Passport 420 LLC et al vs Starr Indemnity & Liability Company

Case Number

19CV03596

Case Type

Hearing Date / Time

Mon, 11/18/2024 - 10:00

Nature of Proceedings

Motion for Brandt Attorney Fees; Motion for Prejudgment Interest

Tentative Ruling

Passport 420, LLC, et al. v. Starr Indemnity & Liability Company, et al. 

Case No. 19CV03596

           

Hearing Date: November 18, 2024                                                    

HEARING:              (1) Plaintiff’s Motion For Brandt Attorney Fees And Costs

                                    (2) Plaintiff’s Motion For Prejudgment Interest On The Award Of Policy Benefits And Brandt Attorney Fees And Costs

                                   

ATTORNEYS:        For Plaintiffs Passport 420, LLC; Spring Creek Research, LLC; and William Parrish: A. Barry Cappello, Lawrence J. Conlan, Richard Lloyd, Cappello & Noel LLP

                        For Defendant Starr Indemnity & Liability Co.: Michael J. Terhar, Carl J. Basile, Cunningham Swaim, LLP, Ralph S. LaMontagne, Jr., Eric A. Amador, LaMontagne & Amador LLP

TENTATIVE RULING:

(1) The motion of plaintiff for Brandt attorney’s fees and costs is granted.

(2) The Court continues the hearing on plaintiff’s motion for prejudgment interest on the award of policy benefits and Brandt attorney fees and costs to December 9, 2024. The Court requires the submission of a joint stipulation by plaintiff and defendant setting forth a proper computation of prejudgment interest in accordance with the Court’s ruling herein. The joint stipulation shall be submitted on or before December 2, 2024, and without prejudice to the parties’ respective positions on the underlying claim of plaintiff. Unless the parties file the joint stipulation described herein, plaintiff and defendant shall each, on or before December 2, 2024, file and serve supplemental briefs setting forth what each party contends constitutes an accurate interest calculation that conforms to the Court’s ruling herein.

Background:

This action arises out of losses sustained as a result of a government seizure of aircraft owned by plaintiffs Passport 420, LLC (Passport), Spring Creek Research, LLC (Spring Creek) and William Parrish (Parrish) (collectively, plaintiffs.) On July 11, 2019, plaintiffs filed a complaint against defendants Starr Indemnity & Liability Company (Starr Indemnity), Avenatti & Associates, APC (Avenatti Associates), and Michael J. Avenatti (Avenatti) (collectively, defendants), alleging three causes of action: (1) breach of contract (against Starr Indemnity); (2) breach of the covenant of good faith and fair dealing (against Starr Indemnity); and (3) declaratory relief (against all defendants). Briefly, as alleged in the complaint:

On July 11, 2016, Parrish and Avenatti, who at the time was Parrish’s attorney, formed Passport for the purpose of purchasing an aircraft. Parrish owns his interest in Passport through Spring Creek. Avenatti purchased his interest in Passport through Avenatti Associates. The aircraft was purchased on January 18, 2017, for a net price of $4,383,605. Parrish held a 52.7 percent ownership interest in the aircraft. Avenatti was removed as the manager of Passport on August 29, 2018.

Starr Indemnity sold to plaintiffs an Elite Comprehensive Corporate Aircraft Policy No. 1000320046-03 (the policy), which provides coverage during the period from January 26, 2019, through January 26, 2020. The policy provided for insurance coverage of up to $10 million for covered perils which include “seizure” of the aircraft by a government authority. During the policy period, the federal government seized the aircraft as part of a criminal investigation of Avenatti. Plaintiffs submitted a sworn proof of loss to Starr Indemnity, but Starr Indemnity refused to acknowledge coverage.

On February 2, 2024, Starr Indemnity answered the complaint responding to its allegations and asserting nineteen affirmative defenses.

The matter proceeded to a thirteen day jury trial which commenced on April 24, 2024. (See Apr. 24, 2024, Minute Order.) On May 16, 2024, the jury returned a verdict in favor of Passport. On May 17, 2024, the jury awarded punitive damages in favor of Passport in the amount of $15 million. (See May 16 & 17, 2024, Minute Orders; May 17, 2024, Verdict Form [Punitive Damages].)

On June 6, 2024, plaintiffs filed a request for the dismissal of Avenatti and Avenatti Associates from the action, without prejudice.

On June 18, 2024, the Court entered a Judgment After Trial By Jury (the judgment). On June 20, 2024, in response to Starr Indemnity’s request, the Court issued a statement of decision with respect to Starr Indemnity’s defense of recission.

On July 31, 2024, Passport filed three motions: (1) for an order awarding attorney’s fees and costs (the fee motion) made pursuant to Brandt v. Superior Court (1985) 37 Cal.3d 813; (2) for an order awarding prejudgment interest on the policy amount and on any award of attorney’s fees and costs (the prejudgment interest motion); and (3) for an order to file under seal exhibits M and N to the declaration of Lawrence J. Conlan (Conlan) submitted in support of the fee motion (the motion to seal). The fee motion and prejudgment interest motion are each opposed by Starr Indemnity.

On September 30, 2024, the Court denied the motion to seal of Passport, and ordered Passport to, on or before October 10, 2024, file in the public record the unredacted declaration of Conlan submitted in support of Passport’s fee motion. (Sept. 30, 2024, Minute Order.) The Court also continued the hearing on the fee motion and the prejudgment interest motion. (Ibid.)

On September 30, 2024, Passport filed a supplemental declaration of Lawrence J. Conlan (the supplemental Conlan declaration) in support of the fee motion, which includes redactions to exhibit L of that declaration.

On October 7, 2024, Passport filed a notice of errata with respect to exhibit L of the supplemental Conlan declaration, asserting that a redacted version of exhibit L was incorrectly included with that declaration. Attached to the notice of errata is an  unredacted version of exhibit L to the declaration of Conlan, which consists of a retainer agreement between Parrish, Passport, Spring Creek, and the law firm of Cappello & Noel LLP (Cappello & Noel), executed by Parrish on September 1, 2022.

Analysis:

Subject to exception with respect to matters relating to the motion to seal, the supplemental Conlan declaration is in all respects substantively in the same form as the redacted and lodged Conlan declaration submitted with the motion to seal and the fee motion. In addition, though the version of the supplemental Conlan declaration filed on September 30, 2024, included redactions to exhibit L, Passport corrected this error by the deadline stated in the September 30, 2024, Minute Order. Therefore, the Court finds that Passport has complied with the Court’s order by timely submitting the supplemental Conlan declaration without redactions.

(1) The Fee Motion

In the fee motion, Passport seeks to recover as damages the attorney’s fees and costs it incurred in this litigation to pursue and obtain benefits under the policy which were withheld by Starr Indemnity. The parties here do not, and cannot reasonably, dispute that Passport has alleged and proven that Passport suffered a loss covered under the policy, that Starr Indemnity failed to pay policy benefits for the covered loss, and that Starr Indemnity violated the covenant of good faith and fair dealing. (May 16, 2024, Special Verdict Form; June 18, 2024, Judgment After Trial By Jury.)

“California adheres to the American rule, ‘which provides that each party to a lawsuit must ordinarily pay his own attorney fees.’ [Citation.] The rule has been codified in Code of Civil Procedure section 1021: ‘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....’ [Citations.]” (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 806 (Cassim).)

“There is a difference, however, between attorney fees sought qua damages and attorney fees sought qua costs of suit.” (Copenbarger v. Morris Cerullo World Evangelism, Inc. (2018) 29 Cal.App.5th 1, 9.) In Brandt v. Superior Court (1985) 37 Cal.3d 813, 817-819 (Brandt), “the California Supreme Court created an exception to the general rule that each party must ordinarily bear its own attorney fees.” [Citation.] Under Brandt, an insurer is liable for attorney fees when the insurer’s tortious conduct in refusing to pay insurance benefits requires the insured to retain an attorney to obtain the benefits of the policy. ‘The attorney’s fees are an economic loss—damages—proximately caused by the tort,’ similar to recovery of medical fees as damages in a personal injury action. [Citation.]” (Byers v. Superior Court (2024) 101 Cal.App.5th 1003, 1009.) 

As a threshold matter, in its opposition to the fee motion, Starr Indemnity contends that the determination of attorney’s fees that Passport may recover as damages under Brandt is a factual matter that the jury was required to decide. Starr Indemnity further contends that it never agreed to submit the issue of attorney’s fees as damages to the Court. Because Passport did not submit its claim for attorney’s fees and costs as damages to the jury or obtain a stipulation to submit the issue to the Court, Starr Indemnity argues, the fee motion must be denied.

Where a party seeks to recover as damages attorney’s fees that party incurred to obtain insurance benefits under a policy of insurance, “the determination of the recoverable fees must be made by the trier of fact unless the parties stipulate otherwise. [Citation.] A stipulation for a postjudgment allocation and award by the trial court would normally be preferable since the determination then would be made after completion of the legal services [citation], and proof that otherwise would have been presented to the jury could be simplified because of the court’s expertise in evaluating legal services.” (Brandt, supra, 37 Cal.3d at pp. 819-820.)

To support its contention that Passport was required to present its claim for attorney’s fee and costs to the jury, Starr Indemnity submits the declaration of its counsel, Carl Basile (Basile), to which are attached various trial and deposition transcripts, jury instructions, exhibit and witness lists. Though the document attached as exhibit 4 to the Basile declaration does not include proposed jury instructions setting forth as a specific item of damages attorney’s fees Passport incurred to recover benefits under the policy, the Court’s records reflect that the proposed jury instructions filed by plaintiffs on April 10, 2024, include attorney’s fees Passport incurred to recover policy benefits as an item of damages for bad faith. (Pl. Apr. 10, 2024, Prop. Jury Instr. at PDF pp. 64 [CACI 2350], 65 [CACI 3935] & 66 [CACI 3934].) Additional evidence and information offered by Starr Indemnity also shows that, at the pretrial conference, Passport stated its intent to submit its claim for attorney’s fees to the jury. (Basile Decl., Exh. 1 at p. 103, l. 20-p. 104, l. 9 [stating that “attorney’s fees paid are an economic loss”]; see also Exh. 6 at p. 49, l. 25-p. 50, l. 1 [opening statement of Passport].)

Available evidence and information further reflects that, during the trial of this action, Starr Indemnity objected to the introduction of testimony by Parrish offered by Passport to establish the amount of attorney’s fees it incurred as a result of the denial of coverage under the policy by Starr Indemnity. As grounds for its objection, Starr Indemnity argued that the question of whether the attorney’s fees claimed by Passport were reasonable or necessary required the presentation of expert testimony. (Basile Decl., Exh. 2 at p. 25, l. 11-p. 26, l. 21.) To resolve this objection, the Court noted that Passport’s claim for attorney’s fees as damages “can be brought as a post-trial issue” which would be “helpful because then parties can submit declarations and other information that demonstrates reasonableness or lack thereof.” (Id. at Exh. 3, p. 92, ll. 3-7.)

The evidence and information further described above shows that, to resolve the objection of Starr Indemnity to the presentation of evidence at trial establishing the attorney’s fees incurred by Passport, the Court announced its intent to address this issue posttrial by way of a postjudgment motion which, as further discussed above, is an authorized and preferred method to determine an appropriate award of attorney’s fees and costs under Brandt. (See also Cassim, supra, 33 Cal.4th at p. 807 [“the calculation of fees [is] best done by the trial court sitting as trier of fact, after the jury had reached its verdict”].) It was the Court’s understanding that, absent any objection by Starr Indemnity to the resolution of this issue posttrial in light of Starr Indemnity’s evidentiary objection, the procedure announced by the Court was agreed to and would be followed by the parties including with respect to Starr Indemnity’s objection raised at the time Passport sought to present evidence to support its damage claim. In ostensible reliance on this understanding, Passport has filed the fee motion. Under the totality of the circumstances present here, the Court will consider and determine the fee motion.

To recover attorney’s fees and costs under Brandt, “the insured is required to plead and prove (1) the amount to which the insured was entitled to recover under the policy, (2) that the insurer withheld payment unreasonably or without proper cause; (3) the amount that the insured paid or incurred in legal fees and expenses in establishing the insured’s right to contract benefits and (4) the reasonableness of the fees and expenses so incurred.” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1079 (Jordan).) Though attorney’s fees and costs may be recovered notwithstanding that the “policy action” and the “tort action” are concurrently tried, the fees may not exceed “the amount attributable to the attorney’s efforts to obtain the rejected payment due on the insurance contract ….” (Brandt, supra, 37 Cal.3d at pp. 818, 819; see also Track Mortg. Group, Inc. v. Crusader Ins. Co. (2002) 98 Cal.App.4th 857, 867 (Track) [fees expended to prove bad faith are not recoverable].) To the extent there exists some overlap in attorney’s fees for work attributable to both contract and tort causes of action, “the trial court should exercise its discretion to apportion the fees.” (Cassim, supra, 33 Cal.4th at p. 811.)

The parties here do not and cannot reasonably dispute that Passport has proven the amount it was entitled to recover under the policy and that Starr Indemnity unreasonably and without cause withheld payment of this amount.

In the Conlan and supplemental Conlan declarations submitted in support of the fee motion, which the Court will refer to collectively, Conlan declares that he is a partner at Cappello & Noel, which was retained by Passport concerning its claim for insurance coverage following the seizure of the aircraft and Starr Indemnity’s refusal to provide insurance coverage under the policy. (Conlan Decl., ¶¶ 1-2.) In addition, Conlan was the lead trial attorney responsible for supervising work on this case. (Id. at ¶ 3.) Conlan declares that he has reviewed and analyzed the attorney’s fees and costs that Passport incurred in connection with services performed by Conlan and other members of Cappello & Noel, and attorney’s fees and costs incurred by Passport in connection with legal services furnished by Blank Rome LLP (Blank Rome), which is the law firm that co-represented Passport in this action. (Ibid.)

Conlan states that Cappello & Noel began representing Parrish in mid-2018 in connection with Parrish’s prior legal representation by Eagan Avenatti LLP, and Avenatti, as well as Parrish’s ownership in Passport. (Conlan Decl., ¶ 15.) Cappello & Noel began its representation of Passport, Spring Creek, and Parrish in the present action in April 2019, and billed its fees pursuant to an existing retainer agreement. (Id. at ¶ 16.) Cappello & Noel, Parrish, Passport, and Spring Creek entered into an updated retainer agreement for the present litigation in September 2022. (Ibid. & Exh. L.)

Conlan submits with his declaration copies of invoices from Cappello & Noel to Parrish which describe legal services rendered by Conlan and other attorneys at Cappello & Noel as well as the fees billed to Parrish for those services, and invoices from Blank Rome to Parrish reflecting services rendered by the attorneys at Blank Rome as well as the fees billed to Parrish for those services. (Conlan Decl., ¶ 16-17 & Exhs. M & N.) The invoices from Blank Rome appear in exhibit A to the declaration of Anna Milunas (Milunas), who is an attorney at Blank Rome with ostensible personal knowledge of the work performed by that firm on behalf of Passport. (Id. at Exh. N [Milunas Decl.], ¶¶ 1 & 3.)

Conlan provides a summary reflecting the number of hours recorded by timekeepers at Cappello & Noel who worked on this matter from the time Passport began pursuing insurance coverage from Starr Indemnity for the aircraft seizure, and a summary reflecting the number of hours recorded by timekeepers at Blank Rome who worked on this matter during Blank Rome’s representation of Passport. (Conlan Decl., ¶ 18.) The summary includes the title, the number of hours worked, and the hourly rate for each timekeeper who furnished legal services to Passport, which Conlon states were periodically updated and paid by Parrish. (Ibid.)

Conlan and his staff analyzed the entries of time billed by timekeepers at Cappello & Noel and Blank Rome for this case, which were electronically recorded in the regular course of business in one-tenth hourly increments. (Conlan Decl., ¶ 17.) To separate, and arrive at an apportionment of, attorney’s fees and costs incurred to obtain coverage under the policy and to prove bad faith, Conlan categorized the legal work and costs into distinct phases which Conlan contends align with the timeline of the litigation and the nature of the legal challenges that were presented in the action. (Id. at ¶ 20.)

The categories set forth in the Conlan declaration are described as: (1) a lawsuit filed by Starr Indemnity in federal court which was remanded to this Court; (2) case analysis and strategic litigation regarding the seizure of the aircraft and Passport’s claim for insurance coverage; (3) written discovery and discovery-related motion practice; (4) the motions of Starr Indemnity for summary judgment and adjudication and a related writ of mandate; (5) motions to bifurcate the contract and tort claims at trial; (6) witness depositions; and (7) trial, which includes legal services rendered in connection with the request of Starr Indemnity for a written statement of decision. (Conlan Decl., ¶ 20 & 24-46.) For each of these categories, Conlan determined what Conlan contends is an appropriate apportionment of fees incurred to litigate the contract claim, fees incurred to litigate the bad faith claim, and fees for which there exists overlap that can be apportioned based on Conlan’s understanding of the work done on the case and the defense that Starr Indemnity presented during the litigation and through trial. (Id. at ¶ 20.)

Conlan also provides a description of efforts undertaken by Passport’s counsel with respect to each category described above. (See Conlan Decl., ¶¶ 24-46.) For example, with respect to the category relating to the federal court litigation initiated by Starr Indemnity and arising from the seizure of the aircraft, Conlan provides a description of Passport’s involvement in that litigation. (Id. at ¶¶ 24-25.) Based on Conlan’s review and analysis of the fee invoices described above, Conlan asserts that all of the attorney’s fees and costs incurred in this category are attributable to the contract claim of Passport and to proving insurance coverage, and do not require apportionment. (Id. at ¶ 26.) Accordingly, Passport requests $273,450 in attorney’s fees as damages incurred in connection with the federal litigation initiated by Starr Indemnity and arising from the seizure of the aircraft. (Ibid.)

By way of further example, with respect to legal services relating to case analysis and strategy, Conlan states that for services furnished from April 2019 until March 2023, Passport incurred $122,483.25 in litigation fees. (Conlan Decl., ¶ 29.) Based on Conlan’s analysis of these legal services, Conlan asserts that 95 percent of fees incurred during this time frame relate to coverage issues, for a total of $116,359 in attorney’s fees and $5,496.18 in costs. (Ibid.) Conlan further states that from March 2023 through trial, Passport incurred another $31,365 in fees for services performed in this category, and that 80 percent of these fees relate to coverage issues for a total of $25,092 in additional attorney fees. Accordingly, Passport requests as damages the amount of $146,947.18 in attorney’s fees incurred for case analysis and strategic litigation. (Ibid.)

Conlan provides a similar analysis regarding the nature of the legal services furnished, attorney’s fees incurred, and an apportionment of the fees incurred with respect to each of the remaining categories further described above. (Conlan Decl., ¶¶ 30-46.) Conlan also includes as exhibit O to his declaration a table reflecting the hours spent by Cappello & Noel and Blank Rome for each category identified above, the total of these hours, the percentage of the total hours spent by counsel on each category, the total amount of attorney’s fees incurred in each category, and the attorney’s fees and costs apportioned to or claimed in connection with Passport’s contract claim.

The Court has reviewed the information and evidence set forth in the Conlan declaration and the fee invoices attached to that declaration. The total amount of attorney’s fees incurred by Passport through the end of June 2024 is $1,709,774.80, and the total costs incurred by Passport is $125,971.01. (Conlan Decl., ¶ 47 & Exh. O.) Pursuant to Conlan’s analysis of an appropriate apportionment of fees and costs, the attorney’s fees incurred by Passport to establish its right to benefits under the policy total $1,417,068.27 and costs total $125,971.01. (Ibid.)

Passport also submits the declaration of Grant Stiefel (Stiefel) in support of the fee motion. Stiefel is the principal and founder of Litigation Limited, a legal fee auditing and consulting firm retained by Cappello & Noel to provide testimony in this action. (Stiefel Decl., ¶ 1.) Stiefel states that he is a consultant and testifying expert in the field of attorneys’ fees and a member of the California State Bar, and has reviewed over $1 billion in law firm billings and testified as a qualified attorney fee expert in California state and federal courts, in attorney-client fee arbitrations before the California and Nevada State Bars, and before the Court of Appeals for the Ninth Circuit. (Id. at ¶ 2.) Stiefel provides a detailed narrative of his relevant expertise and qualifications and a copy of his curriculum vitae. (Id. at ¶¶ 5-27 & Exh. A.)

Stiefel communicated with Conlan and Richard Lloyd from Cappello & Noel regarding this matter, and reviewed the California State Bar member database for each attorney who billed time to this matter, billing records generated by Cappello & Noel and Blank Rome, and various materials and pleadings relating to this litigation. (Stiefel Decl., ¶ 28.) Stiefel states that the invoices of Cappello & Noel and Blank Rome are presented in a customary and appropriate manner, that the  time expended is accurately and contemporaneously recorded, and that there are no charges for overhead or administration included in the fee invoices. (Id. at ¶¶ 33-48.) Stiefel further contends that the hourly rates reflected in the invoices attached to the Conlan declaration are below market and reasonable, and that the apportionment of fees and costs incurred to establish a breach of contract and to establish bad faith offered by Conlan is reasonable. (Id. at ¶¶ 54, 73 & 83.)

Parrish also submits a declaration which repeats the information included in the Conlan declaration regarding the retention of Capello & Noel and Blank Rome. Parrish further states that he ensured all monthly invoices of Cappello & Noel and Blank Rome were paid in full by Passport, also considering that Cappello & Noel offered a 10 percent discount for prompt payment. (Parrish Decl., ¶¶ 6-7.)

In its opposition to the fee motion, Starr Indemnity offers no reasoned argument sufficient to show that the total amount of attorney’s fees or costs incurred by Passport in this action is in any respects unreasonable. Starr Indemnity also does not offer reasoned argument to show that the hourly rates charged by counsel for Passport are not reasonable. Instead, Starr Indemnity largely directs its opposition to whether or not the apportionment of fees set forth in the Conlan declaration is appropriate.

The Court has reviewed the opposing arguments offered by Starr Indemnity with respect to whether or not the apportionment of fees and costs offered by Passport for each category further discussed above is reasonable. The Court notes that, with respect to the government seizure of the aircraft, Passport has highlighted entries appearing in the fee invoices that reflect its counsel’s communications with government entities and for which Passport does not seek recovery. (See, e.g., Conlan Decl., Exh. M at PDF p. 179; see also Track, supra, 98 Cal.App.4th at p. 867 [noting that insured had highlighted entries not incurred to obtain policy benefits].)

Additional evidence and information suggests that the filing of the federal action by Starr Indemnity directly implicated the question of whether or not the government seizure of the aircraft constituted a covered loss under the policy, or precluded coverage under the policy, as well as the question of who was entitled to payment of policy proceeds or returned premiums. Starr Indemnity submits with the Basile declaration trial exhibit 111, which is the complaint filed by Starr Indemnity in the United States District Court for the Central District of California (the federal action) seeking declaratory relief and recission with respect to the policy at issue in this litigation. (Basile Decl., Exh. 111 at ¶¶ 1 & 10 [identifying the policy at issue].) Based on the allegations made by Starr Indemnity, the issues presented in the federal action included, among other things, the submission of a claim under the policy by Parrish, endorsements appearing in the policy which Starr Indemnity alleged preclude coverage for the seizure of the aircraft, and recission of the policy. (Id. at ¶¶ 42-48, 51-57 & 59-64.)

In the complaint filed in the federal action, Starr Indemnity alleged that the policy should be rescinded because the aircraft was purportedly purchased with embezzled funds or funds acquired through a bankruptcy fraud. (Basile Decl., Exh. 111 at ¶ 2.) Starr Indemnity further alleged that one or more exclusions in the policies applied to the claim of Passport, and that to the extent coverage existed, Starr Indemnity required the assistance of the court to determine who should receive payments under the policy or a return of the premiums. (Id. at ¶ 3.)

Based on the allegations asserted and the nature of the relief sought by Starr Indemnity in the federal action, it appears to the Court that attorney’s fees and costs incurred by Passport in connection with the federal action relate directly to Passport’s efforts to obtain payment it alleged was due under the policy. Moreover, based on the issues presented in the federal action with respect to various forfeiture matters, it appears that Passport’s involvement in those proceedings, notwithstanding whether they were initiated by the federal government, was necessitated as a direct result of Starr Indemnity’s denial of policy benefits. Starr Indemnity fails to sufficiently explain why these matters do not directly implicate or relate to Passports efforts to obtain coverage under the policy, why any forfeiture proceedings relate solely to the bad faith claim alleged in this action.

With respect to fees incurred by Passport in connection with discovery matters, Starr Indemnity contends that the subject matter of written discovery and depositions conducted by the parties in this action relates to Passport’s bad faith claim. While it may be true that the subject matter of discovery in this action relates to some extent to the bad faith cause of action, available evidence and information also shows that discovery related to the contract claims asserted by Passport, including Starr Indemnity’s defense with respect to whether coverage under the policy was precluded.

For example, the deposition testimony of Frederic Marziano addresses whether or not the use of illegal funds to purchase the aircraft affected the insured risk under the policy. (Basile Decl., Exh. 8 at pp. 24, l. 18-25, l. 24.) The subject matter of the deposition of David A. Gauntlett also included whether or not testimony provided in the federal action other proceedings was relevant to an analysis of potential insurance coverage in this action or could be used to make a coverage evaluation, and the basis for the denial of coverage by Starr Indemnity. (Id. at Exh. 9, p. 39, ll. 3-20 & pp. 46, l. 8-49, l. 13.) These examples, which are intended to be illustrative but not exhaustive, show that discovery in this action did not relate solely to the bad faith claim of Passport as Starr Indemnity contends.

Furthermore, because the contract and bad faith claims of Passport were litigated together in this action, some “unavoidable intertwining or overlap” with respect to the subject matter of the discovery conducted by the parties will be inevitable. (Jordan, supra, 148 Cal.App.4th at pp. 1079-1080, fn. omitted.) Timekeeper entries appearing in the fee invoices attached to the Conlan declaration also suggest that it would be nearly impossible to segregate the invoices on an item-by-item or hourly basis, including with respect to the depositions cited by Starr Indemnity. (See Track, supra, 98 Cal.App.4th at p. 867.) In light of these factors, the complexity of the issues addressed during discovery, and the results obtained by Passport in this action, Starr Indemnity has failed to sufficiently explain why the apportionment set forth in the Conlan declaration is not fair or equitable. (Ibid.) The same reasoning and analysis applies to the attorney’s fees and costs claimed by Passport in connection with the trial of this action.

Starr Indemnity also relies on the decision in Cassim to argue that the fee motion should be denied. The court in Cassim addressed an award of attorney’s fees under a contingency fee agreement pursuant to which plaintiffs in that case had agreed to pay to their attorney 40 percent of all sums recovered without differentiating between recovery on the contract claim and recovery on the bad faith claim. (Cassim, supra, 33 Cal.4th at pp. 807-808.) The Court in that case also noted that plaintiffs’ counsel had made no attempt to apportion the fees notwithstanding the terms of the contingency fee agreement. (Ibid.)

The retainer agreement at issue here does not disclose a contingent fee arrangement, nor does Passport seek recovery of fees based on a percentage of its recovery. Instead, Passport has submitted itemized invoices to show the attorney’s fees and costs it incurred in this matter together with an apportionment of those fees which were expended to compel payment of policy benefits. The evidence and information presented in the Conlan, Parrish, and Stiefel declarations are sufficient for this purpose. (Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020, 1045, abrogated on other grounds as stated in Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1182.)

The remaining arguments offered by Starr Indemnity in opposition to the fee motion are overly general, speculative, conclusory, and themselves insufficient to show why the apportionment of fees set forth in the Conlan declaration is not fair or equitable given the nature of the claims presented in this litigation and the manner in which they were litigated, or to justify a wholesale denial of the fee motion. In addition, Starr Indemnity offers no reasoned argument showing what, if any, alternative apportionment of fees and costs apart from that offered in the Conlan declaration would be appropriate or reasonable, and why.

The Court has reviewed the information presented in the Conlan declaration and the exhibits thereto, including the fee invoices of Capello & Noel and Blank Rome which were purportedly paid in full by Parrish. Starr Indemnity has not shown why the hourly rates charged by counsel for Passport are unreasonable. (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 1009.) There is also nothing in the records submitted by the parties to suggest that the time spent by counsel for Passport in this action was inflated or excessive. Passport has also segregated specified items from the invoices for which Passport does not seek recovery, and has apportioned the remaining attorney’s fees and costs which are related to obtaining benefits under the policy. Considering the contract and tort claims proceeded through trial concurrently, and given the complexity of issues presented in this action and the results obtained by Passport, the apportionment appears fair and equitable under the totality of the circumstances present here including the Court’s own knowledge and familiarity with the applicable legal market. For these reasons, the Court finds that Passport has met its burden to show the amount of attorney’s fees and expenses it paid or incurred to establish its right to policy benefits, and the reasonableness of these attorney’s fees and expenses. Therefore, the Court will grant the fee motion.

The Court has also reviewed the proposed order submitted by Passport with the fee motion and intends to sign it.

Starr Indemnity’s Evidentiary Objections:

For reasons more fully discussed above, the Court has addressed the objection of Starr Indemnity to the presentation of Passport’s claim for attorney’s fees and costs posttrial.

Starr Indemnity also submits objections to the declarations of Parrish, Stiefel, Conlan, and Milunas submitted in support of the fee motion and further described above, and the exhibits to these declarations. The Court has considered only that evidence which is admissible and relevant to the issues presented in the fee motion. (See, e.g., Evid. Code, § 1271; Jazayeri v. Mao (2009) 174 Cal.App.4th 301, 320-321 [general discussion of authentication of writings]; Menifee v. Superior Court of Santa Clara County (2020) 57 Cal.App.5th 343, 360 [noting trial court’s “broad discretion in deciding whether to admit or exclude expert testimony”]; In re Marriage of Slivka (1986) 183 Cal.App.3d 159, 163 [testimony of a party may be sufficient to support judgment].)

(2) Motion For Prejudgment Interest

Relevant under the undisputed circumstances present here, Civil Code section 3287, subdivision (a), provides that “[a] person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state.” (Civ. Code, § 3287, subd. (a).)

“The test for recovery of prejudgment interest under section 3287, subdivision (a) is whether ‘defendant actually know[s] the amount owed or from reasonably available information could the defendant have computed that amount.’ [Citation.]” (Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1789, original italics.) “Thus, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate.” (Children’s Hosp. and Medical Center v. Bonta (2002) 97 Cal.App.4th 740, 774.)

In the Conlan declaration submitted in support of the prejudgment interest motion, Conlan states that on May 3, 2019, after the aircraft was seized by the federal government, Passport submitted a Sworn Statement In Proof Of Loss (the claim) to Starr Indemnity. (Conlan Decl., ¶ 4 & Exh. A.) The claim sought payment in the amount of $4 million, or the insured value of the aircraft, minus a deductible in the amount of $10,000, for a total amount of $3,990,000 claimed by Passport under the policy. (Ibid.)

The parties here do not dispute that the amount that Passport sought to recover under the policy was known to Starr Indemnity or capable of being made certain by calculation. Under the circumstances present here, the Court finds that Passport has established its entitlement to recover damages in the amount of $3,900,000 representing the amount payable under the policy. (See also Oil Base, Inc. v. Transport Indem. Co. (1957) 148 Cal.App.2d 490, 492 [existence of a coverage dispute does not affect the certainty of damages].)

Conlan further states that Starr Indemnity refused to pay policy benefits in the amount of $3,900,000, pursuant to a “reservation of rights” letter (the reservation of rights) dated June 26, 2019, which forced Passport to file its complaint in this matter on July 11, 2019. (Conlan Decl., ¶ 5.) For these reasons, Passport argues, prejudgment interest with respect to amounts due under the policy should commence from June 26, 2019, and in any event no later than July 11, 2019. (Ibid.) In its opposition to the prejudgment interest motion, Starr Indemnity contends that prejudgment interest should not commence until November 2, 2021, the date it denied coverage for the claim. (Basile Decl., Exh. 524.)

Prejudgment interest vests “from the first day there exists both a breach and a liquidated claim.” (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 828.) Under circumstances such as those present here, where there is no dispute as to the amount of the covered claim as of the date of loss, “it is well established that the insured is entitled to interest at the legal rate to be calculated from the date on which the insurer denied liability ….” (Executive Aviation, Inc. v. National Ins. Underwriters (1971) 16 Cal.App.3d 799, 808

Though Passport does not include with its moving papers a copy of the reservation of rights referenced in the supporting Conlan declaration, Starr Indemnity includes the reservation of rights as exhibit 523 to the Basile declaration. The reservation of rights is signed by Roger W. Clark (Clark), who is identified as coverage counsel for Starr Indemnity. (Basile Decl., Exh. 523 at PDF p. 140.) In the reservation of rights, Clark states that his office is “investigating whether coverage might be in order” for the claim, and that “no determination has been made” as to whether coverage exists. (Id. at 141.)

The November 2, 2021, letter relied on by Starr Indemnity (the denial letter) to establish the date on which Passport’s right to prejudgment vested is attached to the Basile declaration as exhibit 524. In the denial letter, Starr Indemnity asserts that the claim of Passport has “remained under investigation” since its submission, that the investigation was delayed due to Covid 19 shutdowns and the criminal prosecution of Avenatti, and that in the reservation of rights, Starr Indemnity made it clear that it was not denying the claim but only reserving the right to do so if the allegations of embezzlement by Avenatti were substantiated. (Basile Decl., Exh. 524 at PDF pp. 149 & 151.) In the denial letter, Starr Indemnity expressly denied coverage under the exclusions, conditions, and terms of the policy, and offered to rescind, and return the premiums paid for, the policy. (Id. at PDF pp. 155-158.)

The evidence and information detailed above shows that Passport’s entitlement to prejudgment interest with respect to benefits under the policy vested on November 2, 2021, the date on which Starr Indemnity unequivocally denied Passport’s claim for benefits under the policy. Though Passport contends that Starr Indemnity could and should have paid policy benefits at the time its claim was submitted, wholly absent from the prejudgment interest motion is any reasoned argument showing that any provision of the policy provided for payment of the loss on an earlier date. Therefore, with respect to the amount of $3,990,000 in policy benefits recovered in this action by Passport, Passport is entitled to an award of prejudgment interest at the legal rate of 10 percent per annum under Civil Code section 3289, subdivision (b), which applies in the absence of a contractual provision stipulating a legal rate of interest, from November 2, 2021, through June 18, 2024, the date of entry of the judgment. (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 532-533.)

Passport further contends that the interest owed on the policy benefits should be compounded based on the jury’s finding of bad faith on the part of Starr Indemnity in denying coverage under the policy. Passport offers no reasoned argument to show that compound interest under the circumstances present here is specifically authorized by statute. (Salton Bay Marina, Inc. v. Imperial Irrigation Dist. (1985) 172 Cal.App.3d 914, 961 (Salton Bay).) Furthermore, Passport offers no reasoned argument to show that there existed a fiduciary relationship between it and Starr Indemnity, that Starr Indemnity breached any fiduciary duties owed to Passport, or that there exists other circumstances under which compounding of interest would be appropriate in this case. (See, e.g., Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1586 [general discussion of circumstances under which an award of compound interest is appropriate]; Salton Bay, supra, 172 Cal.App.3d at pp. 961-962 [same].) For these reasons, Passport has failed to establish an entitlement to compound interest under the circumstances present here.

Passport also requests an award of prejudgment interest with respect to attorney’s fees and costs that may be awarded by the Court under Brandt as further discussed above. The Court has already addressed Starr Indemnity’s contention that this issue was also required to be determined during the trial of this action. Whether the claim of Passport for prejudgment interest with respect to unliquidated attorney’s fees and costs awarded under Brandt is made under Civil Code section 3287, subdivision (b), based on a breach of policy obligations, or under Civil Code section 3288 (see, e.g., Levy-Zentner Co. v. Southern Pac. Transportation Co. (1977) 74 Cal.App.3d 762, 796-797), it is within the discretion of the Court to make such an award. (Greater Westchester Homeowners Assn. v. City of Los Angeles (1979) 26 Cal.3d 86, 102 (Greater Westchester); Glassman v. Safeco Ins. Co. of America (2023) 90 Cal.App.5th 1281, 1317.)

Generally, the purpose of an award of prejudgment interest “is to provide just compensation to the injured party for loss of use of the award during the prejudgment period—in other words, to make the plaintiff whole as of the date of the injury.” (Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 663.) Here, to the extent Passport was entitled to representation in this action by counsel of its choosing, or to negotiate a reasonable attorney’s fee with its chosen counsel of record, Passport exercised some degree of dominion and control over money spent on attorney’s fees and costs including with respect to the conduct of the litigation. (See, e.g., Greg Opinski Construction, Inc. v. City of Oakdale (2011) 199 Cal.App.4th 1107, 1119-1120 [general discussion].) Moreover, though attorney’s fees and costs incurred by Passport in connection with its breach of contract claim constitute economic loss, the amount of such fees and costs remained continuing and unliquidated, and could not, without speculation, be readily ascertained by Starr Indemnity until the Court’s determination of the fee motion. (Greater Westchester, supra, 26 Cal.3d at p 103 [general discussion in context of noneconomic or intangible damages].)

For all reasons discussed above, under the totality of the circumstances present here including the unliquidated, speculative, and uncertain nature of attorney’s fees and costs recoverable by Passport as damages in this action, and considering that Passport will not be deprived of compensation for an element of its damages, the Court will exercise its discretion to deny the request of Passport for an award of prejudgment interest with respect to attorney’s fees and costs awarded in connection with the fee motion.

 

The proposed order submitted by Passport with the prejudgment interest motion does not conform to the Court’s ruling herein. Therefore, the Court does not intend to sign the proposed order. Furthermore, the calculations offered by Passport and Starr Indemnity with respect to prejudgment interest do not conform to the Court’s ruling.

Having made the rulings above with respect to prejudgment interest requested by Passport, and to avoid potential disagreement between the parties as to the proper calculation of prejudgment interest awarded by the Court, the Court will require a joint stipulation by the parties setting forth the proper computation of prejudgment interest in accordance with the Court’s ruling herein. The filing of a joint stipulation by the parties showing the proper calculation of prejudgment interest in accordance with the Court’s ruling shall be without prejudice to the respective positions of the parties regarding the underlying claim of Passport.

Unless the parties file the joint stipulation described herein setting forth a computation of interest that conforms to the Court’s ruling, the Court will require the parties to separately file and serve supplemental briefs setting forth what each party contends constitutes an accurate prejudgment interest calculation in accordance with the Court’s ruling, notwithstanding that party’s respective position on the underlying claim.

To permit the parties sufficient time to prepare and submit either a joint stipulation or separate supplemental briefs as further discussed above, the Court will briefly continue the hearing on the prejudgment interest motion.