CALIFORNIA ATTORNEY'S FEES

Allocation/Interpretation Of Fees Clause: CC&R Nuisance Provision Allowed For Recoupment Of Over $600,000 In Attorney’s Fees And Costs

 

Allocation Not Necessary Where Same Facts And Evidence Involved On All Claims.

     In Klein v. Nyamathi, Case No. B228157 (2d Dist., Div. 6 Jan. 25, 2012) (unpublished), defendants were found liable to the tune of just under $400,000 for flooding their plaintiff neighbors’ property under nuisance and breach of contract theories. The trial court also awarded plaintiffs attorney’s fees of $552,655.75 and costs of $63,595.83. Defendants appealed.

     They did not get any aid. Paragraph 11 of the governing CC&Rs did have an anti-nuisance clause allowing for fee entitlement. No allocation of fees was necessary between compensable and noncompensable claims because the same facts and evidence were interrelated to all theories of recovery.

Fees Clause Interpretation: Fees Clause In Corporate By-Laws Did Not Allow For Fee Recovery Where Litigant Not Sued In His Official Corporate Capacity

 

$78,250 Fee Award In Favor Of Individual Litigant Gets Reversed.

     For litigators of all ages, we have come to appreciate that the “hat” worn by a litigant frequently may play a determinative role in the course of a lawsuit. This next case we discuss exemplifies this very well.

     One individual defendant won a $78,250 fee award against a Trust in The Alberta Hale Land Trust, Inc. v. Bonneau, Case No. C061945 (3d Dist. Jan. 18, 2012) (unpublished) after a long and complicated prescriptive easements/constructive trusts litigation. The trial court based the award by a fees clause in corporate by-laws, premised on the assumption individual defendant was sued in an official corporate capacity.

     Wrong “hat” caused a reversal of the fee award. He was never sued in this capacity as an agent of the corporation. So, the award went bye bye.

Just a bye-bye kiss. Circa 1906.  Library of Congress.

Fees Clause Interpretation/Section 1717: Narrow Purchase Agreement Fees Clause Did Not Allow Recovery For Litigant Prevailing On Tort Claims

 

Dismissal of Recission Count Preclude Fee Recovery.

     The message from the next case is be careful of what claims you dismiss during the progress of a case on behalf of a client plaintiff. If you have a narrowly worded fees clause, dismissal of a contractually based claim (such as rescission) may end any fee entitlement even though there was success on noncovered tort claims.

     Plaintiff in Taheri v. Khadari, Case No. B222132 et al. (2d Dist., Div. 7 Jan. 17, 2012) (unpublished) must have been feeling pretty good after obtaining a jury verdict on certain tort claims for over $8 million. However, plaintiff had dismissed a rescission claim during the litigation. That was fatal in his later request for attorney’s fees, with the lower court denying the request in toto. So, he did not feel very good for not garnering fees, provoking an appeal.

     The appellate court affirmed the fee request denial, finding that the Purchase Agreement fees clause was narrowly worded and would not allow recovery of fees for successful tort claims. The earlier dismissal of the rescission claim was “over and out” as far as fee entitlement under Civil Code section 1717. (Gil v. Mansano, 121 Cal.App.4th 739, 744 (2004).)

Arbitration/Fee Clause Interpretation: Broadly-Worded Fee Clause Allowed Litigants Successfully Asserting Third Party Claims To Recoup Fees Against Arbitration Winner In Post-Arbitration Judicial Proceedings

 

$74,124 in Fees/$1,529.40 to Successor Trustees Were the Winning Awards.

     Portico Management Group, LLC v. Harrison, Case No. C062060 (3d Dist. Dec. 28, 2011) (unpublished) is a chilling opinion--forget that it is the Holidays that are not as chilly in California as other areas of the country--both about making sure proper parties are named as well as the breadth of fee clauses encompassing arbitration and related proceedings.

     In a word, an arbitration claimant won a damages action for a real estate purchase agreement breach, but the arbitrator made the award against the trust. Claimant did not seek to correct or vacate the award, with catastrophic results. The trustees and successor trustees avoided, for years, claimant’s efforts to collect against the trust property or its proceeds. In fact, claimant lost some third-party claim judicial proceedings against a couple of successor trustees, who won prevailing party fees of $74,124 and costs of $1,529.40, against claimant based on a broad purchase agreement fee clause covering events “arising out of the agreement,” including any arbitration.

     The fee/costs awards were affirmed on appeal. The Third District found that the third-party claim post-arbitration proceedings did arise out of the purchase agreement, even though they were judicial in nature--justifying the lower court’s decisions on fees and costs. (Ajida Technologies, Inc. v. Roos Instruments, Inc., 87 Cal.App.4th 534, 552 (2001).)

     There is another moral to this story, so to speak--if suing a trust, name the trustees and make sure they are named in the judgment in representative capacities.

Fee Clause Interpretation/Section 1717: Attorney Garnering Large Fee Award Lost It On Appeal Because Losing LLC Members Could Not Collect Fees From Him

 

$178,000 Fee Award Went POOF!

     De novo review of a fees clause can be trouble for any litigant, appellant or respondent, on appeal. This means the appellate courts put their contractual interpretation “hats” on to see if the construction passes muster. Sometimes it does; sometimes it doesn’t.

     Doesn’t was the verdict in Amin v. Mitchell, Case No. G044636 (4th Dist., Div. 3 Dec. 28, 2011) (unpublished).

     Attorney represented an LLC involved in a convoluted dispute involving the Tenet Healthcare-Integrated Healthcare sale of four Orange County hospitals through an LLC formed to replace an Integrated investor who withdrew $30 million from the overall deal. After contested capital calls and possible dilutions due to settlement of prior litigation, LLC sued the primary LLC principal and the LLC attorney on various theories. LLC attorney was sued, in essence, for breach of his separate duties as attorney for the LLC, even though the LLC operating agreement--which contained a fees clause--was interwoven throughout the claims in the entire lawsuit. Attorney won a demurrer and was awarded $178,000 in fees based on the LLC operating agreement fees clause.

     Justice Aronson, for a 3-0 panel, rejected the fee award in favor of attorney.

     Because there was no conflicting extrinsic evidence, the fees clause’s applicability was a de novo review issue. With that decided, the appellate court found that LLC members did not sue attorney under the Operating Agreement, but based on independent breaches arising either from the fee retainer agreement or from his separate attorney-client relationship duties--neither of which would have allowed members to recover fees. Other claims against LLC’s principal did not name attorney as a partner, coventurer, or coconspirator such that these theories did not visit fee exposure upon the LLC members. Even under Civil Code section 1717 nonsignatory cases, attorney could only seek fees for contractual claims, something he was not sued on in the operative lawsuit.

     Attorney, as a final salvo, argued he was a third party beneficiary of the operating agreement fees clause. Not so, said Justice Aronson and his colleagues. Nothing in the fees clause demonstrated this proposition, and other provisions of the operating agreement indicated that there were no third party beneficiaries other than the contracting parties (which would also encompass attorney as a non-included person). [That means that the boilerplate clauses sometimes will be given significance in cases, where the interpretive need arises.]

Fee Clause Interpretation: Fees Clause Allowing Prevailing Party Recovery To “Any Party” Permitted Fees Award To Third Party Beneficiary Unsecured Creditor

 

Case Fell Between the Cracks of Unnamed Parties and Third Party Beneficiary Cases, Fifth District Rules.

     The Fifth District, in Cargill, Inc. v. Souza, Case No. F061767 (5th Dist. Dec. 9, 2011) (certified for publication), reversed a decision denying requested attorney’s fees to an unsecured creditor claiming it was a third party beneficiary under a fees clause.

     Needless to say, the reversal was fact intensive in nature.

     However, there are lessons that can be derived from the reversal. The operative fees clause in an agreement between debtor and creditor, with the fee claimant contending it was a third party beneficiary as an unsecured third party creditor of debtor, said fees were available to “any party,” rather than more restrictive fees clauses targeted to only contractual signatories such as debtor and creditor strictly. “The contract in this case falls between Sessions and Blickman Turkus and Real Property Services and Loduca.” Although third party creditor (claimed third party beneficiary) was not expressly named in the fees clause, “the fees clause does not express a clear intent to limit attorney fees to the signatories to the contract.” So, everyone, draftsmanship does matter--keep it broad, and you may get fee recovery; keep it narrow, and beware!

Fee Clause Interpretation: Broad Fees Clause In Shareholder Agreement Justified Award Of Fees To Defense After Suit Dismissed For Failure To Amend Or Post A Bond

CCP § 1021 Was the Basis.

     A $37,369 fee award against plaintiffs and in favor of defendants was affirmed in Higuera v. La Carreta Supermarkets, Inc., Case No. G044286 (4th Dist., Div. 3 Dec. 2, 2011) (unpublished), in a 3-0 decision authored by Justice Bedsworth. Here is what happened.

     Plaintiffs instigated a hybrid shareholder derivative/tort action against defendants in a shareholder dispute involving a shareholder agreement with a broadly-worded fees clause governing disputes between the company and shareholders or among the company’s directors. A demurrer was sustained with leave as to the initial complaint, and plaintiffs ordered to post a bond under Corporations Code section 800. Plaintiff did not amend or post the bond, so the suit was dismissed. The trial court later awarded defendants attorney’s fees of $37,369.

     The fee award was affirmed, but not based on Civil Code section 1717. Code of Civil Procedure section 1021 was the basis because plaintiff would have been entitled to fees had they prevailed on the tort claims, meaning the equity favored an award to defendants also. The broadly-worded fees clause was enforced as the determinative bargain between the two sides. (Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1341, 1343-1344 (1992).)

Fees Clause Interpretation/Arbitration: “Such Proceeding” Language Broad Enough To Encompass Fee Recovery For Litigation, Where Parties Waived Arbitration Rights

 

Breadth of Language Made the Difference in this One.

     Here is an interesting one that confirms that the breadth of language in a fees clause can make a difference. It especially did here, where the parties waived arbitration rights but the fees clause, but the use of “proceeding” language was broad enough to allow recovery in normal court litigation (over and above any fees incurred in an arbitration).

     The case is AmericaHomeKey, Inc. v. Powerhouse Associates, Inc., Case Nos. B224147/B226597 (2d Dist., Div. 5 Sept. 9, 2011) (unpublished), where plaintiff residential finance company won summary adjudication against mortgage brokers for $209,621.87 plus fees and costs when the parties litigated in court and waived contractual arbitraion rights. The court later awarded $81,316.43 is fees and $947.25 in costs, a total award of $82,263.68 to plaintiff as the as prevailing party under a contractual fees clause. Unhappy brokers appealed.

     Unhappiness continued when the judgment and fees/costs award were affirmed.

     Brokers claimed that the fees provision was limited to binding arbitration, so that no fee recovery could be had in normal court litigation. Not so, ruled the appellate court. The fees clause had broad “such proceeding” language, broad enough to encompass civil litigation. The parties’ waiver of an arbitration provision did not alter the result, because it left intact the broad fees clause allowing recovery in normal litigation The fees clause was severable and governed. Fee/costs award sustained on appeal.

Fees Clause Interpretation: Broad LLC Operating Agreement Fees Clause Covered Both Contract And Tort Claims

 

Substantial Fee Recovery Allowed

     We know of nothing proprietary, so here is a fees clause contained in a LLC Operating Agreement that reaped one party a truck load of fees: “If any party to this Agreement institutes any action, suit, counterclaim, appeal, arbitration or mediation for any relief against another party, declaratory or otherwise (collectively an ‘Action’), to enforce the terms hereof or to declare rights hereunder or with respect to any inaccuracies or material omissions in connection with any of the covenants, representations or warranties on the part of the other party to this Agreement, then the prevailing party in such Action, whether by arbitration or final judgment, shall be entitled to have and recover of and from the other party all costs and expenses of the Action, including reasonable attorneys’ fees and costs . . . incurred in bringing and prosecuting such Action and/or enforcing any judgment, order, ruling or award (collectively, a ‘Decision’) granted therein.”

     In Abrahams v. Hentz, Case No. B217665 (2d Dist., Div. 2 July 20, 2011) (unpublished), defendants won a demurrer to a Second Amended Complaint against a plaintiff suing for breach of fiduciary duty, fraud, account, declaratory relief, and injunctive relief in a complaint pitting LLC members against each other. Based on the above clause, the trial court awarded some defendants a fee recovery of $364,924 and another defendant fees of $91,497.75. The appellate court affirmed because the fees clause was broad enough to encompass both contract and tort claims. (Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1342-1343 (1992).)

     Also, losing plaintiff got hit with $4,000 for bringing a frivolous appeal as an in pro per litigant.

Fee Clause Interpretation: Pursuing Reserved Appellate Rights Did Not Give Rise To Fee Recovery Under Settlement Agreement Fees Clause

 

$35,000 Fee Award Vacated By Second District, Division 5.

     Where the contents of a contractual fees clause is clear in nature (with no factual disputes), this sets up an issue of law that an appellate court can review de novo. (Winet v. Price, 4 Cal.App.4th 1159, 1165-1166 (1992).) That is exactly what happened in the next case that we survey.

     The parties in Carr v. Torrance Memorial Medical Center, Case No. B225255 (2d Dist., Div. 5 May 25, 2011) (unpublished) had reached a written settlement after plaintiff lost a summary adjudication motion in a wage and hour case. The settlement did allow plaintiff to reserve his right to appeal the adverse summary adjudication, but stipulated that he released and dismissed all claims. There also was a fees clause in the settlement, covering any “dispute . . . over the enforcement of [the] Agreement.” Plaintiff did appeal, but that was dismissed when the appellate court earlier determined that the dismissal and release of that claim rendered the reservation of the right to appeal ineffective in nature. [PRACTICE POINTER--Be careful how you structure a settlement that preserves appellate issues for review; releases and dismissals obviously can undermine the intent of the parties.]

     The trial court awarded the defense $35,000 in attorney’s fees under the settlement fees clause.

     Reversed. The reason? The parties had agreed that plaintiff could appeal the summary adjudication motion. Plaintiff’s appeal did not concern enforcement of the settlement at all; in fact, one could argue that plaintiff only was seeking to enforce the one preserved claim remaining. The fees clause did not encompass what was done in this case.

Fees Clause Interpretation: Does Clause Mandating Award Of “Actual Costs And Expenses” To Prevailing Party Mean Actual Or Reasonable Fees?

Second District, Division 2 Answers the Question Under Civil Code Section 1717.

     We have seen numerous contracts that have attorney’s fees clauses that read something like this: “In any action between the parties arising out of or in relation to this Agreement, including any collection attempts should Payment not be timely made, the prevailing party in such action will be awarded his or her actual costs and expenses, including actual attorneys’ fees.” Does this really sanction an award of actual versus reasonable fees to a prevailing party?

     The Second District, Division 2 answered this question in a recent unpublished decision, Kleefeld v. Marrero, Case No B224011 (2d Dist., Div. 2 May 5, 2011) (unpublished).

Fee Clause Interpretation/Section 1717: Successful Defense Of Contractual Claim Garners Fee Recovery, But Successful Defense Of Tort Claims Does Not

 

Breadth of Clauses Are the Determinative Factors.

     By way of summary adjudication, nonsuit, and directed verdict, defendants beat contract and tort claims brought by plaintiffs, with the two defendants (Mr. Sun and C2) seeking postjudgment attorney’s fees awards but only C2 garnering a $120,000 fee award for prevailing on an implied covenant contract claim. Mr. Sun appealed the outright fee denial, C2 appealed the denial of fees on the tort claims, and plaintiff appealed the fee award in favor of C2.

INTERPRETATION OF FEES CLAUSE: Court Of Appeal Reverses $22,500 Fees Recovery Because Contractual Fees Clause Did Not Encompass Broker-Salesman Litigation Work

 

Second District, Division 3 Finds Contractual Interpretation of Fees Clause Was Wrong By Lower Court.

     Where there is no conflict in evidence (usually meaning divergent parol evidence), appellate courts will independently construe contractual provisions as a matter of law. In doing so, they may disagree with a lower court’s construction in the process. This does happen in the fee recovery area, as the next decision illustrates.

     In Eshaghyan v. Krikorian Investment Services, Inc., Case No. B221888 (2d Dist., Div. 3 Mar. 10, 2011) (unpublished), a salesperson sued his brokerage agency in court, recovering $245,281.25 in damages from a jury despite the existence of an arbitration provision in the Broker-Salesperson Agreement. Salesperson then moved for an attorney’s fees award pursuant to the fees clause in the Broker-Salesperson Agreement and the Policies and Procedures Manual, seeking $155,372.50 in fees. The trial court granted the motion in part, over opposition, eventually awarding $22,500 in fees against broker. The lower court did not clearly indicate which contract underpinned the fee award. Broker appealed.

Fee Clause Interpretation: Broadly Worded Fees Clause Allows For Fee Recovery In Successfully Prosecuting Tort Claims

 

No Apportionment Needed, Fourth District, Division 3 Rules.

     In the next case, there was a broad attorney’s fees clause that awarded fees to the prevailing party in any action “founded in tort, contract, or equity that in any way [relates to] the contract or is brought because of an alleged dispute in connection with any contract provision.” The breadth of this language sufficed to justify a substantial fee award.

     The Fourth District, Division 3, in a 3-0 opinion by Justice Ikola in Brea Imperial, Inc. v. Automotive Wheels, Inc., Case Nos. G041926/G042148 (4th Dist., Div. 3 Feb. 10,, 2011) (unpublished), confronted a losing defendant’s challenge to a postjudgment order assessing attorney’s fees aggregating $834,868.30 against it pursuant to the broad fees clause synopsized earlier.

Appeal/Interpretation of Fee Clause: Appellate Court Finds Challenge To Fee Entitlement Was Forfeited

 

Appellants Had Only Contested Amount of Fees Below, Not Raising Problems With Fee Entitlement.

     Here is one from the Third District that serves to underscore a crucial lesson for both trial and appellate practitioners: raise challenges at the lower court level or risk having them declared waived at the appellate level. That happened in the next case.

     In Valdovino v. Mason McDuffie Real Estate, Inc., Case No. C062169 (3d Dist. Feb. 2, 2011) (unpublished), seller prevailed against buyers and seller’s brokerage agent by establishing that no real estate purchase contract existed, with there being fees clauses in both the proposed purchase and listing agreements. Postjudgment, the trial court ordered buyers to pay more than $107,000 of seller’s attorney’s fees under the proposed purchase agreement fee clause and also ordered broker to pay $94,761.50 in fees under same clause. However, in opposing the fee request below, broker only challenged the amount of the fees, not the basis for entitlement. Bad error.

     On appeal, the Third District found broker forfeited a challenge to fee entitlement. What made matters worse was that broker had contested the right to fees in opposition to buyers’ separate fee motion, but did not do so when opposing seller’s motion. Appellate courts have discretion to consider issues raised for the first time on appeal, but this is usually reserved for pure questions of law where the public interest or public policy is involved. (Bayside Timber Co. v. Board of Supervisors, 20 Cal.App.3d 1, 5 (1971).) Neither of these concerns were present in this private controversy, such that the Third District declined to visit the entitlement issue by affirming the challenged fee award.

Fee Clause Interpretation: Contractual Fees Clause Led To Affirmance Of Substantial Fee Award, Because Cross-Complaint Did Not Implicate Contract Claims

$401,654 on Sole Contract Claim Sustained on Appeal by Sixth District.

     In this category, the breadth of a fees clause may be case determinative when measured against the actual claims or cross-claims brought by a party. No more and no less, as the next case demonstrates--with the appellate court carefully analyzing the cross-claims at issue.

     Defendant in Smith v. First Principle Church, Case No. H034075 (6th Dist. Jan. 27, 2011) (unpublished) won $401,654 (out of a requested $536,275 in fees, reflecting the work of 6 attorneys) after prevailing in a religious pension agreement dispute where there was a fees clause in the pension agreement. However, losing plaintiffs said hold on, there may be unresolved defense cross-claims under which I might prevail, so no go.

     The appellate court gave a “red light” to the losing plaintiffs in this one.

     Losing plaintiffs seem to argue that defendant’s cross-complaint, which was alive and well, may have been “on the contract” so that no final prevailing party analysis could be made until the cross-claims were resolved. After a very careful microanalysis of the cross-claims (recovery of corporate distributions, money had/received, and breach of fiduciary duty), the appellate court concluded these were statutory or tort claims (or spins on the same) not giving rise to fee exposure. As a result, losing plaintiffs could never recover fees on these cross-claims such that winning defendant’s fee award was vindicated in full.

Fee Clause Interpretation: Later Independent Contractor Agreement Did Not Extinguish Fee Clause In Earlier Purchase Agreement

Fifth District Finds No Novation Under the Circumstances.

     Here is a contractual interpretation/novation case that presents a set of circumstances we have not reported on to date.

     In Miller v. London Properties, Case No. F059259 (5th Dist. Jan. 13, 2011) (unpublished), defendant brokers prevailed in a contractual dispute with plaintiffs over their purchase of an Oakhurst salon known as Sakani Spa. The trial court awarded defendants $78,262.50 in attorney’s fees under an unambiguous fee clause in the purchase agreement.

     On appeal, plaintiffs argued that a subsequent independent contractor agreement superseded the purchase agreement, meaning the fee clause also went POOF!

     Both the trial and appellate courts disagreed.

     The only holistic, reasonable contractual interpretation was that the independent contractor agreement only superseded any prior understandings about one of the plaintiff’s relationships with the spa. Alternatively, under novation principles, there was no clear and convincing evidence of an intent to extinguish the purchase agreement when all the terms of the independent contractor agreement were examined.

     Fee award affirmed.

Spa.  Hada kurabe hana no shōbuyu kurabe (hoso?), koshi yuki no ya.  Artist:  Kunichika Toyhara.  1833-1904.  Library of Congress.

Fee Clause Interpretation: Broadly Worded Fee Clause Relating To Any Initiated Litigation In Connection With Obstruction Justified Substantial Fee Award Against Losing Party

 

Second District, Division 6 Affirms $210,697.50 Fee Award.

     Judges, as much as anyone, do try to be pragmatic in awarding fees, which are frequently based on equitable considerations. Here is one illustrating that principle, even though the breadth of the fees clause and intertwinement of issues well supported the result legally.

     In Zuiderweg v. Hoffman, Case No. B214083 (2d Dist., Div. 6 Dec. 8, 2010) (unpublished), property owner Hoffman, who was subject to several easements favoring dominant tenements owned by respondents, lost a jury trial to respondents, who were awarded $390,250 in compensatory damages. Also, the lower court later awarded one of the respondents $210,697.50 in attorney’s fees based on a fees clause in a stipulated prior judgment that bound the parties. Losing property owner appealed.

     The Second District, Division 6, in a 3-0 decision authored by Justice Perren, found that the fees clause in the stipulated judgment was broad in nature. Although only triggered by initiated litigation, it did allow the lower court to consider “all the circumstances” in awarding fees “result[ing] from the act of removing an obstruction of the access roadway . . . .” Not only did this clause allow consideration of broad equitable considerations, the lower court correctly determined that the obstruction issues were intertwined with the other issues in the litigation so apportionment was not required. The lower court’s full award of the requested fees was no abuse of discretion here.

Fee Clause Interpretation: Mutual Consent To Contract With Fees Clause Enough--No Legal Requirement To Sign A Contract With The Clause

Second District, Division Reverses Trial Court’s Decision to Not Entertain Fee Request on the Merits.

     In C-1 Construction v. Choi, Case No. B217012 (2d Dist., Div. 5 Dec. 3, 2010) (unpublished), C-1 obtain a compensatory award from defendants based on claims it was not allowed to finish certain construction work agreed to under an unsigned AIA contract. The trial court denied a fee request by C-1 because there was no written fee clause governing the parties.

     This determination was reversed on appeal.

     Reason? The parties agreed by mutual consent to proceed based on the AIA contract having a fees clause, with mutual consent being the dispositive concern. (Khajavi v. Feather River Anesthesiologists Med. Group, 84 Cal.App.4th 32, 60 (2000).) There is no legal requirement that the fees clause be in a signed writing, as long as the parties agreed to proceed under a contract with a fees clause. The matter was remanded to have the lower court entertain C-1‘s fees request on the merits.

     BLAWG BONUS:  For a collection of Samuel Goldwyn quotations, beginning with, “[a]n oral contract isn’t worth the paper it’s written on,” click here.

Civil Code Section 1717/Fees Clause Interpretation: $33,500 Fee Affirmed Under Reciprocity Principles

Settlement Agreement Fees Clause Was Broad, Making Blickman Inapt.

     The breadth of a fees clause will often determine whether Civil Code section 1717 reciprocity principles apply. For example, very narrow clauses were found not to give rise to reciprocity in Blickman Turkus, L.P. v. MF Downtown Sunnyvalle, LLC, 162 Cal.App.4th 858 (2008) and Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375, 382 (1994). However, these cases were found not to retard application of reciprocity principles where broader clauses were involving “prevailing parties,” which could encompass third-party beneficiaries to the agreement.

     In Knight v. Conroy, Case No, E049034 (4th Dist., Div. 2 Nov. 16, 2010) (unpublished), Knight was awarded money and attorney’s fees under a breach of contract claim, with defendant appealing primarily the subsequent award of fees to Knight. What happened was that property owner defendant and former co-owner reached a settlement agreement under which property owner waived claims against persons performing work on the property even though these persons would be third party beneficiaries under the settlement agreement. Property owner defendant lost a California State Contractor License Board mandatory arbitration against plaintiff Knight (one of the contractors performing work and a third-party beneficiary under the settlement agreement), with the trial court awarding Knight $3,856.96 in attorney’s fees related to the arbitration and $29,700 in connection with Knight’s lawsuit where recovery was made on the contract claim. The pertinent part of the Settlement Agreement stated: “In the event of litigation involving the provisions of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees and costs.”

     Defendant did not prevail on appeal, such that the fee award was sustained.

     The main reason was that a third-party beneficiary, even if not a contractual signatory, can benefit from a fees clause in the right situations. (Loduca v. Polyzos, 158 Cal.App.4th 334, 344 (2009).) That was the case here, because the fees clause had broad “prevailing party” language (covering contractor Knight), distinguishing it from cases like Blickman and Real Property Services. Also, the different result in Session Payroll Mgt., Inc. v. Noble Constr. Co., 84 Cal.App.4th 671, 680-681 (2000) did not matter in Knight, because the fees clause verbiage referred only to “either” party--contractual signatories--in Session rather than having the wider “prevailing party” contained in the settlement agreement.

Fee Clause Interpretation: General Partner Properly Awarded Fees Under Broadly Worded Partnership Fees Clause

$15,286 Fee Award Affirmed Against Limited Partners Joining Unsuccessful Petition to Wind Up Partnership.

     When a contractual fees clause covers “any dispute,” such broad language usually gives rise to fee entitlement. It did in the next case we look at.

     In LaRocca v Briasco, Case No. B217071 (2d Dist., Div. 8 Oct. 14, 2010) (unpublished), general partner was awarded $7,702.50 fees in a probate proceeding and $15,286 fees in a subsequent civil proceeding when two limited partners lost a partnership wind-up petition under a partnership agreement with a fees clause broadly covering “any” dispute between partners under the agreement. Limited partners appealed the latter fee award.

     They likely were disappointed on appeal, because the fee award was affirmed.

     They first argued that only an oral partnership was involved because the partnership had expired under the express term of the partnership agreement. Both the trial and appellate courts disagreed, observing that the partnership had been actually operational for 7 years beyond the stated term so that the partnership continued by operation of Corporations Code section 16406. That also meant that fee exposure continued under the partnership agreement because the continuation also continued rights and obligations under the contract.

     The second argument was that the contractual fees clause did not cover the wind-up petition dispute, but the breadth of the fee provision submarined this argument.

Mediation: Third District Decides That "Mediation Condition Precedent" Clause In Real Estate Contract Only Applies To Party Commencing An Action

It Does Not Apply to Someone Simply Defending An Action.

     In our category "Mediation," we have explored many decisions entertaining the issue of when attorney's fees are properly awarded under California real estate purchase agreements with attorney's fees clauses mandating mediation as a condition precedent to fee recovery. Here is another decision on the topic, with the "bottom line" message being that you need to pay attention to the wording of the clause (contractual interpretation 101) and then see what version of the CAR contract that is at issue for purposes of resolving a dispute (contractual interpretation advanced class—given that the CAR contract forms have changed over the years).

     Yelinek v. Lane, Case No. C061919 (3d Dist. Oct. 5, 2010) (unpublished) involved a defense verdict in favor of a residential house seller in a fraud/negligent misrepresentation action involving a CAR real estate agreement with a fees clause subject to a mediation condition precedent. The trial judge ultimately awarded defendant seller $49,575 in attorney's fees and $3,808.20 in costs after seller refused to mediate with buyers.

     Buyer's appeal, arguing that seller's failure to mediate prevented an award of attorney's fees, was unsuccessful.

     The mediation condition precedent clause prevented a fee award with respect "to any party commenc[ing] an action based on a dispute or claim to which this paragraph applies …."

     The Court of Appeal determined the fee award was proper, because defendant seller never commenced any action such that he did not have to agree to mediation before being entitled to fee recovery. (Accord, Johnson v. Siegel, 84 Cal.App.4^th 1087, 1101 (2000).) The Third District distinguished the leading case of Frei v. Davey, 124 Cal.App.4^th 1506 (2004) on the ground that the defendants barred from fee recovery there were also cross-complainants such that they needed to satisfy the mediation requirement. In contrast, the defendant in Yelinek was only defending so that he did not need to agree to mediation for fee recovery qualification purposes.

     BLOG OBSERVATION—In this area, litigants also need to be attuned to the fact that the mediation condition precedent in the CAR contract has evolved over the years. We believe that it also now applies to a defendant who refuses to accede to mediation after a plaintiff offers to do so before commencing an action. So, keep focused on the wording of the fee clause and its qualifications in order to determine if fee recovery is in "the ballpark" (aptly stated given that we are now in the midst of the Major League playoffs).     Below:  Babe Ruth.

Fees Clause Interpretation: Fourth District, Division 3 Adopts Contextual Interpretation of Fees Clause

Appellate Court Strikes Attorney's Fees Award of $9,350 in Favor of Plaintiff.

     In Legal Service Bureau, Inc. v. Mostafavi, Case No. G041804 (4^th Dist., Div. 3 Oct. 4, 2010) (unpublished), our local Santa Ana appellate court dealt with a lower court judgment awarding $9,350 to plaintiff under an attorney's fees clause of an agreement between each side. The basic dispute involved compensation entitlement to a company that agreed to represent a chiropractor in connection with pursuit of certain lien claims before the Workers' Compensation Appeals Board. After company did not obtain all the compensatory fees it desired for representing chiropractor, yet did obtain some fees primarily under an unjust enrichment theory, the trial court nevertheless did award attorney's fees to company and against chiropractor pursuant to a contractual fees clause. Everyone appealed.

     The underlying judgment in favor of plaintiff was affirmed, but the Court of Appeal did strike the fee award, in a 3-0 opinion authored by Acting Presiding Justice Bedsworth.

     What was the basis for the reversal? Simple answer: the wording of the fees clause, interpreted by a contextual construction of the entire contract between the parties, did not justify an attorney's fees award. The fees clause only applied to routine billing disputes under the contract, not unjust enrichment claims that were not covered by the fees clause. As aptly observed by the appellate panel, "In the absence of an applicable fee shifting provision, both parties must bear their own attorney fees." (Slip Opn., citing Trope v. Katz, 11 Cal.4^th 274, 278 (1995).)

Section 1717: Simply Worded Fees Clause Broad Enough To Invoke Reciprocity Principle of Civil Code Section 1717

Second District, Division 1 Affirms and Remands to Award Fees on Appeal.

     Levaton v. Levaton, Case No. B213730 (2d Dist., Div. 1 Sept. 24, 2010) (unpublished) involved a family real estate deal gone bust, with the trial court ultimately awarding one side rescission. An initial appeal affirmed most of the judgment, but remanded to the trail court for trial on the issue of fair rental value. While the first appeal was pending, the trial judge awarded the winning side $45,081 in attorney’s fees. Losers contested whether there was a proper basis for a fee award.

     They lost.

     The fee clause at issue stated: “In the event of any legal problems, all legal fees shall be paid by Egal Levaton regarding this transaction or any other problems.” Because no extrinsic evidence was offered, the appellate court did a de novo review and determined that the clause was broad enough to include recovery of fees expended in litigation (especially stressing words like “any legal problem” or “any other problems”). The “transaction” language referred to the failed real estate deal, so it too was broad in nature.

     Losers then argued that the clause was ambiguous because it was only unilaterally worded

to say that Egal would face fee exposure. Not so, said the reviewing court. That is exactly where Civil Code section 1717 comes in to make the right reciprocal, so that the prevailing party recovers fees whether or not he/she is the party specified in the contract. (Pacific Custom Pools, Inc. v. Turner Construction Co., 79 Cal.App.4^th 1254, 1268 (2000).)

     So, the trial judge’s determination was affirmed and the matter remanded to determine the fees due to winners on appeal.

Deadlines And Fee Clause Interpretation: Second District, Division 6 Affirms $121,000 Fee/Cost Award In Neighborhood Mega-Squabble

 

Fee Motion Found Timely and Declaratory Relief Action Was “On the Contract” for Purposes of Justifying the Award.

     We knew that this next case was going to be a crazy one, when Acting Presiding Justice Yegan wrote, “Within a year or so, [the] relationship [between neighbors] had deteriorated from a warm friendship to open hostility” and “The enmity between the parties continued unabated through 2005.” The litigation involved accusations of yelling at each, driving into pots with a car, placing a mailbox in a landscape easement, poisoning of a koi pond, undue car honking, hitting a neighbor with shoveled dirt, and a citizen’s arrest for battery (for which a neighbor was prosecuted but acquitted). This case rivals some of the antics on the T.V. oldie “Romper Room.”

     In Sjoquist v. Nebroski, Case No. B209161 (2d Dist., Div. 6 June 22, 2010) (unpublished), one set of neighbors won $352,000 in compensatory damages and $100,000 in punitive damages for battery/emotional distress in litigation also having a declaratory relief count that requested declarations of rights under an easement agreement alleged to govern the parties (with there being a fees clause in the agreement). The trial court awarded prevailing neighbors $112,00 in attorney’s fees and $8,426 in costs. (As an aside, the losing neighbors got divorced, with wife filing two days after the jury verdicts were returned.) Losers appealed.

Fee Clause Interpretation: $278,323 Fee Award Remanded For Failure To Determine If Narrow Fee Clause Truly Covered Certain Pled Claims

Tort Claims Were Not Covered, Others Were, and Some Needed to be Revisited.

     The Sixth District, in a scholarly unpublished 3-0 opinion authored by Acting Presiding Justice Bamattre-Manoukian, has a very thoughtful discussion of the breadth of a fees clause in a promissory note when plaintiffs prevailed on professional negligence and vendor’s lien claims, lost on their contractual breach, declaratory relief, judicial foreclosure and fraud claims, and defeated defendants’ cross-claims for contractual breach and partial rescission (although losing on the declaratory relief and judicial foreclosure cross-claims). The promissory fees clause stated: “Should suit be commenced to collect this note or any portion thereof, such sum as the Court may deem reasonable shall be added hereto as attorney fees.” The lower court found plaintiffs to be the prevailing parties based on the parts of the complaint/cross-complaint they won, awarding them $278,323 in fees (the total amount requested).

     Defendants appealed the fee award in Bayto v. Doyle, Case Nos. H033773/H034076 (6^th Dist. June 18, 2010) (unpublished).

Fee Clause Interpretation: CAR Broker Fee Clause Draws Starkly Different Views On Fee Recovery In Unpublished Decision

 

First District, Division 2 Panel Has Very Divergent Perspectives on Breadth of Fee Clause.

     Here is a very interesting unpublished decision about the interpretation of a CAR form fee clause in a brokerage contract. The main dispute centered upon the interpretation of the scope of this provision: “In any action, proceeding or arbitration between Seller and Broker regarding the obligation to pay compensation under this Agreement, the prevailing Seller or Broker shall be entitled to reasonable attorneys fees.” In fact, there was a consensus by the First District, Division 2 in Palter v. Jafran, Inc., Case No. A124922 (1^st Dist., Div. 2 June 3, 2010) (unpublished), but only by a 2-1 vote and subject to a “feisty” (our word) dissent by Justice Haerle.

Fee Clause Interpretation And Settlement Exclusion: Court Of Appeal Reverses Trial Court Refusal To Grant Attorney’s Fees To Prevailing Supplier In Water Clarification Building Fire

 

Third District Finds Settlement Agreement Carve-Out Preserved Right to Seek Fees Under Indemnity Agreement Clause.

     Bravo to the attorneys representing a prevailing party in the next case. They properly worded a partial settlement agreement carve-out so as to preserve their client’s ability to seek fees under a contract once the client prevailed against its opponent after a jury trial.

    In F & H Construction, Inc. v. I. Kruger, Inc., Case No. C058312 (3d Dist. May 17, 2010) (unpublished), a general contractor hired by a water agency to upgrade a water treatment plant (F & H) purchased a water clarification system from supplier Kruger. After the agency complained about a sagging problem in the system, a spark emitted from a welding instrument by F & H employees started a fire causing extensive damage to the building in which the system was located. F & H sued Kruger and others for costs spent in rebuilding the building and for extra work. After a flurry of cross-complaints from the other parties, Kruger settled a cross-claim for moneys due under a purchase order, expressly excepting from the partial settlement any claims involving the fire. For example, the settlement agreement excepted “the claims presently asserted by F & H in the suit against KRUGER for damages and/or indemnity for the loss caused by the fire …, and defenses thereto ….” A jury found that Kruger was not negligent in the fire incident given that it had no supervisory control over the F & H welding employees. However, the trial court refused to award Kruger attorney’s fees as the prevailing party under a fees clause in the parties’ purchase agreement.

Section 1717: Trope Limitation Is Trumped By Broadly Worded Fees Clause In Unpublished Decision

Second District, Division 4 So Holds, Noting No Decisions On Point.

     We have examined numerous cases that have denied an award of attorney’s fees under Civil Code section 1717 because of the limitation set forth in Trope v. Katz, 11 Cal.4^th 274 (1995), holding that in pro per attorneys representing themselves cannot obtain fee recovery as prevailing parties.

     However, what happens if there is a broadly worded contractual fees clause in a retainer agreement allowing the attorneys to recover the value of their time to prosecute or defend an action to enforce any provision in the retainer?

     This very issue was confronted in Lockton v. O’Rourke, Case Nos. B208440/B212435 (2d Dist., Div. 4 Apr. 23, 2010) (unpublished).  

     The result? Attorneys were entitled to fees under the broadly worded clause. “The parties cite no case in which a fee clause used this [broad] language, and we have found none.” (Slip Opn., p. 27.) The appellate court found that the parties could agree to a broader fee recovery bargain, and enforced just that in reversing a lower court’s denial of fees to attorneys prevailing under a retainer agreement.

Section 1717 And Fees Clause Interpretation: Broad Fees Clause Meant Trial Court Erred In Denying Fee Recovery To Prevailing Mortuary

Second District, Division 6 Also Holds Fees Do Not Have To Be Apportioned.

     Broad contractual language allowing for fee recovery “in any lawsuit or other legal proceeding to which this Agreement gives” can even grant entitlement to fee recovery with respect to tort claims. (Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4^th 1338, 1342-1343 (1992); Allstate Ins. Co. v. Loo, 46 Cal.App.4^th 1794, 1796-1797 (1996).) This type of breadth in a mortuary cremation services agreement led to fee entitlement in the next case.

     Mortuary defendants prevailed in a mixed contract/tort/statutory case that involved a fees clause in a cremation authorization instrument stating “I . . . agree to protect and indemnify [crematory] or its assigns, against any claims of damages which may result on account of this authorization or my . . . failure to properly identify or pick up said cremated remains, including legal fees and costs and expenses of litigation.” The trial court denied awarding defendants fees under Civil Code section 1717.

     Applying a de novo standard of review, the Second District, Division 6, in a 3-0 decision by Justice Perren, reversed on this issue in Warden v. Dudley Hoffman Mortuary, Case No. B206840 (2d Dist., Div. 6 Apr. 19, 2010) (unpublished).

     The language of authorization was broad enough to encompass both contract and tort claims, with the work done on the noncontract claims so intertwined that it would be impracticable or impossible to separate attorney’s time into compensable and noncompensable units. (Abdallah v. United Savings Bank, 43 Cal.App.4^th 1101, 1111 (1996); Erickson v. R.E.M. Concepts, Inc., 126 Cal.App.4^th 1073, 1085-11086 (2005).)

     Result: reversed and remanded to the trial court to render a proper fees award.

 

Corpse beginning to burn on pyre, India, 1906.  Library of Congress.

Section 1717 And Unlicensed Contractor: No One Is Happy About $2,000 Fee Recovery

Award Is Sustained, But Winning Subcontractor Under Contract With Fees Clause Fights Back Unlicensed General Contractor’s Illegality Argument.

     Usually, under our category “Unlicensed Contractors,” we are dealing with decisions where an unlicensed contractor wins a dispute with a fees clause and attempts to obtain an award of attorney’s fees—not very successfully. In the next case we look at, the losing contractor attempts to shield off a fee recovery under a broad contractual fees clause by claiming that the contract was illegal so that no award was authorized to the victorious licensed contractor. This did not work when it came to the flip side of the coin.

     Haskell Canyon Partners, L.P. v. E&M Concrete Constr., Inc., Case No. B215200 (2d Dist., Div. 4 Apr. 5, 2010) (unpublished) concerned a situation where an unlicensed general contractor was sued along with a licensed subcontractor by plaintiffs in a construction defect suit, with general seeking equitable indemnity against sub. The general-sub contract had two broadly worded attorney’s fees clauses, one for fees to the prevailing party “in any court action arising out of the Agreement or the enforcement or breach thereof” and another for “any action brought against general by third parties, in which E&M is joined as a party.” Both sub and general eventually settled with plaintiffs, although sub settled first and with both compromises confirmed as good faith settlements. Sub sought $125,160 in fee recovery because general’s equitable indemnity cross-complaint was dismissed in the good faith settlement process (although it took sub three attempts to get there). However, it came out in the fee battle that sub’s attorneys had agreed to litigate the case for a negotiated $7,500 cap. The trial court awarded sub $2,000 in fees, with both sides appealing.

Section 1717 And Fees Clause Interpretation: Fee Denials Against Apartment Seller And Escrow Company Reversed And Remanded For Reconsideration

 

Second District, Division 7 Finds Reversal of Prejudgment Interest Issue Requires Reexamination of Prevailing Party Determination and the Escrow Instructions Fee Clauses Were Sufficiently Broad for Fee Entitlement Purposes

     In Marina Glencoe, L.P. v. Malibu Escrow Corp., Case No. B203415 (2d Dist., Div. 7 Mar. 1, 2010) (unpublished), an apartment building purchaser recovered $100,000 from an escrow company for wrongfully withholding a deposit and $9,416.43 interest from seller in litigation over a canceled real estate transaction. Buyer had also sought additional damages for tax liability damages, a claim abandoned by buyer after 16 months of litigation. The trial court refused to award any attorney’s fees to buyer, who had moved to recover more than $380,000 against both defendants pursuant to fee clauses in the purchase agreement and escrow instructions under Civil Code section 1717.

     The Second District, Division 7, in a 3-0 decision authored by Presiding Justice Perluss, reversed and remanded for reconsideration.

     Although defendants challenged the fee denial appeal as untimely, the appellate panel disagreed. Seller only sent a “Notice of Ruling,” which does not comply with the strict rules for sending a “Notice of Entry.” This meant that the longer 180-day appeal period applied, with buyer’s appeal being timely in nature. (Sadler v. Turner, 186 Cal.App.3d 245, 248 (1986).) Similarly, the court’s minute order had no “Notice of Entry” of order language and was not file stamped, meaning it did not trigger the shorter appeal periods. (Alan v. American Honda Motor Co., Inc., 40 Cal.4^th 894, 905 (2007).)

     With respect to the fee denial as to apartment seller, the Court of Appeal agreed that this was a “mixed result” case because buyer did not gain his tax liability damages, giving the lower court discretion to determine if there was a prevailing party. Under Santisas v. Goodin, 17 Cal.4^th 599 (1998) [one of our Leading Cases], nothing prevented the lower court from examining the voluntary dismissal of the tax liability claim in determining if there was a prevailing party. However, because there was a reversal on a narrow prejudgment interest issue, the fee determination was remanded for the trial court to reexamine whether buyer’s additional success on the prejudgment interest issue altered the “prevailing party” decision.

     That brought Justice Perluss and his colleagues to the fee denial as to escrow company for withholding a deposit made by buyer in the canceled transaction. Escrow company argued that the lower court correctly denied fees, because the pertinent clauses were third-party indemnity rather than general attorney’s fees clauses. The appellate court nonetheless found that one of the fee clauses allowed escrow to recover fees for performance arising out of the escrow transaction, which under section 1717’s mutuality principle meant that the clause was sufficiently broad to allow for fee recovery. (Accord, Paul v. Schoellkopf, 128 Cal.App.4^th 147, 152-154 (2005).)

Fee Clause Interpretation: Broad LLC Operating Agreement Fee Clause Encompasses Tort Claims

$38,000 Fee Award Out of Requested $88,795 Amount Affirmed on Appeal.

     Civil Code section 1717 does not always govern the award of contractual attorney’s fees. Code of Civil Procedure section 1021 allows the parties to make attorney’s fees agreements, by contract, that go beyond section 1717 dictates, allowing recovery for tort or even other causes of action depending on the breadth of the language in the fees clause. Section 1021 was the important provision at issue in the next case.

     In Ha v. Yi, Case No. 214212 (2d Dist., Div. 7 Jan. 6, 2010) (unpublished), the LLC Operating Agreement between different members contained a broad attorney’s fees provision—“In the event of a dispute arising out of or in connection with this Agreement, the party prevailing in such dispute shall be entitled to its reasonable costs and attorney’s fees in addition to all other relief to which it may be entitled.” A donnybrook lawsuit ensued in which both contractual and tort claims were asserted by some signatories against other contractual parties. The lower court eventually awarded $38,000 in attorney’s fees (out of a requested $88,795) to the prevailing party, mainly on tort claims.

     On appeal by the losing party, the appellate panel affirmed. CCP § 1021—as interpreted by the trilogy of Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4^th 1338, 1341 (1992), Allstate Ins. Co. v. Loo, 46 Cal.App.4^th 1794, 1798-1799 (1996), and Lerner v. Ward, 13 Cal.App.4^th 155, 158-160 (1993)—allows fee recovery for torts under a broadly-worded attorney’s fees clause. The clause in this case was broad enough to encompass recovery on various torts, so no substantive problem with the result below according to the Court of Appeal.

     Losing party was shocked by the amount of the fees, apparently ignoring the $50,000 discount by the trial court. Didn’t go very far with the reviewing court. Appellant only made generalized assertions of unreasonableness and did not include a hearing of the reporter’s transcript on the fee hearing, effectively waiving an assertion of error on appeal. (See Gee v. American Realty & Construction, Inc., 99 Cal.App.4^th 1412, 1416 (2002).)

Fee Clause Interpretation, 998 Offers, And Routine Costs: A Three-Fer In One Case—And A Resultant POOF! Upon Reversal Of The Fee Award

Substantial Fee Award Reversed Because Fees Provision Did Not Reach Noncontract Recovery, While Rest of Trial Court’s Fee/Costs Orders Affirmed on Appeal.

     In Gaggero v. First Federal Bank of California, Case No. B207273 (2d Dist., Div. 1 Nov. 30, 2009) (unpublished), Borrower voluntarily dismissed with prejudice his equitable, statutory and breach of contract claims, on the eve of a jury trial, after the trial court held a pretrial hearing on contractual interpretation issues and indicated that the defense would be entitled to a nonsuit or directed verdict. Lender filed a costs bill and moved for an award of attorney’s fees. After determining that Lender was not entitled to fees for Borrower’s dismissal of the contract claim, the trial court did award Lender $1.5 million in fees and $22,000 in costs (after disallowing some other routine costs to Lender) for prevailing on the noncontract (primarily tort and statutory) claims. The trial court also disallowed Lender’s expert witness fees on the ground that its Code of Civil Procedure section 998 offer was not made in good faith. Both sides appealed.

     On appeal, the substantial fee/costs award went POOF!, but the lower court’s other rulings were sustained.

Prevailing Party And Fee Clause Interpretation Issues: Court Of Appeal Sustains Trial Court Denial Of Fees To Either Side

Fourth District, Division 1 Utilizes “Pragmatic” Prevailing Party Test and Determines Narrow Fee Clause Did Not Allow For Recovery on Successful Tort Claim.

     In a dispute involving a brokerage arrangement with respect to a mobile home, seller won a small compensatory and punitive damages jury verdict against brokers for breach of fiduciary duty, although seller lost a contractual claim and brokers lost a contract-based cross-claim after having it dismissed because no supporting evidence was presented at trial. Seller moved for $89,772.50 in contractual attorney’s fees for prevailing on his tort claim, and brokers moved for $61,217.50 in contractual fees and costs for obtaining a directed verdict on seller’s breach of contract claim. The trial court denied fees to either side, and both sides appealed claiming each one respectively should have been awarded fees.

     The Fourth District, Division 1 affirmed the fee denials in Whitton v. AAAmerican Pacific Manufactured Homes, Inc., Case No. D053737 (4^th Dist., Div. 1 Nov. 24, 2009) (unpublished).

     The appellate court found that under the Hsu v. Abbara, 9 Cal.4^th 863 [one of our Leading Cases] “pragmatic” test, brokers did not prevail overall despite defensing seller’s contract claim through a directed verdict. The reason is that broker suffered a defeat by losing their contract cross-claim, with no authority being cited to show that the trial court had to ignore this defeat when determining if brokers prevailed for purposes of fee recovery.

     That brought the panel to seller’s claim that it was entitled to fees under a fees clause for winning his tort claim. Not so, said the Court of Appeal. The fee clause at issue was very narrow, only encompassing contractual enforcement rather than broader claims “arising out of” the agreement. The fiduciary duty claim was not brought to enforce the agreement. (Exxess Electronixx v. Heger Realty Corp., 64 Cal.App.4^th 698, 709 (1998).) Thus, the more narrow nature of the fees clause prevented seller from recovering his fees, meaning the lower court’s interpretation of the contract was correct.

Fee Clause Interpretation and 998 Offers: Court Of Appeal Remands $400,000 Fee Award against Contractor But Affirms Separate $296,148.84 Against Contractor In Favor of Subcontractor

Fourth District, Division 1 Address Plethora of Fee Issues in Unpublished Decision.

     Well, strap your helmets on, readers, because we now synopsize a 75-page unpublished decisions dealing with a cornucopia (a good word in celebration of upcoming Thanksgiving) of attorney’s fees issues under California law.

     In The Gifted Schools v. Grahovac Construction Co., Case No. GIC840032 (4^th Dist., Div. 1 Nov. 19, 2009) (unpublished), plaintiffs Trust and an associated Corporation received an aggregate award of $438,610 against defendant Contractor as well as a Civil Code section 1717 attorney’s fees award of $400,000 to both “Plaintiffs” (out of submitted bills totaling $772,001). Earlier, plaintiffs had rejected a substantial, higher 998 offer of $605,000 made by Contractors jointly to “Plaintiffs.” Contractor also lost his cross-complaint against subcontractor, which was awarded fees of $296,148.84 under section 1717. Everyone appealed except subcontractor.

Fee Clause Interpretation And Allocation: Substantial Fee Award Affirmed Where Fees Clause Was Broad In Nature And All Claims Based On Same Operative Facts

Fourth District, Division 2 Sustains $382,233.25 Fee Award Under Code of Civil Procedure Section 1021.

     As we have reminded readers before, a broad fee clause will frequently give winning litigants a “big bonus” for fee recovery purposes: the broader the clause, the better the chances that noncontractual claims will be found to give rise to fee recovery. The next case we look at is an example of how a substantial fee recovery can flow from a broadly worded attorney’s fees clause.

     Roadway Construction Co., Inc. v. Hanson Enterprises, Inc., Case No. E046037 (4^th Dist., Div. 2 Nov. 19, 2009) (unpublished) involved a grading contractor which sued the former owner of the property subject to its construction for breach of contract, unjust enrichment, and declaratory relief, requesting attorney’s fees based on a fees clause in the grading contract. The clause read this way: “If any arbitration or legal action is commenced between the parties concerning the Contract Documents, or the rights and duties of any person in relation thereto, the party prevailing in such action shall be entitled to recover its attorney’s fees and costs in connection therewith from the losing party.” The trial court dismissed the unjust enrichment claim based on the two-year statute of limitations, which prompted contractor to dismiss the other claims with prejudice. Later, the lower court awarded former owner contractual attorney’s fees of $382,233.25, prompting an appeal by contractor.

Fee Clause Interpretation: Landlord Awarded Substantial Attorney Fees For Prevailing In Three Actions Against Feisty Former Tenant

 

Court of Appeal Finds Fee Clause is Broad Enough to Encompass All Three Actions.

     Under Civil Code section 1717, the key to recovering fees in disputes involving contract and tort claims often devolves to a determination of whether the fee clause is sufficiently broad to encompass matters “arising out of” or “concerning” the agreement in question. That breadth did occur in the next case we review, which concomitantly led to an affirmance of a sizable attorney’s fees award in favor of a landlord as against former tenants.

     In Lippett v. Lembi, Case Nos. A115453, A116342, & A117583 (1^st Dist., Div. 5 Nov. 17, 2009) (unpublished), landlord basically won three actions against tenants arising out of a lease with a fees clause—an initial action by which the lease was declared to have been forfeited (awarding back rent and an attorney’s fees award of $80,000), a second action in the lease battle by which the parties entered into a settlement agreement (under which tenants were to pay certain principal sums and the $80,000 prior fee award over time on an installment basis), and a third action alleging primarily torts against landlord, in which tenants requested reinstatement of the lease (the lease previously determined to have forfeited by tenants). Landlord successfully obtained summary judgment in the third action, with the trial court awarding landlord $82,050.50 in further attorney’s fees against tenants. Unhappy, tenants appealed.

Fee Clause Interpretation: Narrowly-Worded Fee Clause Did Not Allow For Fee Recovery By Attorney In Successfully Defending Against Legal Malpractice Action

Fourth District, Division 1 So Holds In a Result Consonant With Prior Reviewed Decisions on this Website.

     Here is one we have seen before, but bears repeating.

     Attorney sues to collect on a receivable owed from a former client, but through a cross-complaint after client sues for legal malpractice. Attorney prevails in both actions, defensing the malpractice action and affirmatively recovering on the receivable cross-complaint. Attorney has a retainer agreement, with a fees clause, albeit fairly narrow in scope—allowing for fee recovery if prevailing in any action “to recover any amount due pursuant to the terms of this Attorney/Client Fee Agreement.” Attorney moved to recover fees of $343,205 in fees expended in defending against the legal malpractice action and in recovering on the receivable. The trial court awarded successful attorney $68,641 in fees based on recovery under the receivable cross-complaint. Disgruntled she did not get more, attorney appealed seeking additional fees.

     Not to be had, said the Court of Appeal in Ferrey v. Hasso-Najm, Case No. D053741 (4^th Dist., Div. 1 Nov. 13, 2009) (unpublished).

     The problem here was that the retainer agreement fees clause was narrow in scope, reaching only fees in an action to recover expenses “pursuant to the terms” of the retainer agreement, not more broadly worded “arising out” retainer language. The legal malpractice action did not challenge the enforceability of the retainer agreement, but was one for a tort independent of recovery under the contract. The narrow wording of the fee clause properly did not allow for recoupment of fees expended in successfully defending against the malpractice action, but only recoupment of apportioned fees spent in winning under the receivable lawsuit. Judgment affirmed, given that the lower court only awarded apportioned fees in the non-malpractice segment of the litigation.

     BLOG UNDERVIEW—This case is hardly an aberration. We refer readers to these posts that are consistent with the ruling in Ferrey: July 1, 2008 post on Wolf v. Glassberg, Pollak & Associates (1^st Dist., Div. 4 unpublished) [legal malpractice action was not “on the contract”, but based on a tort, for purposes of Civil Code section 1717 fee recovery] and May 27, 2009 post on Tesh v. LeTourneau (4^th Dist., Div. 1 unpublished) [narrow fee clause did not allow for recovery in action with malpractice claims].

Civil Code Section 1717: Nonsignatories Who Were Intended To Be Parties Can Be Entitled To Contractual Fee Recovery Even Though Contractual Clauses Are Very Limited In Nature

Second District, Division 4 Explores Some “Nooks and Crannies” of Section 1717 in Unpublished Opinion.

     This next case, albeit unpublished, is a very scholarly discussion of Civil Code section 1717, exploring nonsignatory and fee clause breadth issues. And, best for us, only a challenge to a denial of attorney’s fees is involved. So, with type of narrow issue on which we regularly report and with no further delay, here we go.

     Trading Post Loan v. Kiss, Case No. B212886 (2d Dist., Div. 4 Oct. 22, 2009) (unpublished) involved some defendant real property owners selling a business to plaintiffs and leasing the property back to plaintiffs under a lease agreement with a purchase option (complete with an attorney’s fees provision covering all reasonable fees “necessary to enforce Lessor’s rights”). Later, the parties executed a purchase agreement for sale of the real property (plaintiffs being the buyers), also with a fees clause but which was cancelled mutually through escrow with a release of liability relating to the escrow. Plaintiff lessees/buyers sued defendant lessors/sellers on the ground plaintiffs had exercised the lease purchase option, but defendants obtained summary judgment on the ground that the later purchase agreement had superseded the earlier option and that the parties had cancelled the later purchase transaction (because plaintiffs had never properly exercised the lease purchase option). Defendants sought an award of attorney’s fees, a request denied by the lower court. They appealed solely on the fee denial.