In re: Darin Davis

FILED
JUL 3 2019
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT

In re: BAP No. CC-18-1326-FLKu

DARIN DAVIS, Bk. No. 1:10-bk-17214-VK

Debtor. Adv. Pro. 1:10-ap-01354-VK

ASPHALT PROFESSIONALS, INC.,

Appellant,

v. MEMORANDUM*

DARIN DAVIS,

Appellee.

Argued and Submitted on June 20, 2019
at Pasadena, California

Filed – July 3, 2019

Appeal from the United States Bankruptcy Court
for the Central District of California

*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
 Honorable Victoria S. Kaufman, Bankruptcy Judge, Presiding

Appearances: Ray B. Bowen, Jr. of Law Offices of Ray B. Bowen, Jr.
argued for appellant Asphalt Professionals, Inc.; Alan
Wayne Forsley of Fredman Lieberman Pearl LLP argued
for appellee Darin Davis.

Before: FARIS, LAFFERTY, and KURTZ, Bankruptcy Judges.

INTRODUCTION

In the parties’ previous appearance before the Bankruptcy Appellate

Panel (“BAP”), we affirmed the bankruptcy court’s judgment in favor of

chapter 71 debtor Darin Davis on creditor Asphalt Professionals, Inc.’s

(“API”) nondischargeability claim and objection to discharge. API appeals

again, this time from the bankruptcy court’s award of attorneys’ fees and

costs to Mr. Davis. It argues that Mr. Davis was not a party to the

underlying contract, so he cannot enforce the contract’s attorneys’ fees

provision against API. It also argues that some of the allowed fees and

costs were unreasonable and unrelated to the underlying dispute.

The bankruptcy court did not err in holding that California law

allows recovery under the contract. It also did not err in calculating fees

1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are the Federal Rules of Civil
Procedure.

2
and costs owed to Mr. Davis. We AFFIRM.

FACTUAL BACKGROUND2

A. The underlying contract dispute

Mr. Davis was a developer of small real estate projects through

various limited liability companies. He and a partner formed T.O. IX, LLC

(“T.O.”) to develop the “Whitman Project” in Thousand Oaks, California.

API is a general engineering contractor that builds roads, streets, and

sidewalks. API entered into a construction subcontract agreement

(“Subcontract”) for work on the Whitman Project. The Subcontract

repeatedly referred to, but never identified, the “Contractor.” The

Subcontract identified T.O. as the “Owner” of the Whitman Project and a

third-party beneficiary with “the right to enforce the provisions of this

Agreement against Subcontractor.”

Paragraph 23 of the Subcontract provided:

In the event that Contractor prevails in any reference
proceeding or court action arising out of this Agreement or the
enforcement or breach thereof, or in any action brought against
Subcontractor by third parties in which Contractor is joined as a
party or interpleads, whether the same proceeds to judgment or
not, Subcontractor agrees to pay Contractor reasonable

2
We borrow heavily from our earlier decision in this matter, Asphalt Professionals,
Inc. v. Davis (In re Davis), BAP Nos. CC-18-1158-FKuTa, CC-18-1163-FKuTa, 2019 WL
406680 (9th Cir. BAP Jan. 31, 2019). We also exercise our discretion to review the
bankruptcy court’s docket, as appropriate. See Woods & Erickson, LLP v. Leonard (In re
AVI, Inc.), 389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).

3
 attorneys’ fees. In the event that Subcontractor prevails . . . ,
Contractor agrees to pay Subcontractor reasonable attorneys’
fees. The parties’ covenants set forth in this Paragraph 23 shall
survive and be enforceable following termination of this
Agreement.

API was responsible for altering a median on a public roadway. It

stopped work when it discovered a problem with the site plans. API

refused to resume work until another of Mr. Davis’ entities, D&S Homes,

Inc., updated the site plan or paid API to do so.

In April 2005, D&S Homes told API that it had violated the terms of

the Subcontract and terminated the agreement. T.O. back-charged API

$80,000 for the cost of another subcontractor to complete the work.

In September 2005, API sued T.O., Mr. Davis, and others in state

court (the “State Court Action”) for breach of contract, fraud, and other

claims. It alleged throughout the State Court Action that T.O. was the alter

ego of Mr. Davis. API also alleged that it “entered into a written contract

with defendants T.O., D and S, D & S Development, [Mr. Davis],” and

others.

In July 2007, the state license board cited T.O. for lack of a

contractor’s license.

B. Mr. Davis’ bankruptcy case

In June 2010, before API’s claims went to trial in the State Court

Action, Mr. Davis filed a chapter 7 petition. API filed a timely adversary

4
complaint seeking a denial of Mr. Davis’ discharge under §§ 727(a)(2)(A),

(a)(2)(B), and (a)(4), and a determination that the debt was

nondischargeable under § 523(a)(2)(A).

Throughout the adversary proceeding, API alleged that Mr. Davis

was a party to the Subcontract and requested attorneys’ fees that it

incurred during the course of the adversary proceeding. It alleged in its

complaint and joint pretrial stipulations that Mr. Davis “knowingly entered

into a subcontract agreement with [API] . . .” and that T.O. was his alter

ego. It also sought “the costs of this proceeding and the attorney’s fees

incurred by plaintiff in this proceeding[.]”

In September 2010, the bankruptcy court granted API relief from the

automatic stay to allow it to litigate its claims in the State Court Action and

potentially establish a basis for issue preclusion in the adversary

proceeding.

C. The state court trials and appeals

The state court trifurcated the State Court Action into Phase One

(breach of contract, foreclosure on a mechanic's lien, and quantum meruit),

Phase Two (alter ego), and Phase Three (fraud and punitive damages). The

state court held a bench trial as to Phase One and entered a judgment in

favor of API in October 2010. The state court awarded API $318,000 in

damages and $1.65 million in attorneys’ fees. T.O. appealed the award of

fees, but the court of appeal affirmed.

5
 The state court next tried the alter ego issues in Phase Two. In

December 2011, the state court ruled that T.O. “failed to disclose to [API]

the entities that were actually involved in the [Subcontract]” and that it was

not a licensed contractor. It also found that T.O., D&S Homes, and others

were alter egos of Mr. Davis and were jointly and severally liable to API

such that they were liable for attorneys’ fees and “any other or future

orders or orders awarding damages, punitive damages, attorneys fees

and/or costs to [API] against T.O. IX, LLC . . . .”

The state court entered judgment in favor of API. Mr. Davis and T.O.

appealed the judgment, but the court of appeal affirmed in all relevant

respects.

In 2013, API filed an acknowledgment that the $1.9 million Phase

One judgment had been satisfied in full.

D. The bankruptcy court decision

In January 2011, API filed a proof of claim totaling $3 million. The

bankruptcy court disallowed the $1.9 million that had been paid on the

Phase One judgment but allowed the remaining $1.1 million pending the

outcome of Phase Three in the State Court Action.

In December 2014, the court held a trial on API’s § 727(a) claims. The

bankruptcy court entered judgment in favor of Mr. Davis on all claims.

The bankruptcy court later held a trial on API’s § 523(a) claims. It

again ruled in Mr. Davis’ favor, concluding that API had failed to establish

6
any element of the § 523(a)(2)(A) claim. The bankruptcy court entered a

judgment in favor of Mr. Davis.

API appealed the two judgments to the BAP, and we affirmed on

January 31, 2019. We agreed with the bankruptcy court’s determination

that API had failed to establish the mental state required by §§ 727(a)(2),

(a)(4), and 523(a)(2). We also held that the court did not err in considering

the trial evidence and applying issue preclusion.

E. The motion for attorneys’ fees and costs

Meanwhile, Mr. Davis had filed a motion for fees and costs (“Fee

Motion”) in the bankruptcy court. He sought a total of $153,913.89 in fees

and costs that he had incurred defending against the adversary proceeding.

Mr. Davis argued that California state law allows for the recovery of

attorneys’ fees provided by contract. He contended that California Civil

Code (“CCC”) section 1717 allows a party or nonparty to recover attorneys’

fees incurred in the litigation of a contract claim and that API’s complaint

against him was based on a contract. He also argued that his fees were

recoverable under California Code of Civil Procedure (“CCCP”)

section 1021, which permits recovery of fees pursuant to an agreement of

the parties.

The Fee Motion included the declaration of Mr. Davis’ attorney, Alan

W. Forsley, which attached Mr. Forsley’s billing records. Mr. Forsley’s

hourly billing rate began at $350 in April 2011, but increased to $425 by

7
August 2017.

API opposed the Fee Motion, arguing that API prevailed in the State

Court Action, so Mr. Davis could not claim that he was the prevailing party

under the Subcontract; as such, the state statutes awarding fees to the

prevailing party in a contract dispute were inapplicable. It also contended

that Mr. Davis could not recover attorneys’ fees because Mr. Forsley’s time

records were inadequate.

The court issued a tentative ruling indicating that it was inclined to

grant the Fee Motion in part. It held a hearing on the Fee Motion but

continued it to allow for further briefing on issues that API raised for the

first time at the hearing.

In its supplemental brief, API argued that Mr. Davis was not a party

to the Subcontract and that he could not enforce T.O.’s rights. It argued that

it had not taken the position that Mr. Davis was a party to the Subcontract,

so judicial estoppel was inapplicable. It also contended that California

Business & Professions Code (“B&P”) § 7031 barred Mr. Davis from

recovering attorneys’ fees under the Subcontract because T.O. was an

unlicensed contractor.

In his supplemental response, Mr. Davis pointed out the many times

that API alleged in the state court that Mr. Davis was a party to the

Subcontract or could be held liable under the alter ego doctrine.

After a continued hearing, the bankruptcy court granted the Fee

8
Motion. It held that the state superior court and court of appeal had

implicitly found that Mr. Davis was a party to the Subcontract when they

determined that Mr. Davis was liable for attorneys’ fees because T.O. was

his alter ego.

The court next extensively examined California law and held that

state law allows nonsignatory parties to recover attorneys’ fees if the

opposing party would have been able to recover fees from the

nonsignatory party under the same provision, had it prevailed. It held that

CCC section 1717(a) was not applicable to the present case because a

nondischargeability action under § 523(a)(2)(A) is not an “action on a

contract.”

However, the court held that Mr. Davis could recover his attorneys’

fees pursuant to CCCP sections 1021 and 1032 and the attorneys’ fees

provision in the Subcontract. It held:

API explicitly contracted for reciprocity as to liability for
attorneys’ fees. Had [API] prevailed on its nondischargeability
claim, because of the Alter Ego Judgment, [API] would have
been able to collect its award of attorneys’ fees from
[Mr. Davis]. In fact, in the Adversary Complaint, [API]
requested an award of attorneys’ fees; for a nondischargeability
claim under § 523(a)(2)(A), [API’s] bases to obtain an award of
attorneys’ fees are the Agreement’s attorneys’ fees provision
and the Alter Ego Judgment. Based on the authorities above, as
a prevailing party, [Mr. Davis] may receive an award of
attorneys’ fees under the Agreement.

9
 The bankruptcy court noted that the Subcontract allowed T.O. to

enforce any provision of the Subcontract, including the attorneys’ fees

provision. Thus, API “agreed that T.O. would have the right to enforce any

provision of the Agreement[,]” and Mr. Davis, as T.O.’s alter ego, also had

the right to enforce the Subcontract. The court noted that API already

recovered breach of contract damages, including attorneys’ fees, in the

State Court Action and that it would be inequitable to bar Mr. Davis from

similarly recovering under the same provision of the Subcontract. The

court limited recovery to the § 523(a) claim, because the claim for the denial

of discharge under § 727 did not arise from the Subcontract.

Moreover, it rejected API’s argument that Mr. Davis was not the

prevailing party because API had prevailed in the State Court Action. It

said that the “nondischargeability action is separate and distinct from the

state court action. . . . In this action, [Mr. Davis] is the prevailing party

because [Mr. Davis] ‘falls squarely’ within one of the ‘prevailing party’

definitions under CCP § 1032(a)(4): [he] is ‘a defendant as against those

plaintiffs who do not recover any relief against that defendant.’”

The bankruptcy court further held that API was judicially estopped

from taking the position that Mr. Davis was not a party to the Subcontract

because it had previously argued successfully that Mr. Davis was a party to

the Subcontract and that T.O. was his alter ego.

Finally, the bankruptcy court held that B&P section 7031 did not bar

10
Mr. Davis from recovering attorneys’ fees, inasmuch as that statute only

applies to a business trying to recover compensation for work that it

performed as a contractor.

Regarding the amount of fees, the bankruptcy court found that

Mr. Forsley’s hourly rate was reasonable for an attorney in Los Angeles

with Mr. Forsley’s experience. The court did not take issue with an increase

in Mr. Forsley’s billing rate during the course of the litigation. It ordered

Mr. Forsley to submit a supplemental itemized statement of attorneys’ fees

and costs and allowed API the opportunity to respond. It directed

Mr. Forsley not to include fees for the § 727 matter and to explain time

entries that were lumped together or redacted.

F. The itemized fees and costs

Mr. Forsley submitted a supplemental declaration explaining his

requested fees. He stated that his firm’s billings for all of Mr. Davis’

matters exceeded $200,000. To comply with the bankruptcy court’s order

that the request for fees include only time entries related to the

§ 523(a)(2)(A) claim, Mr. Forsley stated that he “blacked out and deducted

all other fees on the bills so that they would not be included.” He

continued, “Nevertheless, some § 523(a)(2)(A) and § 727(a) claims are so

intertwined that they could not be separated. . . . In such instances, the

§ 727 claims could not be apportioned so they were included in the

billings.” He stated that, after the deductions, his fees totaled $129,065.37,

11
and his costs totaled $1,501.74.

API argued that the Fee Motion sought to recover fees that

Mr. Forsley had performed for other clients on unrelated matters,

overstated Mr. Forsley’s billing rate, and included billing entries that were

unreasonable or for menial tasks.

API speculated that a third party might have been paying

Mr. Forsley’s fees, so it would be improper to award attorneys’ fees to “a

non-debtor, most likely to a creditor” by allowing recovery for work done

“for client.” The court responded that it did not matter who was paying the

bill, only that Mr. Forsley was doing work on behalf of Mr. Davis.

API further argued that it would be improper to award fees on

redacted billing entries and questioned the court’s arithmetic. The court

responded that it “did not award any fees on redacted entries.”

The bankruptcy court awarded Mr. Davis $91,390.92 in fees and

$956.87 in costs. It noted that Mr. Forsley attempted to reduce his fee by

deducting amounts billed in connection with the § 727 claim, as Mr. Davis’

recovery was based only on the § 523(a) claim. It further reduced the award

by subtracting any redacted items, items lumped together with the State

Court Action, items concerning different clients, litigation against the

chapter 7 trustee, litigation of unrelated matters, and items lumped

together with disallowed tasks.

The court issued its order granting in part the Fee Motion on

12
December 3, 2018. API timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334

and 157(b)(1). We have jurisdiction under 28 U.S.C. § 158.

ISSUES

(1) Whether the bankruptcy court erred by awarding Mr. Davis

attorneys’ fees and costs under the Subcontract.

(2) Whether the award of attorneys’ fees and costs was reasonable.

STANDARDS OF REVIEW

“To the extent the issue is whether California law allows the award of

attorneys’ fees, our review is de novo.” Saccheri v. St. Lawrence Valley Dairy

(In re Saccheri), BAP No. EC-12-1269-JuKiD, 2012 WL 5359512, at *5 (9th Cir.

BAP Nov. 1, 2012), aff’d, 599 F. App’x 687 (9th Cir. 2015) (citing Fry v. Dinan

(In re Dinan), 448 B.R. 775, 783 (9th Cir. BAP 2011)). “De novo review

requires that we consider a matter anew, as if no decision had been made

previously.” Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP

2014) (citations omitted).

We review the bankruptcy court’s decision regarding an award of

fees and costs for an abuse of discretion. Hosseini v. Key Bank, N.A. (In re

Hosseini), 504 B.R. 558, 563 (9th Cir. BAP 2014) (citing Renfrow v. Draper, 232

F.3d 688, 693 (9th Cir. 2000); In re Dinan, 448 B.R. at 783).

We apply a two-part test to determine whether the bankruptcy court

13
abused its discretion. United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th

Cir. 2009) (en banc). First, we consider de novo whether the bankruptcy

court applied the correct legal standard to the relief requested. Id. Then, we

review the bankruptcy court’s factual findings for clear error. Id. at 1262.

We must affirm the bankruptcy court’s factual findings unless we conclude

that they are illogical, implausible, or without support in inferences that

may be drawn from the facts in the record. Id.

DISCUSSION

A. The bankruptcy court did not err in awarding Mr. Davis his
attorneys’ fees and costs pursuant to the Subcontract.

API argues that the bankruptcy court impermissibly allowed

Mr. Davis to recover attorneys’ fees under a contract to which he was not a

party. We discern no error.

1. California law allows for recovery under the Subcontract.

API argues that the bankruptcy court erred when it ruled that CCC

section 1717(a) was inapplicable yet relied on three cases that construed

that same section.3 We disagree.

Section 1717(a) concerns the award of attorneys’ fees “[i]n any action

3
California law applies because “[n]o general right to recover attorney’s fees
exists under the Bankruptcy Code.” In re Hosseini, 504 B.R. at 568 (citation omitted).
Merely prevailing on a § 523(a) claim, in and of itself, does not entitle a party to
attorneys’ fees. Id. Thus, the party seeking fees must demonstrate some independent
basis for the fee request. Id. at 567 (“a prevailing party may not recover attorney’s fees
except as provided for by contract or by statute”).

14
on a contract . . . .”4 This section is not limited solely to breach of contract

claims. “California courts liberally construe the term ‘on a contract’ as used

within section 1717. As long as the action ‘involve[s]’ a contract it is ‘on

[the] contract’ within the meaning of Section 1717.” Dell Merk, Inc. v.

Franzia, 132 Cal. App. 4th 443, 455 (2005) (citations and some quotation

marks omitted).

However, we have held that section 1717(a) is inapplicable to § 523(a)

nondischargeability claims for fraud that do not involve a breach of

contract claim: “we will . . . narrowly apply CCC § 1717 and approve

attorney’s fees only if the action involves a contract claim. . . . Here, the

Complaint did not contain a breach of contract claim. Rather, the only

claim asserted was a nondischargeability claim based on fraud. Therefore,

CCP [sic] § 1717 is not applicable.” Redwood Theaters, Inc. v. Davison (In re

Davison), 289 B.R. 716, 724 (9th Cir. BAP 2003) (citations omitted)

(construing California law); see Terra Nova Indus., Inc. v. Chen (In re Chen),

4
CCC section 1717(a) provides, in relevant part:

(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.

Cal. Civ. Code § 1717(a).

15
345 B.R. 197, 201 (N.D. Cal. 2006) (holding that the bankruptcy court did

not err in declining to award fees under CCC section 1717 because “the

bankruptcy court did not make any determination as to the contract claim,

nor did it rely on the contract in its ruling on the dischargeability claim”);

Taburaza v. Zarate (In re Zarate), 567 B.R. 176, 185 (Bankr. N.D. Cal. 2017)

(holding that a § 523(a)(2)(A) claim was not an action “on a contract” under

CCC section 1717(a) because the bankruptcy court did not need to

determine whether the contract was enforceable).

The bankruptcy court correctly determined that this provision did

not apply. API’s initial complaint in the bankruptcy court included claims

for breach of the Subcontract, as well as §§ 523 and 727 claims. If the

bankruptcy court had entered judgment on the contract claims, the court

might have awarded fees under CCC section 1717. Instead, however, the

bankruptcy court lifted the automatic stay so that the state court could

adjudicate the contract claims. The claims that remained in the bankruptcy

court – the §§ 523 and 727 claims – were not an “action on a contract.” No

one disputes this decision, and we agree with the bankruptcy court.

Nevertheless, the bankruptcy court cited three cases, Dell Merk, Inc.,

132 Cal. App. 4th 443, Reynolds Metals Co. v. Alperson, 25 Cal. 3d 124 (1979),

and Burkhalter Kessler Clement & George LLP v. Hamilton, 19 Cal. App. 5th 38

(Ct. App. 2018), that construe CCC section 1717(a). Those cases stand for

the general proposition that, if a plaintiff sues a nonsignatory on a contract

16
as if the nonsignatory were a contracting party, he becomes liable for fees

under CCC section 1717(a) if the nonsignatory prevails. See Dell Merk, Inc.,

132 Cal. App. 4th at 451 (“[I]n cases involving nonsignatories to a contract

with an attorney fee provision, the following rule may be distilled from the

applicable cases: A party is entitled to recover its attorney fees pursuant to

a contractual provision only when the party would have been liable for the

fees of the opposing party if the opposing party had prevailed.”); Reynolds

Metals Co., 25 Cal. 3d at 129 (“Had plaintiff prevailed on its cause of action

claiming defendants were in fact the alter egos of the corporation,

defendants would have been liable on the notes. Since they would have

been liable for attorney's fees pursuant to the fees provision had plaintiff

prevailed, they may recover attorney’s fees pursuant to section 1717 now

that they have prevailed.); Burkhalter Kessler Clement & George LLP, 19 Cal.

App. 5th at 46 (“even though Hamilton was not a party to the contract, she

is entitled to recover her attorney fees under section 1717, because

Burkhalter would have been entitled to recover its attorney fees against

Hamilton had it prevailed on its alleged alter ego theory of liability”).

But CCC section 1717(a) is not the only statutory basis for the

recovery of attorneys’ fees in California:

California Code of Civil Procedure section 1021 provides that,
except where specifically provided by statute, parties are free
to enter their own agreements regarding payment of fees.
Similarly, a prevailing party may ordinarily recover “costs,”

17
 §§ 1021 and 1032(b), and parties may contractually designate
fees as recoverable costs, § 1033.5(a)(10). Pursuant to these
provisions, “[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, 17 Cal. 4th 599, 608, 71 Cal. Rptr.
2d 830, 951 P.2d 399 (1998) (quoting Xuereb v. Marcus &
Millichap, Inc., 3 Cal. App. 4th 1338, 1341, 5 Cal. Rptr. 2d 154
(1992)).

MRW, Inc. v. Big-O Tires, LLC, 684 F. Supp. 2d 1197, 1201 (E.D. Cal. 2010)

(emphases added).

CCCP section 1021 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; but parties to actions or proceedings are

entitled to their costs, as hereinafter provided.” Cal. Civ. Proc. Code § 1021.

CCCP section 1021 is broader in some respects than CCC section 1717(a):

CCP § 1021 does not limit the recovery of attorney’s fees to
certain claims. The Ninth Circuit noted that attorney’s fees may
be recoverable under CCP § 1021 even though they are not
recoverable under CCC § 1717. Therefore, it held that
“California law permits recovery of attorney’s fees by
agreement, for tort as well as contract actions.”

In re Davison, 289 B.R. at 724 (citing and quoting 3250 Wilshire Boulevard

Bldg. v. W.R. Grace & Co., 990 F.2d 487, 489 (9th Cir. 1993)). In particular,

CCCP section 1021 permits recovery of attorneys’ fees in §§ 523 and 727

18
cases. See Charlie Y., Inc. v. Carey (In re Carey), 446 B.R. 384, 391 (9th Cir.

BAP 2011) (applying CCCP section 1021 to an attorneys’ fee request in a

§ 727 action).5

The bankruptcy court also relied on CCCP section 1032(b), which

provides: “Except as otherwise expressly provided by statute, a prevailing

party is entitled as a matter of right to recover costs in any action or

proceeding.” Cal. Civ. Proc. Code § 1032(b). “Costs” include “Attorney’s

fees, when authorized by . . . Contract.” Cal Civ. Proc. Code § 1033.5(a)(10).

Neither CCCP section 1021 nor CCCP section 1032 provides that a

nonsignatory to a contract can recover attorneys’ fees. Nevertheless, we

agree with the bankruptcy court’s conclusion that nonsignatories may

recover attorneys’ fees under CCCP sections 1021 and 1032 just as they can

under CCC section 1717. When an action is “on a contract,” CCC section

1717 permits recovery of attorneys’ fees by a nonsignatory. CCCP section

1021 speaks of “the agreement . . . of the parties” and CCCP section 1032

allows for the prevailing party to “recover costs” “when authorized by . . .

5
API argues that CCCP section 1021 “only applies to ‘costs’ and not ‘attorney’s
fees[.]’” But the plain language of the statute mentions attorneys’ fees and leaves them
to the “agreement, express or implied, of the parties[.]” See 3250 Wilshire Blvd. Bldg., 990
F.2d at 489 (“where attorney’s fees are not recoverable for a non-contract action under
section 1717, they may nonetheless be recoverable under section 1021”); Xuereb v.
Marcus & Millichap, Inc., 3 Cal. App. 4th 1338, 1341 (1992) (“It is quite clear from the case
law interpreting Code of Civil Procedure section 1021 that parties 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.”).

19
Contract.” We see no reason why the principle of reciprocal recovery

applies to CCC section 1717 but not to CCCP sections 1021 and 1032.

At oral argument, the Panel asked counsel for API if there are any

cases instructing that the reciprocity principle in CCC section 1717 is

inapplicable to other statutes. Counsel stated that Reynolds Metals Co., 25

Cal. 3d 124, and Xuereb, 3 Cal. App. 4th 1338, hold that, “if you’re going to

apply [CCCP sections] 1021 or 1032, it applies to signatories . . . .” Those

cases do not stand for such a proposition. They only discuss the general

proposition that CCC section 1717(a) allows reciprocal recovery of fees and

does not prohibit reciprocal recovery under CCCP sections 1021 and 1032.6

Here, Mr. Davis was a nonsignatory to the Subcontract. However,

API requested in its adversary complaint that the bankruptcy court require

Mr. Davis to pay its attorneys’ fees and costs. Moreover, API had enforced

the attorneys’ fees provision against Mr. Davis in the State Court Action

and recovered $1.65 million in attorneys’ fees. The bankruptcy court did

not err in holding that Mr. Davis had the reciprocal right to enforce the

attorneys’ fees provision against API under CCCP sections 1021 and 1032.

6
Although Xuereb discusses the relationship between CCC section 1717 and
CCCP section 1021, it does so only to clarify that “Civil Code section 1717 necessarily
assumes the right to enter into agreements for the award of attorney fees in litigation, a
right which it in fact derives from Code of Civil Procedure section 1021. Because of its
more limited scope, Civil Code section 1717 cannot be said to supersede or limit the
broad right of parties pursuant to Code of Civil Procedure section 1021 to make
attorney fees agreements.” Xuereb, 3 Cal. App. 4th at 1342.

20
 2. Mr. Davis was the “prevailing party” in the adversary
proceeding.

API next argues that the court erred in holding that Mr. Davis was

the “prevailing party,” because API had prevailed in the state court and

recovered $1.9 million. It contends that the bankruptcy court was bound by

the state court’s rulings and could not interpret the attorneys’ fees

provision to award anything to Mr. Davis. We disagree.

Aside from general preclusion principles, API does not cite any

authority for its position that its success in the state court prevents

Mr. Davis from being a “prevailing party” in the bankruptcy court. The

bankruptcy court correctly held that, while API prevailed on its breach of

contract claims in the state court, the § 523(a)(2) complaint was a

completely separate nondischargeability action that concerned Mr. Davis’

allegedly false representations and fraud in inducing API to enter into the

Subcontract. While the § 523(a) claim arose out of the Subcontract, it was

not an action for breach of contract. Thus, issue and claim preclusion do not

apply.

Further, API contends that the bankruptcy court misconstrued CCCP

section 1032, which defines “prevailing party.” That section states:

(4) “Prevailing party” includes the party with a net monetary
recovery, a defendant in whose favor a dismissal is entered, a
defendant where neither plaintiff nor defendant obtains any
relief, and a defendant as against those plaintiffs who do not

21
 recover any relief against that defendant. If any party recovers
other than monetary relief and in situations other than as
specified, the “prevailing party” shall be as determined by the
court, and under those circumstances, the court, in its
discretion, may allow costs or not and, if allowed, may
apportion costs between the parties on the same or adverse
sides pursuant to rules adopted under Section 1034.

Cal. Civ. Proc. Code § 1032(a)(4). The bankruptcy court determined that

Mr. Davis was a prevailing party in the adversary proceeding because he

was a “defendant as against those plaintiffs who do not recover any relief

against that defendant.”

The bankruptcy court was correct. In the adversary proceeding

(which is separate from the state court action), Mr. Davis is clearly the

prevailing party; the bankruptcy court sided with him on the §§ 727 and

523 claims, and the BAP affirmed. API did not recover any relief.

API would have us deem it the prevailing party, because it recovered

more in the State Court Action than Mr. Davis recovered in the adversary

proceeding. But, as the bankruptcy court correctly stated, the State Court

Action was completely separate from the nondischargeability action.

Even if one regards the state court proceeding and the adversary

proceeding as part of a larger whole, Mr. Davis ultimately came out on top:

he has no liability to API.

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 The bankruptcy court did not err.7

B. The bankruptcy court did not err in calculating the fees and costs
awarded to Mr. Davis.

API argues that the bankruptcy court erred in awarding Mr. Davis

over $92,000 in fees and costs. It repeats its arguments that the court failed

to exclude certain of Mr. Forsley’s billing entries and that his hourly rate

was unreasonable. We disagree.

We must consider the reasonableness of the attorneys’ fee award

under California law:

After a court decides that a contract provides attorneys’
fees for a prevailing party, the court must determine the
reasonableness of the requested fees. If the contract does not
specify a particular sum, “it is within the trial court’s
discretion to determine what constitutes reasonable attorneys’
fees.” Niederer v. Ferreira, 189 Cal. App. 3d 1485, 1507 (1987)
(citations omitted). In California, this inquiry “ordinarily begins
with the ‘lodestar,’ i.e., the number of hours reasonably
expended multiplied by the reasonable hourly rate.” PLCM
Group v. Drexler, 22 Cal. 4th 1084, 1095 (2000). “The reasonable
hourly rate is that prevailing in the community for similar
work.” Id. (citations omitted). “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

7
The bankruptcy court also found that, as T.O.’s alter ego, Mr. Davis was entitled
to enforce the Subcontract’s attorneys’ fees provision against API and that API was
judicially estopped to deny that Mr. Davis could recover his fees. Because we hold that
the bankruptcy court did not err in awarding Mr. Davis his attorneys’ fees under two
California state statutes, we do not reach these issues.

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 services provided.” Id. (citing Serrano v. Priest, 20 Cal. 3d 25, 49
(1977) (in bank)). . . . “When apprised of the pertinent facts, the
trial court may rely on its own experience and knowledge in
determining the reasonable value of the attorney’s services.”
Id. (citation omitted).

Okada v. Whitehead, No. 8:15-CV-01449-JLS-KES, 2017 WL 2626990, at *2

(C.D. Cal. June 12, 2017) (emphases added).

1. API does not establish that the fees included work for other
clients or on other matters.

API complains that the bankruptcy court failed to exclude from

Mr. Forsley’s billing statements work for multiple clients and work on

unrelated matters. It contends that Mr. Forsley’s firm was representing

multiple clients (including Mr. Davis’ wife) in related proceedings, and the

“billing statements do not distinguish which of his many clients he is

representing and billing . . . .” It speculates that Mr. Forsley’s use of the

term “client” in his billing statements could refer to other individuals

besides Mr. Davis.

API’s arguments are meritless. Mr. Forsley testified in his declaration

that the billing statements were for “work performed for Debtor including

this Adversary Matter.” He further stated that his firm creates bills for each

of the clients. The inclusion of Mr. Davis’ wife’s name on the billing

statements was irrelevant, because Mr. Forsley represented that he did not

do any work on the adversary proceeding for Mrs. Davis. API offers only

24
conjecture that Mr. Forsley billed Mr. Davis for work done on behalf of

other clients.8

2. API does not establish that the fees or rates were excessive.

API also contends that Mr. Forsley’s hourly rate is unreasonable and

that he over-billed for simple legal work.

The bankruptcy court painstakingly combed through Mr. Forsley’s

time entries and deducted fees for anything not concerning the § 523 claim.

It said that it disallowed fees for the § 727 claim, redacted entries, items

lumped with other litigation, items concerning other clients, and appellate

matters. At the hearing, API challenged the court’s arithmetic, but it failed

to prove that the court did not make the stated reductions. The court did

not abuse its discretion in determining that the fee award of $91,390.92 was

reasonable.

API claims that Mr. Forsley misled the bankruptcy court about his

hourly rate, because his rate started at $350 per hour and increased over

seven years to $425 per hour. But although the court stated generally that

Mr. Forsley’s hourly rate was $425, it based its calculations on the rate that

Mr. Forsley actually billed. API offers no evidence that the bankruptcy

8
API argues that Mr. Forsley’s billing entries suggest that Mr. Forsley might
have been seeking payment of Mr. Davis’ fees from another person or entity and that it
is unknown who was actually paying the firm’s bills, so the court must disallow the
fees. But the court correctly pointed out at the hearing that it does not matter who paid
for Mr. Davis’ representation, just that Mr. Forsley was doing work for Mr. Davis. API
offers no authority to the contrary.

25
court merely multiplied the number of billed hours by $425. Nor does API

offer any evidence that the $425 hourly rate was excessive or unreasonable.

The bankruptcy court found that $425 per hour was reasonable for an

attorney in Los Angeles with Mr. Forsley’s experience, and we discern no

abuse of discretion.

API also questions the work that Mr. Forsley performed on the § 523

claim. It complains that Mr. Forsley did not engage in much discovery or

offer many witnesses or exhibits at trial. But it never claims that

Mr. Forsley did not actually perform the work or that the hours billed were

unreasonable. Even though Mr. Forsley may not have called many direct

witnesses, the billing records show that Mr. Forsley prepared for each

witness and reviewed and prepared the evidence.

3. The hours that Mr. Forsley spent on his supplemental
declaration were not unreasonable.

Finally, API argues that the hours Mr. Forsley claimed to have

worked are unreasonable. It appears to argue that Mr. Forsley did not edit

his billing entries as the court had directed.

The gist of API’s argument seems to be that Mr. Forsley did not do

enough work to comply with the court’s directives, not that the time he

spent doing so was unreasonable. “In awarding fee preparation expenses,

the time expended should bear a reasonable relationship to the dispute and

amounts involved.” Great W. Savings v. Dominguez (In re Dominguez), 51

26
B.R. 171, 173 (Bankr. C.D. Cal. 1985). Mr. Forsley billed an additional 8.6

hours in response to the court’s directive to submit a supplemental

declaration and deduct certain items from his fee request. This work totals

an additional $3,655. Given that Mr. Davis recovered a total of $92,000, we

cannot say that this sum – representing less than four percent of the overall

award – is unreasonable.

CONCLUSION

The bankruptcy court did not err in determining that Mr. Davis was

entitled to fees and costs pursuant to the Subcontract and awarding him

$91,390.92 in fees and $956.87 in costs. We therefore AFFIRM.

27