Stonebrae LP v. Toll Bros Inc, 3:08-cv-00221

Background

Stonebrae filed a Rule 68Offer-related dispute over fees, costs, and prejudgment interest after Toll Bros. breached a Village B Purchase Agreement (VBPA) for 56 residential lots.
VBPA § 19.7 provided prevailing party reasonable fees, costs, and litigation expenses, to be determined by the court; the Rule 68 offer referenced costs and fees with prejudgment interest to be determined by the court.
Plaintiff Stonebrae seeks attorneys’ fees, taxable and non-taxable costs, and mandatory prejudgment interest under Cal. Civ. Code § 3287(a); Toll challenges the fee amount, hours, redundancy, and interpretation of costs under the Offer.
The court adopts the lodestar method for fees, with adjustments for duplicative work, unrelated claims, overstaffing, and inefficiencies, and reduces hours accordingly.
Stonebrae recovered approximately $4.774 million under the Rule 68 offer; the court calculates a lodestar of $2,667,599 and awards that amount in fees, with limited or no prejudgment interest.
The court determines the Rule 68 offer’s interpretation as to costs and prejudgment interest, and ultimately denies prejudgment interest under § 3287(a) given damages were not certain after Stonebrae amended its complaint.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Reasonableness of fees	Stonebrae contends the lodestar reflects reasonable rates and hours.	Toll argues time and rates are excessive, redundant, or unrelated to successful claims.	Lodestar accepted with reductions; total $2,667,599 awarded.
Related vs. unrelated claims and hours	Stonebrae asserts related claims justify overall hours; declaratory relief linked to breach.	Toll argues separate, unrelated claims (tortious interference) should be excluded.	Unrelated interference hours excluded; declaratory relief hours kept as related; overall reduction applied.
Overstaffing and duplication	Stonebrae claims staffing was appropriate given complexity.	Toll demonstrates substantial duplicative work between S&M and C&K.	Deduction of 50% of C&K hours as duplicative; 5% inefficiency reduction for S&M; total lodestar adjusted.
Reasonable hourly rates	Rates charged by Stonebrae's counsel reflect prevailing Bay Area commercial rates.	Rates for C&K are higher; adjusts to S&M scale; argues submarket for real estate litigation.	S&M rates upheld; C&K’s rates adjusted down to match S&M scale for lodestar calculation.
Costs under Rule 68 offer	Costs may include litigation expenses beyond § 1033.5; VBPA supports broader recovery.	Rule 68 costs are limited to § 1033.5 allowable costs; non-allowable litigation expenses excluded.	Costs interpretation resolved in favor Toll; plaintiff may submit allowable costs; non-allowable costs denied.
Prejudgment interest under § 3287(a)	Damages were certain due to liquidated damages provision, entitling interest as a matter of right.	Damages were uncertain after plaintiff amended to challenge liquidated damages; § 3287(a) not automatic.	Rule 68 offer construed as discretionary; no prejudgment interest under § 3287(a); damages uncertain post-amendment.

Key Cases Cited

Hensley v. Eckerhart, 461 U.S. 424 (U.S. 1983) (lodestar method and adjustments; reasonableness under Kerr factors)
Blum v. Stenson, 465 U.S. 886 (U.S. 1984) (prevailing market rates in community for fees)
Sorensen v. Mink, 239 F.3d 1140 (9th Cir. 2001) (evidence of prevailing rates; lodestar adjustments)
United Steelworkers of Am. v. Phelps Dodge Corp., 896 F.2d 403 (9th Cir. 1990) (attorney’s fee evidence and rate determinations)
Cunningham v. County of Los Angeles, 879 F.2d 481 (9th Cir. 1988) (Kerr factors; the lodestar framework)
Moralez v. City of San Rafael, 534 F.3d 1106 (9th Cir. 2008) (context on adjustments to lodestar; partial success)
Thorne v. El Segundo, 802 F.2d 1141 (9th Cir. 1986) (relatedness of claims under Hensley analysis)
Leff v. Gunter, 33 Cal.3d 508 (Cal. 1983) (certainty of damages under § 3287(a))
Chavez v. City of Los Angeles, 47 Cal.4th 970 (Cal. 2009) (relatedness of claims; Hensley framework in California)
Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., 47 Cal. App. 4th 464 (Cal. App. 1996) (interpretation of costs and litigation expenses in contracts)
Thrifty Payless, Inc. v. Mariner Mile Gateway, LLC, 185 Cal. App. 4th 1050 (Cal. App. 2010) (codes and interpretation of costs in contracts)
City of Pasadena v. Los Angeles County, 235 Cal. App. 2d 153 (Cal. App. 1965) (principles on prejudgment interest and certainty)