post-trial motion , and Judge Segal opined that perhaps that figure might be appropriate and reasonable to use.
Under this first approach, the court calculated Bedrosians LTIP (Long Term Incentive Plan compensation program) and SIP (Stock Incentive Plan program) damages awards as follows:
"LTIP Damages: 222,000 shares x ($19 - $11.625) = $1,637,250, where 222,000 is the number of pre-2002 stock split options plaintiff claims he should have been granted, and $11.625 is the exercise option price per share.
SIP Damages:
A. Restricted Shares: 616,000 x $19 = $11,704,000, although this number of restricted shares, 616,000, is admittedly based on evidence outside of the record.
B. Options: 1,000,000 shares x ($19 - $9.50) + 250,000 x ($19 - $13.85) = $9,500,000 + $1,281,250 = $10,781,250."
This first approach would result in awarding Bedrosian a total of $24,122,500 for the LTIP and SIP damages at issue.
Under Judge Segals second approach, referred to as the LTIP and SIP damages calculation pursuant to the reference trial damage theory, the court focused on the testimony of Dr. Barbara Luna, Bedrosians expert witness at the first reference trial. As Judge Segal explained, Dr. Luna calculated the then present value of Bedrosians LTIP damages for 1994 and 1995 at $658,884, calculated as follows: "$28,059 for the period beginning June 1, 1994, plus $304,729 for the period beginning July 1, 1994, plus $104,244 for the period beginning June 1, 1995, plus $221,852 for the period beginning September 26, 1995." Dr. Luna also calculated the then present value of Bedrosians SIP damages for the value of the restricted stock at $2,640,000, calculated at 88,000 shares or $1,320,000 for 1994, plus 88,000 shares or $1,320,000 for 1995. Regarding the then value of stock options, Dr. Luna figured it as $1,041,440, calculated at $520,720 for 1994 and $520,720 for 1995.
Judge Segal ruled that this later reference trial damage theory was the most appropriate method of calculating damages. This approach yielded a damage award to Bedrosian of $4,340,324 for his 1994 and 1995 LTIP and SIP damages. Judge Segal further observed that this approach explicitly adhered to our 2002 opinion and was restricted to evidence at the 1994 reference trial, and that Bedrosian "can hardly be heard to complain about or object to damages based on calculations performed by his expert."[] Finally, Judge Segal granted Bedrosian the option of choosing which of two remedies, $2,640,000 or 176,000 restricted shares, to include in the judgment, and Bedrosian opted for the money rather than the shares. On March 28, 2003, a judgment was filed, modifying the prior judgment of May 21, 1997.
Bedrosian, of course, does complain. Bedrosian urges, in part, that he relied on the expert to establish a damages award by granting the monetary equivalent of the value of the options he had already received, and not for the purpose of valuing any 1994 and 1995 SIP and LTIP awards, to which Bedrosian would be entitled but which had not yet been made. The experts analysis referred to existing stock options and not to the additional shares Bedrosian claimed, apart from the fact that the 1995 award to the comparable corporate officer had not yet been declared.
On April 10, 2003, Judge Segal ruled on the issues of attorney fees and costs. The court found that Bedrosian was the prevailing party and observed: "[D]espite plaintiffs occasionally inflated view of the value of his claims, plaintiff substantially succeeded on his claim for breach of his written employment contract. Indeed, on his claims for LTIP and SIP damages, plaintiff obtained what his expert opined as the value of these damages, at the time of the first reference trial. Defendants contentions, that plaintiffs LTIP and SIP damages should be modest or zero, were rejected by the Court of Appeal and this court."
Bedrosian argued that he was "entitled to a straight 31.25% contingency fee based on his contingency fee agreement with his attorney." However, Judge Segal analyzed the case law and concluded that the court was not bound by the contingency agreement in awarding contractual attorney fees. Rather, a lodestar analysis was appropriate; i.e., calculating the number of hours reasonably expended multiplied by the reasonable hourly rate, adjusted for any relevant case-specific factors.
Judge Segal analyzed Bedrosians claims and determined that prior to our 1999 opinion Bedrosians primary claim was that he had an oral or implied agreement for lifetime employment (or at least until age 65), and that Tenet had no right to terminate his employment without cause. Bedrosians secondary claims involved various contractual bonus and benefit rights and were based on the claim that even if Tenet had the right to terminate his employment without cause, Tenet breached the terms of the employment agreement by not paying Bedrosian certain benefits to which he was entitled. Judge Segal found these two groups of claims entirely distinct and not inextricably intertwined. Since Bedrosian did not prevail on his main claim for breach of oral or implied contract and most of counsels time prior to the 1999 opinion was spent on tasks relating to that claim, the court exercised its discretion and determined such fees for tasks relating to that main claim were not reasonable in relation to the results obtained.
Judge Segal then independently reviewed the 270 pages of time records submitted by Bedrosian. The court determined the charges reasonably incurred on the successful claims for LTIP and SIP damages for breach of the written employment contract and the successful declaratory judgment regarding PIP options up to and including the date of our 1999 opinion, and valued the total fees at $29,081.25.
As Judge Segal further observed, after our 1999 opinion, Bedrosian "began the long and arduous task of recovering" the awards mandated by that opinion. The task took Bedrosian down the path of "a reference to another referee that never should have been made, a second reference trial that never should have occurred, and a meritless appeal." Judge Segal determined that all of Bedrosians attorney fees after the 1999 opinion were necessary and reasonable and incurred in prosecuting the contract claim on which he prevailed. Those fees amounted to $943,599.25.
Accordingly, under the lodestar analysis, the total amount of reasonably incurred attorney fees was $972,680.50. And Tenet did not argue that the hourly rate charged by Bedrosians counsel was unreasonable.
In determining a lodestar multiplier, Judge Segal considered the following: "Here, there is no question that the issues involved in this litigation were enormously complex, difficult, and novel, and required 10 years of hard-fought litigation including multiple appeals to resolve. The last four years of litigation required plaintiff and his attorneys to go through a second reference trial and subsequent appeal that they never should have had to endure, caused according to the Court of Appeal by defendants `intransigence in protracting litigation. This factor weighs heavily in favor of a multiplier greater than one. The contingent nature of the fee award weighs moderately in favor of a multiplier, but not overwhelmingly so, because plaintiffs fee arrangement was only partially contingent. Finally, there is no evidence that the litigation precluded plaintiffs attorneys from representing other clients in other cases." Judge Segal found a lodestar multiplier of 1.5 appropriate, and then calculated the total attorney fee award at $1,459,020.70. Regarding the award of costs, Bedrosian sought "recovery of all costs incurred on all claims and all issues litigated since the inception of litigation." Judge Segal observed that Bedrosian, as the prevailing party seeking costs pursuant to a contractual provision awarding reasonable fees and costs, must "`specially plead and prove" at trial the right to recover items not specifically covered in Code of Civil Procedure section 1033.5. Here, Bedrosian did not seek to recover his contractual costs pursuant to a memorandum of costs and a summary postjudgment motion. Rather, Bedrosian sought to recover his costs by a noticed posttrial, prejudgment motion, with the matter submitted to the trier of fact for resolution, which entitled him to recover his costs reasonably incurred in prosecuting his successful claims, even those costs not specifically authorized by section 1033.5. Although Bedrosian did not isolate which costs were spent on successful versus unsuccessful claims, Judge Segal independently reviewed the 10 pages of costs charts submitted by Bedrosian and found no costs that were associated with successful claims prior to June 29, 1999. The court found, however, that all of the reasonable costs incurred after that date were incurred in prosecuting the contract claim on which Bedrosian prevailed. It ruled that reasonable costs incurred included costs for copying, parking and mileage, Federal Express, long distance telephone calls and miscellaneous items. Costs ruled unreasonable, amounting to $4,473.60, included costs incurred for word processing, fax charges, secretarial and staff overtime, lunches, and hotel rooms. The court awarded reasonable costs in the amount of $52,372.92. Pursuant to a motion to tax costs on appeal, the court also awarded Bedrosian $5,805.29 in costs regarding the 2002 appeal.
On March 28, 2003, the court filed the modified judgment under review.
DISCUSSION
I. Bedrosians appeal
A. The measure of damages for the wrongful failure to deliver shares of corporate securities
The proper measure of damages for the wrongful failure to deliver shares of corporate securities is the stocks market value. The question, however, is at what point in time should the stocks market value be determined?
"[T]he general rule is that the measure of damages for the failure to deliver property according to the contract, or for its conversion, is the value of the property at the time it was to be delivered, or at the time it was converted. This general rule, however, has been found inadequate to furnish just indemnity for the losses occasioned by the conversion of, or the wrongful failure to deliver, stocks and other properties of like character, the values of which are subject to frequent and wide fluctuations." (Clements v. Mueller (9th Cir. 1930) 41 F.2d 41, 42.) The problem is that fixing the value at the date of conversion or the date of breach upon failure to deliver "does not always accurately represent the opportunity costs to the plaintiff." (11 Fletcher Cyclopedia of the Law of Private Corporations (2003) § 5117, p. 140.) Despite the vagaries and fluctuations of the stock market, it is a generally recognized theory that shares of stock "do not depreciate over time; indeed, they are bought because the owner anticipates appreciation." (Ibid.) And to the extent a stock is a cyclical stock, a wrongdoer would be encouraged to obtain or wrongfully retain the shares at a low point and "essentially buy the stock at a bargain price" (ibid.), and unfairly limit the victims recovery of damages.
Accordingly, courts in numerous jurisdictions value shares at some point after the date of conversion or breach. Some courts take the highest value of the shares between the date of conversion or breach and the lawsuit, which to some extent certainly "gives the benefit of the doubt to the plaintiff." (11 Fletcher Cyclopedia of the Law of Private Corporations, supra, § 5117, p. 140.) Other courts use what is often called the "New York rule," which takes the highest value of the shares within a "reasonable" period after conversion or breach. The rules caveat of a reasonable time period, similar to the familiar notion of a plaintiffs duty to minimize losses, avoids the concern that a victim may deliberately delay in bringing an action (not an issue here) in the hope that the share price might go up. And the rules use of the highest share valuation properly shifts to the wrongdoer the risk of increased losses from a rising share price of which the plaintiff cannot take advantage. (Id. at pp. 140-142; see also Measure of Damages for Conversion of Corporate Stock or Certificate, 31 A.L.R.3d 1286.)
As indicated in the above noted treatises, this approach (the "New York rule") has found favor in a myriad of contexts in various jurisdictions, and it is the approach we deem most appropriate.[] We thus use as the proper measure of damages for the wrongful failure to deliver shares of corporate securities the stocks highest market value within a reasonable period and, by parity of reasoning, also include into the calculation of damages any stock splits that may have occurred.
Tenet complains that Bedrosian belatedly asserts a similar theory of valuing stock and stock options "by reference to the highest price Tenets stock ever attained." Tenet urges that Bedrosian never raised this approach to damages at the 1994 trial or in the 1999 appeal, and that this "highest price" approach is based on evidence largely outside the record. However, Bedrosian has not improperly changed his theory of the case; the causes of action or theories of liability have not changed. Only Bedrosians approach to calculating damages has arguably changed.
In any event, even characterizing Bedrosians approach to damages as a changed theory of the case, it is not improper in the present circumstances. The correct method of assessing damages is a question of law, and Tenet is not disadvantaged by Bedrosians reliance on any disputed facts that somehow could have been refuted if only Tenet had the opportunity. (Cf. Adelson v. Hertz Rent-A-Car (1982) 133 Cal.App.3d 221, 225-226.) Indeed, such relevant facts as to the per share price of Tenets stock and the companys stock splits are not subject to dispute, and they have been judicial noticed.
B. Interpretation of the scope of our prior 2002 opinion
The holding of our prior 2002 opinion was that the trial courts order for a second reference trial was not authorized by the remand directions in our 1999 opinion, that the second reference trial was thus in excess of the trial courts jurisdiction, and that the modified judgment was void and therefore reversed. We acknowledge that our 2002 opinion indeed observed that after the 1999 opinion remanding the matter for modification of the judgment, the correct calculations regarding stock options and the value of other benefits were capable of being calculated or reasonably projected based on the evidence already adduced at the 1994 reference trial. However, the thrust of our discussion was to restrict the parties from having a new trial, raising contentions previously raised, and creating, as we stated, "new issues after new evidence." (2002 opinion, p. 10.)
Facts subject to judicial notice, such as the price per share of Tenets stock and the existence of stock splits (see In re Marriage of Brigden (1978) 80 Cal.App.3d 380, 385, fn. 3; Estate of Shannon (1965) 231 Cal.App.2d 886, 892), indeed constituted evidence. Nonetheless, such facts were brought before the court not during a forbidden retrial, but rather by way of a simple motion for judicial notice. Most significantly, we consider the proper rule for the assessment of damages a fundamental question of law that was always at issue. The assessment of damages is thus not a "new issue," meaning a new theory of liability or defense, after new evidence.
Our 2002 opinion used language we intended to be somewhat qualifying: "Essentially, all that was required upon remand to the trial court [in 1999] was to modify the judgment after any appropriate oral argument and submission of points and authorities, based on our prior opinion and the evidence already adduced." (Italics added.) (2002 opinion, p. 10.) When arguing in the present appeal for a factually restrictive view of the remand ordered by our 2002 opinion, Tenets brief omits the qualifying word "Essentially." And our 2002 opinion also observed, "It is unnecessary and inappropriate for an appellate court to attempt to envision and to set forth in detail the entire universe of matters prohibited by its directions on remand." (2002 opinion, p. 11.)
Nonetheless we did not intend in our 2002 opinion to restrict the scope of remand for modification so as to handcuff the trial court as Judge Segal apparently thought we had. With the benefit of hindsight, it appears that our opinion was reasonably susceptible to such an unintended construction.[] But Judge Segal was not precluded from relying on relevant and undisputed facts, such as Tenets stock price per share and stock splits.
We also note, as we did in our 2002 opinion, that a party questioning appellate directions may seek a writ of mandate to compel compliance with its interpretation of directions (Bakkebo v. Municipal Court (1981) 124 Cal.App.3d 229, 234), or a writ of prohibition to restrain variance from the directions (Hampton v. Superior Court (1952) 38 Cal.2d 652, 656.) Neither party did so here.
C. Calculation of the value of Bedrosians stock and stock options
To determine the value of Bedrosians stock and stock options, we use a modified version of the highest market price theory, as outlined in the alternative calculation, which Judge Segal discussed but did not adopt. We modify this calculation by using the highest market price of $52.50 (rather than $19) per share and considering the three-for-two stock split in 2002 (increasing the number of shares of stock by 50 percent). However, we employ the same option prices, as noted by Judge Segal: $ 11.625, as to the LTIP, based on the exercise price accorded to the CEO and President of Tenet in lieu of LTIP cash awards; $ 9.50 and $13.85, as to the SIP, based on the exercise prices accorded to the successor CEO.
Regarding SIP damages and the number of restricted shares, Judge Segal remarked in his calculation under the alternative highest market price theory that the number of restricted shares, 616,000, was based on evidence outside the record. However, the record to which the trial court insisted it was limited included the 1988 and 1990 employment contracts between the parties, which contained annexed exhibits setting forth the number of restricted shares to which Bedrosian was entitled; i.e., 308,000 restricted shares that became 616,000 shares after a two-for-one stock split in August of 1991. Tenet unsuccessfully argued in 1999 that Bedrosian received all the restricted stock called for under Tenets interpretation of his employment contract. (1999 opinion, p. 23) As observed by Bedrosian, however, Tenet does not dispute the facts and circumstances as to the number of restricted shares subject to deferred and then accelerated vesting.
Specifically, although Bedrosians employment agreement ended in January of 1995, the two-year salary and benefit continuation period extended until September 23, 1995, by virtue of the "without cause" termination clause in his contract. This resulted in extending and replicating all his benefits, including the grant of the same number of restricted shares he had previously been granted. The vesting of those shares spread over the term of the contract, but since the term of the renewed contract applicable to Bedrosian expired September 23, 1995, the deferred and spread vesting accelerated. The entire number of the additional restricted share grant thus vested in Bedrosian as of that date.
Consistent with the above discussion, Bedrosians LTIP and SIP damages are as follows:
LTIP Damages: 333,000 shares (222,000 shares, plus 50% for the 2002 stock split) x ($52.50 - $11.625) = $13,611,375, where 222,000 is the number of options (prior to the stock split) that Bedrosian should have been granted, and $11.625 is the exercise option price per share.
SIP Damages:
A. Restricted Shares: 924,000 (616,000 shares, plus 50% for the 2002 stock split) x $52.50 = $48,510,000
B. Options: 1,500,000 shares (1,000,000 shares, plus 50% for the 2002 stock split) x ($43, which is $52.50 minus the option price of $9.50) + 375,000 (250,000 shares, plus 50%) x ($38.65, which is $52.50 minus the option price of $13.85) = $64,500,000 + $14,493,750 = $78,993,750
Accordingly, Bedrosian is entitled to LTIP and SIP awards for 1994 and 1995 totaling $141,115,125.
Finally, Judge Segals judgment modifying the prior judgment provided for interest on the LTIP and SIP damage awards, with interest accruing at the legal rate from April 25, 1995, to the date of Judge Segals judgment (March 28, 2003), and the entire damage award including prejudgment interest bearing interest at the legal rate until paid. We find no abuse of discretion as to the date from which the prejudgment is interest is set to run. (Civ. Code, § 3287, subd. (b).)
However, as the amount of the judgment is modified, the amount of prejudgment interest must likewise be modified. Prejudgment interest on the modified judgment amount of $141,115,125 is an additional $111,886,894.63.
D. Attorney fees
Bedrosian contends that his right to be reimbursed for reasonable attorney fees requires that Tenet reimburse him in the amount reflected in his contingent fee contract, and that there is no factual or equitable principle that would make such an award unreasonable. Pursuant to their contingent fee contract, Bedrosian must pay his attorneys 31.25 percent of the entire amount recovered. However, we find that in awarding attorney fees the trial court properly concluded it was not bound by the contingent fee agreement, and that it did not abuse its discretion in using a lodestar analysis to calculate $1,459,020.70 as the reasonable attorney fees recoverable from Tenet.
Bedrosians 1990 written employment contract provided that "if any action at law or equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party will be entitled to reasonable attorneys fees, costs and necessary disbursements in addition to any other relief to which he or it may be entitled." "The prevailing party determination is to be made only upon final resolution of the contract claims and only by `a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions." (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.)
Bedrosian sued for, among other causes of action, breach of his written employment agreement and prevailed on that claim with a substantial recovery. As Judge Segal aptly observed: "[Bedrosian] prevailed on this contract claim. [Tenet] did not. The fact that [Bedrosian] lost on some of his alternative contractual theories does not change the fact that he prevailed on his breach of contract claim. [Citation.] As [this court stated in our 2002 opinion], [Tenet] `was perfectly free to terminate Bedrosians employment without cause, but that freedom carried an obligation to pay for termination in the various ways required by the terms of his generous contract. . . . Recovery of attorneys fees incurred by [Bedrosian] in successfully suing defendant for breaching its contractual obligations to pay for the termination is one of the `other benefits to which Bedrosian is entitled under the terms of the contract."
As Judge Segal remarked, Bedrosian "substantially succeeded on his claim for breach of his written employment contract." Specifically, he obtained damages (now quite sizeable with the passage of time) as to his LTIP and SIP claims, and Tenets "contentions, that [Bedrosians] LTIP and SIP damages should be modest or zero, were rejected by the Court of Appeal and this court."
The lodestar principle in contractual attorney fees cases
It is well settled that in contractual attorney fees cases, "the fee setting inquiry in California ordinarily begins with the `lodestar, i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate. . . . The lodestar figure may then be adjusted, based on consideration of factors specific to the case, in order to fix the fee at the fair market value for the legal services provided. [Citation.] Such an approach anchors the trial courts analysis to an objective determination of the value of the attorneys services, ensuring that the amount awarded is not arbitrary." (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095. Although the trial court may consider the terms of the contract between the attorney and the client, the terms "`do not compel any particular award." (Id. at p. 1096.) The trial court simply is not bound by a contingency fee agreement in awarding contractual attorney fees under Civil Code section 1717. (PLCM Group, Inc. v. Drexler, supra, 22 Cal.4th at p. 1096.)
The trial court has discretion to determine that time spent on issues and claims on which plaintiff did not prevail was time not reasonably spent. (Boquilon v. Beckwith (1996) 49 Cal.App.4th 1697, 1722-1723.) "`There is no precise rule or formula for making these determinations. The [trial] court may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success. The court necessarily has discretion in making this equitable judgment." (Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 248.)
In the present case, Bedrosian did not indicate to the trial court any particular amount of time spent on successful as opposed to unsuccessful claims, and his motion for attorney fees was silent on the issue of lodestar calculations. Judge Segal independently reviewed the 270 pages of time records submitted by plaintiff to determine, as the court stated: "The main issue [of] whether and to what extent plaintiff can recover attorneys fees incurred in prosecuting (1) distinct claims on which he prevailed, (2) legal theories on which he did not prevail but which related to claims on which he did prevail, and (3) distinct claims on which he did not prevail. Under California law, plaintiff may recover attorneys fees reasonably expended on (1) and (2), but not (3)." (See Sokolow v. County of San Mateo, supra, 213 Cal.App.3d at pp. 247-250.) Moreover, where plaintiffs seeks to "vindicate their personal financial interest," rather than a "public right" where attorney fees are sought under a "`private attorney general" theory, courts are more likely to deduct fees for time spent on unsuccessful causes of action. (Boquilon v. Beckwith, supra, 49 Cal.App.4th at p. 1722.)
Judge Segal reviewed the extensive time records of Bedrosians attorney and found that prior to June 29, 1999 (the date of our 1999 opinion), $29,081.25 in fees were reasonably incurred by plaintiff on his successful LTIP and SIP damages for breach of his written employment contract and his successful declaratory judgment regarding PIP options. The court found that from June 30, 1999, to March 17, 2003, Bedrosian engaged in the "arduous task of recovering" the LTIP and SIP awards mandated by our 1999 opinion, a task we determined in our 2002 opinion was made unreasonably difficult by Tenets "intransigence during protracted litigation," (2002 opinion, p. 12) which included "reference to another referee that never should have been made, a second reference trial that never should have occurred, and a meritless appeal." Judge Segal determined that all of Bedrosians attorney fees "incurred after June 29, 1999 were necessary, reasonable, and incurred in prosecuting the contract claim on which [he] prevailed." Judge Segal did not abuse his broad discretion or otherwise err in concluding those attorney fees amounted to $943,599.25, and the total attorney fees thus $ 972,680.50.
The lodestar multiplier
"There is no hard-and-fast rule limiting the factors that may justify an exercise of judicial discretion to increase or decrease a lodestar calculation." (Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 834.) Among the relevant factors that the trial court may consider are the following: (1) the novelty and difficulty of the questions involved, and the skill displayed in presenting them; (2) the extent to which the nature of the litigation precluded other employment by the attorneys; and (3) the contingent nature of the fee award, both from the perspective of eventual victory on the merits and the point of view of establishing eligibility for an award. (Ibid .; Hammond v. Agran (2002) 99 Cal.App.4th 115, 135.)
In the present case, the trial court applied a lodestar multiplier of 1.5. Weighing in favor of a multiplier greater than one, Judge Segal found that the issues were enormously complex and novel, and that the matter involved 10 years of hard-fought litigation with several appeals, including a second reference trial and second appeal that should never have occurred but for Tenets intransigence in protracting the litigation. However, only weighing moderately in favor of a multiplier, the court found that the fee arrangement was only partially contingent and determined that there was no evidence that the litigation precluded Bedrosians attorney from representing other clients in other cases.
Using the 1.5 multiplier on the lodestar amount of $972,680.50, Judge Segal assessed a total fee award at $1,459,020.70. Even if another judge may reasonably have used a larger multiplier, we are not convinced the amount awarded was so small that it was "clearly wrong" in view of all the circumstances. (Olson v. Cohen (2003) 106 Cal.App.4th 1209, 1217.)
Costs
Bedrosian complains that the trial court improperly limited the award of costs to those incurred after June 29, 1999, for a total cost award of $52,372.92, depriving Bedrosian of approximately $43,600 of statutory costs for the six years preceding that date. According to Bedrosian, the trial courts ruling is contrary to the requirements of Code of Civil Procedure sections 1032, subdivision (b) and 1033.5, that the prevailing party is entitled to recover all statutory costs in the action, not just those incurred on the contract claim.
However, Code of Civil Procedure section 1032, subdivision (a)(4) provides, in pertinent part, that when "any party recovers other than monetary relief and in situations other than as specified, the `prevailing party shall be as determined by the court, [which] in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides . . . ." Here, Tenet, for example, previously obtained nonmonetary relief by way of a declaration that Bedrosian was not contractually entitled to pension benefits of approximately $ 340,000 per year for life.
Judge Segal awarded costs in a manner parallel to the award of attorney fees, awarding Bedrosian costs incurred after June of 1999, but with each side bearing its own costs prior to that date. The trial court did not abuse its broad discretion in this matter.
II. Tenets cross-appeal
In its cross-appeal Tenet raises the following contentions: (1) the 1994 cycle IX LTIP award should be stricken; (2) the 1995 cycle X LTIP award should be stricken or reduced; (3) the damages relating to the SIP grants of 176,000 shares of restricted stock should be stricken; (4) the award relating to options should be stricken; and (5) Bedrosian is not a prevailing party (Civ. Code, § 1717) and should not recover his attorney fees. But for Tenets contention as to the restricted shares based on Dr. Lunas testimony (which is of no consequence in view of our above discussion), we have gone down the road with these issues before.
We have reviewed the opinions and briefs in prior appeals and cross-appeals involving this matter. The ineluctable conclusion is that the above noted contentions in the present cross-appeal have been previously raised by Tenet (formerly referred to as NME) and rejected by this court. For example, to quote from our 1999 opinion, Tenet previously argued that Bedrosian "was entitled to no LTIP awards at all," that "Bedrosian had no right to demand an award for either the 1994 or 1995 cycle, whether an award of cash (1994) or a stock option in lieu of cash (1995)," and that "the objective [financial] threshold . . . was not met" such as to entitle Bedrosian to any LTIP award. (1999 opinion, p. 21.) We concluded in 1999 that Bedrosian was "entitled to LTIP awards for 1994 and 1995" and directed the trial court on remand to modify the judgment to "include" LTIP awards for those two years. (1999 opinion, pp. 23, 37.)
Tenet discusses the repeated raising of the same contentions in terms of the doctrine of law of the case, and urges it is covered by an exception and therefore does not violate the doctrine. The doctrine of law of the case precludes a principle or rule of law determined in a first appeal from being raised in any subsequent retrial or appeal in the same case. (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 301.) As observed by Tenet: "Admittedly it is not always simple to determine whether a given issue is amenable to disposition under law of the case. . . . "`If the decision relate[s] to a matter of fact, the evidence respecting it may be entirely different on the second trial, and a different question be thus presented on the second appeal. It is only where the evidence is the same, that the decision of the appellate court would be conclusive."" (People v. Shuey (1975) 13 Cal.3d 835, 842.)
Tenet then argues that the evidence now on review actually did not consist of the evidence at the 1994 reference trial because Judge Segal had before him "only a subset of the evidence presented at the 1994 trial [since] [e]ach party [only] placed before the trial court all of the evidence it believed was relevant." Thus, according to Tenet, the same arguments can be raised again because the evidence is different.
We acknowledge that the parties apparently did not submit to Judge Segal the entire record of the 1994 reference trial. However, Judge Segal specifically stated that he reviewed both "the evidence submitted by the parties and the extensive record in this case." In any event, Tenet cannot be heard to complain about the use by Bedrosian or this court in the present appeal of the plenary record in 1994. As counsel for Tenet acknowledged to Judge Segal, "As I understand it, the parties are free to argue to the court based upon the evidence introduced during the first referenced trial, not the second referenced trial, but the first referenced trial." As previously discussed, based on the evidence at the first reference trial (and matters that can be judicially noticed), we have calculated the LTIP and SIP damages to be awarded consistent with our interpretation of Bedrosians employment contract.
Moreover, since we deal here with the proper construction of an employment contract, Tenets application of an evidentiary based exception to the doctrine of the law of the case is questionable. As observed in the rest of the paragraph in People v. Shuey, supra, 13 Cal.3d at page 842, from which Tenet excerpts the quote noted above, if the decision relates "`"to a matter which cannot be thus presented under a different aspect—as the construction of a contract or a statute—the first decision of the appellate court is conclusive upon the second trial and second appeal . . . .""
Accordingly, the doctrine of law of the case does apply, and Tenets contentions in its cross-appeal are unavailing.[]
Bedrosian requests the imposition of sanctions for a largely frivolous cross-appeal. We have considered the matter (cf. Beckstead v. International Industries, Inc. (1982) 127 Cal.App.3d 927, 934-935; Nelson v. Crocker Nat. Bank (1975) 51 Cal.App.3d 536, 541 [issues barred by res judicata or amounting to spurious circumvention of a prior decision can support imposition of sanctions on appeal]), but decline the invitation to impose sanctions.
DISPOSITION
The judgment filed March 28, 2003, is modified to reflect the following: (1) LTIP damages for 1994 and 1995 of $13,611,375; (2) SIP damages for 1994 and 1995 of $48,510,000 as to restricted shares; (3) plus SIP damages for 1994 and 1995 of $78,993,750 as to options; (4) prejudgment interest on those amounts accrued at the legal rate of interest from April 25, 1995, to March 28, 2003, totaling $111,886,894.63; and (5) postjudgment interest at the legal rate of interest on the entire amount awarded until paid.
As so modified, the judgment is affirmed. Bedrosian is entitled to costs on appeal.
We concur, DOI TODD, J., ASHMANN-GERST, J.