Second District, Division One Affirms and Reverses Portions of Fee Award Under Contractual Provision and Discretionary Fee-Shifting Statutes.
By now, it should be apparent that there are stark differences in how some fee-shifting statutes operate. Civil Code section 1717 mandates an award to a "prevailing party" under a contractual fees clause, although there is some discretion in determining who "prevails." California's Fair Employment and Housing Act (FEHA), Gov. Code, § 12989.2, and the federal Fair Housing Act (FHA), 42 U.S.C. § 3613(c)(2), allow courts at their discretion to award reasonable attorney's fees and costs to the prevailing party (other than California and the United States, under each respective scheme), although a prevailing party should normally recover fees unless special circumstances make an award unjust. (Hensley v. Eckerhart, 461 U.S. 424, 429 (1983).) Under all these statutes, the "prevailing party" determination is a predicate concern. Beyond that, however, a prevailing party under section 1717 is usually a signatory to a contract with a fees clause, unless special exceptions are in play. All of these principles led the Second District, Division One to affirm some parts and reverse other parts of fee awards in the case we next discuss.
In Cardenas v. Seven Palms Apts., Case No. B193241 (2d Dist., Div. 1 Sept. 10, 2008) (unpublished), three plaintiffs—husband (the only signatory under a residential apartment rental agreement), wife, and the Fair Housing Council of San Fernando Valley (FHC)—sued an apartment complex (the other signatory to the rental agreement) and its managers for violation of state and federal fair housing laws (FEHA and FHA), violations of California's Unruh Act, assault/battery, breach of the covenant of quiet enjoyment under the rental agreement, unfair business practices (a claim later withdrawn), negligent hiring and supervision, and intentional infliction of emotional distress. The main focus of the action was plaintiffs' claims that certain apartment rules relating to children and occupancy limits were discriminatory in nature. After a bench trial, a predominantly defense verdict was entered against all plaintiffs, except plaintiff wife was awarded $8,250.00 for violation of her quiet enjoyment and for emotional distress as well as $10,000 in punitive damages, all against two defendants (the apartment complex and a resident property manager).
Defendants filed a motion seeking $109,700 in fees under section 1717, FEHA, and FHA. Wife filed her own fee motion under the same statutes, seeking to recover $213,170.96 in fees and $6,125 in costs.
The trial court denied wife's motion, but granted defendants' motion for fees/costs under section 1717 and the rental agreement as against all three plaintiffs in the sums of $39,725 (fees) and $6,820.55 (costs). Plaintiffs also recovered $5,975 as their costs of suit.
Both sides appealed, with some modifications to the lower court's fee orders.
Retired Judge Neidorf, sitting by assignment on the Court of Appeal and assigned authorship of the cause, first addressed the propriety of the fee rulings under section 1717. Because wife was a clear winner on the quiet enjoyment claim arising under the rental fee agreement (the only contract-based claim), she "prevailed." It did not matter that she did not prevail on noncontract-based claims. (See Hsu v. Abbara, 9 Cal.4th 863, 876 (1995) [focus is on an evaluation of the parties' comparative litigation success on the contract-based claims].) Similarly, defendants were entitled to a fee recovery against husband, who was a signatory to the rental agreement with the fees clause. However, because the other nonsignatories could never have recovered fees from defendants had they prevailed on the contract claims, there was no legal basis for defendants to recoup fees from the two nonsignatories, the wife and FHC. (See Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375, 380, 382 (1994).) No special circumstances such as alter ego, guarantor, assignee, or third party beneficiary principles were present to invoke exceptions to the nonsignatory "no recovery" rule. (See Wilson's Heating & Air Conditioning v. Wells Fargo Bank, 202 Cal.App.3d 1326, 1332-1334 nn. 6-7 (1988).)
Next, appellate attention turned to the wife's claim that she was improperly denied fee recovery under FHA and FEHA. No abuse of discretion occurred in denying fees. Because the trial record backed up the trial court's conclusion that plaintiffs were not evicted for engaging in any protected activity, none of the plaintiffs prevailed under the federal or state fair housing fee-shifting provisions.
Finally, the appellate panel considered defendants' contention that they should have been awarded more than $39,725 in fees of the $109,700 sought-after amount. Only the husband was subject to fee exposure, because wife won the quiet enjoyment claim and FHC was not a party to the rental agreement. Although articulating no reason other than that the requested amount was "absolutely out of bounds," the trial court's discretion was sustained on reducing the defense fee request against husband.
The end result is that husband was liable for defense fees in having lost the quiet enjoyment claim, but no similar exposure was extended to wife or FHC. Wife was found to have prevailed on the quiet enjoyment claim, so that she could not be liable for fees under section 1717. (However, because she was not a signatory to the lease, she had no ability to recoup fees as the winner.)