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1 PETER C. De GOLIA (SBN 113103)
JEFFREY S. LYONS (SBN 227277)
2 CLEMENT, FITZPATRICK & KENWORTHY
3333 Mendocino Avenue, Suite 200
3 Santa Rosa, CA 95403
4 Telephone: (707) 523-1181
Facsimile: (707) 546-1360
5 pdegolia@cfk.com
jlyons@cfk.com
6
7
8
SUPERIOR COURT OF THE STATE OF CALIFORNIA
9
COUNTY OF SONOMA
10
11 VILLA ROSA HOMEOWNERS Case No. SCV-267991
ASSOCIATION,
12
VILLA ROSA HOMEOWNERS
13 Plaintiff, ASSOCIATION’S RESPONSE TO COURT
INQUIRIES FOLLOWING HEARING ON
14 vs. MOTION FOR ATTORNEYS’ FEES
15 VALLEN W. COOPER, an individual;
DATE: March 22, 2023
VALLEN W. COOPER, CPM, INC.,
16 individually and dba COMMONWEALTH TIME: 3:00 p.m.
PROPERTY MANAGEMENT; CTRM: 18
17
COMMONWEALTH ASSOCIATION
18 MANAGEMENT, INC.; KELLIN A. Assigned to the Honorable Christopher M.
BAKER, individually and dba Honigsberg
19 ACCURATE PROPERTY SERVICES aka
ACCURATE MAINTENANCE &
20
JANITORIAL; CHAD W. COOPER, an
21 individual; and DOES 1 through 50,
22 Defendants.
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Table of Contents
I. INTRODUCTION ...................................................................................................4
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II. QUESTIONS TO VILLA ROSA ............................................................................4
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Question to Plaintiff No. 1: ......................................................................................4
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Response to Plaintiff’s Question 1:..............................................................4
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Question to Plaintiff No. 2: ......................................................................................5
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Response to Plaintiff’s Question No. 2: .......................................................5
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Question to Plaintiff No. 3: ......................................................................................6
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Response to Plaintiff’s Question No. 3 ........................................................7
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Question to Plaintiff No. 4: ......................................................................................8
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Response to Plaintiff’s Question No. 4: .......................................................8
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Question to Plaintiff No. 5: ......................................................................................9
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Response to Plaintiff’s Question No. 5: .......................................................9
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III. QUESTIONS TO DEFENSE ................................................................................13
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Question to Defense No. 1: ....................................................................................13
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Plaintiff’s Response to Defense Question No. 1:.......................................13
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Question to Defense No. 2: ....................................................................................13
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Plaintiff’s Response to Defense Question No. 2:.......................................13
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Question to Defense No. 3: ....................................................................................14
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Plaintiff’s Response to Defense Question No. 3:.......................................14
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Question to Defense No. 4: ....................................................................................14
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Villa Rosa Response to Question No. 4: ....................................................14
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Question to Defense No. 5: ....................................................................................16
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Villa Rosa Response to Question No. 5: ....................................................16
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IV. QUESTIONS FOR BOTH PARTIES ...................................................................18
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Question to Both Parties No. 1: .............................................................................18
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Plaintiff’s Response to Question to Both Parties No. 1: ............................18
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V. CONCLUSION ......................................................................................................21
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VI. APPENDIX 1 .........................................................................................................22
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Table of Authorities
1 Page(s)
2 Cases
3
Galan v. Wolfriver Holding Corp., (2000) 80 Cal.App.4th 1124 ................................................. 20
4
Gilbert v. National Enquirer, Inc., (1997) 55 Cal.App.4th 1273 ........................................... 19, 20
5
Heather Farms Homeowners Ass'n v. Robinson, (1994) 21 Cal.App.4th 1568 ........................... 21
6
7 Heimlich v. Shivji, (2019) 7 Cal.5th 350....................................................................................... 17
8 Int'l Indus., Inc. v. Olen, (1978) 21 Cal.3d 218 ............................................................................ 21
9 McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn., (1991)
231 Cal.App.3d 1450 ................................................................................................................. 21
10
11 Santisas v. Goodin, (1998) 17 Cal.4th 599 ................................................................................... 19
12 Silver v. Boatwright Home Inspection, Inc., (2002) 97 Cal.App.4th 443 ........................... 8, 13, 18
13 White v. W. Title Ins. Co., (1985) 40 Cal. 3d 870 ......................................................................... 16
14 Rules
15 California Rules of Professional Conduct Rule 3.3(a)(1)-(2) ....................................................... 18
16
Statutes
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Code Civ. Proc. § 998 ................................................................................................................... 17
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Evid. Code § 1152......................................................................................................................... 17
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21
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23
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25
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27
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1 I. INTRODUCTION
2 Villa Rosa Homeowner’s Association (“Villa Rosa”) provides these responses to the
3 Court’s questions to the parties on or about February 10, 2023, following the Court’s hearing on
4 the Defendant Vallen W. Cooper, CPM, Inc. dba Commonwealth Property Management’s
5 (“Defendant” or “Commonwealth”) Motion for Attorney Fees and Costs (“Motion”).
6 II. QUESTIONS TO VILLA ROSA
7 QUESTION TO PLAINTIFF NO. 1:
8 The original complaint included a prayer for special damages in the amount of
9 approximately $1.46 million. The first amended complaint similarly included a prayer for special
10 damages in the amount of approximately $1.46 million. How did plaintiff calculate those special
11 damages?
12 RESPONSE TO PLAINTIFF’S QUESTION 1:
13 The first complaint was filed on March 12, 2021. As stated in the complaint, (see ¶30 of
14 Villa Rosa Complaint), the demand for $1,462,209 was based on the following areas of damage
15 incurred by Villa Rosa as a result of Defendants’ negligence, fraud, and breach of contract,
16 diminution in real property value, repair costs, and increased premiums. (Declaration of
17 Nicholas J. Bernate (“NJB Dec.”) at ¶2.) The vast majority of the alleged damages related to the
18 massive increase in insurance premiums Villa Rosa suffered due to Defendants’ actions.
19 Prior to the second fraudulent insurance claim Vallen Cooper (“Vallen”), Chad Cooper
20 (“Chad”), and Commonwealth made on Villa Rosa’s behalf without the association’s knowledge,
21 Villa Rosa was paying $45,818.00 per year in insurance premiums for its Travelers’ policy.
22 (Declaration Dan Ellecamp in Support of Villa Rosa Homeowner Association’s Opposition to
23 Defendant’s Motion for Attorneys’ Fees (“Ellecamp Dec.”) ¶16.) After the second fraudulent
24 claim made by Vallen, Chad, and Commonwealth, Villa Rosa was deemed an unacceptable
25 insurance risk and Travelers determined it would not renew Villa Rosa’s policy. (Ellecamp Dec.
26 at ¶¶14-15.) After a frantic search by George Petersen Insurance, Villa Rosa’s insurance broker,
27 Villa Rosa was ultimately able to obtain a non-standard policy with a premium cost of
28 $285,052.40, an annual increase of $239,222.40. (Id.) Though it was entirely unclear whether
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1 Villa Rosa would be capable of ever returning to the standard market, it was certain that at
2 minimum, Villa Rosa would be in the non-standard marketplace for an additional three (3) years.
3 Thus, over those three years, it would suffer approximately $717,667.20 in increased premiums.
4 In addition to the allegations regarding Vallen, Chad, and Commonwealth’s fraudulent
5 insurance claim, the Complaint also alleged that the work Defendants claimed to have performed
6 on the Villa Rosa property (“Premises”), was never performed. Meaning that while Villa Rosa
7 had been required to seek non-standard insurance because of the two claims, it never received the
8 benefit Accurate Maintenance and Janitorial (“AMJ”) supposedly provided to the association,
9 namely power washing the Premises. As such, included in the original claim for $1.46 million
10 was the value of the two insurance claims, $493,708.16 (the November 1, 2019 “Kincade
11 Claim”) and $248,990.59 (the September 4, 2020 “Walbridge Claim”) (NJB Dec. at ¶2.)
12 In total, the additional insurance premiums of $717,667.20 plus the Walbridge Claim,
13 plus the Kincade Claim, cost Villa Rosa approximately $1,460,365.95. Villa Rosa also sought
14 punitive damages.
15 QUESTION TO PLAINTIFF NO. 2:
16 The second amended complaint included a prayer for special damages in the amount of
17 $184,685.00. The second amended complaint was filed in January 2022. In October 2021,
18 Travelers reinstated the insurance policy at the prior rate. How did plaintiff calculate the
19 $184,685.00 in damages in January 2022?
20 RESPONSE TO PLAINTIFF’S QUESTION NO. 2:
21 Plaintiff calculated the $184,685.00 based on two items: (1) the additional premiums it
22 paid from the time of the non-renewal of the Travelers policy until its partial retroactive
23 reinstatement pursuant to the terms of Villa Rosa’s settlement agreement with Travelers; and (2)
24 the $24,685.41 “management fee” Commonwealth took for making the first fraudulent Kincade
25 Claim. (NJB Dec. at ¶3).
26 The delta between the original demand of $1,460,365.95 and the $184,685.00 is almost
27 entirely based on the amount of premiums saved by Villa Rosa as a result of its settlement with
28 Travelers which, in turn, was heavily reliant on the underlying litigation. Effectively, as a direct
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1 result of its settlement with Travelers, Villa Rosa was able to reduce its premiums by
2 $743,365.95. The remainder of the reduction was similarly related to the settlement with
3 Travelers. In particular, as discussed further below, prior to the settlement, Travelers intended to
4 file a claim for insurance fraud against both Villa Rosa and Defendants, for the value of the two
5 subject insurance claims. (Declaration of Nicholas J. Bernate submitted in Support of Villa Rosa
6 Homeowners Association’s Opposition to Defendant’s Motion for Fees (“NJB Dec. to Opp”) at
7 ¶2). As part of its settlement agreement with Travelers, Villa Rosa was obligated to return to
8 Travelers the value of the second fraudulent claim, the Walbridge Claim, which totaled
9 $248,990.59 by making an initial payment of $98,990.59 and thereafter making monthly
10 payments. (Exhibit 2 to Ellecamp Dec.). In addition, Travelers, understanding that Villa Rosa
11 was a victim of fire insurance fraud, and that Vallen, Chad, and Commonwealth, had already,
12 unbeknownst to Villa Rosa, distributed the $493,708.16 from the Kincade Claim, forgave that
13 amount from Villa Rosa. (Id.) However, it was also understood that if Villa Rosa were to
14 successfully recover the $493,708.16 from Defendants, it would ultimately be obligated to
15 reimburse Travelers for that value. Similarly, as Travelers’ policy had been reinstated, it was not
16 clear that Villa Rosa maintained standing to recover the $248,990.59 from Defendants. For these
17 reasons, the total actual value of the Kincade Claim and the Walbridge Claim, $742,698.75, was
18 removed from Villa Rosa’s damage claim in its second amended complaint.
19 The critical aspect of this reduction is that it had absolutely nothing to do with the merits
20 of Villa Rosa’s claims (see below) or Defendants’ claimed legal prowess. The reduction in
21 damages occurred because, as a direct result of its litigation against Commonwealth, and its
22 prelitigation settlement with Travelers, Villa Rosa was able to effectively limit its damages.
23 QUESTION TO PLAINTIFF NO. 3:
24 In Nicholas Bernate’s email to Villa Rosa on April 20, 2022, he states that, on behalf of
25 Villa Rosa, he sought to join Traveler’s lawsuit. Travelers refused to stipulate. If Villa Rosa
26 already had the policy premiums reinstated in October 2021 and Villa Rosa believed the
27 defendants were insolvent, why did Villa Rosa desire to join Travelers’ lawsuit? If the litigation
28 objective of reinstating the original premium was achieved in October 2021, what was the
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1 litigation objective in joining Travelers’ lawsuit at that point?
2 RESPONSE TO PLAINTIFF’S QUESTION NO. 3
3 From the beginning of the lawsuit, the litigation objective was to compensate Villa Rosa
4 for the damages it incurred as a result of Defendants’ actions. As described above, ultimately,
5 through its prelitigation settlement with Travelers, Villa Rosa was able to reduce its premium
6 increase damages significantly. And, as detailed, it was determined that the additional damages
7 sought were likely no longer recoverable given said lawsuit. While in April 2022, Villa Rosa’s
8 damages had been reduced to $184,685,00, that nonetheless represented a significant cost to a
9 low to middle income homeowners’ association like Villa Rosa. Joining the Travelers’ lawsuit
10 provided the potential opportunity to minimize Villa Rosa’s financial risk in paying its own
11 attorneys’ fees and costs while also maintaining some prospect of recovery. To that end, joining
12 the Travelers’ lawsuit meant that Villa Rosa could rely on Travelers resources for discovery,
13 experts, etc. while maintaining a background position. (NJB Dec. at ¶4). If Travelers were
14 successful in their fraud claim, Villa Rosa would also have the potential of some recovery based
15 on its own similar claim. (Id.) Effectively, joining the Travelers lawsuit meant that Villa Rosa
16 could “ride the coattails” of Travelers and its substantial war chest while keeping some potential,
17 though unlikely, ability to recover the remaining $184,685. (Id.)
18 To be sure, joining the Travelers lawsuit was only one piece of Villa Rosa’s decision to
19 send the eventual § 998 offers and then dismissing without prejudice. Nonetheless, after
20 Travelers notified Villa Rosa that it would object to Villa Rosa joining the lawsuit, it effectively
21 meant that Villa Rosa would continue to pay substantial fees and costs to try and recover against
22 an apparently insolvent company and their seemingly insolvent owners. Given Defendants’
23 scorched-earth approach to litigation, and apparent willingness to spend money on their attorney
24 rather than negotiate with their ex-clients to whom they owed a fiduciary obligation, the
25 likelihood of throwing “good money after bad” greatly increased when Travelers objected to
26 Villa Rosa’s joinder.
27 /////
28 /////
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1 QUESTION TO PLAINTIFF NO. 4:
2 Mr. Bernate’s April 20, 2022, email states that Villa Rosa’s damages had been reduced to
3 $120k to $250k. The $30,000 settlement was approximately 12% to 25% of the remaining
4 damages. Please argue how you believe the Court should view this settlement. Please discuss
5 Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443. In Silver, the plaintiffs
6 obtained nearly their entire damages, approximately 98% or $68,500 out of $70,000 in claimed
7 damages. How does that percentage of recovery compare to plaintiff’s percentage of recovery?
8 RESPONSE TO PLAINTIFF’S QUESTION NO. 4:
9 In Silver, the court did not apply a percentage of recovery analysis in making its
10 determination. The court of appeal followed the practical approach from Santisas that tasks the
11 trial court to determine the reasons for the plaintiff’s dismissal: (1) whether it was after obtaining
12 all or most of the requested relief through settlement or otherwise; or, (2) whether there were
13 other reasons that had nothing to do with the with the probability of success. Silver v.
14 Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 451. The Silver court agreed with
15 the trial court’s determination “that viewing plaintiffs’ case as a whole, plaintiffs are the
16 prevailing parties for purposes of Boatwright's motion for attorney's fees because they recovered,
17 or were in the process of recovering, significant relief.” Id. at 452.
18 The practical approach urges the court to take a holistic view of the reasons behind the
19 dismissal. In Silver, there was no reason for the trial court to factor-in any other reasons for
20 plaintiff’s dismissal because of the extent of the relief obtained by the plaintiff. However, it is
21 important to note that while significant relief was found in Silver to be determinative, authorities
22 on pretrial dismissals do not require a court to find that a plaintiff obtained significant relief (or
23 any relief at all). Instead, the court considers all the reasons of plaintiff’s decision to dismiss.
24 Villa Rosa did nonetheless recover a substantial percentage of its damages. As described
25 above, Villa Rosa’s initial demand was $1,460,365.95 of which $742,698.75 related to the
26 insurance money paid by Travelers for the Kincade Claim and the Walbridge claim. Any
27 recovery by Villa Rosa would likely have been paid directly to Travelers; as evidenced by the
28 terms of the Villa Rosa-Travelers settlement agreement. As such, the likely recoverable
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1 damages incurred by Villa Rosa was related to (a) additional premiums plus (b) the
2 “management fee” Commonwealth charged to Villa Rosa. (NJB Dec. at ¶5.) These totaled
3 approximately $719,510.25. After the pre-litigation settlement agreement with Travelers, Villa
4 Rosa’s damages were reduced down to $184,685.00. (Id.) Following the $30,000.00 recovered
5 in its 998 judgments from the individual defendants (the owners of Commonwealth and AMJ),
6 Villa Rosa’s final unrecovered damages was $154,685. (Id.) Comparing the actual damages
7 incurred by Villa Rosa, $719,510.25, against $154,685 in unrecovered damages, Villa Rosa
8 recovered seventy-nine percent (79%) of its claimed damages. (Id.)
9 In addition to a significant recovery, Plaintiff’s board of directors made a business
10 decision to not spend more of its members’ resources to continue pursuing the remaining entity
11 defendants knowing that the defendants’ counsel engages in aggressive tactics that will cost
12 additional money as demonstrated by this motion as well as defendants’ prior motions.
13 Furthermore, the continuing litigation and prosecution of the defendants for insurance fraud by
14 others made the prospects of any further recovery unlikely.
15 All things considered, like Silver, Villa Rosa achieved significant relief as a direct result
16 of filing its lawsuit; and, Commonwealth did not receive a favorable judgment because it was
17 determined not to have liability to Villa Rosa. Its judgment came in the form of a dismissal.
18 QUESTION TO PLAINTIFF NO. 5:
19 What information did Villa Rosa have regarding the solvency of defendants? Was this an
20 assumption based on the overall circumstances of the other lawsuits and prosecution or did Villa
21 Rosa have financial information about the solvency of defendants?
22 RESPONSE TO PLAINTIFF’S QUESTION NO. 5:
23 Villa Rosa obtained judgments against all three individual defendants, Vallen W. Cooper,
24 Chad W. Cooper, and Kellin A. Baker. Meaning, at the time of dismissal, the only remaining
25 defendants were the corporations, Vallen W. Cooper, CPM, Inc., dba Commonwealth Property
26 Management and Commonwealth Association Management, Inc., (collectively,
27 “Commonwealth”). Thus, Villa Rosa’s determination regarding recoverability against
28 Commonwealth was whether the corporations were capable of paying a significant judgment.
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1 Prior to dismissal, Villa Rosa had pieces of information which, when taken together,
2 reasonably pointed to the likelihood that any judgment against Commonwealth would either be
3 discharged in bankruptcy or otherwise not recoverable:
4 The Travelers Complaint: As noted in its Opposition to Defendants’ Motion for
5 Attorneys’ Fees, on or about February 22, 2022, about 45 days after Villa Rosa filed its Second
6 Amended Complaint, counsel for Villa Rosa received a copy of Travelers’ Complaint against
7 Defendants seeking the following, in relevant part: (1) $6,360,138.39 for treble damages for each
8 of the seven fraudulent insurance claims made and paid out by Travelers; (2) civil penalties in
9 the amount of $110,000, relating to the eleven fraudulent insurance claims made by Defendants;
10 (3) attorneys’ fees and costs; (4) a constructive trust against all Defendants, against “any and all
11 real property, personal property and accounts from the conduct alleged in the complaint;” and (5)
12 an equitable lien against all Defendants, against “any and all real property, personal property and
13 accounts from the conduct alleged in the complaint.” (NJB Dec. to Opp. at ¶5; Exhibit 3 to Villa
14 Rosa’s Request for Judicial Notice in Support of Villa Rosa Homeowners Association’s
15 Opposition to Defendant’s Motion for Attorneys’ Fees (“RJN iso Opp.”).
16 In addition to the demand, the Complaint also set forth, in detail, the manner in which
17 Defendants had committed insurance fraud by using the guise of the devastating Sonoma County
18 wildfires to make false insurance claims purportedly on behalf of eleven (11) Sonoma County
19 homeowners’ associations. (Id.) Given the relative size of Commonwealth – it is a small,
20 locally-based corporation – it would be unreasonable to believe Commonwealth could (a) pay a
21 judgment for over $6 million or (b) otherwise pay for attorney’s fees and costs to defendant
22 Travelers lawsuit, Villa Rosa’s claim, and Commonwealth’s claim against George Petersen
23 Insurance. (NJB Dec. at ¶6). As to the latter issue, a brief review of the docket in the subject
24 case, People of the State of California v. Baker, et al. SCV-269077, Superior Court, County of
25 Sonoma, indicates the massive funds Commonwealth is expending on fees and costs.
26 Commonwealth, et al. v. George Petersen Insurance: On November 23, 2021, Vallen W.
27 Cooper, Vallen W. Cooper, CPM, Inc., and Commonwealth Association Management, Inc., filed
28 suit against George Petersen Insurance Agency, Inc., and its broker Rachel Adams. (See Cooper
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1 et al. v. Rachel Adams, et al., SCV-269735). Counsel for Villa Rosa was made aware of this
2 lawsuit on January 21, 2022, via communications from counsel for George Petersen Insurance
3 (“GPI”). (NJB Dec. at ¶7).
4 The crux of the complaint centers around Rachel Adams’ communications with various
5 homeowners’ associations who, through their affiliation with George Petersen Insurance Agency
6 (Ms. Adams’s employer) as their insurance broker, learned from Ms. Adams of the unauthorized
7 and fraudulent insurance claims made by Commonwealth on their behalf. (Exhibit A to NJB
8 Dec.) While there is no doubt that Ms. Adams was correct, and potentially duty-bound, to notify
9 her clients of these insurance fraud claims, the portion of the claim relevant to the immediate
10 issue are the various damages claimed by Commonwealth. To wit, in their complaint,
11 Commonwealth alleged to have suffered the following: (1) ten separate homeowners
12 associations refused to do business after learning of Commonwealth et al.’ fraudulent claims; (2)
13 lost revenue in excess of $162,000 and continued loss of revenue of $331,948 annually; (3) the
14 loss of ¼ of Commonwealth’s staff at a purported value of $250,000; (4) damages suffered to its
15 reputation in the amount of $10,000,000. (Id.) While it is possible Commonwealth maintained a
16 reputation valuable enough to support a loss of $10,000,000, the allegation that ten different
17 clients fired them was considered in 2021, to be an accurate allegation, as was the general loss of
18 reputation (“NJB Dec. at ¶8). Thus, notwithstanding the absolutely incredible claim that ten
19 different homeowners’ associations separately came to the same conclusion that Commonwealth
20 had defrauded and abused their position as fiduciary for their clients solely based on Ms.
21 Adams’s comments, the underlying allegations regarding Commonwealth’s losses were
22 impactful on Villa Rosa’s determination to dismiss. (Id.) Namely, that Commonwealth had
23 suffered significant, likely permanent financial losses. (Id.) Given that Vallen W. Cooper, CPM,
24 Inc., dba Commonwealth Property Management and Commonwealth Association Management,
25 Inc., are service-based companies, relying exclusively on fees for managing various properties
26 around Sonoma County, the companies were unlikely to have any tangible assets. Without
27 clients, Commonwealth had no income and no tangible assets.
28 /////
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1 Investigations by Insurance Commissioner SIU Teams: As outlined in Nicholas
2 Bernate’s Declaration in Support of Villa Rosa Homeowners Association’s Opposition to
3 Defendants’ Motion for Attorneys’ Fees, prior to dismissal against Commonwealth, Mr. Bernate
4 had spoken with three separate investigators who had determined that Commonwealth had
5 committed fraud, two Special Investigation Unit investigators from Travelers and Nationwide,
6 and Martin “Marty” Dito, investigator from the California Department of Insurance. (NJB Dec.
7 to Opp. at ¶¶3-4). In each case, the investigator notified Mr. Bernate that they had heard the
8 same story from multiple Sonoma County homeowners associations; i.e. Commonwealth had
9 made unauthorized fraudulent insurance claims on their behalf, without their knowledge, and
10 with no basis for the alleged damages. (Id.) The details of the investigations and apparent
11 conclusions of these investigators is detailed below. But, for purposes of determining whether
12 Commonwealth could financially support a judgment against it by Villa Rosa, the high chance
13 that Travelers, Nationwide (who determined there were four associations for whom
14 Commonwealth had made claims), and the Sonoma County District Attorneys’ Office would
15 prosecute Commonwealth, further supported the conclusion that Commonwealth was, or would
16 shortly become, insolvent.
17 Although Villa Rosa was not in possession of documents specifically outlining any
18 assets, liability, or general financial condition of Commonwealth, absent a punitive damage
19 finding, those documents would be privileged and otherwise unobtainable during the normal
20 course of this litigation. Meaning, Villa Rosa has no way to prove Commonwealth was actually
21 insolvent absent the company filing bankruptcy. But, as the foregoing shows, for purposes of
22 considering the likelihood that Commonwealth would be able to remain solvent or otherwise
23 satisfy a judgment against it in Villa Rosa’s favor, it was entirely reasonable for Villa Rosa to
24 conclude that it could not. Instead, it was more likely than not that Villa Rosa would expend vast
25 sums of fees and costs to ultimately become an unsecured creditor against an insolvent company.
26 Rather than continue to spend fees and costs, Villa Rosa settled with Vallen W. Cooper (owner
27 of Vallen W. Cooper, CPM, Inc., and President of Commonwealth Association Management,
28 Inc.) and Chad W. Cooper (Vice President of Commonwealth Association Management, Inc.),
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1 and Kellin Baker, for $30,000 and dismissed the corporate defendants without prejudice. To do
2 otherwise would have been entirely impractical.
3 III. QUESTIONS TO DEFENSE
4 QUESTION TO DEFENSE NO. 1:
5 In the reply brief filed February 1, 2023, page 1, line 7, defendant states that plaintiff was
6 pleading more than $2.2 million. Was that prior to the second amended complaint and after the
7 second amended complaint? What was the breakdown of the $2.2 million in damages?
8 PLAINTIFF’S RESPONSE TO DEFENSE QUESTION NO. 1:
9 It is unclear where Defendants came up with this total.
10 QUESTION TO DEFENSE NO. 2:
11 Defense argues the case was dismissed because the case against the defendants was
12 negated by witnesses. Can you cite to any cases/authority that allows the Court to consider the
13 merits of the lawsuit and likelihood of prevailing at trial when determining the prevailing party?
14 Is there any authority that the Court cannot consider the merits of the case when determining the
15 prevailing party?
16 PLAINTIFF’S RESPONSE TO DEFENSE QUESTION NO. 2:
17 The merits of the lawsuit and the likelihood of prevailing at trial are not part of the trial
18 court’s analysis in pretrial dismissal cases where “prevailing party” is not defined for the
19 recovery of attorney’s fees. This was made clear in Santisas and Olen and is restated in Silver v.
20 Boatwright stating: “Regarding this matter of a plaintiff's probability of success on the merits of
21 its case had there been no pretrial voluntary dismissal, the Santisas court stated that ‘scarce
22 judicial resources should not be used to try the merits of voluntarily dismissed actions merely to
23 determine which party would or should have prevailed had the action not been dismissed.’”
24 Silver, 97 Cal.App.4th at 451. Instead, “the court must utilize its discretion in determining
25 whether such defendant should be considered a prevailing party for the purpose of recovering
26 attorney's fees as costs under sections 1032 and 1033.5. In exercising that discretion, the court
27 may consider the reason for the dismissal, including whether the parties have reached their
28 litigation objectives by settlement, judgment, or other means.” Id. at 452.
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1 Notwithstanding the foregoing, if the Court decides to consider the merits of the
2 underlying case, Villa Rosa has provided a summary of the evidence and further argument
3 demonstrating the merits of Villa Rosa’s case in Appendix 1, submitted herewith.
4 QUESTION TO DEFENSE NO. 3:
5 Defense argues there were multiple attempts to settle the case shortly after the complaint
6 was filed. Can you cite to any cases/authority that allows the Court to consider settlement
7 attempts when determining the prevailing party? Is there any authority that the Court cannot
8 consider a defendant’s offers to settle when determining the prevailing party?
9 PLAINTIFF’S RESPONSE TO DEFENSE QUESTION NO. 3:
10 Villa Rosa was unable to locate case law which supported the premise that settlement
11 attempts may or may not be considered for this purpose. However, in pretrial dismissal cases
12 where the trial court must consider plaintiff’s reasons for dismissal to determine prevailing party
13 under the practical approach, settlement attempts might be helpful. Certainly, a defendant’s
14 refusal of a reasonable offer to settle, or a defendant’s unreasonable offer to plaintiff, could very
15 well factor into a Plaintiff’s reasons for dismissal.
16 QUESTION TO DEFENSE NO. 4:
17 What evidence is there of defendant’s offers to settle?
18 VILLA ROSA RESPONSE TO QUESTION NO. 4:
19 In his declaration, Attorney Erlach claims, under oath, that on numerous occasions, he
20 offered to “resolve” this matter on behalf of Defendants early in litigation. Attached to the
21 Bernate Declaration submitted herewith as Exhibits B, C, D, and E are copies of Defendants’
22 supposed offers to settle. As the Court can see, the “offers” were nothing more than borderline
23 unprofessional threats and chest pounding and offered absolutely no reasonable offer or good
24 faith attempt to resolve this case. A representative example of Defendants’ “offers,” and the way
25 in which their attorney made absolutely no effort to actually resolve this matter prior to his
26 clients agreeing to pay $30,000 in damages, is an email Attorney Erlach sent to Villa Rosa
27 counsel on May 21, 2021. (Exhibit F to NJB Dec.) The email states without revision:
28 /////
VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT
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1 From: Raymond Erlach
Sent: Friday, May 21, 2021 7:23 PM
2
To: Nicholas Bernate ; Peter Degolia ;
3 Lisa Holmberg
Cc: Jennifer Pearl
4 Subject: RE: Villa Rosa Homeowners Association v. Vallen W. Cooper, et al.
5 WRITTEN SETTLEMENT DEMAND
6
Dear Counsel, cc’s of Ms. Turler’s email:
7 Written Settlement Demand: Dismiss the amended complaint with prejudice with
the stipulated order that the court will set Defendants’ attorney’s fees and the
8 amount of defendants’ damages, including loss of income and harm to reputation
in an expedited proceeding. This offer is open for seven days and then if not
9 accepted, it is revoked.
10
In support of this generous offer, we can confirm to you that the Villa Rosa HOA
11 along with each attorney listed in Ms. Turler’s email transmitting the amended
complaint will be a defendant in the malicious prosecution lawsuit for the false
12 fraud allegations, after [not if] the amended complaint ends up in the same dark
place as your original complaint. We had warned you, but to the detriment of
13 your client, you have persisted.
14
Additionally, we are sure you have already advised your client that the fees
15 opposing this action are subject to the attorney’s fees clause of the parties’ written
agreement; and then, there is also recovery under the indemnity clause. The
16 situation should be of little comfort to your client, as our current fees exceed
$40,000, and, upon the inevitable “deposition” of the amended complaint in its
17
preordained grave, our fees will likely exceed $60,000 as you will throw up
18 everything you can think of to protect… yourselves. And the Villa Rosa
Homeowners will be responsible for 100% of all of the defendants’ fees---as you
19 no doubt have advised it before filing, right? Now, you didn’t advise the HOA
that you would recover your fees from the defendants such that this case would
20 cost them nothing, or did you?
21
And, I am not sure you have advised your client that, even at the point the
22 HOA acknowledges its responsibility for the defendants’ fees, it will not be
through with its liability for damages to my Clients, have you? As in things of
23 this sordid nature, attorney fees are just the start of the Villa Rosa Homeowners’
liability for the damages done to my Clients. The damages exceed the HOA’s
24 entire annual budget. Hmmm…do you think the HOA knew that? Perhaps the
HOA can look for some monetary help from Ms. Adams or Ms. Zimmerman
25
or from Travelers’ investigator or from whatever hearsay source it is that your
26 firm has been parroting in the place of performing a competent investigation into
the facts. That may not be productive, but it may be more productive than a call
27 to me for a walkaway settlement---no releases without full compensation here.
Regards, --Ray Erlach
28
VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT
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Raymond N. Stella Erlach, State Bar Number 056958
1 LAW OFFICES OF RAYMOND N. STELLA ERLACH
2 ////
3 Needless to say, a defendant “offering” to have an opposing party take a judgment
4 against them for attorneys’ fees and damages where the defendant has not even filed a
5 counterclaim, is not an “attempt to resolve” the case. It is not surprising that Attorney Erlach
6 neither attached nor even referenced his May 21, 2021, email anywhere in his declaration, let
7 alone under his “Attempts to Resolve” heading. Defendants never attempted to “resolve” this
8 case. Instead, they and their attorney did nothing but make excessive threats and take a largely
9 unsuccessful scorched-earth approach before the individual defendants eventually had judgments
10 taken against them.
11 QUESTION TO DEFENSE NO. 5:
12 How should the Court consider the fact that defendant refused plaintiff’s 998 offer of
13 only fees and costs? Is there evidence of a plaintiff 998 for only fees and costs other than the last
14 sentence of the April 20, 2022, email from Mr. Bernate to Villa Rosa? Does the refusal by
15 defendants to accept the 998 and ultimate dismissal by plaintiff factor into the analysis of
16 prevailing party? Is there any authority to support the Court considering 998 offers when
17 determining the prevailing party? Is there any authority that the Court cannot consider 998 offers
18 when determining the prevailing party?
19 VILLA ROSA RESPONSE TO QUESTION NO. 5:
20 The Court Can Consider Defendants’ Refusal to Accept Plaintiff’s §998 offer:
21 Our Supreme Court in White v. W. Title Ins. Co. (1985) 40 Cal. 3d 870, 888-89 states:
22 We believe, however, that despite their difference in wording sections 1152 and 998
23 should receive a parallel construction. Section 1152 states that offers are inadmissible to
prove “liability for the loss or damage,” which we have construed to refer to liability for
24 that loss or damage to be compromised by the offer. Section 998, subdivision (b), states
that an offer cannot be “given in evidence upon the trial.” We think that language refers
25 to the trial upon the liability which the offer proposed to compromise. Thus both sections
would serve the same purpose; to bar the introduction into evidence of an offer to
26 compromise a claim for the purpose of proving liability for that claim, but to permit its
27 introduction to prove some other matter at issue.
It would seem to be consistent with White for the trial court to consider settlement offer
28
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1 history, including 998 offers, to prove “some other matter at issue” such as the reasons for a
2 plaintiff’s dismissal.
3 This is also supported in later decisions, although none that plaintiff could find directly
4 on a pretrial dismissal case. “While the Evidence Code bars admission of a settlement offer
5 specifically “to prove [a party's] liability for … loss or damage” (Evid. Code, § 1152, subd. (a)),
6 the Code of Civil Procedure states without any limitation that a declined 998 offer “cannot be
7 given in evidence” (Code Civ. Proc. § 998, subd. (b)(2)). Nonetheless, we concluded that
8 provision should be read to implement the same policies as those underlying the Evidence Code
9 bar, and thus be subject to similar limitations, notwithstanding its absolute terms. Accordingly,
10 although a 998 offer is inadmissible to prove liability, it may be admissible to prove unrelated
11 matters.” Heimlich v. Shivji (2019) 7 Cal.5th 350, 360.
12 Plaintiff Offered Commonwealth a Waiver of Costs and Fees:
13 On June 11, 2022, Defendants filed their Case Management Conference statement.
14 (Exhibit A to Declaration of Peter C. DeGolia.) Therein, Defendants noted that the individual
15 defendants had “compromised via Section § 998” for $10,000 each. (Id.) Defendants then
16 demanded that Plaintiff dismiss the remainder of the case. (Id.) Having obtained its litigation
17 objective and judgments against the owners of the defendant corporations, Plaintiff was willing
18 to offer a walkway for a waiver of costs and fees, as referenced in Defendants’ CMC statement.
19 On June 15, 2023, Villa Rosa served upon both Commonwealth Association
20 Management Inc., and Vallen Cooper, CPM, Inc., Offers to Compromise pursuant to Code Civ.
21 Proc. §998. (Exhibit B to Declaration of Peter C. DeGolia.)
22 The Court Should Consider the Corporate Defendants’ Refusal to Accept Plaintiff’s Offer to
23 Settle for a Waiver of Costs and Fees:
24 The Court should consider Commonwealth and Vallen Cooper, CPM, Inc.’s refusal to
25 accept Plaintiff’s § 998 offers when determining plaintiff’s reasons for dismissal. The intent
26 with Villa Rosa’s §998 offer, as with all such offers, was to cease litigation and avoid either
27 party incurring additional fees and costs. As Villa Rosa was faced with the prospect of
28 recovering its approximately $154,000 in damages against a likely insolvent corporation, or face
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1 a meritless fee motion, the § 998s were a reasonable last effort to avoid likely unfruitful motions
2 and appeals. Rather than accept the offers and cut-off their potential liability with finality, the
3 corporations decided to exploit their strategic position in hopes of this Court granting
4 Defendants, as a whole, attorneys’ fees. Specifically, the individual owners of the corporations
5 had already taken a judgment against them for $30k total, inclusive of attorneys’ fees. Meaning,
6 if Villa Rosa continued litigating against the corporations, any judgment against them could not
7 include attorneys’ fees against Vallen Cooper, Chad Cooper, or Kellin Baker. Instead, the
8 judgment would be limited to two likely insolvent corporations, with no apparent assets to satisfy
9 any judgment, and the opportunity to go bankrupt. By denying the § 998s, the corporations
10 risked little in order gain the benefit of filing the immediate motion where they demand fees
11 spent defending both the corporations and their otherwise judgment-proof owners. Granting
12 Defendants’ attorneys’ fees under these circumstances would be entirely unequitable and against
13 the purpose both of § 998 offers and the pragmatic approach necessitated by Olen, Santisas, etc.
14 IV. QUESTIONS FOR BOTH PARTIES
15 QUESTION TO BOTH PARTIES NO. 1:
16 Other than Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, does
17 either party have any cases to cite to the Court regarding the determination of prevailing party
18 when the action against the defendant is dismissed? Please limit any citations and analysis to a
19 maximum of three to five cases. Please do not repeat Olen, Hsu or Santisas as cited in the prior
20 briefs.
21 PLAINTIFF’S RESPONSE TO QUESTION TO BOTH PARTIES NO. 1:
22 The court requested the parties provide cases other than Silver v. Boatwright Home
23 Inspection, Inc. (2002) 97 Cal.App.4th 443 regarding the determination of prevailing party when
24 the action against the defendant is dismissed. The court then asks the parties not to repeat Olen,
25 Hsu, or Santisas as cited in the prior briefs.
26 It is important to note that Hsu does not belong in a pretrial dismissal discussion—it was
27 not a pretrial dismissal case. It was a section 1717 case regarding a single contract claim after
28 trial. Moving party’s reply brief tread extremely close to violating California Rules of
VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT
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1 Professional Conduct Rule 3.3(a)(1)-(2) when it urged this court to apply Hsu and to limit its
2 consideration to only the pleadings and like sources to determine the prevailing party.
3 Santisas held that when the statute or contract that the moving party is claiming
4 attorney’s fees under fails to “define ‘prevailing party’ or expressly either authorize or bar
5 recovery of attorney fees in the event an action is dismissed, a court may base its attorney fees
6 decision on a pragmatic definition of the extent to which each party has realized its litigation
7 objectives, whether by judgment, settlement, or otherwise.” Santisas v. Goodin (1998) 17
8 Cal.4th 599, 622. As such, when a dismissed party makes a claim for attorneys’ fees as a
9 prevailing party under Civil 1032 and 1033.5, the court is to determine the prevailing party using
10 that pragmatic approach. The following
Preview
1 PETER C. De GOLIA (SBN 113103) JEFFREY S. LYONS (SBN 227277) 2 CLEMENT, FITZPATRICK & KENWORTHY 3333 Mendocino Avenue, Suite 200 3 Santa Rosa, CA 95403 4 Telephone: (707) 523-1181 Facsimile: (707) 546-1360 5 pdegolia@cfk.com jlyons@cfk.com 6 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SONOMA 10 11 VILLA ROSA HOMEOWNERS Case No. SCV-267991 ASSOCIATION, 12 VILLA ROSA HOMEOWNERS 13 Plaintiff, ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON 14 vs. MOTION FOR ATTORNEYS’ FEES 15 VALLEN W. COOPER, an individual; DATE: March 22, 2023 VALLEN W. COOPER, CPM, INC., 16 individually and dba COMMONWEALTH TIME: 3:00 p.m. PROPERTY MANAGEMENT; CTRM: 18 17 COMMONWEALTH ASSOCIATION 18 MANAGEMENT, INC.; KELLIN A. Assigned to the Honorable Christopher M. BAKER, individually and dba Honigsberg 19 ACCURATE PROPERTY SERVICES aka ACCURATE MAINTENANCE & 20 JANITORIAL; CHAD W. COOPER, an 21 individual; and DOES 1 through 50, 22 Defendants. 23 24 25 26 27 28 VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 1 1 Table of Contents I. INTRODUCTION ...................................................................................................4 2 II. QUESTIONS TO VILLA ROSA ............................................................................4 3 Question to Plaintiff No. 1: ......................................................................................4 4 Response to Plaintiff’s Question 1:..............................................................4 5 Question to Plaintiff No. 2: ......................................................................................5 6 Response to Plaintiff’s Question No. 2: .......................................................5 7 Question to Plaintiff No. 3: ......................................................................................6 8 Response to Plaintiff’s Question No. 3 ........................................................7 9 Question to Plaintiff No. 4: ......................................................................................8 10 Response to Plaintiff’s Question No. 4: .......................................................8 11 Question to Plaintiff No. 5: ......................................................................................9 12 Response to Plaintiff’s Question No. 5: .......................................................9 13 III. QUESTIONS TO DEFENSE ................................................................................13 14 Question to Defense No. 1: ....................................................................................13 15 Plaintiff’s Response to Defense Question No. 1:.......................................13 16 Question to Defense No. 2: ....................................................................................13 17 Plaintiff’s Response to Defense Question No. 2:.......................................13 18 Question to Defense No. 3: ....................................................................................14 19 Plaintiff’s Response to Defense Question No. 3:.......................................14 20 Question to Defense No. 4: ....................................................................................14 21 Villa Rosa Response to Question No. 4: ....................................................14 22 Question to Defense No. 5: ....................................................................................16 23 Villa Rosa Response to Question No. 5: ....................................................16 24 IV. QUESTIONS FOR BOTH PARTIES ...................................................................18 25 Question to Both Parties No. 1: .............................................................................18 26 Plaintiff’s Response to Question to Both Parties No. 1: ............................18 27 V. CONCLUSION ......................................................................................................21 28 VI. APPENDIX 1 .........................................................................................................22 VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 2 Table of Authorities 1 Page(s) 2 Cases 3 Galan v. Wolfriver Holding Corp., (2000) 80 Cal.App.4th 1124 ................................................. 20 4 Gilbert v. National Enquirer, Inc., (1997) 55 Cal.App.4th 1273 ........................................... 19, 20 5 Heather Farms Homeowners Ass'n v. Robinson, (1994) 21 Cal.App.4th 1568 ........................... 21 6 7 Heimlich v. Shivji, (2019) 7 Cal.5th 350....................................................................................... 17 8 Int'l Indus., Inc. v. Olen, (1978) 21 Cal.3d 218 ............................................................................ 21 9 McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn., (1991) 231 Cal.App.3d 1450 ................................................................................................................. 21 10 11 Santisas v. Goodin, (1998) 17 Cal.4th 599 ................................................................................... 19 12 Silver v. Boatwright Home Inspection, Inc., (2002) 97 Cal.App.4th 443 ........................... 8, 13, 18 13 White v. W. Title Ins. Co., (1985) 40 Cal. 3d 870 ......................................................................... 16 14 Rules 15 California Rules of Professional Conduct Rule 3.3(a)(1)-(2) ....................................................... 18 16 Statutes 17 Code Civ. Proc. § 998 ................................................................................................................... 17 18 Evid. Code § 1152......................................................................................................................... 17 19 20 21 22 23 24 25 26 27 28 VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 3 1 I. INTRODUCTION 2 Villa Rosa Homeowner’s Association (“Villa Rosa”) provides these responses to the 3 Court’s questions to the parties on or about February 10, 2023, following the Court’s hearing on 4 the Defendant Vallen W. Cooper, CPM, Inc. dba Commonwealth Property Management’s 5 (“Defendant” or “Commonwealth”) Motion for Attorney Fees and Costs (“Motion”). 6 II. QUESTIONS TO VILLA ROSA 7 QUESTION TO PLAINTIFF NO. 1: 8 The original complaint included a prayer for special damages in the amount of 9 approximately $1.46 million. The first amended complaint similarly included a prayer for special 10 damages in the amount of approximately $1.46 million. How did plaintiff calculate those special 11 damages? 12 RESPONSE TO PLAINTIFF’S QUESTION 1: 13 The first complaint was filed on March 12, 2021. As stated in the complaint, (see ¶30 of 14 Villa Rosa Complaint), the demand for $1,462,209 was based on the following areas of damage 15 incurred by Villa Rosa as a result of Defendants’ negligence, fraud, and breach of contract, 16 diminution in real property value, repair costs, and increased premiums. (Declaration of 17 Nicholas J. Bernate (“NJB Dec.”) at ¶2.) The vast majority of the alleged damages related to the 18 massive increase in insurance premiums Villa Rosa suffered due to Defendants’ actions. 19 Prior to the second fraudulent insurance claim Vallen Cooper (“Vallen”), Chad Cooper 20 (“Chad”), and Commonwealth made on Villa Rosa’s behalf without the association’s knowledge, 21 Villa Rosa was paying $45,818.00 per year in insurance premiums for its Travelers’ policy. 22 (Declaration Dan Ellecamp in Support of Villa Rosa Homeowner Association’s Opposition to 23 Defendant’s Motion for Attorneys’ Fees (“Ellecamp Dec.”) ¶16.) After the second fraudulent 24 claim made by Vallen, Chad, and Commonwealth, Villa Rosa was deemed an unacceptable 25 insurance risk and Travelers determined it would not renew Villa Rosa’s policy. (Ellecamp Dec. 26 at ¶¶14-15.) After a frantic search by George Petersen Insurance, Villa Rosa’s insurance broker, 27 Villa Rosa was ultimately able to obtain a non-standard policy with a premium cost of 28 $285,052.40, an annual increase of $239,222.40. (Id.) Though it was entirely unclear whether VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 4 1 Villa Rosa would be capable of ever returning to the standard market, it was certain that at 2 minimum, Villa Rosa would be in the non-standard marketplace for an additional three (3) years. 3 Thus, over those three years, it would suffer approximately $717,667.20 in increased premiums. 4 In addition to the allegations regarding Vallen, Chad, and Commonwealth’s fraudulent 5 insurance claim, the Complaint also alleged that the work Defendants claimed to have performed 6 on the Villa Rosa property (“Premises”), was never performed. Meaning that while Villa Rosa 7 had been required to seek non-standard insurance because of the two claims, it never received the 8 benefit Accurate Maintenance and Janitorial (“AMJ”) supposedly provided to the association, 9 namely power washing the Premises. As such, included in the original claim for $1.46 million 10 was the value of the two insurance claims, $493,708.16 (the November 1, 2019 “Kincade 11 Claim”) and $248,990.59 (the September 4, 2020 “Walbridge Claim”) (NJB Dec. at ¶2.) 12 In total, the additional insurance premiums of $717,667.20 plus the Walbridge Claim, 13 plus the Kincade Claim, cost Villa Rosa approximately $1,460,365.95. Villa Rosa also sought 14 punitive damages. 15 QUESTION TO PLAINTIFF NO. 2: 16 The second amended complaint included a prayer for special damages in the amount of 17 $184,685.00. The second amended complaint was filed in January 2022. In October 2021, 18 Travelers reinstated the insurance policy at the prior rate. How did plaintiff calculate the 19 $184,685.00 in damages in January 2022? 20 RESPONSE TO PLAINTIFF’S QUESTION NO. 2: 21 Plaintiff calculated the $184,685.00 based on two items: (1) the additional premiums it 22 paid from the time of the non-renewal of the Travelers policy until its partial retroactive 23 reinstatement pursuant to the terms of Villa Rosa’s settlement agreement with Travelers; and (2) 24 the $24,685.41 “management fee” Commonwealth took for making the first fraudulent Kincade 25 Claim. (NJB Dec. at ¶3). 26 The delta between the original demand of $1,460,365.95 and the $184,685.00 is almost 27 entirely based on the amount of premiums saved by Villa Rosa as a result of its settlement with 28 Travelers which, in turn, was heavily reliant on the underlying litigation. Effectively, as a direct VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 5 1 result of its settlement with Travelers, Villa Rosa was able to reduce its premiums by 2 $743,365.95. The remainder of the reduction was similarly related to the settlement with 3 Travelers. In particular, as discussed further below, prior to the settlement, Travelers intended to 4 file a claim for insurance fraud against both Villa Rosa and Defendants, for the value of the two 5 subject insurance claims. (Declaration of Nicholas J. Bernate submitted in Support of Villa Rosa 6 Homeowners Association’s Opposition to Defendant’s Motion for Fees (“NJB Dec. to Opp”) at 7 ¶2). As part of its settlement agreement with Travelers, Villa Rosa was obligated to return to 8 Travelers the value of the second fraudulent claim, the Walbridge Claim, which totaled 9 $248,990.59 by making an initial payment of $98,990.59 and thereafter making monthly 10 payments. (Exhibit 2 to Ellecamp Dec.). In addition, Travelers, understanding that Villa Rosa 11 was a victim of fire insurance fraud, and that Vallen, Chad, and Commonwealth, had already, 12 unbeknownst to Villa Rosa, distributed the $493,708.16 from the Kincade Claim, forgave that 13 amount from Villa Rosa. (Id.) However, it was also understood that if Villa Rosa were to 14 successfully recover the $493,708.16 from Defendants, it would ultimately be obligated to 15 reimburse Travelers for that value. Similarly, as Travelers’ policy had been reinstated, it was not 16 clear that Villa Rosa maintained standing to recover the $248,990.59 from Defendants. For these 17 reasons, the total actual value of the Kincade Claim and the Walbridge Claim, $742,698.75, was 18 removed from Villa Rosa’s damage claim in its second amended complaint. 19 The critical aspect of this reduction is that it had absolutely nothing to do with the merits 20 of Villa Rosa’s claims (see below) or Defendants’ claimed legal prowess. The reduction in 21 damages occurred because, as a direct result of its litigation against Commonwealth, and its 22 prelitigation settlement with Travelers, Villa Rosa was able to effectively limit its damages. 23 QUESTION TO PLAINTIFF NO. 3: 24 In Nicholas Bernate’s email to Villa Rosa on April 20, 2022, he states that, on behalf of 25 Villa Rosa, he sought to join Traveler’s lawsuit. Travelers refused to stipulate. If Villa Rosa 26 already had the policy premiums reinstated in October 2021 and Villa Rosa believed the 27 defendants were insolvent, why did Villa Rosa desire to join Travelers’ lawsuit? If the litigation 28 objective of reinstating the original premium was achieved in October 2021, what was the VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 6 1 litigation objective in joining Travelers’ lawsuit at that point? 2 RESPONSE TO PLAINTIFF’S QUESTION NO. 3 3 From the beginning of the lawsuit, the litigation objective was to compensate Villa Rosa 4 for the damages it incurred as a result of Defendants’ actions. As described above, ultimately, 5 through its prelitigation settlement with Travelers, Villa Rosa was able to reduce its premium 6 increase damages significantly. And, as detailed, it was determined that the additional damages 7 sought were likely no longer recoverable given said lawsuit. While in April 2022, Villa Rosa’s 8 damages had been reduced to $184,685,00, that nonetheless represented a significant cost to a 9 low to middle income homeowners’ association like Villa Rosa. Joining the Travelers’ lawsuit 10 provided the potential opportunity to minimize Villa Rosa’s financial risk in paying its own 11 attorneys’ fees and costs while also maintaining some prospect of recovery. To that end, joining 12 the Travelers’ lawsuit meant that Villa Rosa could rely on Travelers resources for discovery, 13 experts, etc. while maintaining a background position. (NJB Dec. at ¶4). If Travelers were 14 successful in their fraud claim, Villa Rosa would also have the potential of some recovery based 15 on its own similar claim. (Id.) Effectively, joining the Travelers lawsuit meant that Villa Rosa 16 could “ride the coattails” of Travelers and its substantial war chest while keeping some potential, 17 though unlikely, ability to recover the remaining $184,685. (Id.) 18 To be sure, joining the Travelers lawsuit was only one piece of Villa Rosa’s decision to 19 send the eventual § 998 offers and then dismissing without prejudice. Nonetheless, after 20 Travelers notified Villa Rosa that it would object to Villa Rosa joining the lawsuit, it effectively 21 meant that Villa Rosa would continue to pay substantial fees and costs to try and recover against 22 an apparently insolvent company and their seemingly insolvent owners. Given Defendants’ 23 scorched-earth approach to litigation, and apparent willingness to spend money on their attorney 24 rather than negotiate with their ex-clients to whom they owed a fiduciary obligation, the 25 likelihood of throwing “good money after bad” greatly increased when Travelers objected to 26 Villa Rosa’s joinder. 27 ///// 28 ///// VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 7 1 QUESTION TO PLAINTIFF NO. 4: 2 Mr. Bernate’s April 20, 2022, email states that Villa Rosa’s damages had been reduced to 3 $120k to $250k. The $30,000 settlement was approximately 12% to 25% of the remaining 4 damages. Please argue how you believe the Court should view this settlement. Please discuss 5 Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443. In Silver, the plaintiffs 6 obtained nearly their entire damages, approximately 98% or $68,500 out of $70,000 in claimed 7 damages. How does that percentage of recovery compare to plaintiff’s percentage of recovery? 8 RESPONSE TO PLAINTIFF’S QUESTION NO. 4: 9 In Silver, the court did not apply a percentage of recovery analysis in making its 10 determination. The court of appeal followed the practical approach from Santisas that tasks the 11 trial court to determine the reasons for the plaintiff’s dismissal: (1) whether it was after obtaining 12 all or most of the requested relief through settlement or otherwise; or, (2) whether there were 13 other reasons that had nothing to do with the with the probability of success. Silver v. 14 Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 451. The Silver court agreed with 15 the trial court’s determination “that viewing plaintiffs’ case as a whole, plaintiffs are the 16 prevailing parties for purposes of Boatwright's motion for attorney's fees because they recovered, 17 or were in the process of recovering, significant relief.” Id. at 452. 18 The practical approach urges the court to take a holistic view of the reasons behind the 19 dismissal. In Silver, there was no reason for the trial court to factor-in any other reasons for 20 plaintiff’s dismissal because of the extent of the relief obtained by the plaintiff. However, it is 21 important to note that while significant relief was found in Silver to be determinative, authorities 22 on pretrial dismissals do not require a court to find that a plaintiff obtained significant relief (or 23 any relief at all). Instead, the court considers all the reasons of plaintiff’s decision to dismiss. 24 Villa Rosa did nonetheless recover a substantial percentage of its damages. As described 25 above, Villa Rosa’s initial demand was $1,460,365.95 of which $742,698.75 related to the 26 insurance money paid by Travelers for the Kincade Claim and the Walbridge claim. Any 27 recovery by Villa Rosa would likely have been paid directly to Travelers; as evidenced by the 28 terms of the Villa Rosa-Travelers settlement agreement. As such, the likely recoverable VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 8 1 damages incurred by Villa Rosa was related to (a) additional premiums plus (b) the 2 “management fee” Commonwealth charged to Villa Rosa. (NJB Dec. at ¶5.) These totaled 3 approximately $719,510.25. After the pre-litigation settlement agreement with Travelers, Villa 4 Rosa’s damages were reduced down to $184,685.00. (Id.) Following the $30,000.00 recovered 5 in its 998 judgments from the individual defendants (the owners of Commonwealth and AMJ), 6 Villa Rosa’s final unrecovered damages was $154,685. (Id.) Comparing the actual damages 7 incurred by Villa Rosa, $719,510.25, against $154,685 in unrecovered damages, Villa Rosa 8 recovered seventy-nine percent (79%) of its claimed damages. (Id.) 9 In addition to a significant recovery, Plaintiff’s board of directors made a business 10 decision to not spend more of its members’ resources to continue pursuing the remaining entity 11 defendants knowing that the defendants’ counsel engages in aggressive tactics that will cost 12 additional money as demonstrated by this motion as well as defendants’ prior motions. 13 Furthermore, the continuing litigation and prosecution of the defendants for insurance fraud by 14 others made the prospects of any further recovery unlikely. 15 All things considered, like Silver, Villa Rosa achieved significant relief as a direct result 16 of filing its lawsuit; and, Commonwealth did not receive a favorable judgment because it was 17 determined not to have liability to Villa Rosa. Its judgment came in the form of a dismissal. 18 QUESTION TO PLAINTIFF NO. 5: 19 What information did Villa Rosa have regarding the solvency of defendants? Was this an 20 assumption based on the overall circumstances of the other lawsuits and prosecution or did Villa 21 Rosa have financial information about the solvency of defendants? 22 RESPONSE TO PLAINTIFF’S QUESTION NO. 5: 23 Villa Rosa obtained judgments against all three individual defendants, Vallen W. Cooper, 24 Chad W. Cooper, and Kellin A. Baker. Meaning, at the time of dismissal, the only remaining 25 defendants were the corporations, Vallen W. Cooper, CPM, Inc., dba Commonwealth Property 26 Management and Commonwealth Association Management, Inc., (collectively, 27 “Commonwealth”). Thus, Villa Rosa’s determination regarding recoverability against 28 Commonwealth was whether the corporations were capable of paying a significant judgment. VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 9 1 Prior to dismissal, Villa Rosa had pieces of information which, when taken together, 2 reasonably pointed to the likelihood that any judgment against Commonwealth would either be 3 discharged in bankruptcy or otherwise not recoverable: 4 The Travelers Complaint: As noted in its Opposition to Defendants’ Motion for 5 Attorneys’ Fees, on or about February 22, 2022, about 45 days after Villa Rosa filed its Second 6 Amended Complaint, counsel for Villa Rosa received a copy of Travelers’ Complaint against 7 Defendants seeking the following, in relevant part: (1) $6,360,138.39 for treble damages for each 8 of the seven fraudulent insurance claims made and paid out by Travelers; (2) civil penalties in 9 the amount of $110,000, relating to the eleven fraudulent insurance claims made by Defendants; 10 (3) attorneys’ fees and costs; (4) a constructive trust against all Defendants, against “any and all 11 real property, personal property and accounts from the conduct alleged in the complaint;” and (5) 12 an equitable lien against all Defendants, against “any and all real property, personal property and 13 accounts from the conduct alleged in the complaint.” (NJB Dec. to Opp. at ¶5; Exhibit 3 to Villa 14 Rosa’s Request for Judicial Notice in Support of Villa Rosa Homeowners Association’s 15 Opposition to Defendant’s Motion for Attorneys’ Fees (“RJN iso Opp.”). 16 In addition to the demand, the Complaint also set forth, in detail, the manner in which 17 Defendants had committed insurance fraud by using the guise of the devastating Sonoma County 18 wildfires to make false insurance claims purportedly on behalf of eleven (11) Sonoma County 19 homeowners’ associations. (Id.) Given the relative size of Commonwealth – it is a small, 20 locally-based corporation – it would be unreasonable to believe Commonwealth could (a) pay a 21 judgment for over $6 million or (b) otherwise pay for attorney’s fees and costs to defendant 22 Travelers lawsuit, Villa Rosa’s claim, and Commonwealth’s claim against George Petersen 23 Insurance. (NJB Dec. at ¶6). As to the latter issue, a brief review of the docket in the subject 24 case, People of the State of California v. Baker, et al. SCV-269077, Superior Court, County of 25 Sonoma, indicates the massive funds Commonwealth is expending on fees and costs. 26 Commonwealth, et al. v. George Petersen Insurance: On November 23, 2021, Vallen W. 27 Cooper, Vallen W. Cooper, CPM, Inc., and Commonwealth Association Management, Inc., filed 28 suit against George Petersen Insurance Agency, Inc., and its broker Rachel Adams. (See Cooper VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 10 1 et al. v. Rachel Adams, et al., SCV-269735). Counsel for Villa Rosa was made aware of this 2 lawsuit on January 21, 2022, via communications from counsel for George Petersen Insurance 3 (“GPI”). (NJB Dec. at ¶7). 4 The crux of the complaint centers around Rachel Adams’ communications with various 5 homeowners’ associations who, through their affiliation with George Petersen Insurance Agency 6 (Ms. Adams’s employer) as their insurance broker, learned from Ms. Adams of the unauthorized 7 and fraudulent insurance claims made by Commonwealth on their behalf. (Exhibit A to NJB 8 Dec.) While there is no doubt that Ms. Adams was correct, and potentially duty-bound, to notify 9 her clients of these insurance fraud claims, the portion of the claim relevant to the immediate 10 issue are the various damages claimed by Commonwealth. To wit, in their complaint, 11 Commonwealth alleged to have suffered the following: (1) ten separate homeowners 12 associations refused to do business after learning of Commonwealth et al.’ fraudulent claims; (2) 13 lost revenue in excess of $162,000 and continued loss of revenue of $331,948 annually; (3) the 14 loss of ¼ of Commonwealth’s staff at a purported value of $250,000; (4) damages suffered to its 15 reputation in the amount of $10,000,000. (Id.) While it is possible Commonwealth maintained a 16 reputation valuable enough to support a loss of $10,000,000, the allegation that ten different 17 clients fired them was considered in 2021, to be an accurate allegation, as was the general loss of 18 reputation (“NJB Dec. at ¶8). Thus, notwithstanding the absolutely incredible claim that ten 19 different homeowners’ associations separately came to the same conclusion that Commonwealth 20 had defrauded and abused their position as fiduciary for their clients solely based on Ms. 21 Adams’s comments, the underlying allegations regarding Commonwealth’s losses were 22 impactful on Villa Rosa’s determination to dismiss. (Id.) Namely, that Commonwealth had 23 suffered significant, likely permanent financial losses. (Id.) Given that Vallen W. Cooper, CPM, 24 Inc., dba Commonwealth Property Management and Commonwealth Association Management, 25 Inc., are service-based companies, relying exclusively on fees for managing various properties 26 around Sonoma County, the companies were unlikely to have any tangible assets. Without 27 clients, Commonwealth had no income and no tangible assets. 28 ///// VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 11 1 Investigations by Insurance Commissioner SIU Teams: As outlined in Nicholas 2 Bernate’s Declaration in Support of Villa Rosa Homeowners Association’s Opposition to 3 Defendants’ Motion for Attorneys’ Fees, prior to dismissal against Commonwealth, Mr. Bernate 4 had spoken with three separate investigators who had determined that Commonwealth had 5 committed fraud, two Special Investigation Unit investigators from Travelers and Nationwide, 6 and Martin “Marty” Dito, investigator from the California Department of Insurance. (NJB Dec. 7 to Opp. at ¶¶3-4). In each case, the investigator notified Mr. Bernate that they had heard the 8 same story from multiple Sonoma County homeowners associations; i.e. Commonwealth had 9 made unauthorized fraudulent insurance claims on their behalf, without their knowledge, and 10 with no basis for the alleged damages. (Id.) The details of the investigations and apparent 11 conclusions of these investigators is detailed below. But, for purposes of determining whether 12 Commonwealth could financially support a judgment against it by Villa Rosa, the high chance 13 that Travelers, Nationwide (who determined there were four associations for whom 14 Commonwealth had made claims), and the Sonoma County District Attorneys’ Office would 15 prosecute Commonwealth, further supported the conclusion that Commonwealth was, or would 16 shortly become, insolvent. 17 Although Villa Rosa was not in possession of documents specifically outlining any 18 assets, liability, or general financial condition of Commonwealth, absent a punitive damage 19 finding, those documents would be privileged and otherwise unobtainable during the normal 20 course of this litigation. Meaning, Villa Rosa has no way to prove Commonwealth was actually 21 insolvent absent the company filing bankruptcy. But, as the foregoing shows, for purposes of 22 considering the likelihood that Commonwealth would be able to remain solvent or otherwise 23 satisfy a judgment against it in Villa Rosa’s favor, it was entirely reasonable for Villa Rosa to 24 conclude that it could not. Instead, it was more likely than not that Villa Rosa would expend vast 25 sums of fees and costs to ultimately become an unsecured creditor against an insolvent company. 26 Rather than continue to spend fees and costs, Villa Rosa settled with Vallen W. Cooper (owner 27 of Vallen W. Cooper, CPM, Inc., and President of Commonwealth Association Management, 28 Inc.) and Chad W. Cooper (Vice President of Commonwealth Association Management, Inc.), VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 12 1 and Kellin Baker, for $30,000 and dismissed the corporate defendants without prejudice. To do 2 otherwise would have been entirely impractical. 3 III. QUESTIONS TO DEFENSE 4 QUESTION TO DEFENSE NO. 1: 5 In the reply brief filed February 1, 2023, page 1, line 7, defendant states that plaintiff was 6 pleading more than $2.2 million. Was that prior to the second amended complaint and after the 7 second amended complaint? What was the breakdown of the $2.2 million in damages? 8 PLAINTIFF’S RESPONSE TO DEFENSE QUESTION NO. 1: 9 It is unclear where Defendants came up with this total. 10 QUESTION TO DEFENSE NO. 2: 11 Defense argues the case was dismissed because the case against the defendants was 12 negated by witnesses. Can you cite to any cases/authority that allows the Court to consider the 13 merits of the lawsuit and likelihood of prevailing at trial when determining the prevailing party? 14 Is there any authority that the Court cannot consider the merits of the case when determining the 15 prevailing party? 16 PLAINTIFF’S RESPONSE TO DEFENSE QUESTION NO. 2: 17 The merits of the lawsuit and the likelihood of prevailing at trial are not part of the trial 18 court’s analysis in pretrial dismissal cases where “prevailing party” is not defined for the 19 recovery of attorney’s fees. This was made clear in Santisas and Olen and is restated in Silver v. 20 Boatwright stating: “Regarding this matter of a plaintiff's probability of success on the merits of 21 its case had there been no pretrial voluntary dismissal, the Santisas court stated that ‘scarce 22 judicial resources should not be used to try the merits of voluntarily dismissed actions merely to 23 determine which party would or should have prevailed had the action not been dismissed.’” 24 Silver, 97 Cal.App.4th at 451. Instead, “the court must utilize its discretion in determining 25 whether such defendant should be considered a prevailing party for the purpose of recovering 26 attorney's fees as costs under sections 1032 and 1033.5. In exercising that discretion, the court 27 may consider the reason for the dismissal, including whether the parties have reached their 28 litigation objectives by settlement, judgment, or other means.” Id. at 452. VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 13 1 Notwithstanding the foregoing, if the Court decides to consider the merits of the 2 underlying case, Villa Rosa has provided a summary of the evidence and further argument 3 demonstrating the merits of Villa Rosa’s case in Appendix 1, submitted herewith. 4 QUESTION TO DEFENSE NO. 3: 5 Defense argues there were multiple attempts to settle the case shortly after the complaint 6 was filed. Can you cite to any cases/authority that allows the Court to consider settlement 7 attempts when determining the prevailing party? Is there any authority that the Court cannot 8 consider a defendant’s offers to settle when determining the prevailing party? 9 PLAINTIFF’S RESPONSE TO DEFENSE QUESTION NO. 3: 10 Villa Rosa was unable to locate case law which supported the premise that settlement 11 attempts may or may not be considered for this purpose. However, in pretrial dismissal cases 12 where the trial court must consider plaintiff’s reasons for dismissal to determine prevailing party 13 under the practical approach, settlement attempts might be helpful. Certainly, a defendant’s 14 refusal of a reasonable offer to settle, or a defendant’s unreasonable offer to plaintiff, could very 15 well factor into a Plaintiff’s reasons for dismissal. 16 QUESTION TO DEFENSE NO. 4: 17 What evidence is there of defendant’s offers to settle? 18 VILLA ROSA RESPONSE TO QUESTION NO. 4: 19 In his declaration, Attorney Erlach claims, under oath, that on numerous occasions, he 20 offered to “resolve” this matter on behalf of Defendants early in litigation. Attached to the 21 Bernate Declaration submitted herewith as Exhibits B, C, D, and E are copies of Defendants’ 22 supposed offers to settle. As the Court can see, the “offers” were nothing more than borderline 23 unprofessional threats and chest pounding and offered absolutely no reasonable offer or good 24 faith attempt to resolve this case. A representative example of Defendants’ “offers,” and the way 25 in which their attorney made absolutely no effort to actually resolve this matter prior to his 26 clients agreeing to pay $30,000 in damages, is an email Attorney Erlach sent to Villa Rosa 27 counsel on May 21, 2021. (Exhibit F to NJB Dec.) The email states without revision: 28 ///// VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 14 1 From: Raymond Erlach Sent: Friday, May 21, 2021 7:23 PM 2 To: Nicholas Bernate ; Peter Degolia ; 3 Lisa Holmberg Cc: Jennifer Pearl 4 Subject: RE: Villa Rosa Homeowners Association v. Vallen W. Cooper, et al. 5 WRITTEN SETTLEMENT DEMAND 6 Dear Counsel, cc’s of Ms. Turler’s email: 7 Written Settlement Demand: Dismiss the amended complaint with prejudice with the stipulated order that the court will set Defendants’ attorney’s fees and the 8 amount of defendants’ damages, including loss of income and harm to reputation in an expedited proceeding. This offer is open for seven days and then if not 9 accepted, it is revoked. 10 In support of this generous offer, we can confirm to you that the Villa Rosa HOA 11 along with each attorney listed in Ms. Turler’s email transmitting the amended complaint will be a defendant in the malicious prosecution lawsuit for the false 12 fraud allegations, after [not if] the amended complaint ends up in the same dark place as your original complaint. We had warned you, but to the detriment of 13 your client, you have persisted. 14 Additionally, we are sure you have already advised your client that the fees 15 opposing this action are subject to the attorney’s fees clause of the parties’ written agreement; and then, there is also recovery under the indemnity clause. The 16 situation should be of little comfort to your client, as our current fees exceed $40,000, and, upon the inevitable “deposition” of the amended complaint in its 17 preordained grave, our fees will likely exceed $60,000 as you will throw up 18 everything you can think of to protect… yourselves. And the Villa Rosa Homeowners will be responsible for 100% of all of the defendants’ fees---as you 19 no doubt have advised it before filing, right? Now, you didn’t advise the HOA that you would recover your fees from the defendants such that this case would 20 cost them nothing, or did you? 21 And, I am not sure you have advised your client that, even at the point the 22 HOA acknowledges its responsibility for the defendants’ fees, it will not be through with its liability for damages to my Clients, have you? As in things of 23 this sordid nature, attorney fees are just the start of the Villa Rosa Homeowners’ liability for the damages done to my Clients. The damages exceed the HOA’s 24 entire annual budget. Hmmm…do you think the HOA knew that? Perhaps the HOA can look for some monetary help from Ms. Adams or Ms. Zimmerman 25 or from Travelers’ investigator or from whatever hearsay source it is that your 26 firm has been parroting in the place of performing a competent investigation into the facts. That may not be productive, but it may be more productive than a call 27 to me for a walkaway settlement---no releases without full compensation here. Regards, --Ray Erlach 28 VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 15 Raymond N. Stella Erlach, State Bar Number 056958 1 LAW OFFICES OF RAYMOND N. STELLA ERLACH 2 //// 3 Needless to say, a defendant “offering” to have an opposing party take a judgment 4 against them for attorneys’ fees and damages where the defendant has not even filed a 5 counterclaim, is not an “attempt to resolve” the case. It is not surprising that Attorney Erlach 6 neither attached nor even referenced his May 21, 2021, email anywhere in his declaration, let 7 alone under his “Attempts to Resolve” heading. Defendants never attempted to “resolve” this 8 case. Instead, they and their attorney did nothing but make excessive threats and take a largely 9 unsuccessful scorched-earth approach before the individual defendants eventually had judgments 10 taken against them. 11 QUESTION TO DEFENSE NO. 5: 12 How should the Court consider the fact that defendant refused plaintiff’s 998 offer of 13 only fees and costs? Is there evidence of a plaintiff 998 for only fees and costs other than the last 14 sentence of the April 20, 2022, email from Mr. Bernate to Villa Rosa? Does the refusal by 15 defendants to accept the 998 and ultimate dismissal by plaintiff factor into the analysis of 16 prevailing party? Is there any authority to support the Court considering 998 offers when 17 determining the prevailing party? Is there any authority that the Court cannot consider 998 offers 18 when determining the prevailing party? 19 VILLA ROSA RESPONSE TO QUESTION NO. 5: 20 The Court Can Consider Defendants’ Refusal to Accept Plaintiff’s §998 offer: 21 Our Supreme Court in White v. W. Title Ins. Co. (1985) 40 Cal. 3d 870, 888-89 states: 22 We believe, however, that despite their difference in wording sections 1152 and 998 23 should receive a parallel construction. Section 1152 states that offers are inadmissible to prove “liability for the loss or damage,” which we have construed to refer to liability for 24 that loss or damage to be compromised by the offer. Section 998, subdivision (b), states that an offer cannot be “given in evidence upon the trial.” We think that language refers 25 to the trial upon the liability which the offer proposed to compromise. Thus both sections would serve the same purpose; to bar the introduction into evidence of an offer to 26 compromise a claim for the purpose of proving liability for that claim, but to permit its 27 introduction to prove some other matter at issue. It would seem to be consistent with White for the trial court to consider settlement offer 28 VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 16 1 history, including 998 offers, to prove “some other matter at issue” such as the reasons for a 2 plaintiff’s dismissal. 3 This is also supported in later decisions, although none that plaintiff could find directly 4 on a pretrial dismissal case. “While the Evidence Code bars admission of a settlement offer 5 specifically “to prove [a party's] liability for … loss or damage” (Evid. Code, § 1152, subd. (a)), 6 the Code of Civil Procedure states without any limitation that a declined 998 offer “cannot be 7 given in evidence” (Code Civ. Proc. § 998, subd. (b)(2)). Nonetheless, we concluded that 8 provision should be read to implement the same policies as those underlying the Evidence Code 9 bar, and thus be subject to similar limitations, notwithstanding its absolute terms. Accordingly, 10 although a 998 offer is inadmissible to prove liability, it may be admissible to prove unrelated 11 matters.” Heimlich v. Shivji (2019) 7 Cal.5th 350, 360. 12 Plaintiff Offered Commonwealth a Waiver of Costs and Fees: 13 On June 11, 2022, Defendants filed their Case Management Conference statement. 14 (Exhibit A to Declaration of Peter C. DeGolia.) Therein, Defendants noted that the individual 15 defendants had “compromised via Section § 998” for $10,000 each. (Id.) Defendants then 16 demanded that Plaintiff dismiss the remainder of the case. (Id.) Having obtained its litigation 17 objective and judgments against the owners of the defendant corporations, Plaintiff was willing 18 to offer a walkway for a waiver of costs and fees, as referenced in Defendants’ CMC statement. 19 On June 15, 2023, Villa Rosa served upon both Commonwealth Association 20 Management Inc., and Vallen Cooper, CPM, Inc., Offers to Compromise pursuant to Code Civ. 21 Proc. §998. (Exhibit B to Declaration of Peter C. DeGolia.) 22 The Court Should Consider the Corporate Defendants’ Refusal to Accept Plaintiff’s Offer to 23 Settle for a Waiver of Costs and Fees: 24 The Court should consider Commonwealth and Vallen Cooper, CPM, Inc.’s refusal to 25 accept Plaintiff’s § 998 offers when determining plaintiff’s reasons for dismissal. The intent 26 with Villa Rosa’s §998 offer, as with all such offers, was to cease litigation and avoid either 27 party incurring additional fees and costs. As Villa Rosa was faced with the prospect of 28 recovering its approximately $154,000 in damages against a likely insolvent corporation, or face VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 17 1 a meritless fee motion, the § 998s were a reasonable last effort to avoid likely unfruitful motions 2 and appeals. Rather than accept the offers and cut-off their potential liability with finality, the 3 corporations decided to exploit their strategic position in hopes of this Court granting 4 Defendants, as a whole, attorneys’ fees. Specifically, the individual owners of the corporations 5 had already taken a judgment against them for $30k total, inclusive of attorneys’ fees. Meaning, 6 if Villa Rosa continued litigating against the corporations, any judgment against them could not 7 include attorneys’ fees against Vallen Cooper, Chad Cooper, or Kellin Baker. Instead, the 8 judgment would be limited to two likely insolvent corporations, with no apparent assets to satisfy 9 any judgment, and the opportunity to go bankrupt. By denying the § 998s, the corporations 10 risked little in order gain the benefit of filing the immediate motion where they demand fees 11 spent defending both the corporations and their otherwise judgment-proof owners. Granting 12 Defendants’ attorneys’ fees under these circumstances would be entirely unequitable and against 13 the purpose both of § 998 offers and the pragmatic approach necessitated by Olen, Santisas, etc. 14 IV. QUESTIONS FOR BOTH PARTIES 15 QUESTION TO BOTH PARTIES NO. 1: 16 Other than Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, does 17 either party have any cases to cite to the Court regarding the determination of prevailing party 18 when the action against the defendant is dismissed? Please limit any citations and analysis to a 19 maximum of three to five cases. Please do not repeat Olen, Hsu or Santisas as cited in the prior 20 briefs. 21 PLAINTIFF’S RESPONSE TO QUESTION TO BOTH PARTIES NO. 1: 22 The court requested the parties provide cases other than Silver v. Boatwright Home 23 Inspection, Inc. (2002) 97 Cal.App.4th 443 regarding the determination of prevailing party when 24 the action against the defendant is dismissed. The court then asks the parties not to repeat Olen, 25 Hsu, or Santisas as cited in the prior briefs. 26 It is important to note that Hsu does not belong in a pretrial dismissal discussion—it was 27 not a pretrial dismissal case. It was a section 1717 case regarding a single contract claim after 28 trial. Moving party’s reply brief tread extremely close to violating California Rules of VILLA ROSA HOMEOWNERS ASSOCIATION’S RESPONSE TO COURT INQUIRIES FOLLOWING HEARING ON MOTION FOR ATTORNEYS’S FEES 18 1 Professional Conduct Rule 3.3(a)(1)-(2) when it urged this court to apply Hsu and to limit its 2 consideration to only the pleadings and like sources to determine the prevailing party. 3 Santisas held that when the statute or contract that the moving party is claiming 4 attorney’s fees under fails to “define ‘prevailing party’ or expressly either authorize or bar 5 recovery of attorney fees in the event an action is dismissed, a court may base its attorney fees 6 decision on a pragmatic definition of the extent to which each party has realized its litigation 7 objectives, whether by judgment, settlement, or otherwise.” Santisas v. Goodin (1998) 17 8 Cal.4th 599, 622. As such, when a dismissed party makes a claim for attorneys’ fees as a 9 prevailing party under Civil 1032 and 1033.5, the court is to determine the prevailing party using 10 that pragmatic approach. The following