Maurice Heffernan et al vs Nationstar Mortgage LLC

The duty of candor is not simply an obligation to answer honestly when asked a direct question by the trial Court. It includes an affirmative duty to inform the Court when a material statement of fact or law has become false or misleading in light of subsequent events. Attorneys also have an ethical obligation to advise the Court of legal authority that is directly contrary to a claim being pressed.

Fees

Plaintiff agreed to Nationstar's recovery of Attorneys' Fees under the Deed of Trust and Nationstar is entitled to fees under the contracts governing this action. Plaintiff and her husband at the time, Maurice D. Heffernan, in their capacities of husband and wife, as community property with right of survivorship, obtained a mortgage loan of $2,230,000 on February 13, 2007, from Countrywide Home Loans, Inc., secured by a deed of trust encumbering 1202 Del Oro Avenue, Santa Barbara, California 93109 (Deed of Trust).

A promissory note was executed by Plaintiff and her husband in February 2007 (Note) and, together with the Deed of Trust, encumber the property at 1202 Del Oro Avenue, Santa Barbara, California 93109 (Property). The Deed of Trust and Note contain the terms governing the mortgage loan on the Property. The Deed of Trust states the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include reasonable attorneys' fees.

Accordingly, not only is Nationstar entitled to attorneys' fees under case law because Nationstar is the prevailing party, but Nationstar is also entitled to their fees for this litigation under the Deed of Trust. Nationstar prevailed in this action. The Court ruled in favor of Nationstar and against Plaintiff following the non-jury trial. There can be no dispute that Nationstar is the prevailing party. The law expressly authorizes the Court to award reasonable expenses, including attorney's fees, incurred by another party as a result of the frivolous action.

Attorney's fees are the paradigmatic monetary sanction under Sec. 128.5, particularly where, as here, the entire action is considered frivolous. Nationstar was forced to defend this lawsuit from inception through trial. But for Plaintiff's decision to initiate and prosecute this frivolous action, Defendant would not have incurred the substantial attorney's fees documented in the supporting declaration. These fees are a direct and foreseeable result of Plaintiff's bad-faith litigation conduct and fall squarely within the "reasonable expenses, including attorney's fees" that Sec. 128.5 permits the Court to shift.

Moreover, awarding fees under Sec. 128.5 serves the statute's dual purposes: (1) to compensate the party who has been forced to expend resources opposing frivolous litigation, and (2) to deter similar abuses of the judicial process. A fee award here will place Nationstar as nearly as possible in the position it would have occupied had Plaintiff not pursued this case through trial.

The determination of what constitutes "reasonable attorney fees" is committed to the discretion of the trial Court. The trial Court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. The trial Court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case.

Calculations may be based on the number of hours expended by counsel multiplied by the prevailing market rate for comparable legal services... where counsel is located. Trial Courts are not required to issue any explanation of its decision with regard to the fee award. Civil Code section 1717 and the cases construing it do not indicate that contractual and statutory awards must be consistent in permitting a reduction in an award of attorney fees otherwise determined to be reasonable on the basis of the losing party's financial condition.

Here, Nationstar was successful on the entire case following trial. Nationstar is not seeking any increase in the lodestar amount. Nationstar submits their fee request in the amount of $402,275.66 is reasonable in light of the time, work, and effort required to defend against Plaintiff's egregious causes of action against Nationstar. The first factor used to determine reasonable attorneys' fees is the number of hours expended by the prevailing Defendant's attorneys. An attorney's declaration, made under penalty of perjury, describing hours devoted constitutes reliable evidence to establish the fees earned by that attorney.

A Defendant can carry its burden of establishing its entitlement to attorney fees by submitting a declaration from counsel instead of billing records or invoices. In reviewing the amount charged, a Court must bear in mind the "economics of the time" - that is, the amount of fees currently charged by the legal community in general. Here, as explained by the Declaration of Andrea M. Hicks, Nationstar was forced to incur attorneys' fees and costs to protect Nationstar's rights and interest under the Note and the Deed of Trust.

Nationstar has expended considerable resources defending this litigation for more than two years. The various attorneys that have worked on this matter, on behalf of Nationstar, and their rates are included in the concurrently filed Declaration of Andrea M. Hicks. Here, the Court has acknowledged on multiple occasions that this matter is one of consequence and not routine. The Court has further noted that counsel was well prepared and the trial preparation was "comprehensive." Additionally, this case was made even more complex by the conduct of Plaintiff and her counsel and Nationstar being forced to address Plaintiff's various bad-faith machinations in the weeks leading up to trial.

In this action, Nationstar was initially represented by Troutman Pepper Hamilton Sanders LLP, and later Troutman Pepper Locke LLP. Due to the length of litigation, there were several attorneys involved in defending this matter. The attorneys included Kyle Deak, Justin Balser, Andrea Hicks, and Katalina Baumann.

Mr. Deak is a partner at Troutman Pepper Locke LLP. He was admitted pro hac vice to be the lead trial attorney for this matter. He has 22 years of experience in litigation. The emphasis of his practice includes consumer finance litigation, regulatory compliance, consumer lending, and mortgage fraud representing financial institutions, mortgage lenders and loan servicers. His hourly rate of $635 is reasonable in Santa Barbara County. Mr. Balser is a partner at Troutman Pepper Locke LLP. He has 25 years of experience in litigation.

The emphasis of his practice includes consumer finance litigation, regulatory compliance, consumer lending, and mortgage fraud representing financial institutions, mortgage lenders and loan servicers. His hourly rate of $635 is reasonable in Santa Barbara County. Ms. Hicks has served as a handling attorney and trial counsel on this matter. She is counsel at Troutman Pepper Locke. She has 24 years of experience in consumer finance litigation. The emphasis of her practice includes consumer finance litigation, regulatory compliance, consumer lending, and mortgage fraud representing financial institutions, mortgage lenders and loan servicers.

Her hourly rate of $500 is reasonable in Santa Barbara County. Ms. Baumann has served as a handling attorney on this matter. She is counsel at Troutman Pepper Locke. She has 14 years of experience in consumer finance litigation. The emphasis of her practice includes consumer finance litigation, regulatory compliance, consumer lending, and mortgage fraud representing financial institutions, mortgage lenders and loan servicers. Her hourly rate of $500 is reasonable in Santa Barbara County. Ms. Barton is a litigation paralegal with over a decade of experience.

The emphasis of her practice areas includes consumer finance litigation, regulatory compliance, consumer lending, and mortgage fraud representing financial institutions, mortgage lenders and loan servicers. Her hourly rate of $235 is reasonable in Santa Barbara County. In California, Mr. Balser, Mr. Deak, Ms. Hicks, Ms. Baumann, and Ms. Barton's rates are reasonable for defending a lender/mortgage servicer against similar mortgage-foreclosure lawsuits as Plaintiff's action here. The work provided by Nationstar's counsel included the following: reviewing the initial file and preparing the motion to dismiss for the original complaint, preparing demurrers for the first, and second amended complaint and answering the second amended complaint; engaging in settlement discussions; preparing the motion for summary judgment, alternatively, summary adjudication and all supporting documents; prepare replies in support of motion for summary judgment; propounding extensive discovery upon Plaintiff; responding to the discovery propounded by Plaintiff; conducting meet and confer on discovery issues; preparing supplemental discovery responses; reviewing and analyzing supplemental responses served by Plaintiff; preparing for depositions of Plaintiff and her expert, defending the deposition of Nationstar's Person Most Knowledgeable, and preparing the instant motion for fees.

Given the amount of work involved and the number of hours spent by Nationstar's counsel, as well as the result achieved, the fees requested are reasonable given the backdrop of years of litigation. The rates for the attorneys and paralegal who worked on this matter were in the range of $235-$600 per hour, at or below the average hourly rates for attorneys and paralegals of their caliber, experience, and expertise given the area in which the law firm is located. Nationstar requests the Court grant the current motion and enter an award of $399,275 in attorneys' fees already incurred--and an anticipated $3,000 incurred by Troutman Pepper Locke LLP for the drafting of the current motion for attorney's fees.

As this Court found, Plaintiff's claims are barred by res judicata and collateral estoppel. Plaintiff, her counsel, and her expert were all aware of the fact that Plaintiff had already litigated the same quiet title and declaratory relief claims based on the same alleged facts and legal theories in Plaintiff's 2011 bankruptcy adversary proceeding, and lost on the merits, which bars the claims. In her previous adversary proceeding against HSBC as part of the 2011 bankruptcy, Plaintiff filed substantively identical claims that alleged the same wrongdoing and bringing the same causes of action as here against HSBC.

Specifically, Plaintiff brought causes of action for quiet title and declaratory relief based on her theory that HSBC lacked authority to foreclose because the Assignment of Deed of Trust was invalid. Plaintiff relied on the testimony and opinions of Marie McDonnell to advance those claims in 2011 and again relied on Ms. McDonnell to advance her same claims here. These claims were decided in the adversary proceeding in HSBC's favor. Plaintiff and her counsel were aware of the prior proceeding and its preclusive effect before this litigation was filed, and Nationstar first raised this issue in its Motion to Dismiss the original complaint in federal Court, and again on demurrer to the amended complaints in this Court.

Plaintiff even conceded that these theories had been previously advanced in her adversary proceeding when opposing Nationstar's Motion in Limine to Exclude Undisclosed Witnesses. Plaintiff and her counsel knew that they had previously litigated these exact claims and knew that the claims had been rejected by the bankruptcy Court. Undeterred, Plaintiff advanced them again up to and through trial in this matter. This alone is the epitome of advancing meritless claims and amounts to sanctionable conduct.

Counsel repeatedly represented to the Court that her client's claims were valid under Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (2016) (as to her quiet title and declaratory judgment claims based upon assignment, robo signing and securitization claims) and Alvarez v. BAC Home Loans Servicing, LP (2014) 228 Cal.App.4th 941 (as to her negligence claim). But, as counsel for Nationstar repeatedly stated to counsel and this Court, Yvanonva and Alvarez are not controlling in this case. As this Court found, Plaintiff's claims were not viable under the controlling law.

Plaintiff's counsel failed to even acknowledge these controlling cases (or their progeny) and sought further claims despite these controlling cases warrants sanctions. A simple review of the California Court of Appeal's decision clearly, thoroughly, and definitively illustrates why the arguments made by Plaintiff in connection with her quiet title and declaratory judgment claims based upon assignment, robo-signing and securitization issues are at best intellectually lazy and dishonest, and at worst sanctionable.

Plaintiff clearly did not have standing to prosecute her claims under controlling law - law that her counsel failed to cite to this Court or acknowledge at any time - including at trial when her expert attempted to advance Plaintiff's theories and was discredited on cross-examination. Instead, Plaintiff attempted to rely on outdated and discredited cases that are no longer controlling as to the specific issues of this case.

The Opposition Filed 6/30/26; 21 pages; summarized: Nationstar's motion asks this Court to convert an ordinary post-trial fee request into a punitive, six-figure penalty against a homeowner and her counsel. It should be denied in substantial part. Although the Court ruled for Nationstar after trial and made strong findings against Plaintiff on the merits, those findings do not establish what Nationstar must prove to recover the relief it seeks: that Plaintiff's counsel acted in subjective bad faith, that this action was totally and completely without merit from its inception, or that Nationstar is contractually entitled to an affirmative money judgment for every dollar its national counsel billed.

Three features of the record defeat the motion as framed. First, this Court denied Nationstar's motion for summary judgment and summary adjudication, finding triable issues across the very claims and defenses, including res judicata and collateral estoppel, that Nationstar now calls frivolous. A claim that survives dispositive review is, by definition, not one that "any reasonable attorney would agree" is totally without merit. Second, the Court's Statement of Decision, while critical of Plaintiffs evidence and credibility, contains no finding that Rodriguez Law Group acted in bad faith.

To the contrary, the Court expressly commended counsel, noting that "the lawyers consistently were civil, prompt and prepared." Third, the contractual fee provision Nationstar invokes authorizes only that fees be "paid back" and added to the loan balance, not that they be reduced to a separate, affirmative judgment. That provision also reaches only contract claims, not the statutory and tort claims that dominated this litigation. Nationstar also disregards the statutory architecture of Code of Civil Procedure section 128.5.

Section 128.5 requires subjective bad faith, demands a separate motion describing specific sanctionable acts, and limits any monetary award to expenses incurred as a direct result of the identified misconduct. Nationstar instead seeks $150,000, untethered to any specific act, any billing entry, or any expense caused by counsel's conduct, jointly and severally against a homeowner and her lawyers. That request is unsupported by evidence and foreclosed by statute. Plaintiff requests that the Court (1) deny the request for $150,000 in sanctions in its entirety; (2) deny any sanctions against Rodriguez Law Group; and (3) deny or substantially reduce the contractual fee request to reasonable, recoverable, properly apportioned amounts.

Plaintiff filed this action concerning the nonjudicial foreclosure process, the servicing history of the subject loan, and related loss-mitigation disputes. The operative Second Amended Complaint asserted seven causes of action: (1) quiet title; (2) declaratory relief; (3) violation of the Homeowner Bill of Rights ("HBOR"); (4) violation of Business and Professions Code section 17200; (5) breach of the implied covenant of good faith and fair dealing; (6) negligence; and (7) violation of Civil Code section 2924.12.

Nationstar did not obtain judgment at the pleading stage. It answered and asserted numerous affirmative defenses, then moved for summary judgment or, in the alternative, summary adjudication, asking the Court to end the case before trial. The Court denied that motion in full. In doing so, the Court did not rest on a mere procedural defect. It analyzed Nationstar's separate statement, evidence, and legal theories and found triable issues of material fact regarding, among other things, Nationstar's communications with Plaintiff, loss-mitigation activity, loan-modification documentation, HBOR compliance, standing, causation, and damages.

Critically for the present motion, the Court also declined to find Nationstar's res judicata and collateral estoppel defenses established as a matter of law. The Court observed that the prior 2011 bankruptcy adversary proceeding did not name Nationstar as a party and appeared, on the record presented, to involve different theories of liability; that Nationstar's privity assertion was a legal conclusion unsupported by the evidence cited; and that Nationstar had not provided sufficient evidence to establish claim or issue preclusion.

The matter proceeded to trial. During trial, Plaintiff dismissed the three jury causes of action with prejudice, including her negligence claim and her claim for breach of the implied covenant of good faith and fair dealing (the only cause of action sounding in contract), and the Court continued the trial on the four equitable counts (quiet title, declaratory relief, the UCL, and Civil Code section 2924.12). After hearing the evidence, the Court issued its Statement of Decision in favor of Nationstar, finding Plaintiffs evidence unpersuasive, making adverse credibility determinations, and characterizing the action as a foreclosure-delay lawsuit.

The same decision, however, opened by acknowledging and appreciating the professional work done by counsel, and observed that although the case was contentious, "the lawyers consistently were civil, prompt and prepared. Finally, the Court set an order to show cause re bad faith sanctions against Plaintiff Susan Heffernan, directed Nationstar to file a brief addressing whether such sanctions are appropriate together with a fee declaration, set a 25-page limit for Plaintiffs response, and set the matter for hearing on August 5, 2026.

The OSC, by its terms, was directed to Plaintiff, not to Rodriguez Law Group.

Code of Civil Procedure section 128.5 permits sanctions only for bad-faith actions or tactics that are frivolous or solely intended to cause unnecessary delay. "Frivolous" is defined narrowly. A tactic is frivolous only if it is "totally and completely without merit" or undertaken "for the sole purpose of harassing an opposing party." (Code Civ. Proc., Sec. 128.5, subd. (b)(2).) California Courts apply this standard with restraint. In In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650, the Supreme Court explained that sanctions are appropriate only when "any reasonable attorney would agree that the appeal is totally and completely without merit."

Although Flaherty addressed appellate sanctions, its discussion of objective frivolousness has been relied upon by later California decisions analyzing sanctions under Code of Civil Procedure section 128.5. The standard is intentionally demanding because Courts must avoid chilling zealous advocacy. Similarly, in Peake v. Underwood (2014) 227 Cal.App.4th 428, 440, the Court of Appeal explained that a claim is factually frivolous if it is "not well grounded in fact" and legally frivolous if it is "not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law."

In either case, the moving party must show the party's conduct was objectively unreasonable. Courts also recognize that section 128.7 must not be construed so as to conflict with the primary duty of an attorney to represent his or her client zealously. Sanctions cannot be imposed simply because a party loses. Counsel and their clients have a right to present issues that are arguably correct, even if it is extremely unlikely that they will win. A claim does not become frivolous merely because it is weak, difficult to prove, ultimately unsuccessful, or rejected after the trier of fact weighs the evidence.

Section 128.5 permits sanctions against a party, counsel, or both, but only for the person's own bad-faith action or tactic. Sanctions against counsel cannot rest on hindsight disagreement with counsel's litigation judgment, the client's adverse credibility findings, or the fact that the client ultimately lost. Rather, the moving party must establish that counsel personally engaged in a specific action or tactic undertaken in subjective bad faith that caused compensable harm. The moving party must identify the specific action or tactic alleged to be sanctionable and demonstrate that the expenses sought were incurred because of that conduct.

Conclusory accusations of gamesmanship, lack of candor, or bad faith are insufficient. Civil Code section 1717 authorizes fees only in an action on a contract where the contract provides for fees. Even where a party is entitled to contractual fees, the Court must determine a reasonable amount. The party seeking fees bears the burden of proving that the fees sought are reasonable. The Court may reduce requested fees that are excessive, duplicative, inefficient, inadequately documented, or otherwise unreasonable.

The Court has discretion to apportion attorney's fees between recoverable contracts claims and nonrecoverable tort, statutory, or equitable claims unless the issues are so intertwined that apportionment is impracticable.

Section 128.5 requires both objective frivolousness and subjective bad faith, a demanding standard reserved for the clearest cases. Code of Civil Procedure section 128.5 authorizes sanctions only for actions or tactics, made in bad faith, that are frivolous or solely intended to cause unnecessary delay. The statute supplies two independent requirements. The conduct must be frivolous, defined as totally and completely without merit or for the sole purpose of harassing an opposing party. It must also be undertaken in bad faith.

As amended in 2017, Code of Civil Procedure section 128.5 requires proof of subjective bad faith, a more demanding standard than the purely objective standard applicable under section 128.7. Nationstar bears the burden of proving both that the challenged conduct was objectively totally and completely without merit and that Plaintiff or her counsel acted with subjective bad faith. To be objective prong is itself exacting. Sanctions for frivolousness are appropriate only where any reasonable attorney would agree that the [position] is totally and completely without merit.

A position that is simply without merit is not by definition frivolous, and sanctions must be reserved for the rare and clearest cases lest legitimate advocacy be chilled. The moving party bears the burden of establishing that the conduct was objectively unreasonable, and Courts apply the standard with restraint. Nationstar's motion never meaningfully engages this demanding standard. Instead, it treats the Court's post-trial findings as though they alone satisfy its burden under section 128.5. They do not satisfy it.

A failure of proof at trial is not evidence of subjective bad faith, and an unsuccessful claim is not, without more, a frivolous one.

Before trial, Nationstar asked this Court to rule that Plaintiffs claims lacked merit as a matter of law. The Court refused. That ruling is powerful, and largely dispositive, evidence that the action was not frivolous. Summary judgment is proper only where there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. By denying Nationstar's motion and finding triable issues across Plaintiffs claims and Nationstar's preclusion defenses, the Court necessarily determined that Plaintiffs claims could not be resolved against her as a matter of law.

A claim with enough merit to require a trial is not a claim that any reasonable attorney would agree is totally and completely without merit. California Courts have recognized precisely this inferential force. Having concluded that Plaintiff's claims presented triable issues requiring a trial, the Court cannot now conclude those same claims were so totally and completely without merit as to warrant sanctions. The sanctions case law confirms the point a fortiori. In the closely analogous section 128.7 context, the Court of Appeal has held that the fact that a Plaintiff fails to provide a sufficient showing to overcome a demurrer or to survive summary judgment is not, in itself, enough to warrant the imposition of sanctions, because our adversary system requires that attorneys and litigants be provided substantial breathing room to develop and assert factual and legal arguments.

If a litigant who loses at summary judgment is thereby not exposed to sanctions, then a fortiori a litigant whose claims survived summary judgment and proceeded to trial cannot be sanctioned as having pursued a frivolous action.

Nationstar's reliance on the post-trial Statement of Decision to prove frivolousness is impermissible hindsight. The relevant inquiry is whether Plaintiff's claims were objectively tenable when asserted and litigated, not whether they ultimately prevailed after the Court weighed competing evidence, resolved disputed facts, and made credibility determinations at trial. The very purpose of a trial is to resolve factual disputes and credibility issues that cannot be decided as a matter of law. If every litigant who survived summary judgment but ultimately lost at trial could thereafter be sanctioned, section 128.5 would effectively become a prevailing-party penalty statute, an outcome fundamentally inconsistent with the statute's narrow purpose and demanding standard.

Nationstar leans heavily on the strong language of the Statement of Decision. Plaintiff does not minimize that language. But the Court's findings are directed to Plaintiffs evidence, Plaintiffs testimony, Plaintiffs litigation position, and the persuasiveness of her expert. They are not directed to any misconduct by Rodriguez Law Group. The decision nowhere finds that counsel fabricated evidence, knowingly presented false testimony, violated a Court order, concealed controlling authority, or acted for an improper purpose.

That distinction is dispositive. An adverse credibility finding against a client does not become counsel's bad faith; the rejection of an expert's opinion does not become attorney misconduct; and a claim that fails at trial does not become a sanctionable filing. Far from condemning counsel, the Court praised them, acknowledging the professional work done by counsel and finding that the lawyers consistently were civil, prompt and prepared. A Court's express commendation of counsel's professionalism is irreconcilable with a finding that those same lawyers litigated in subjective bad faith.

The Court's own management of the case confirms the point. The Court denied Nationstar's motion for judgment at the close of Plaintiffs case because it preferred to hear all the evidence on a case like this with real consequences, hardly the description of a frivolous proceeding, and only then resolved the merits after a full evidentiary trial.

Nationstar's sanctions theory rests largely on the assertion that Plaintiffs claims were barred by res judicata and collateral estoppel and that counsel was aware the doctrines foreclosed the action from inception. The record refutes that characterization. Claim and issue preclusion are among the most fact-intensive doctrines in California law. Claim preclusion requires a final judgment on the merits, the same cause of action, and the same parties or those in privity with them; issue preclusion additionally requires that the identical issue was litigated and necessarily decided and may be asserted only against a party to the prior proceeding or one in privity.

Here, the preclusion questions were not just debatable. They were litigated and resolved in Plaintiff's favor at the dispositive-motion stage. This Court denied summary judgment on precisely these defenses, finding that the prior adversary proceeding did not name Nationstar, appeared to rest on different theories, and that Nationstar had failed to establish privity or preclusion as a matter of law. When a trial Court has already rejected a preclusion defense as unestablished, counsel cannot be sanctioned for declining to treat that same defense as an insuperable bar.

Moreover, Plaintiffs HBOR, UCL, and section 2924.12 claims rested on servicing and loss-mitigation conduct occurring years after the 2011 proceeding, implicating different primary rights and post-dating any prior judgment. Whether those theories ultimately succeeded is beside the point; counsel had an objectively reasonable basis to argue they fell outside the scope of any prior adjudication. Sanctions may not be imposed merely because a Court later adopts one side's interpretation of disputed legal doctrines.

Nationstar's most serious accusation, that counsel breached the duty of candor by citing Yvanova and Alvarez and failing to disclose Mendoza and Sheen, mischaracterizes both the authorities and the duty. The duty to disclose adverse authority is narrow. Rule 3.3(a)(2) of the Rules of Professional Conduct requires disclosure only of legal authority, that is (i) in the controlling jurisdiction, (ii) directly adverse to the client's position, and (iii) not already disclosed by opposing counsel. The rule does not require counsel to cite every distinguishable Court of Appeal decision or every noncontrolling authority, particularly where opposing counsel has already placed the authority before the Court.

And Rule 3.3 is a disciplinary standard enforced by the State Bar; it is not itself a source of monetary sanctions, which must independently satisfy section 128.5's demanding test. Applied here, the accusation collapses: Yvanova is binding Supreme Court authority. Mendoza is a non-controlling decision in an acknowledged split. Yvanova itself expressly left that question open. Where the Supreme Court has flagged an issue as unresolved and the Courts of Appeal are divided, advancing one side of the split is the paradigm of a debatable, non-frivolous position, not a candor violation.

And because Nationstar itself cited Mendoza, the disclosure duty was never even triggered. Alvarez remains published and was cited within a genuine split the Supreme Court itself recognized. An attorney has a right to present issues that are arguably correct, even if it is extremely unlikely that he [or she] will win. Advocating one side of questions the Supreme Court has acknowledged to be split or unsettled is the exercise of that right, not a sanctionable abuse of it.

Nationstar recasts a series of ordinary discovery disputes as sanctionable misconduct. None supports a $150,000 award. The late document production was, by Nationstar's own account, the product of mislabeled materials located in storage, an inadvertent oversight that counsel disclosed and then cured by producing the documents before the discovery cutoff. Inadvertence, promptly corrected, is the antithesis of subjective bad faith. The witness-disclosure dispute was litigated through Nationstar's own motions in limine, and the Court had, and exercised, the full panoply of trial-management tools to address it; a party that obtains its remedy through the in-limine process cannot relitigate the same grievance as a sanctions claim.

Plaintiff's reconsideration of whether to dismiss certain claims or damages reflects the ordinary, permissible evolution of litigation positions; a party is entitled to change course, and the claims at issue were in fact dismissed with prejudice at trial. More fundamentally, Nationstar offers no evidence that any of this conduct was undertaken to harass or delay (the subjective element section 128.5 requires), or that it caused any quantified expense (the causal element addressed below). Discovery disputes are a routine feature of contested litigation, not proof of bad faith.

Nor does the supporting declaration supply the missing proof. Much of the Hicks declaration consists not of admissible facts but of argument and legal conclusions. It asserts, for example, that Plaintiff's counsel made misrepresentations to the Court, engaged in unethical and misleading conduct, and failed the duty of candor. Whether counsel violated a duty of candor or acted in bad faith is a legal conclusion for the Court, not competent declarant testimony, and Plaintiff objects to these paragraphs on that basis.

Stripped of its characterizations, the declaration establishes only that the parties had discovery disagreements, not that Plaintiff's counsel acted in subjective bad faith.

Even if Nationstar could identify sanctionable conduct, and it cannot, its $150,000 demand is foreclosed by the statute's compensatory design. Section 128.5 limits any monetary award to the reasonable expenses, including attorney's fees, incurred by another party as a direct result of the specific bad-faith action or tactic. Sec. 128.5, subds. (a), (f)(2)), requires the order to recite in detail the conduct justifying it and caps any sanction at what is sufficient to deter repetition. The statute thus demands a direct causal nexus between the identified misconduct and the dollars awarded.

Nationstar's motion satisfies none of these requirements. It does not identify which billing entries were caused by which allegedly sanctionable act; it does not segregate fees attributable to claimed misconduct from the fees Nationstar would have incurred defending the case in any event; and it offers no explanation for the round figure of $150,000. The number is, on its face, untethered to any expense caused by the conduct Nationstar challenges. A sanction selected for its roundness rather than its causal connection to identified misconduct is punitive, not compensatory, and section 128.5 does not authorize it.

The request for sanctions against Plaintiff's counsel suffers from an additional, independent defect: the Court's order to show cause was directed to Plaintiff Susan Heffernan, not to Rodriguez Law Group. Counsel were never placed on notice, through the Court's OSC, that their own conduct was at issue, and Nationstar cannot unilaterally expand the scope of the Court's OSC to reach counsel without the separate notice the statute requires. Section 128.5 reinforces the point. It also exposes a striking irony in Nationstar's motion.

The statute commands that a motion for sanctions under this section shall be made separately from other motions or requests and shall describe the specific alleged action or tactic, made in bad faith, that is frivolous or solely intended to cause unnecessary delay. Nationstar did precisely what it accuses Plaintiff of doing: it disregarded the rules. Rather than file a separate sanctions motion describing specific acts, Nationstar combined its section 128.5 sanctions request with its contractual fee motion in a single filing, captioned a Motion for Attorneys' Fees and Sanctions, and described its grievances at the very level of generality ("gamesmanship," "lack of candor") the statute forbids.

Unless the Court ordered Nationstar to combine the two requests into a single motion, Nationstar's own filing violates subdivision (f)(1)(A), and it is in no position to obtain discretionary sanctions while itself flouting the statute's mandatory procedure. To the extent any portion of Nationstar's theory rests on a pleading or paper 'that can be withdrawn or appropriately corrected, the statute's 21 -day safe-harbor procedure also applies and Nationstar does not establish compliance.

Section 128.5 contains procedural safeguards. A sanctions motion must be made separately from other motions or requests and must describe the specific alleged action or tactic, made in bad faith, that is frivolous or solely intended to cause unnecessary delay. Here, Nationstar combined its sanctions request with its attorneys' fee motion. It seeks contractual fees and sanctions in one motion. That is not the separate sanctions motion contemplated by section 128.5. Nor has Nationstar established compliance with the 21-day safe-harbor requirement for any pleading, motion, or written filing it now claims was sanctionable and capable of withdrawal or correction.

Nationstar may argue the Court set an OSC regarding bad-faith sanctions. But the existence of an OSC does not relieve Nationstar, as the party seeking $150,000 jointly and severally against counsel, from providing a legally sufficient showing, identifying specific conduct, proving causation, and complying with applicable statutory procedures to the extent its request is brought by motion. At minimum, any sanctions request against counsel must be denied absent strict compliance with the statute and a particularized showing of counsel's own bad-faith conduct.

Whatever the scope of the Court's own OSC, any sanction against counsel must rest on a particularized showing of counsel's own subjective bad faith, a showing Nationstar has neither attempted nor made.

A Court may order sanctions, and any award shall be limited to what is sufficient to deter repetition. Even where the statutory threshold is met, the Court retains broad discretion to decline to impose sanctions. That discretion should be exercised here. The requested $150,000 is a round figure untethered to any quantified expense caused by the conduct Nationstar challenges. A sanction of that character is punitive rather than compensatory or deterrent, and section 128.5 authorizes monetary sanctions only to compensate for expenses directly caused by sanctionable conduct and to deter its repetition. Because Nationstar has not shown that any such expense was incurred, and because the deterrent purpose of the statute does not require a six-figure penalty on this record, the Court should decline, in its discretion, to impose any sanction.

Plaintiff recognizes that Nationstar prevailed at trial. But prevailing-party status does not entitle Nationstar to an affirmative judgment for every dollar billed. Even where entitlement exists, the Court retains an independent duty to ensure that any fee award is contractually authorized in form, limited to recoverable claims, and reasonable in amount. Nationstar fails on each axis. Nationstar's entitlement theory founders on the language of its own instrument. The Note provides that the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note, including reasonable attorneys' fees.

That is a paid back or added-to-the-debt provision: a right to recoup enforcement expenses against the loan balance, not a clause authorizing an affirmative, free-standing fee judgment against the borrower. Civil Code section 1717 authorizes fees only in an action on a contract. Where an action asserts both contract and non-contract claims, section 1717 applies only to attorney fees incurred to litigate the contract claims. For tort and statutory claims, recovery turns not on section 1717 but on whether the contractual language is broad enough to embrace them.

A clause limited to expenses in "enforcing this Note" is narrow. This action was dominated by such non-contract claims: HBOR, negligence, quiet title, and declaratory relief. Indeed, the only cause of action sounding in contract, breach of the implied covenant, was voluntarily dismissed during trial, and section 1717(b)(2) provides that there is no prevailing party on a contract claim that is voluntarily dismissed. California law therefore requires apportionment between any recoverable contract work and the non-recoverable balance, unless Nationstar carries its burden to show the issues are so inextricably intertwined that segregation is impracticable.

Nationstar makes no such showing; it seeks essentially all its fees without allocating a single entry.

The HBOR claim independently defeats fee recovery. The Homeowner Bill of Rights contains its own, deliberately one-directional fee provision authorizing fees only to a prevailing borrower. That targeted, borrower-only scheme reflects a legislative judgment to encourage enforcement of HBOR, and it forecloses a Defendant from recovering fees on an HBOR claim, whether by contract or otherwise. A servicer that defeats an HBOR claim is not a "prevailing borrower" and is entitled to nothing under that statute.

Nationstar devoted substantial resources to a dispositive motion that sought complete judgment and failed entirely. The motion did not narrow the issues, eliminate a single cause of action, or secure any relief. While unsuccessful work is not categorically excluded, the degree of success is a critical factor in the lodestar analysis, and time spent on wholly unsuccessful efforts may be reduced or disallowed. The point has special force here: Nationstar simultaneously contends that Plaintiffs claims were so meritless as to warrant sanctions, yet it could not prevail on those same claims at summary judgment.

The Court should give little or no weight to the hours Nationstar expended on its failed motion.

The lodestar begins with the reasonable hours expended multiplied by the reasonable hourly rate, and the relevant community is that where the Court is located. Here, that community is Santa Barbara County. Out-of-forum or national-firm rates are appropriate only where the fee claimant shows that local counsel were unavailable or that retaining out-of-area counsel was reasonably necessary. Nationstar makes no such showing. It is represented by a national firm whose lead trial partner (Mr. Deak) was admitted pro hac vice from North Carolina, and it seeks rates of $635 and $500 per hour while invoking a Los Angeles-market decision approving $1,000 rates, all for a mortgage-servicing defense litigated in Santa Barbara.

The Court should test the requested rates against the prevailing Santa Barbara market and adjust them accordingly. The burden of proving reasonableness rests on Nationstar, not Plaintiff. The Court is not required to accept counsel's billing at face value and retains broad discretion to reduce fees that are excessive, duplicative, unnecessary, inefficient, or inadequately documented. A request exceeding $400,000 warrants exactly this scrutiny. To assist the Court, Plaintiff identifies specific, recurring defects apparent on the face of Nationstar's own billing records, which total $399,275.66 across 654 line entries, together with a recommended treatment for each.

These categories overlap and are not additive; at a minimum, the Court should apply the most significant applicable reduction to each affected entry. The burden of justifying every hour and rate rests on Nationstar, not Plaintiff. [Inserts chart; read and considered it] These figures are conservative approximations drawn from the descriptions in Nationstar's own invoices; because roughly 30% of the entries are too vague to categorize at all, the true extent of non-recoverable and unsupported time is necessarily understated.

The point is not merely that the total is large. It is that Nationstar, which bears the burden of proof, has submitted a record that cannot be meaningfully tested. The single largest defect is illustrative: 243 separate entries, accounting for more than $122,000, consist of nothing more than a bare verb such as "Analyze" or "Prepare," with no indication of the subject, purpose, or necessity of the work. A fee applicant cannot carry its burden with entries that, on their face, disclose nothing the Court can evaluate.

The Court should, at a minimum, reduce the request substantially to account for these defects, and may deny it altogether.

Nationstar's own declarant concedes that the fees were not billed at the rates the motion asks this Court to bless. The Hicks Declaration states that Nationstar and Troutman Pepper have a global agreement in place in California for payment of attorney's fees, under which fees are allocated per matter on a global basis, which means that some bills for this matter may include an upward or downward adjustment for fees actually paid by Nationstar. By Nationstar's own admission, then, the invoice amounts reflect portfolio-level adjustments spanning multiple unrelated matters, not the fees actually and reasonably incurred in this case.

That concession is corroborated by the invoices themselves, whose line amounts are irregular and do not correspond to the stated hourly rates multiplied by time. Where, as here, billing is admittedly subject to negotiated, cross-matter adjustments, the raw invoice total is not a reliable measure of reasonable fees, and the Court should require Nationstar to prove what was actually and reasonably incurred in this matter alone before shifting any amount to Plaintiff.

Plaintiff lost at trial. But losing is not sanctionable bad faith. Nationstar failed to obtain summary judgment; this Court found triable issues; the Court praised counsel's professionalism; and nothing in the Statement of Decision finds that Rodriguez Law Group acted in subjective bad faith or for an improper purpose. Nationstar has not identified specific sanctionable conduct, has not shown subjective bad faith, and has not connected any conduct to the $150,000 it demands. The fee request fares no better.

The governing clause permits only that fees be added to the loan balance, not reduced to an affirmative judgment; section 1717 does not reach the statutory and equitable claims that dominated this case, and the only contract claim was voluntarily dismissed before judgment; HBOR forecloses fees against the borrower; the failed summary judgment work merits little weight; the requested national-counsel rates exceed the Santa Barbara market; more than $122,000 in fees rests on entries too vague to evaluate; and Nationstar concedes its invoices reflect cross-matter "global" adjustments rather than fees actually incurred here.

Even if the threshold for sanctions were met, the Court should exercise its discretion to decline a punitive award untethered to any quantified expense. Plaintiff requests that the Court: 1. Deny Nationstar's request for $150,000 in sanctions in its entirety; and 2. Deny any sanctions against Rodriguez Law Group; and 3. Deny or substantially reduce Nationstar' s request for contractual attorneys' fees; and 4. Exclude fees incurred on non-recoverable statutory, tort, and equitable claims, on the unsuccessful summary judgment motion, on sanctions-related work, and on excessive, duplicative, or inadequately supported billing entries; and 5.

Grant such other and further relief as the Court deems just and proper.

The Reply Filed 7/15/26; 8 pages; read and considered. The Court's Conclusions Sanctions Must be Awarded The Court does not intend to levy any sanctions against Plaintiff's lawyer or law firm. I believe the lawyer did everything she could to manage the Plaintiff. I concluded that Plaintiff was going to march to her own drummer. Clearly, s anctions should be levied against the Plaintiff. This Court firmly believes that when there is such capable counsel representing Plaintiff that all final decisions are her responsibility.

She has been told the law and probable outcome. Any decision to go forward and any consequences of her decision belong exclusively with her. She can't blame the lawyer or just kick the can down the alley. The Court's analysis as to sanctions is not complicated. Astonishingly and unaccountably, Plaintiff had not paid mortgage payments to the Defendant for a very long time. Nevertheless, she took the case through this Courtroom, and other Courtrooms, and made wild assertions that had no merit. Her testimony lacked any creditability.

It had absolutely no basis in fact. Plaintiff bites the hand that fed her. Not just a nip but a real bite. Additionally, she significantly abused the legal system. Plaintiff requested a jury in the case. The Court accommodated. Literally hundreds of citizens were called and asked to participate in deciding issues raised in the case. The Court and counsel spent considerable time to seat a jury. Then, she moved to dismiss the three causes of action that were before the jury, breach of good faith and fair dealing, negligence and the homeowner bill of rights with prejudice and proceed on the remaining causes of action as a bench trial.

The Court dismissed the jurors. The case proceeded as a Court Trial. That decision came vastly too late in the case and clearly must have been considered by Plaintiff long before the Jury Commissioner, its staff, prospective jurors, the Court and its staff, and the defense lawyers, went through an arduous, expensive, time consuming task of seating the jury. Plaintiff had to be informed of all this but nevertheless she abused the citizens of the community who gathered and volunteered in good faith to act as jurors.

All totally without merit from the very get-go. Who will speak for prospective jurors if not the Bench?

The Opposition Lacks Merit

In her opposition, Plaintiff argues that because this Court denied Nationstar's Motion for Summary Judgment, her claims are de facto meritorious. This is not true and not supported by the record. Plaintiff misconstrues the Court's ruling on summary judgment and argues that the Court rejected Nationstar's arguments regarding res judicata and statute of limitations. The Court's ruling on summary judgment establishes that the Court did not even reach those arguments. Instead, the Court focused its decision on the alleged facts of the case and denied summary judgment because certain facts were in dispute.

The Court did not find that Nationstar's res judicata defense failed, and in fact, after trial, held that the quiet title and declaratory relief claims were each barred by res judicata and collateral estoppel. Plaintiff completely ignores this finding in her Opposition and instead tries to argue that the MSJ ruling is dispositive of this issue. The Court proceeded with trial, heard the evidence and testimony, and after that determined that Plaintiff's claims were either barred by res judicata, time-barred, or not viable under California law.

The fact that the Court did not reach that decision on summary judgment does not somehow afford merit to Plaintiff's claims. The Court explicitly found that this was a "foreclosure delay lawsuit" and that it was "meritless." Plaintiff argues that Nationstar failed to carry its burden in demonstrating that sanctions are appropriate, but it is not Nationstar's burden to show that the conduct the Court noted is sanctionable. It is Plaintiff and her lawyer's responsibility to demonstrate that it is not.

Under CCP 128.5 once the Court issues an order to show cause identifying the specific action or tactic that appears to have been made in bad faith and to be frivolous or solely intended to cause unnecessary delay, the burden is on the party or attorney subject to the OSC to show cause why sanctions should not be imposed The statutory procedure is framed in those terms. CCP 128.5(f)(D). The structure places the burden of coming forward with an explanation or justification on the party facing sanctions, not on the other party particularly where the OSC is Court-initiated rather then brought by noticed motions.

Nationstar has shown, and the Court has acknowledged, that conduct by Plaintiff throughout the pretrial proceedings and trial rose to the level of harassment. Plaintiff argues that the request for sanctions is based on Nationstar's broader disagreement with Plaintiff's litigation positions but that is not the case. Nationstar seeks sanctions against Plaintiff who repeatedly attempted to thwart discovery efforts, represented that certain claims would be withdrawn and then backtracked, and failed to disclose several witnesses and documents that she intended to use at trial.

These are precisely the vexatious tactics that Sec.128.5 was designed to address. In its Opposition to the Motion, counsel once again attempts to argue that her client's claims are viable under Yvanova (as to her quiet title and declaratory judgment claims based upon assignment, robo signing and securitization claims) and Alvarez (as to her negligence claim), asserting once again that they were both "controlling authority." This assertion is false. As argued by Nationstar at trial, and again in the Motion, the weight of authority was against Plaintiff in both instances.

As the Mendoza Court stated, there is a mountain of authority contrary to the position Plaintiff has taken here. And the California Supreme Court weighed in and rejected Alvarez. The fact that Plaintiff continues to assert this position, despite the arguments raised by Nationstar's counsel, the cases repeatedly cited, and the Court's unambiguous findings, only demonstrates that sanctions are warranted.

Attorney Fees

The Court has reviewed and considered the attorney fee request carefully; have done so hundreds if not thousands of times. Every case is different, and this case is no exception. The fees requested are reasonable and have been supported, The Court acknowledges that Plaintiff argues that Nationstar's fee request is unreasonable and unsupported. However, Nationstar's Motion and the supporting declarations provide specific information regarding the times spent on various tasks, the experience level of the attorneys' involved, and the prevailing rate for similar work.

Nationstar's request for attorney's fees should not be limited solely to work on contract-related claims, and the fact that Plaintiff dismissed her contract claims in the middle of trial does not obviate the need for Nationstar to have prepared a vigorous defense to these claims. The Court's OSC specifically contemplates an award of attorney fees under 128.5 which allows for recovery on all claims. The major factors to be considered by a Court in fixing reasonable attorney fees include the nature of the litigation and its difficulty; the amount involved; the skill required and the skill employed in handling the litigation; the attention given; the success of the attorney's efforts and his or her learning, age, and experience in the particular type of work demanded; the intricacies and importance of the litigation; the labor and the necessity for skilled legal training and ability in trying the cause; and the time consumed.

When the trial Court is informed of the extent and nature of the services rendered, it may rely on its own experience and knowledge in determining their reasonable value. Moreover, the exercise of sound discretion by the trial Court in the matter of attorney fees includes also judicial evaluation of whether counsel's skill and effort were wisely devoted to the expeditious disposition of the case. Here Nationstar prevailed fully at trial. Nationstar is not seeking any increase in the lodestar amount and Nationstar submits that the fees requested are reasonable considering the time, work, and effort required to defend against Plaintiff's egregious causes of action against Nationstar.

Nationstar spent significant time and resources defending this litigation in the face of Plaintiff's bad-faith tactics, multi-million dollar demand to the jury, and insistence on proceeding with meritless claims. The Court has reviewed and considered attorney fees requested thousands of times. Each request must be weighed carefully because every case is different. I was very impressed by the quality of work done in this case by the defense without exception or reservation. The defense was confronted by very experienced and able lawyers.

Plaintiff's demands were of real consequence. Nationstar could not afford a blow to their reputation and a loss of this litigation. Such a result would have negative fallout. A second-rate defense team was never appropriate. The amount of the fees charged by each of the people on the defense team has been weighed and considered and was not unreasonable by any stretch of the imagination. Mr. Balser, Mr. Deak, Ms. Hicks, Ms. Baumann, and Ms. Barton's rates are reasonable for defending a lender/mortgage servicer against similar mortgage-foreclosure lawsuits as Plaintiff's action here.

The total cost for the defense of $400,000 is clearly reasonable. They are entitled to their fees.

Tentative Ruling: Maria Gonzalez, as guardian ad litem for Jacob Garcia v. Antonio Haro and Diana Haro Tentative Ruling: Maria Gonzalez, as guardian ad litem for Jacob Garcia v. Antonio Haro and Diana Haro