Nei Contracting & Engineering v. Hanson Aggregates Pacific Sw

Opinion

FILED NOT FOR PUBLICATION JUN 5 2019 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

NEI CONTRACTING AND No. 17-55903 ENGINEERING, INC., on Behalf of Itself and All Others Similarly Situated, D.C. No. 3:12-cv-01685-BAS-JLB Plaintiff-Appellant,

v. MEMORANDUM*

HANSON AGGREGATES PACIFIC SOUTHWEST, INC., a Delaware Corporation; HANSON AGGREGATES, INC.; LEHIGH HANSON, CO.,

Defendants-Appellees.

Appeal from the United States District Court for the Southern District of California Cynthia A. Bashant, District Judge, Presiding

Argued and Submitted November 15, 2018 Pasadena, California

Before: PAEZ and CLIFTON, Circuit Judges, and GLEASON,** District Judge.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Sharon L. Gleason, United States District Judge for the District of Alaska, sitting by designation. This memorandum disposition, filed concurrently with our opinion in this

case, is limited to addressing Plaintiff-Appellant’s challenge to the district court’s

order denying its motion for attorney’s fees. We affirm the district court’s order.

1. Plaintiff-Appellant NEI Contracting and Engineering (“NEI”) sought to

recover attorneys’ fees pursuant to California Civil Procedure Code § 1021.5 and

the catalyst theory. The district court declined to award attorney’s fees, finding

that NEI did not satisfy any of the requirements for recovery under the catalyst

theory, including the prelitigation demand requirement. We review a district

court’s decision to deny attorneys’ fees pursuant to a state-law provision for abuse

of discretion. Indep. Living Ctr. of S. California, Inc. v. Kent, 909 F.3d 272, 278

(9th Cir. 2018). “Abuse of discretion occurs if the district court based its decision

‘on an erroneous legal conclusion or a clearly erroneous finding of fact.’” Id.

(quoting Labotest, Inc. v. Bonta, 297 F.3d 892, 894 (9th Cir. 2002)). “We review

de novo whether the district court ‘applied the correct legal standard in determining

entitlement to attorneys’ fees.’” Id. (quoting Klein v. City of Laguna Beach, 810

F.3d 693, 698 (9th Cir. 2016)).

2. The district court’s conclusion that NEI did not satisfy the prelitigation

demand requirement did not constitute an abuse of discretion. NEI did not attempt

to settle the dispute prior to filing the lawsuit. Furthermore, substantial evidence

2 before the trial court suggested that prelitigation settlement efforts would not have

been futile. The decision by defendant-appellant Hanson Aggregates Pacific

Southwest, Inc. (“Hanson”) to modify its recording during the litigation

“indicat[ed] it was not stalwartly opposed to modifying its phone system’s

admonition.” That the modification occurred shortly after NEI filed its Second

Amended Complaint provides further evidence that Hanson may well have been

amenable to settling prior to litigation.

3. NEI’s arguments to the contrary are not convincing. First, NEI contends

that because Hanson has never been willing to concede that its initial recorded

message was inadequate, it would not have agreed to change the recorded

admonition before NEI filed its suit. But during the litigation, Hanson actually did

alter the admonition, albeit while simultaneously continuing to assert that the

original admonition was sufficient. NEI has not established that Hanson’s

“steadfast” position regarding the admonition would have been incompatible with a

willingness to change the recording had it been asked; if anything, Hanson’s

conduct suggests the opposite. Second, NEI contends that this case is analogous to

Cates v. Chiang, in which a California appellate court concluded that a

prelitigation settlement demand would have been futile. See 153 Cal. Rptr. 3d 285,

307–08 (Cal. Ct. App. 2013). But in Cates, the defendant altered its conduct only

3 after four years of litigation. Id. at 306. Hanson altered its recorded message just a

few months after NEI first asserted its § 632.7 claim. This case is also

distinguishable from MacDonald v. Ford Motor Co. — another case relied upon by

NEI. 142 F. Supp. 3d 884 (N.D. Cal. 2015). In that case, plaintiffs served the

defendant with two prelitigation demand letters prior to filing the lawsuit, and the

parties agreed that any prelitigation settlement attempt would have been futile. Id.

at 888, 895. Finally, NEI argues that the court incorrectly reasoned that NEI was

unable to show the futility of a prelitigation demand because Hanson changed its

behavior only a few months after NEI clarified its theory of relief. NEI’s proposed

approach would reward litigants who initially file and litigate specious claims —

an outcome at odds with the purpose of the prelitigation demand requirement. Cf.

Graham v. DaimlerChrysler Corp., 101 P.3d 140, 155 (Cal. 2004), as modified

(Jan. 12, 2005) (“Awarding attorney fees for litigation when those rights could

have been vindicated by reasonable efforts short of litigation does not advance

[the] objective [of § 1021.5] and encourages lawsuits that are more opportunistic

than authentically for the public good.”).

4. The district court did not abuse its discretion in finding that NEI did not

satisfy the prelitigation demand requirement. Because this conclusion is

dispositive as to NEI’s inability to recover pursuant to the catalyst theory, the

4 Court does not address the other requirements for an award of attorneys’ fees under

§ 1021.5. See Carian v. Dep’t of Fish & Wildlife, 185 Cal. Rptr. 3d 594, 605 (Cal.

Ct. App. 2015). Accordingly, the district court’s order denying NEI’s motion for

attorney’s fees is AFFIRMED.