Opinion
No. 27869-7-III.
December 8, 2009.
Appeal from a judgment of the Superior Court for Benton County, No. 01-2-00510-1, Carrie L. Runge, J., entered December 29, 2008.
Affirmed by unpublished opinion per Brown, J., concurred in by Kulik, A.C.J., and Korsmo, J.
Mike Johnson appeals the trial court's $1,000 attorney fee award against Moses Lake Construction Co., Inc. (MLC). In Moses Lake Constr. Co., Inc. v. Johnson, 2006 WL 2147602 (Wash. App. Div. 3), we affirmed on the substantive issues, disapproved an attorney fee offset, and remanded for reconsideration of the attorney fees. Now, Mr. Johnson contends the superior court abused its discretion by disregarding the directives of this court. We find no abuse of discretion, and affirm.
FACTS
Mr. Johnson is a contractor who is the sole shareholder and officer of two construction companies: Johnson, Inc. (a defunct corporation) and Venture Construction Enterprises, Inc. In July 2000, Mr. Johnson leased three dump trucks and a water truck from MLC. The trucks were purportedly leased to Johnson, Inc., yet they were solely used by Venture for its construction projects. Although the leases provided the trucks could not be subleased except by written consent of MLC, Mr. Johnson admits he essentially subleased the trucks to Venture without written consent. Lease amendments allowed the lessee to purchase any one or all of the trucks on fulfillment of certain conditions. Johnson, Inc. fell behind on the rent and efforts to buy the trucks eventually ended in a repossession squabble with MLC.
MLC sued Mr. Johnson and Johnson, Inc. for breach of contract and sued Venture on additional claims based on implied contract, quasi contract, and quantum meruit. The complaints were consolidated and amended before trial. Johnson, Inc. and Venture responded with tort claims against MLC. Moses Lake Constr. Co., Inc., 2006 WL 2147602 at *2.
At trial, the court dismissed MLC's claims against Venture and most of Venture's claims against MLC. On the remaining claims, the jury found for MLC against Johnson, Inc. but found in favor of Mr. Johnson in his individual capacity. The jury found MLC was not liable on Venture's remaining claim. Id. MLC, Mr. Johnson, and Venture all sought attorney fees under the leases as prevailing parties. Finding neither Venture nor MLC was a prevailing party in its claims against the other, the trial court denied Venture's claim for attorney fees. The trial court awarded MLC $30,580 in attorney fees as the prevailing party against Johnson, Inc. It also awarded Mr. Johnson $10,193 in attorney fees as the prevailing party against MLC. Because it found Johnson, Inc. was insolvent, the trial court concluded the "'fair and just result'" was to offset the fees awarded to Mr. Johnson from the amount owed to MLC. Id.
On appeal, this court affirmed on the substantive issues, disapproved the offset, and remanded for reconsideration of attorney fees. We noted the record did not reveal how the trial court computed Mr. Johnson's attorney fees. Moses Lake Constr., 2006 WL 2147602, at *9. We concluded by stating, "We encourage the trial court to exercise its broad discretion, especially in light of this court's vacation of the offset." Id.
On remand, the Benton County Superior Court expressed some frustration in exercising its discretion beyond its original determination. The trial court asked Mr. Johnson's attorney to document work performed solely for Mr. Johnson, including work on the appeal. Counsel responded with a letter stating that when MLC filed its suit, Johnson, Inc. was a defunct corporation and Venture was an inactive and insolvent corporation. He submitted an affidavit requesting $36,880 for attorney fees and costs incurred at trial and he additionally requested $12,391 for the first appeal, for a total of $49,271. On the issue of segregating the fees, counsel stated, "The fees were incurred solely because the plaintiff insisted on prosecuting a claim which it lost. . . . I would suggest that the costs of defending the action be divided between Mike M. Johnson, individually, and Venture Construction, Inc." Clerk's Papers (CP) at 59.
On March 12, 2008, the trial court issued a letter opinion awarding Mr. Johnson $1,000 in attorney fees. The court found Mr. Johnson had not requested attorney fees on appeal and therefore the court did not address his entitlement to those fees. The attorney fees judgment was entered on December 29, 2008. The trial court's findings of fact and conclusions of law on remand incorporated the written findings and decision of the trial court's March 12, 2008 letter. Mr. Johnson appealed.
ANALYSIS A. Attorney Fees for Trial
The issue is whether the trial court abused its discretion when it reduced Mr. Johnson's attorney fee award from $49,271 to $1,000. Mr. Johnson contends he is entitled to the full sum requested because he was forced to defend himself at trial and on appeal against frivolous claims.
The question of a party's entitlement to attorney fees is an issue of law we review de novo. Bloor v. Fritz, 143 Wn. App. 718, 747, 180 P.3d 805 (2008). The reasonableness of an attorney fees award is a matter of the trial court's discretion and is reviewed for abuse of that discretion. Id. (citing Scott Fetzer Co. v. Weeks, 122 Wn.2d 141, 147, 859 P.2d 1210 (1993)). Abuse is shown when the trial court's decision is unreasonable or based on untenable grounds. Allard v. First Interstate Bank of Washington, 112 Wn.2d 145, 148-49, 768 P.2d 998 (1989). The trial court must create an adequate record for review showing a tenable basis for the fee award. Loeffelholz v. Citizens for Leaders with Ethics Accountability Now (C.L.E.A.N.), 119 Wn. App. 665, 690, 82 P.3d 1199 (2004).
Mr. Johnson is entitled to attorney fees under the lease contracts as a prevailing party. See Moses Lake Constr., 2006 WL 2147602 at *9. When attorney fees are awarded by contract, the proper method for calculating a reasonable fee award is the lodestar method. Crest Inc. v. Costco Wholesale Corp., 128 Wn. App. 760, 773, 115 P.3d 349 (2005). Under the lodestar method, the fee is calculated by multiplying the reasonable hourly rate by the reasonable number of hours expended on the matter. Svendsen v. Stock, 143 Wn.2d 546, 559, 23 P.3d 455 (2001); Fetzer, 122 Wn.2d at 149-50. Hours spent on wasteful or duplicative activities or pertaining to unsuccessful theories or claims are excluded from the calculation. Mahler v. Szucs, 135 Wn.2d 398, 434, 957 P.2d 632 (1998). If fees are recoverable for only some of the party's claims, the trial court may require the party to segregate the time spent on successful and unsuccessful claims. Bloor, 143 Wn. App. at 747; C.L.E.A.N., 119 Wn. App. at 690. The burden of segregating is carried by the party requesting the fees. C.L.E.A.N., 119 Wn. App. at 690 (citing Kastanis v. Educ. Employees Credit Union, 122 Wn.2d 483, 501-02, 859 P.2d 26 (1993)).
Lodestar is merely the starting point, however, "and the fee thus calculated is not necessarily a 'reasonable' fee." Absher Constr. Co. v. Kent Sch. Dist. No. 415, 79 Wn. App. 841, 847, 917 P.2d 1086 (1996). Adjustments up or down are permitted for subjective factors, including the contingent nature of the fee agreement and the quality of the work performed. Fetzer, 122 Wn.2d at 150; Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 598, 675 P.2d 193 (1983). "An award of substantially less than the amount requested should indicate at least approximately how the court arrived at the final numbers, and explain why discounts were applied." Absher, 79 Wn. App. at 848.
Here, the trial court determined that the hourly fee charged by Mr. Johnson's attorneys-$200-was reasonable for the geographical area and the issues of the case. This conclusion is not disputed by the parties. The trial court then addressed the reasonable number of hours dedicated to defending Mr. Johnson. Charges billed by a second attorney were rejected on the basis that "this case was not complex and did not require two lawyers to handle" the trial. CP at 55. Fees for letters directed to bonding companies or insurance companies for the corporations were excluded, as well as a couple of apparently duplicative charges. The court arrived at 134 hours of attorney time, multiplied that figure by the $200 hourly rate, and arrived at a preliminary figure of $26,800. But the court had not yet addressed the segregation of claims or equity.
The trial court asked Mr. Johnson to apportion the amount of time expended solely on defending him in his individual capacity. He responded that all of the fees and costs were expended to defend him and Venture. MLC argued the sole issue raised by Mr. Johnson that was not asserted to defend Johnson, Inc. was the question whether he was liable on the contracts individually. Because little "time was expended on this issue," MLC asserted that possibly 5 hours could be attributed to this issue. CP at 73. Five hours multiplied by $200 per hour is $1,000, a reasonable basis for the court's decision to award Mr. Johnson $1,000 in fees and costs. The court questioned this assertion, but reached the same result.
In effect, the trial court used its own observations of the trial process and equitable considerations in reducing the fee award. The judge originally off-set the award "because I made a finding that it would be harsh to award MLC fees from an insolvent defendant while ordering MLC to pay fees to the successful defendant, who is the owner of the insolvent corporate defendant." CP at 56. The judge asserted this rationale still applied. Additionally, the judge noted Mr. Johnson rented the trucks on behalf of Johnson, Inc. knowing "full well" that the trucks were really rented on behalf of Venture, and thereby protected Venture. Id. A trial court may, in its discretion, base an award of fees on a "recognized ground of equity providing for fee recovery." Dayton v. Farmers Ins. Group, 124 Wn.2d 277, 280, 876 P.2d 896 (1994).
The party seeking fees has the burden to segregate the time spent on issues authorizing fees from the time spent on all other issues. C.L.E.A.N., 119 Wn. App. at 690. If the party seeking fees refuses to properly segregate, the trial court must deny fees altogether. Loeffelholz, 119 Wn. App. at 692. Or if the party segregates in a way that the trial court does not find persuasive, the trial court may, in its discretion, decide what are the reasonable fees incurred for the successful party or issue, as long as the court shows on the record a rational basis for the decision. Id.
We may affirm the trial court's decision on any basis established by the pleadings and supported by the record. Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wn.2d 751, 766, 58 P.3d 276 (2002). As the trial court found, Mr. Johnson did not persuasively segregate the fees expended on his defense after he was specifically asked to do so. He failed to carry his burden of proof. MLC offered an opinion that Mr. Johnson's counsel spent no more than five hours defending on the basis that Mr. Johnson was not personally liable on the leases. The trial court, having had the benefit of observing the trial process and exercising diescretion, agreed in the end. We conclude the trial court did not abuse its discretion.
B. Attorney Fees for Appeal.
Both parties request attorney fees on appeal. RAP 18.1 allows this court to award attorney fees on appeal if authorized by applicable law. Here, the lease provision authorizing fees for the prevailing party is authority for fees incurred on appeal. Marassi v. Lau, 71 Wn. App. 912, 920, 859 P.2d 605 (1993). The prevailing party is the one who obtains a judgment in its favor. Riss v. Angel, 131 Wn.2d 612, 633, 934 P.2d 669 (1997). If neither party wholly prevails, the party that substantially prevails is entitled to fees. Marassi, 71 Wn. App. at 916. The party seeking fees must devote a section of its opening brief to the request. RAP 18.1(b).
Mr. Johnson did not seek fees in the first appeal. He therefore is not entitled to fees for that appeal. RAP 18.1(b). Both parties complied with RAP 18.1 in this appeal. Because we affirm, MLC is entitled to fees. RAP 18.1.
Affirmed.
A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.
KULIK, A.C.J. and KORSMO, J., concur.