Parameters of “Discrete Win” Doctrine Probed, With Interim Wins On Petitions To Compel Arbitration Not Determining Eventual Winner Unless Discrete Proceeding Ended Matter.
Frog Creek Partners, LLC v. Brown, Case No. A129651 (1st Dist., Div. 5 May 24, 2012) (certified for publication) is a scholarly opinion considering, in a two party-one contract context arising under Civil Code section 1717, which party is the prevailing one where one party won an interim petition to compel arbitration although it ultimately lost the ultimate contractual dispute in a subsequent arbitration after successfully bringing a second petition to compel arbitration. Acting Presiding Justice Simons, in a 3-0 opinion discussing the various cases (Lachkar, Otay, Green, Kors, and Acosta), decided that (1) a lower court should not award section 1717 fees to a litigant who wins a petition to compel arbitration filed in an independent lawsuit but should await what happens in the arbitration, (2) a lower court can award fees to a litigant that obtains a denial of an independent petition to compel arbitration (not one brought in a lawsuit), because the victory in the discrete petition proceeding is a definite/final victory, and (2) a lower court should not award fees to a litigant who defeats a petition to compel arbitration in a filed lawsuit but await either the outcome in an arbitration or the lawsuit. (In this particular case, petitioner filed a renewed arbitration petition and won, and then won in the later in a 50-day arbitration--garnering $663,293 in net fees/costs, but after awarding the interim winner $125,000 in fees and denying ultimate winner’s request for $128,000 in fees for the initial petition to compel skirmishes. The appellate court in this one reversed the $125,000 fee award and remanded so that ultimate winner could obtain fees for the initial petition to compel battles, otherwise known as “to the victor goes the spoils”).
In reaching its result, the appellate court disagreed with the reasoning in Kors and Acosta, which might put this decision higher up for state supreme court review given that the jurisprudence is rich and constantly evolving in this area. Also, the policy implications of this decision were discussed in lengthy footnote 18 of the slip opinion, with the appellate court deciding that no “race to the courthouse” will ensue because nothing indicated a defendant would gain “a predictably greater entitlement of fees” under section 1717 by filing an independent petition to compel arbitration.
Photo: Red-backed poison frog. Flickr creative commons license. Dominik Hofer, photographer.