Opinion
Case No.16-cv-03775-LB
04-07-2017
SHAUNAK SAYTA, Plaintiff, v. BENNY MARTIN, Defendant.
ORDER DENYING THE DEFENDANT'S MOTION FOR ATTORNEY'S FEES.
Re: ECF No. 52
INTRODUCTION & BACKGROUND
This case arises from an attorney-client relationship gone wrong. The court previously compelled arbitration of client Shaunak Sayta's claims against attorney Benny Martin and confirmed a prior, fees-based arbitration award in favor of Mr. Martin. The court assumes familiarity with the case and incorporates by reference the statement of facts in its prior order.
Mr. Sayta is also a licensed attorney. See First Amended Compl. - ECF No. 39, ¶ 1.
Order - ECF No. 47.
Id. at 2-4.
Mr. Martin, an attorney proceeding pro se in this litigation, now moves to collect attorney's fees "measured by the loss of income that he suffered as a result of litigating the case. He seeks to recover those "fees" on three grounds: (1) under the parties' agreement for attorney's fees in the event of a dispute (as authorized by California Civil Code section 1717); (2) as sanctions under 28 U.S.C. § 1927; and (3) as sanctions under the court's inherent authority.
Motion for Attorney's Fees - ECF No. 52-1 at 8; Reply - ECF No. 55 at 7.
See generally id.
The court can decide this matter without oral argument and vacates the hearing on April 13, 2017. Civil. L.R. 7-1(b). The court denies Mr. Martin's motion because he is not entitled to recover his opportunity costs and the court declines to impose those losses as a sanction on Mr. Sayta.
ANALYSIS
1. Mr. Martin Is Not Entitled to Attorney's Fees Under Civil Code Section 1717
Mr. Martin's first claim for attorney's fees arises under the parties' contract and California Civil Code section 1717. Section 1717(a) provides for the recovery of reasonable attorney's fees and costs to the prevailing party in a contract action:
Id. at 9-12.
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.Cal. Civ. Code § 1717(a); Lucasfilm, Ltd. v. Canal Toys, No. C 11-01639 WHA, 2012 WL 685415, at *3 (N.D. Cal. Mar. 2, 2012).
And, indeed, the parties' attorney-client fee agreement contains two fee provisions. First, it says, "[i]n the event it becomes necessary to institute an action at law to enforce this agreement or any part thereof, including recovery of fees and/or costs and expenses, the prevailing party in that action shall be entitled to recover reasonable attorney'[s] fees." Second, the agreement provides, the parties must arbitrate "any dispute with respect to this agreement," and that "[t]he prevailing party shall be entitled to recover reasonable attorney's fees, [whether] pro se or otherwise, in said [arbitration]." Thus, Mr. Martin asserts, because there "can be no doubt that [he] was the prevailing party in this action," and because the contract provides for his recovery of attorney's fees, he is entitled to those fees under section 1717.
Attorney-Client Fee Agreement - ECF No. 9 at 6-9, § 4.
Id. § 9.
Motion at 10.
But Mr. Martin identifies the "twist" here: the parties are both attorneys that represented themselves pro se. Mr. Martin asserts that "[n]o case law prohibits the parties' bargain" and that "there is no public policy conceivable for preventing a litigator that hires another litigator from agreeing to pay the other's reasonable fees."
Id. at 10-12.
Id. at 10-11.
Not so. The California Supreme Court has held "that an attorney who chooses to litigate in propria persona and therefore does not pay or become liable to pay consideration in exchange for legal representation cannot recover 'reasonable attorney's fees' under Civil Code section 1717." Trope v. Katz, 11 Cal. 4th 274, 292 (1995). The Trope Court "based its decision solely on the statutory interpretation of section 1717, and specifically on what it means to 'incur' attorneys' fees." Farmers Ins. Exch. v. Law Offices of Conrado Joe Sayas, Jr., 250 F.3d 1234, 1237 (9th Cir. 2001) (discussing Trope).
Under Trope, "section 1717 applies only to contracts specifically providing that attorney['s] fees 'which are incurred to enforce that contract' shall be awarded to one of the parties or to the prevailing party." Trope, 11 Cal. 4th at 280 (emphasis in original). "To 'incur' a fee, of course, is to 'become liable,'" and so a pro se attorney "cannot be said to 'incur' compensation for his time and his lost business opportunities." Id. And section 1717 applies only to "fees" —"the consideration that a litigant actually pays or becomes liable to pay in exchange for legal representation." Id. In other words, an attorney proceeding pro se does not "incur" — or, does not actually pay or become liable to pay — "fees" measured by time spent and opportunities lost. Id. at 283; see Farmers, 250 F.3d at 1237 ("[T]he key to the analysis of section 1717 under Trope is the incurring of fees.") (emphasis in original); In re Aureal, Inc., No. C 04-05100 SI, 2006 WL 2130903, at *5 (N.D. Cal. July 25, 2006) (describing Trope's holding as "the conclusion that an attorney who represents herself in propria persona cannot recover attorney['s] fees as compensation for the time and effort she expends on her own behalf).
Here, Mr. Martin represented himself pro se. He asserts that he "incurred the legal fees [he seeks] as a cost or expense in representing himself, measured by the loss of income that he suffered as a result of having to take time off [of] work to respond to Mr. Sayta's federal action." But under Trope, Mr. Martin cannot recover under section 1717 for lost time and opportunities; he did not "incur" any "attorney's fees." He provides no authority to the contrary and asserts only that "[n]o case law prohibits the parties' bargain." Absent compelling, controlling authority that allows recovery in this context, Trope governs. The court denies Mr. Martin's recovery under the parties' agreement and Civil Code section 1717.
Id. at 8.
Id. at 11.
2. The Court Declines to Impose Sanctions on Mr. Sayta
Mr. Martin's other two claims for attorney's fees, under 28 U.S.C. § 1927 and the court's inherent authority, rest in the court's discretion. See Trulis v. Barton, 107 F.3d 685, 694 (9th Cir. 1995); F.J. Hanshaw Enters., Inc. v. Emerald River Dev., Inc., 244 F.3d 1128, 1135 (9th Cir. 2001). The court exercises that discretion and declines to sanction Mr. Sayta with Mr. Martin's opportunity costs.
First, 28 U.S.C. § 1927 provides that "[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." Sanctions imposed under § 1927 may be imposed only based on activities before the sanctioning court. GriD Sys. Corp. v. John Fluke Mfg. Co., Inc., 41 F.3d 1318, 1319 (9th Cir. 1994) (per curiam). They also "must be supported by a finding of subjective bad faith." In Re Keegan Mgmt. Co., Sec. Litig., 78 F.3d 431, 436 (9th Cir. 1996) (internal quotations omitted). Such "[b]ad faith is present when an attorney knowingly or recklessly raises a frivolous argument, or argues a meritorious claim for the purpose of harassing an opponent." Id.
Here, Mr. Sayta's arguments in the litigation — primarily based on the enforceability of the parties' agreement (and thus the arbitrability of their disputes) — proved unsuccessful. But the court cannot say that they were made in bad faith, especially in light of the uncontested allegations that Mr. Martin violated California Business & Professions Code section 6148(c). And because the court ordered the arbitration of Mr. Sayta's substantive claims, the court has not adjudicated them and cannot say that they are frivolous or made for the purpose of harassing Mr. Martin. The court therefore declines to award Mr. Martin "fees" under § 1927.
Mr. Sayta is a California-licensed attorney. See supra n.1.
See generally Order - ECF No. 47 at 2-3. --------
Second, a court may impose sanctions under its inherent power if it finds "bad faith or conduct tantamount to bad faith," such as recklessness "combined with an additional factor such as frivolousness, harassment, or an improper purpose." See Fink v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001). For the reasons stated above regarding § 1927, the court declines to impose sanctions on Mr. Sayta.
CONCLUSION
Mr. Martin is not entitled to fees under California Civil Code section 1717 because he represented himself pro se, did not "incur" any "attorney's fees," and he cannot be compensated for lost time and opportunities under that statute. The court also declines to exercise its discretion to sanction Mr. Sayta and award Mr. Martin those losses.
The court denies Mr. Martin's motion for attorney's fees.
IT IS SO ORDERED.
Dated: April 7, 2017
/s/_________
LAUREL BEELER
United States Magistrate Judge