2. No. B243062
COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT, DIVISION EIGHT
STEPHEN M. GAGGERO, Plaintiff and Appellant,
V.
KNAPP, PETERSEN & CLARK, STEVEN RAY GARCIA; STEPHEN
M. HARRIS; ANDRE JARDINI, Defendants and Respondents.
Appeal from the Superior Court of California, County of Los Angeles
Los Angeles Superior Court Case No. BC286925
Honorable Robert L. Hess, Dept. 24
APPELLANT'S OPENING BRIEF
David Blake Chatfield, State Bar No. 88991
WESTLAKE LAW GROUP
2625 Townsgate Road, Suite 330
Westlake Village, California 91361
Telephone: 805-267-1220
Facsimile: 805-267-1211
Attorneys for Appellant
STEPHEN M. GAGGERO
3. TO BE FILED IN THE COURT OF APPEAL APP-008
COURT OF APPEAL, Secolld APPELLATE DISTRICT, DIVISION Eight co_._a C=,°N_
B243062
_OP_N Ey _ PA, R'W V_l r ROUT_. A TTOR N Ey_(_a m_ SJa_ar number, and a_[e=):
DavtdBlake Chattteld (uar #88991)
-- Westlake Law Group
2625 Townsgate Rd., Suite 330
Westlake Village, CA 91361
TELEPHONENOs (805) 267-1220 FAXNO,(O_.._: (805) 267-121 t
E._WL_D_S_(O_,,O: davidblakec@yahoo.com
ArroRn=.YveatNarael:Appellant Stephen M. Gaggero
, ,, , ,,,
APPELLANT/PETITIONER:Stephen M. Gaggero, et al.
RESPONDENT/REALPARTYIN INTEREST: Knapp, Petersen & Clarke, et al.
CERTIFICATE OF INTERESTED ENTITLES OR PERSONS
(Check one), F'_ INITIAL CERTIFICATE _ SUPPLEMENTAL CERTIFICATE
Superior Court Ca= Num_e_
BC286925
FOR COURT USE ONLY
Notice: Please read rules 8.208 and 8,488 before completing this form. You may use this form for the initial
certificate in an appeal when you file your brief or a prebriefing motion, application or opposition to such a
motion or application in the Court of Appeal, and when you file a petition for an extraordinary writ. You may
also use this form as a supplemental certificate when you learn of changed or additional information that must
be disclosed.
1. This form is being submittedon beha f of the fo owing party (name) Appellant Stephen M. Gaggero
2. a, I-'7 There are no interested entities or persons that must be listed in this certificate under rule 8,208,
b, l_ Interested entities or persons required to be listed under rule 8.208 are as follows:
I Full name of interestedentity or person
(1) Terra Mar "['rust
(2)
(3)
(4)
(5)
r--I Continued on attachment 2.
I Nature of Interest I(Explain):
The undersigned certifies that the above-listed persons or entities (corporations, partnerships, firms, or any other
association, but not including government entities or their agencies) have either (1) an ownership interest of 10 percent or
more in the party if it is an entity; or (2) a financial or other interest in the outcome of the proceeding that the justices
should consider in determining whether to disqualify themselves, as defined in rule 8.208(eX2).
Date: November 3, 2013
David Blake Chatfield
(TYPE OR PRINT NAME)
Page 1of 1
RPERSONS
......... vr.._'w.ooucdtlloea.gov
F_.-m Approved |or Op_C_J USe
Judicial C_l of Ca1_o_a
APP-OO8 {Re_ JanUa_ 1. 2009]
CERTIFICATE OF INTERESTED ENTITIES OR PERSONS
4. TABLE OFCONTENTS
TABLE OF CONTENTS ............................................................................... i
TABLE OF AUTHORITIES ........................................................................ iii
APPELLANT'S OPENING BRIEF .............................................................. 1
STATEMENT OF APPEALABILITY ......................................................... 1
STATEMENT OF THE CASE ..................................................................... 2
STATEMENT OF FACTS ............................................................................ 4
ARGUMENT ................................................................................................ 8
II
GAGGERO IS ENTITLED TO A REVERSAL IF
THIS COURT REVERSES THE ALTER-EGO
JUDGMENT IN APPEAL B241675 -EVEN IF ONLY
FOR THE OTHER APPELLANTS ........................................ 8
THE TRIAL COURT IMPROPERLY AWARDED
NON-RECOVERABLE FEES AND COSTS ...................... 11
A. Moving to Amend the Judgment to Add New
Debtors Was not Enforcement of the Judgment ........ 13
B. Client Communications and Routine
Administrative Tasks Are not Enforcement
Efforts ......................................................................... 14
C. Respondents May not Recover for Work their
Attorneys Performed in Other Cases ......................... 14
Respondents Were not Entitled to Recover Fees
from Gaggero's Other Appeals .................................. 15
1. The Trial Court Improperly Awarded
Respondents Fees They Incurred when
Seeking Fees for Gaggero's Original
Appeal ............................................................. 15
2. The Court Had no Authority to Award
Fees Incurred in an Appeal that Was Still
Pending at the Time ........................................ 16
D,
5. E. The Court Erred by Awarding Fees Based on
Billing Entries that Had Been Heavily Redacted ....... 17
F. The Trial Court Improperly Awarded Several
Non-Recoverable Costs .............................................. 18
CONCLUSION ........................................................................................... 19
WORD COUNT CERTIFICATION ........................................................... 20
WORD COUNT CERTIFICATION ........................................................... 20
PROOF OF SERVICE ................................................................................ 21
6. TABLE OF AUTHORITIES
Cases
Berti v. Santa Barbara Beach Props. (2006) 145 Cal.App.4th 70 ........ 11, 12
Chinese Yellow Pages Co. v. Chinese Overseas Marketing Service
(2008) 170 Cal.App.4th 868 ...................................................................... 2
Dominguez v. Financial Indem. Co. (2010) 183 Cal.App.4th 388 ............... 2
Globalist Internet Technologies, Inc. v. Reda
(2008) 167 Cal.App.4th 1267 .................................................................. 12
Greenspan v. LADTLLC (2010) 191 Cal.App.4th 486 .......................... 9, l0
Las Palmas Assoc. v. Las Palmas Ctr. Assoc.
(1991) 235 Cal.App.3d 1220 ..................................................................... 9
Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289 ....................... 1
Misikv. D'Arco (2011) 197 Cal.App.4th 1065 ............................................. 9
Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510 .... 9
Purdy v. Johnson (1929) 100 Cal,App. 416 .................................................. 9
Ripley v. Pappadopoulos (1994)23 Cal.App.4th 1616 ............................... 18
RonaldP. Slates, APC v. Gorabi (2010) 189 Cal.App.4th 1210 .......... 12, 13
Sonora Diamond Corp. v. Sup. Ct. (2000) 83 Cal.App.4th 523 ................... 9
Statutes
California Rules of Court, rule 3.1702 ........................................................ 17
California Rules of Court, rule 8.104 ............................................................ 2
California Rules of Court, rule 8.204 .......................................................... 20
Code of Civil Procedure § 685.040 ...................................................... passim
Code of Civil Procedure § 904.1 ................................................................... 1
Evidence Code § 452 ..................................................................................... 2
Evidence Code § 453 ..................................................................................... 2
iii
7. No. B243062
COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT, DIVISION EIGHT
STEPHEN M. GAGGERO, Plaintiff and Appellant,
V.
KNAPP, PETERSEN & CLARK, STEVEN RAY GARCIA; STEPHEN
M. HARRIS; ANDRE JARDINI, Defendants and Respondents.
Appeal from the Superior Court of California, County of Los Angeles
Los Angeles Superior Court Case No. BC286925
Honorable Robert L. Hess, Dept. 24
APPELLANT'S OPENING BRIEF
STATEMENT OF APPEALABILITY
This appeal challenges an amended judgment following an order
which both denied a motion to tax post-judgment enforcement costs and
granted a motion for attorney fees. Such orders are appealable pursuant to
Code of Civil Procedure section 904.1(a)(2.) I Amended judgments are
appealable pursuant to section 904.1 (a)(1). Awards of fees and costs are also
appealable as collateral orders directing the payment of money. (Marsh v.
Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 297-298.)
Where a judgment embodies a prior order and the notice of appeal was
filed after entry of the order but before entry of the judgment, the notice of
1 All statutory citations are to the Code of Civil Procedure unless otherwise
noted.
8. appeal is construed "as being from the subsequently rendered final
judgment." (Dominguez v. Financial Indem. Co. (2010) 183 Cal.App.4th
388, 391 fn. 1.) "A notice of appeal filed after judgment is rendered but
before it is entered is valid and is treated as filed immediately after entry of
judgment." (Cal. Rules of Court, Rule 8.104(d)(1).) Further, where a notice
of appeal is filed after the court announces its intended ruling but before it
has entered judgment thereon, it may be treated as an appeal from the
subsequent judgment. (Cal. Rules of Court, Rule 8.104(d)(2).)
STATEMENT OF THE CASE
Judgment was entered in favor of respondents Knapp, Petersen &
Clarke, Stephen Ray Garcia, Stephen M. Harris, and Andre Jardini and
against appellant Stephen M. Gaggero in February 2008. (JA2 421-423.) 2
Respondents were thereafter awarded $1,327,674.40 in attorney fees and
costs from Gaggero in an amended judgment. (JA7 1884-1889.) This court
affirmed the judgment in May 2010, and respondents were thereafter
awarded $193,245.90 in appellate fees and costs plus $320,591.78 in interest
in a second amended judgment. (B241675 CT1 114-116.)
In April 2012, respondents filed a motion to further amend the
2 For the sake of consistency, Gaggero's record citations are in the
same format used by the other ten appellants in their opening briefs in related
appeals B241675 and B245114. Citations to "JA", "Trial RT" and "Opn."
refer to the joint appendix, reporter's transcript and opinion from Gaggero's
appeal of the original judgment, B207567. Citations to "CT" and "RT" refer
to the clerk's and reporter's transcripts in the present appeal. Citations to the
clerk's and reporter's transcripts from any of the other pending appeals start
with the number of that appeal (to illustrate: B241675 CT1 1-2). Gaggero
respectfully asks the court to judicially notice the briefing and records in
these related appeals per Evidence Code sections 452, subdivision (d), and
453.
9. judgment to add ten Entities3 asjudgment debtorsbasedon the ground that
they were Gaggero's alter egos and were thus the real parties in interest.
(B241675 CT1 24- B241675 CT3 376.)Gaggeroand the Entities separately
opposedthemotion. (B241675 CT3 379-396,397-422.)
On May 15, 2012, while the alter-ego motion was still pending,
respondentsfiled both a memorandumof post-judgment enforcement costs
(CT1 23-27) and a motion for attorneyfees.(CT1 28-CT2 214.)
On May 29, 2012, after oral argument, the trial court granted
respondents'motion and amendedthe judgment to add the ten Entities as
judgment debtors. (B241675 CT3 540-542.) Gaggero and the Entities
challengedthat order in appealB241675,which they filed on June 1, 2012.
(B241675 CT3 543-545.)
Gaggero filed a motion to tax the costs memorandum on May 31,
2012. (CT Supp4-92.) Both respondents'fee motion and Gaggero's motion
to tax were heard on July 13, 2012. (CT2 245.) The court granted
respondents' motion in its entirety and denied the entire motion to tax,
issuinga minute order to that effect the sameday. (CT2 245.) Gaggeroand
the Entities filed their notice of appealon August 3, 2012. (CT2 246-248.)
Three days later, the court formally entered a third amended judgment
incorporating the additional fees,costsand interest.(CT2 249-250.)
3The Entities are Pacific CoastManagement,Inc., 511 OFW L.P.,
GingerbreadCourt L.P., Malibu Broadbeach,L.P., Marina GlencoeL.P., Blu
HouseL.L.C., Boardwalk SunsetL.L.C., andJosephPraskeasTrusteeof the
the Giganin Trust ("Giganin"), the Arenzano Trust ("Arenzano") and the
AquasanteFoundation ("Aquasante"). They havealso appealedthe May 29
order and judgment. This brief shall refer to them collectively as the
"Entities".
10. STATEMENT OF FACTS
Appellant Stephen Gaggero was a successful real estate investor and
developer who owned a number of properties in the Los Angeles area by the
mid-1990s. In 1997, he transferred title to several of those properties to
various limited liability companies and limited partnerships which had been
created on the advice of his estate planning attorney, Joseph Praske, for the
benefit of his family. (Trial RT1 602-604; Trial RT5 2720; B241675 CT1
124-125; B241675 CT3 411.) Respondents estimated their value as of 1997
at $35 million to $40 million, though they did not account for mortgages or
other encumbrances. (B241675 CT1 28, 31; B241675 CT3 432.)
Respondents have conceded that Gaggero no longer owned the properties
after he transferred them to those Entities. (B241675 CT1 28:2-6, 29:21-22,
31:8-11, 31:11-12, 31:18-20, 32:4-5, 36:2-6, 40:4-6, 42:15-16; B241675
CT3 428:15-17, 430:20-21, 432:5-7, 432:9-10, 432:11-12.) Pursuant to
Praske's estate planning advice, Gaggero then transferred his ownership
interest in the Entities to trusts which Praske had also created as part of his
estate plan, including Arenzano and Aquasante. (B241675 CT2 191-193,
360- B241675 CT3 370.) Respondents have conceded both that Gaggero no
longer owned the LLC's or LP's after the transfers. (B241675 CT1 28:6-8,
29:1-4, 29:21-22, 31:12-18, 33:13-15, 36:2-6, 42:15-16; B241675 CT3
432:3-5, 432:7-9, 432:9-10, 432:11-12.) He separately transferred his
residence in Ventura to Giganin. (B241675 CT2 193-196.) Respondents have
conceded that Giganin is a Qualified Personal Residence Trust ("QPRT")
within the meaning of 26 U.S.C. § 2702, subd. (a)(3)(A). (B241675 CT1 31;
CT2 193-194.) 4
4 A QPRT is an irrevocable trust which takes ownership of the settlor's
personal residence, allowing him to live there for a fixed period of years
before title passes to the beneficiaries. (26 U.S.C. § 2702, subd. (a)(3)(A); 34
Am.Jur.2d Federal Taxation ¶ 40203; Bogert, The Law of Trusts and Trustees
11. In August 2000, Gaggero hired respondents to represent him in five
lawsuits in which he was a party. (JA2 521-534; Trial RT2 610-615.) In
January 2002, appellant substituted respondents out of his cases. (Trial RT3
908-909, 1278-1279, 1288-1289; Trial RT8 4616; Trial RT10 5750.) In
December 2002 he filed this action against them for legal malpractice and
breach of contract. (JA7 1934; B241675 CT1 19.) The case was tried in the
summer of 2007, until respondents successfully moved for entry of judgment
on September 10 of that year. (Trial RT10 5737-5738; JA1 147; JA2 366.)
The court subsequently wrote a 32-page statement of decision,
disparaging Gaggero's ethics and credibility at far greater length than was
necessary to justify its decision. (B241675 CT1 60-91 .) On February 5, 2008,
the court entered judgment in favor of respondents and against Gaggero.
(JA2 421-423.) In May 2008, the judgment was amended to award
respondents of $1,327,674.40 in fees and costs, based on the parties' retainer
agreement. (JA7 1884-1889.) In May 2010, this court affirmed the amended
judgment. (Opn. at 21-23.) In December 2010, the judgment was amended a
second time to award respondents a further $513,837.68 in interest and
appellate fees and costs. (B241675 CT1 114-116.)
In April 2012, respondents brought a motion to amend their February
2008 judgment a third time by adding the ten Entities as judgment debtors.
(B241675 CT1 24- B241675 CT3 376.) These Entities consist of a
management corporation of which appellant is not a shareholder, officer, or
employee; four limited partnerships in which appellant is not a general or
limited partner; two limited liability companies in which appellant is not a
member or manager; and three irrevocable 5 trusts of which he was the settlor
(Thomson West 2013) § 1201.)
s Respondents' own papers contained sworn testimony by Gaggero
and Praske that the trusts were all irrevocable. (B241675 CT1 31; B241675
CT2 193-194; B241675 CT3 373, 469-471,473, 481.) As the proponents of
12. but is neitherthe trusteenor a beneficiary.6(B241675 CT3 395,411-413.)
Respondents' motion did not claim that it was based on any
information they had obtained after thejudgment was enteredin February
2008,or even after the trial endedin September2007.They did not so much
as try to explain why they had waited until April 2012 before bringing it.
During the 2007 trial, their questionsand argumentsshowednot only that
they already had all the information that they later used in their alter-ego
motion but also that they were already disputing the Entities' separateness
from Gaggero. (Trial RT4 1836-1839, 2132-2134; Trial RT5 2769-2773;
Trial RT6 3005, 3067-3068; Trial RT9 4814-4816.)
Respondents alleged in their alter-ego motion that the amendment was
proper because the Entities were Gaggero's alter egos and thus actually the
real parties in interest in this action. (B241675 CT1 24-42.) Gaggero and the
Entities opposed the motion on the grounds that it sought outside reverse
piercing that the court was not authorized to do (B241675 CT3 387-89, 404-
07) it lacked sufficient evidence of alter ego (B241675 CT3 389-92, 407-09)
and it was barred on estoppel grounds. (B241675 CT3 392-94.)
While the alter-ego motion was pending, respondents filed a
memorandum of post-judgment enforcement costs (CT1 23-27) and a motion
for attorney fees and costs. (CT1 28-CT2 214.) These papers sought
$86,247.70 in additional attorney fees, $1,474.55 in additional costs, and
that evidence, respondents judicially admitted its truth. (Evid. Code, § 1220;
Fassberg Const. Co. v. Housing Authority of City of Los Angeles (2007) 152
Cal.App.4th 720, 752.) The admission has a "conclusive effect" and
"removes the matter as an issue in the case." (Gelfo v. Lockheed Martin Corp.
(2006) 140 Cal.App.4th 34, 47-48.) They offered no evidence that any of the
trusts is revocable. But even if they had, their admissions would trump it. (ln
re VincentB. (1981) 125 Cal.App.3d 752, 757.)
6 Though nominally a foundation, Aquasante is one of the irrevocable
trusts. (B241675 CT1 31:23-24; B241675 CT2 193:8-16.)
13. $569.569.96in additional interest.(CT1 23, 29.) The motion and the costs
memowere both servedonly on counselfor Gaggeroand not on theEntities
or anyoneacting on their behalf. (CT 215-220.) The motion arguedonly that
Gaggero should have to pay respondents' costs, and said nothing about
holding any of theEntities liable. (CT1 28-36.)
The alter-ego motion was heard and granted on May 29, 2012.
(B241675RT 1-28.) The court orderedthejudgment amendedto addtheten
Entities asjudgment debtors.(B241675 RT 25-28; B241675 CT3 540-42.)
On June 1, 2012, appellant and the Entities appealedthis order. (B241675
CT3 543-45.)
Gaggerofiled a motion to tax costson May 31, 2012. (CT Suppl 4-
92.) His motion arguedthat mostof respondentsclaim wasfor feesandcosts
that were notreasonableandnecessaryto enforcing thejudgment asrequired
by section685.040.(CT Suppl 6-9.)He explained,inter alia, thatrespondents
were improperly seekingfeesthey incurredin their pendingalter-egomotion,
aswell as in other cases. (CT Suppl 9:5-15.) He also noted that they were
seeking feesfor such non-enforcementtasks as pursuing an award of fees
and costs from Gaggero's original appeal (CT Suppl 8:26-27),
communications betweenthemselvesand their counsel,and that they were
seeking non-recoverable costs such as routine photocopying. (CT Suppl
7:22-8:6, 8:24-26.) In addition, henoted that the bills had beenredactedso
heavily that it wasimpossibleto determinewhethermanyof thechargeswere
recoverableor not. (CT Suppl 8:28-9:2.) He made similar argument in his
opposition to the fee motion, which hefiled onJune29. (CT2 221-237.)
Gaggero supported both his motion to tax and his fee motion with
spreadsheetslisting, page by page, the recoverable and non-recoverable
amounts respondentshad sought on each page of their attorney invoices.
(CT2 228-236; CT Supp 11-19.) Additionally, he attached highlighted
copiesof the attorneybills to his motion to tax so that the court could readily
14. determinewhich itemshe waschallenging. (CT Suppl 20-91.)7
The feemotion and motion to tax were heardon July 13,2012. The
court denied the motion to tax and grantedthe fee motion "in the amount
sought". (CT2 245.) Respondentssubmitteda proposedamendedjudgment
threedayslater.(CT2 253-256.) Thatjudgment namednot only Gaggerobut
also the Entities (CT3 250), even though they had not been named in the
original feemotion (CT1 28-42) or thereply (CT2 238-244) and even though
they had been served with neither the memorandum of costs (CT2 215-217)
nor the fee motion. (CT2 218-220.) The court signed it without modification
on August 6. (CT2 249-250.)
Gaggero and the Entities filed a notice of appeal on August 3, 2012.
(CT2 246-248.)
ARGUMENT
I
GAGGERO IS ENTITLED TO A REVERSAL IF THIS COURT
REVERSES THE ALTER-EGO JUDGMENT IN APPEAL B241675 -
EVEN IF ONLY FOR THE OTHER APPELLANTS
Most of the $86,247.70 fee award stemmed from respondents' motion
to deem the Entities Gaggero's alter egos and to amend the judgment by
naming them additional judgment debtors. Although the court granted that
motion on May 29, 2012, it had not yet been argued when respondents filed
their costs memorandum and their motion for fees on May 15.
Both Gaggero and the Entities have appealed the May 29, 2012 order
in case no. B241675. 8 They explained in their opening briefs that the motion
7 The exhibits attached to the service copy were highlighted the same way.
s As of today, the opening briefs in that appeal have been filed but the
respondents' brief has not.
15. was not just technically flawed but fundamentally improper for many
reasons.To name but a few:
1. Even though an alter ego must either own the original
judgment debtor or share common ownership with it in order to be
held responsiblefor the debt(Las Palmas Assoc. v. Las Palmas Ctr.
Assoc. (1991)235 Cal.App.3d 1220, 1249-1251; Greenspan v. LADT
LLC (2010) 191 Cal.App.4th 486, 513-514), respondents never
claimed that any of the Entities owned Mr. Gaggero or that he and the
Entities were jointly owned by somebody else - a claim that could not
be taken seriously even if they had made it.
2. Although only an alter ego who controlled the party and the
litigation may be added as a new judgment debtor (Misik v. D'Arco
(2011) 197 Cal.App.4th 1065, 1073), respondents never claimed that
any of the Entities controlled Gaggero. Instead, they claimed that
Gaggero controlled the Entities. (B241675 CT1 28:10-11, 29:18-19,
36:23, 37:21-22, 38:1-4; B241675 CT3 424:10-11,428:25-26.)That
is precisely the opposite of what they had to show. And the trial court
expressly found that Gaggero controlled his own litigation (B241675
CT3 540; B241675 RT 2, 17, 18, 22, 27), which means no one can be
named an additional judgment debtor.
3. Respondents offered no evidence whatsoever that Gaggero
and any of the Entities had ever commingled their funds, accepted
liability for the other's debts, held themselves out as mere
instrumentalities of one another, or demonstrated any of the other
usual indicia of alter-ego status. (Sonora Diamond Corp. v. Superior
Court (2000) 83 Cal.App.4th 523,538-539.)
4. California law expressly forbids outside reverse veil-
piercing - meaning that the liability of an owner may never be
transferred to a business he owns. (Postal Instant Press, Inc. v. Kaswa
16. Corp. (2008) 162 Cal.App.4th 1510, 1512-13, 1518 ("PIP");
Greenspan, supra, 191 Cal.App.4th at p. 513.) So even if Gaggero
really did own the Entities, they could not be forced to pay his debt.
Yet respondents argued that California law does allow outside veil-
piercing - a claim they were able to make only by deliberately
misrepresenting the holding of PIP. (B241675 CT1 42.)
5. What's more, instead of claiming that Gaggero owned the
Entities, respondents conceded expressly and repeatedly that he had
long since given up any ownership interest in the Entities and their
assets. (B241675 CT1 28:2-8, 29:1-4, 29:21-22, 31:8-11, 31:11-12,
31:12-18, 31:18-20, 32:4-5, 33:13-15, 36:2-6, 40:4-6, 42:15-16;
B241675 CT3 428:15-17 430:20-21, 432:3-5, 432:5-7, 432:7-9,
432:9-10, 432:11-12.) Because respondents admitted that Gaggero
did not own the Entities and because the Entities obviously did not
own Gaggero or share common ownership with him, the most
fundamental requirement for alter-ego liability is completely missing.
6. Respondents were estopped to claim that the Entities were
Gaggero's alter egos, both because they had taken the opposite
position in other cases (B241675 CT2 285,287-288) and because they
had won at trial by arguing that he was financially separate from them.
(Trial RT 3629; B241675 CT1 85-87.)
7. Respondents' claim was barred by laches because they had
all the relevant information by September 2007 at the latest - almost
five months before the original judgment was entered - yet chose not
to act on it until more than four and a half years had passed. (B241675
CT1 36-38, 51-52; B241675 CT2 223,283-288; B241675 CT3 394.)
This is but a sampling of the reasons why the alter-ego order cannot
stand. The list goes on, but Gaggero's point is not to re-argue case B241675
here. Instead, it is to note the absurdity of making him pay tens of thousands
10
17. of dollars to reimburse respondentsfor the legal fees they incurred in
bringing a motion that was soutterly meritless.
When ajudgment is reversedon appeal,any associatedaward of fees
andcostsmust alsobereversed.(Purdy v. Johnson (1929) 100 Cal.App. 416,
420-421.) It is bad enough that Gaggero had to oppose the alter-ego motion.
If anybody deserves to be compensated for the associated fees and costs, it is
he and the Entities. Respondents are not entitled to make Gaggero bear any
of the associated costs - especially if the May 29 rulings are reversed on
appeal.
II
THE TRIAL COURT IMPROPERLY AWARDED
NON-RECOVERABLE FEES AND COSTS
"The judgment creditor is entitled to the reasonable and necessary
costs of enforcing a judgment", including attorney fees if the judgment
contained an award of fees pursuant to an underlying contract between the
parties. (Section 685.040.) (Berti v. Santa Barbara Beach Props. (2006) 145
Cal.App.4th 70, 77.) Creditors are thus not automatically entitled to all their
post-judgment fees and costs. They may only recover charges they incurred
while enforcing their judgment- and even then, only if the charges were both
reasonable and necessary for that purpose.
Respondents asked the trial court to make Gaggero pay, in full, for
every item on their bills from December 2010 through April 2012. (CT1 131-
CT2 214.) The court did precisely as respondents had asked. (CT2 245.) 9
Some of these charges were for work done on entirely different cases. Most
of the charges which arose from this case were not related to enforcing the
9 Respondents noted that their claim did not include charges which they had
removed in subsequent bills. (CT1 95:25-27.) Even so, they claimed that every
charge they'd asked their clients to pay was recoverable. The trial court then
awarded them everything they had asked for.
11
18. judgment. And many of the charges that did relate to enforcing the judgment
were either unreasonable and/or unnecessary for that purpose, and many
were redacted so heavily that there was no way to tell what they were for or
whether they were reasonable and necessary enforcement measures. The
trial court had no authority to award any of these sums to respondents. (Berti,
supra, 145 Cal.App.4th at p. 77 ["in the absence of express statutory
authorization, such as that contained in the final sentence of Code of Civil
Procedure section 685.040, post-judgment attorney fees cannot be
recovered."])
"The calculation of attorney fees and costs is a matter addressed to the
discretion of the trial court." (Chinese Yellow Pages Co. v. Chinese Overseas
Marketing Service (2008) 170 Cal.App.4th 868, 885.) But the court has no
discretion to award post-judgment fees and costs unless they were reasonable
and necessary to the enforcement of the judgment. An award of any other
costs or fees is simply beyond the court's authority. Whether an award of
fees or costs exceeds that authority is reviewed de novo. (Globalist Internet
Technologies, Inc. v. Reda (2008) 167 Cal.App.4th 1267, 1273.)
That a billing entry has some tangential relationship to the underlying
judgment is not enough. It must actually have been incurred in order to
enforce that judgment. Thus, even though litigating against another
judgment creditor over who has priority might advance the interests of the
judgment creditor, the associated fees are not recoverable. (RonaldP. Slates,
APC v. Gorabi (2010) 189 Cal.App.4th 1210, 1214.) To award such fees
would risk "imposing open-ended liability on judgment debtors ... for events
... beyond the judgment debtor's control." (Id.)
The trial court awarded respondents $86,247.70 in attorney fees. (CT2
245.) Only $28,103 of that was incurred enforcing the judgment against
Gaggero. That amount covered post-judgment discovery and court
proceedings thereon, as well as other time spent pursuing Gaggero. (CT2
12
19. 224,226, 228-236;CT Suppl 5, 8-9, 10-19.)The trial court had discretion to
award only that amount. The rest of the award cannot stand.
A. Moving to Amend the Judgment to Add New Debtors Was
not Enforcement of the Judgment.
We have already seen that the award of attorney fees connected with
the alter-ego motion must be reversed if the May 29, 2012 amended judgment
is also reversed. But even if this court rejects that argument, it should still
find that Gaggero cannot be made to pay those fees because they were not
incurred to enforce the judgment against him. Trying to add other parties to
a judgment is not the same thing as enforcing it.
The reason respondents tried to add new judgment debtors was that
they had been unable to collect from Gaggero. But whether a judgment is
collectible depends upon the "happenstance" of the debtor's financial
condition. (Slates v. Gorabi, supra, 189 Cal.App.4th at p. 1215.) Had
Gaggero been wealthier, respondents would not have turned to other sources
of payment. "It seems unlikely that the Legislature intended a section
685.040 postjudgment fee award to turn on whether the judgment debtor had
sufficient assets to satisfy all judgments against him." (ld.) Instead, such
awards are supposed to encourage the debtor to cooperate in paying the
judgment. (Id.) To the extent Gaggero gave respondents reason to pursue
him aggressively, the court could properly make him pay for those efforts.
But the court could not also make him pay for respondents' pursuit of third
parties whose pockets were deeper.
Even if this court believes that moving to add new judgment debtors
can qualify as enforcing a judgment, that would not be enough to make the
cost of doing so necessarily recoverable under section 685.040. The
judgment creditor would also have to show that bringing the motion was both
reasonable and necessary, and that it was done in a reasonable and necessary
13
20. way. Respondents made no such showing here, even though the trial court
found that they did. It can never be reasonable or necessary to bring a motion
for relief that is expressly forbidden by law. It is both unreasonable and
unnecessary to bring a motion that relies on active misrepresentations of the
law and the record. And it is certainly neither reasonable nor necessary to
spend tens of thousands of dollars on a motion that repeatedly concedes that
its most fundamental factual predicates - here, ownership and control of the
original judgment debtor by the alleged alter-egos - are absent.
U. Client Communications and Routine Administrative Tasks
Are not Enforcement Efforts.
Thousands of dollars of the attorney fee award was for such activities
as preparing status reports to respondents and their insurance carrier and
extensive amounts of file review related to those reports. (CT1 133, 135; CT2
138, 139, 142, 143, 159, 170, 185, 196, 202.) Counsel may have needed to
do this work, but that does not make it recoverable as a cost of enforcing the
judgment. Respondents' enforcement efforts would have been identical had
they spent twice as much time on these tasks - or half as much, or none at
all. This work may have been "reasonable and necessary" in order to
maintain a good relationship with the clients, but it had nothing to do with
enforcing the judgment. It is therefore not recoverable under section
685.040.
C. Respondents May not Recover for Work their Attorneys
Performed in Other Cases.
Several entries on respondents' legal bills were for work their lawyers
performed in other cases, including Sulphur Mountain v. Knapp, Petersen &
Clarke, et al., Ventura S.C. No. CIV 214486, a case which respondents had
long since lost, and Bunge v. 511 OFWLP, L.A.S.C. No. SC100361, a case
14
21. which wasstill pending atthetime andto which respondentswerenot parties.
(CT1 24, 71, 73-74.) By definition, that work was not done to enforce the
judgment in this case. It certainly was not a reasonableor necessarypart of
respondents'enforcementeffort. The fees therefore were not recoverable.
Gaggeronotedthis twice (CT2 224:28;CT Suppl 8:28,24), but thetrial court
wasunswayed. Gaggerourgesthis court to take a morecritical approach.
D. Respondents Were not Entitled to Recover Fees from
Gaggero's Other Appeals.
1. The Trial Court Improperly Awarded Respondents
Fees They Incurred when Seeking Fees for
Gaggero's Original Appeal.
The fee award included hundreds of dollars respondents' lawyers
had charged for seeking an award of fees and costs connected to Gaggero's
appeal from the original judgment, case no. B207567. (CT1 160; CT2 202.)
But that appeal was about whether the judgment was proper. Defending the
propriety of a judgment is not the same thing as enforcing it. Neither is
asking the court to amend the judgment to award fees and costs incurred in
defending its propriety. Respondents were not entitled to the fees and costs
they incurred.
Those fees were not incurred to enforce the judgment. Because
section 685.040 makes only enforcement costs recoverable, money spent on
other aspects of the case - including an appeal - are not recoverable under
that statute.
The judgment debtor in Jaffe v. Pacelli (2008) 165 Cal.App.4th 927
filed a bankruptcy petition after losing his appeal from a judgment on a
promissory note with an attorney-fee clause. The creditor filed an adversary
action which resulted in the dismissal of the bankruptcy case. He then
asked the trial court to award him the fees he incurred in the bankruptcy
15
22. caseundersection 685.040and thecost of enforcing thejudgment. The trial
court denied his requestonthe ground, inter alia, that opposingthe
bankruptcy petition did not qualify asenforcingthejudgment. The creditor
appealed,andDivision Threeof this Court reversed,m
In the words of the appellatedecision, "the entire purposeof
Pacelli's bankruptcy filing, and herrelatedappeals,wasto avoid paying the
judgment Jaffe soughtto enforce.Pacelli soughtto sabotageJaffe's
collection efforts.... Jaffe's preventive measureswere directly relatedto the
continuedenforceability of the ...judgment .... Jaffe's actions in the
bankruptcyproceedingswere necessaryin order to maintain, preserve,and
protect the enforceability of thejudgment." (Id. at p. 938.)
Gaggero's appeal,however,wasaboutthejudgment's validity and
not its enforceability. Defending thevalidity of ajudgment is distinct from
enforcing that judgment. That is why, in the absenceof a stay,ajudgment
may beenforcedeven while it is being challengedon appeal.
2. The Court Had no Authority to Award Fees
Incurred in an Appeal that Was Still Pending at the
Time.
The trial court also awarded respondents thousands of dollars in fees
for dozens of billing entries related to Gaggero's then-pending appeal from
an order compelling him to respond to post-judgment discovery, case no.
B236834. (CT1 132, 133; CT2 134, 138, 143, 196, 199, 200, 205, 207.) That
appeal had been filed on October 5, 2011, and was not dismissed until
October 3, 2012.
l0 The Jaffe trial court also awarded the creditor his fees for defending
the earlier appeal, but the debtor did not challenge that award. Jaffe thus says
nothing about whether appellate attorney fees are recoverable under section
685.040.]
16
23. Appellate attorney fees must be claimed after an appeal has been
resolved and within 40 days after the remittitur is issued. (Cal. Rules of
Court, rule 3.1702(c)(1).) Respondentscannot escapethis limitation by re-
labeling their appellatefeesasenforcementcosts.Rule 3.1702(c)(1) applies
to all claims for appellatefees,regardlessof how they are labeled.
It is true, of course,that theprevailing party in an appealinvolving a
contract with an attorney-feeclausemay recover feesreasonablyincurred in
that appeal. But there was no prevailing party yet when the trial court
awardedthesefees. Besides,suchfeesarerecoverableunderrule 3.1702and
arenot costsofenforeement recoverableundersection685.040. That is why
they areawardableeven to successfuljudgment debtors. It is also why they
areawardablefor feesincurredafter ajudgment hasbeencollected- or even
if there hasbeenno attemptto collect thejudgment at all.
Gaggeronoted- both in his motion to tax and in his opposition to the
fee motion - that respondentswere improperly seekingfeesrelatedto these
appeals.(CT2 224:26-28; CT Supp 8:26-28.) Respondentsdid not claim
otherwise. The trial court hadno authority to awardthosefees.
E. The Court Erred by Awarding Fees Based on Billing
Entries that Had Been Heavily Redacted.
Many of respondents' billing entries had been so heavily redacted that
there was no way to tell what they were for. (See CT1 132-CT2 136; CT2
138-139, 142-143, 149, 154-155, 159-160, 170, 185, 200, 205-208.) There
was no way to tell whether most of these entries were connected to the
present case at all, let alone whether they were reasonable and necessary to
enforce the judgment. Gaggero noted this in both his motion to tax and his
opposition to the fee motion (CT2 224-225; CT Supp 8-9.)
Respondents argued only that the redactions had been necessary in
order to prevent Gaggero from learning their enforcement strategy. (CT2
17
24. 242; CT Supp 97.) But explaining why they redacted their bills did not
changethe fact that the redactionsmade it impossible to tell whether the
billing entrieswere for work that fell within the scopeof section 685.040.
Respondentscould havesupportedtheir motion with adeclarationthat
explainedthe nature of eachredactedentry, much asaprivilege log explains
the natureof itemswithheld from production. Perhapsthey could have come
up with another way to justify their claims without giving up their secrets.
But they were the ones who had to prove that the billing entries were for
enforcement of the judgment, and they were the ones who withheld the
contentsof thoseentries. Having provided no evidencethat the entrieswere
for recoverable services, respondents were not entitled to recover the
associatedfees.
F. The Trial Court Improperly Awarded Several Non-
Recoverable Costs.
The court also awarded respondents $53.40 for unexplained
photocopying charges. (CT2 136, 139, 196, 203.) Such charges are not
recoverable. (Ripley v. Pappadopoulos (1994) 23 Cal.App.4th 1616, 1628.)
Gaggero explained this in his motion to tax. (CT Suppl. 8:2-6.) Respondents
did not address the argument in their opposition. (CT Supp 93-97.) He
explained it again in his opposition to their fee motion. (CT2 224:2-6.)
Respondents did not address it in their reply. (CT2 238-242.) Gaggero raised
the same issue yet again in his reply to the motion to tax, noting that
respondents had never addressed the issue. (CT Supp I 01:28-102:7.)
Respondents never explained why the charges were supposedly
recoverable. Gaggero explained precisely why they were not. The trial court
awarded them anyway.
The court also awarded respondents their $44 filing fee for the alter-
ego motion (CT2 160) and the $40 filing fee for an ex parte application to
18
25. correct an unspecified minute order. (CT 147.) As Gaggero noted both in
his motion to tax (CT Supp 8) and in his opposition to the fee motion (CT2
224), these l_es were "not related to enforcement of the judgment against
Gaggero or to any post-judgment discovery proceeding." Respondents did
not address this argument in any of their papers. Yet despite respondents'
failure to even try to justify these costs, the court refused to tax them. Here
again, the court's order was improper and should be reversed.
CONCLUSION
Most of the fee award is for work that was unrelated to enforcing the
judgment against Gaggero and/or that was not reasonable and necessary for
that purpose. Much of it was for a motion that was so baseless in law or fact
that it would be more just to make respondents should be made to pay
Gaggero's fees for opposing it than to make him pay their fees for bringing
it. Even the costs portion of the award includes items that are clearly not
allowed.
Gaggero pointed all of this out in the trial court, but the court paid him
no heed. It denied his motion to tax in its entirety and granted respondents'
tee motion in full.
For all these reasons, appellant, Stephen M. Gaggero respectfillly asks
this court to reverse the trial court's orders and the third amended judgment
which was based thereon.
Dated: November 3, 2013 WESTLAKE LAW GROUP
Attorneys for A_pe_lant
STEPHEN M. _3GERO
19
26. WORD COUNT CERTIFICATION
Pursuant to Cal. Rules of Court, Rule 8.204(c)(l), I certify that the
word count for Appellant's Opening Brief is 5,526 words, as counted by
Microsoft Word which was the computer software program used to produce
this brief.
Dated: November 3, 2013 WESTLAKE LAW GROUP
By: _
Attorneys for Al_p,_llant
STEPHEN M. (_GGERO
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27. PROOF OF SERVICE
I am a resident of the State of California, over the age of eighteen
years, and not a party to the within action. My business address is 2625
Townsgate Road, Suite 330, Westlake Village, California 91361.
On November 4, 2013, I served the foregoing document(s) described
as: APPELLANT'S OPENING BRIEF
x_._ BY MAIL I placed the above document(s) in a sealed envelope with
postage thereon fully prepaid, in the United States mail at Westlake
Village, California, addressed as set forth below.
Randall A. Miller
Miller LLP
515 South Flower Street, Suite 2150
Los Angeles, CA 90071
Clerk of the Superior Court
Superior Court of Los Angeles County
111 North Hill Street
Los Angeles, CA 9001
Edward A. Hoffman
11755 Wilshire Blvd., Suite 1250
Los Angeles, CA 90025
Clerk of the Supreme Court
Supreme Court of California
350 McAllistcr Street
San Francisco, CA 94102
(Filed Electronically)
I declare under penalty of perjut3, under the laws of the State of
California that the above is true and correct.
Executed on November 4, 2013 at Los Angeles, California.
David Blake Chatfi_ t
21
