CALIFORNIA ATTORNEY'S FEES

Prevailing Party/Section 1717: Parties Not Prevailing On Dueling Contractual Claims Also Not Entitled To Contractual Fee Recovery

 

No One Got A Clear Win, So Go Your Own Way, Says Appellate Court in Much More Eloquent Fashion.

     Under Civil Code section 1717, ya gotta prevail--and that is a pragmatic determination, which means ya gotta be a clear winner (not just a contender). In the next case, both plaintiff and cross-complainant did not win on their contract claims, although one got close (but did not get damages) and another won on a closely related negligence claim. The result: no clear winner, no fee recovery on the crucial contract-based claims that trigger 1717 fee entitlement.

     Krolop v. National Econ Corp., Case No. G045140 (4th Dist., Div. 3 Feb. 9, 2012) (unpublished) is a mixed bag case that neither litigant likely was real elated with as far as things go. After an 11-day jury trial (yep, that amount of time), plaintiff lost contractual and other claims to defendant, and defendant--on a cross-complaint--did not recover damages on a contractual cross-claim but was awarded damages on a negligence cross-claim (actually, about 9% of the amount sought on the negligence cause). The trial court denied fee recovery to either side, finding that no one prevailed on the contractual claims for 1717 recovery purposes.

     Result on appeal? Affirmed, in a 3-0 decision penned by Acting Presiding Justice Rylaarsdam.

     There was no complete victory on the contract claims, with defendant/cross-complainant coming close, but not getting the jury to find she proved damages--a necessary element of any contract claim. The contractual fee clauses were not broad enough to encompass tort claims, so the win on the negligence claim did not qualify for fee recovery. Beyond that, even from a pragmatic level, defendant/cross-complainant only won about 9% of her claimed damages--hardly the overwhelming victory needed to obtain fee recovery on even a “pragmatic” basis.

Section 1717: Lessees Prevailing On Cross-Complaint Entitled To $40,000 Fee Award

 

Though Their Defense to Tort Claims Did Not Give Rise to a Fee Entitlement, Cross-Claim Win Did It For Prevailing Lessees.

     Arrambide v. Mastagni, Case No. B223980 (2d Dist., Div. 6 Feb. 2, 2012) (unpublished) reinforces a good lesson in the Civil Code section 1717 area--you can win fees on a cross-claim even though your defense to tort claims will not do the job.

     There, lessees successfully defensed a lessors’ complaint based on fraud, which would not give rise to section 1717 fees even though lessees successfully raised a contractual defense to a tort claim. (Gil v Mansano, 121 Cal.App.4th 739, 741 (2004).) However, not to despair. Lessees did win on cross-claims which sought to enforce the lease. The win fortified that they were entitled to $40,000 in fees, as the lower court appropriately awarded.

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.]

Section 1717: Plaintiffs Losing Specific Performance Complaint And Defendants Losing Damages Cross-Complaint Were Not Prevailing Parties, No Matter How You Slice The Ham

 

Fifth District Weighs in on Silver Creek Comparative Measuring Test and Hsu Dicta on “Defensive” Cross-Complaints.

     Above:  Lewis Wiggins cutting off a slice of homecured ham in his smokehouse.  June 1940.  Marion Post Wolcott, photographer.  Library of Congress.

     Here is an interesting Civil Code section 1717 decision from the Fifth District, authored by Presiding Justice Hill--a former high school classmate of co-contributor Mike. The case is Boland v. Baker, Case No. F060786 (5th Dist. Dec. 19, 2011) (unpublished).

     There, plaintiffs lost a specific performance complaint on a right of first refusal to purchase a piece of real property, while defendants lost a cross-complaint seeking about $500,000 in damages after determining plaintiffs did not breach the contract. After the appellate court reversed a prior finding that plaintiffs were the prevailing parties, the lower court on remand denied defendants’ motion for attorney’s fees on their claim that they prevailed.

     This determination was affirmed on appeal

     There was no unqualified win by defendants, with these litigants ignoring the fact that they did not prevail as cross-complainants on their cross-complaint. Such a “mixed result” certainly gave the lower court discretion to find that no one prevailed.

     However, the appellate panel did have some interesting observations on two other decisions we have posted about before.

     First, the panel did question the comparative measuring method used in Silver Creek LLC v. BlackRock Realty Advisors, Inc., 173 Cal.App.4th 1533 (2009) to determine the prevailing party in a real property dispute, especially when Silver Creek did not recover the value of the property in damages but merely obtained a declaration that it had validly terminated the contract for sale of the property. However, it did distinguish Silver Creek because the party recovering the deposit did so on a non-breach basis.

     Second, the panel clarified its interpretation of a footnote in Hsu v. Abbara, 9 Cal.4th 863, 875 n.10 (1995), where a trial court can find that an unsuccessful defensive cross-complaint does not give rise to section 1717 fee recovery where it was essentially defensive in nature. The Fifth District found this only gave the trial court discretion (not a mandate to award fees), but only where the cross-complaint sought to undermine or defeat the plaintiff’s contract claim rather than seeking to establish a separate breach of contract. “Where both parties seek affirmative relief based on claims that the other party breached the contract, the success of the competing claims should be compared in determining which party prevailed for purposes of an award of attorney’s fees.” (Slip Opn., p. 11.)

Year in Review - 2011

Wrapping It Up:  M & M’s Top 25 Attorney’s Fees Decisions For 2011  Part 1 of 2

     It is that time of year, at year end, for us to list our top published attorney’s fees decisions from the U.S. Supreme Court, Ninth Circuit Court of Appeals, and California Courts of Appeal. Although we normally do the “Top 20” decisions, the 2011 year was prolific for many, many decisions of interest, so we expanded it to the top 25.

     We might note that 2012 looms as an important year for the California Supreme Court to decide the issues involved in Kirby v. Immoos Fire Protection, United Parcel Service Wage & Hour Cases (McGann), and related cases considering whether a prevailing defendant is entitled to recover Labor Code section 218.5 attorney’s fees for successfully defending against a plaintiff employee’s claims for meal/rest break violations even if those claims were joined with Labor Code section 1194 overtime compensation claims subject to a unilateral pro-plaintiff fee shifting provision. (See our posts of September 28, October 25, and November 25, 2011.)

     However, we can only report and score on the top 25, keeping in mind that appellate jurists did decide many other important cases. These are our favorites in a wide range of areas, so enjoy. This will be the first 13 cases, with 12 more to follow in a subsequent post--likely closer to year’s end.

     25. La Cuesta v. Benham, 193 Cal.App.4th 1287 (2011) [4th Dist., Div. 3]; author--Presiding Justice Sills (who, unfortunately, passed away earlier this year after a long and distinguished career):  Under Civil Code section 1717, a lopsided win by landlord in obtaining repossession and compensation from tenant made landlord the prevailing party, reversing denial of fees even under an abuse of discretion standard. [Discussed in our March 30, 2011 post.]

     24. Ferwerda v. Bordon, 193 Cal.App.4th 1178 (2011) [3d Dist.]; author--Justice Robie:  Attorney’s fees cannot be awarded to a homeowners’ association based on unrecorded CC&R enforcement documents and manuals.  [Discussed in our March 26, 2011 post.]

     23. Turner v. Assn. of American Medical Colleges, 193 Cal.App.4th 1047 (2011) [1st Dist., Div. 5]; author--Justice Simons:  Attorney’s fees are not awardable to defendant prevailing on Unruh Civil Rights Act, Civil Code sections 52 and 54.3 claims even though defendant did prevail (but did not claim entitlement to work) under a broader fee-shifting provision contained in section 55. [Discussed in our March 25, 2011 post.]

     22. In re Marriage of Fong, 193 Cal.App.4th 278 (2011) [2d Dist., Div. 3]; author-- Justice Croskey:  Wife not complying with her financial disclosure requirements in family law proceeding could not seek fee award from noncompliant husband under Family Code section 2107(c). [Discussed in our March 4, 2011 post.]

     21. Marriage of Fossum, 192 Cal.App.4th 336 (2011) [2d Dist., Div. 1]; author--Justice Johnson, writing for the majority; Justice Rothschild, dissenting:  Spouse/domestic partner’s breach of Family Code section 721(b) fiduciary duty gives rise to mandatory fee award under Family Code section 1101(g); dissenting justice spelled out anomalous results from this interpretation and suggested a legislative amendment to the statute to make it discretionary in nature. [Discussed in our January 29, 2011 post.]

     20. Harris v. Maricopa County Superior Court, 631 F.3d 963 (9th Cir. 2011); author--Circuit Judge Reinhardt for the majority; Circuit Judge Bybee, concurring and dissenting:  “But for” test, not pro-rata allocation of fees between frivolous and nonfrivolous claims, was proper standard for fee recovery under federal civil rights fee-shifting statute; dissenting judge argues that “but for” test will make it impossible for defense to argue fee apportionment in mixed-bag cases. [Discussed in our January 16, 2011 post.]

     19. Garcia v. Politis, 192 Cal.App.4th 1474 (2011) [2d Dist., Div. 4]; author--Justice Willhite: Plaintiff seeking fees in default judgment context cannot file a fee motion post-judgment, but must make a fees request in plaintiff’s default judgment packet paperwork. [Discussed in our February 26, 2011 post.]

     18. First National Mortgage Co. v. Federal Realty Investment Trust, 631 F.3d 1058 (9th Cir. 2011); author--Senior Circuit Judge Thompson: 28 U.S.C. § 1821(b) $40-per-day limitation on witness expenses “preempted” application of California Code of Civil Procedure section 998’s allowance of broader “reasonable” expert witness fees in diversity cases. [Discussed in our February 1, 2011 post.]   Justice Thompson died February 19, 2011.

     17. Simke, Chodos, Silberfeld & Anteau, Inc. v. Athans, 195 Cal.App.4th1275 (2011) [2d Dist., Div. 1]; author--Presiding Justice Mallano:  Unspecified attorney’s fees prayer in complaint did not void future default judgment based on terminating sanctions conduct. [Discussed in our May 26, 2011 post.]

      16. Puerta v. Torres, 195 Cal.App.4th 1267 (2011) [4th Dist., Div. 3]; author--Justice Moore: Failure to include some type of acceptance language in Code of Civil Procedure section 998 offer invalidates the offer. [Discussed in our May 25, 2011 post.]

      15. Martinez v. L.A. County Metropolitan Transp. Auth., 195 Cal.App.4th 1038 (2011) [2d Dist., Div. 1]; author--Justice Rothschild:  Code of Civil Procedure section 998 offer excluding “costs” from recovery also means that attorney’s fees are excluded from the ambit of the offer. [Discussed in our May 23, 2011 post.]

     14. Ilshin Investment Co., Ltd v. Buena Vista Home Entertainment, Inc., 195 Cal.App.4th 612 [2d Dist., Div. 1]; author—Justice Chaney:  Attorney’s fees are not allowable for prevailing party in post-judgment enforcement independent creditor’s suit. [Discussed in our May 15, 2011 post.]

      13. In re Marriage of Davenport, 194 Cal.App.4th 1507 (2011) [lst Dist., Div. 2]; author--Justice Richman:  Scorched earth litigation practices justified denial of family sanction fees to wife and allowed for substantial fees against her/in favor of husband; case distinguishes between zealous advocacy and “attack dog”/”scorched earth” litigation. [Discussed in our May 6, 2011 post.]

      BLOG UNDERVIEW--This last one is a good one to end on, because both co-contributors have dogs--Mike has Riffle, a Labrador, and Marc has Watson, a mixed-breed dog, but still a good dog! Watch for our ensuing post before the end of the year with the next 12 decisions rounding out our “Top 25.” Happy Holidays to all of our readers.

Earlier Year End Wrap-Ups:

     2010  Part I; Part II     2009 Part I; Part II     2008 Part I; Part II

 

Prevailing Party/Section 1717: Landlord Prevailing On Tenants’ Defense Cross-Complaint Involving Personal Property Retrieval Statutes Did Not Prevail “On A Contract” For Section 1717 Purposes

 

Landlord Lost $23,029.88 Fee Recovery When Fee Award Deleted From Judgment by Appellate Court.

     Although originally unpublished, the appellate court in Kumar v. Yu, Case No. B226335 (2d Dist., Div. 7 Nov. 17, 2011) certified its opinion for publication on December 16, 2011.

     Basically, landlord lost a contractual lease dispute with a fee-shifting clause after proper damages “credit” was given for subsequent mitigation efforts. Tenant brought a defensive cross-complaint alleging that landlord had failed to give him statutory notices to retrieve personal property by which he was impeded from reclaiming some valuable videotapes. The trial court awarded nothing to either side, but found that both had prevailed on their respective cross-actions--awarding tenant $55,390.48 and landlord $23,029.88 in attorney’s fees. In line with the “dueling” fee awards, “dueling” appeals were filed by both sides.

     The merits judgment and tenant’s fee award were affirmed on appeal. However, tenant did get the landlord’s fee award reversed on appeal, with the award being deleted from the original judgment.

     Basis for the reversal? Landlord did not prevail “on a contract” for purposes of Civil Code section 1717. Clearly, the appellate court reasoned, tenant did prevail under the lease by defeating landlord’s damages claims. Different matter as to landlord’s defeat of the cross-complaint: it was based on personal property retrieval/disposal Civil Code statutes that were unrelated to the performance of the lease (not “on a contract”) or alternatively it was purely defensive such that tenant was still the prevailing party. (Hsu v. Abbara, 9 Cal.4th 863, 875 n.10 (1995).) However, plaintiff did prevail on the cross-complaint for a costs award, so not all was lost.

     BLOG UNDERVIEW--For lawyers dealing with prospective rent cases, this case is must reading in this area, as it discusses how to credit subsequent mitigation efforts in these type of cases--discussing Willis v. Soda Shoppes of California, 134 Cal.App.3d 899 (1982) in the process.

Special Fee Shifting Statute/Section 1717/Section 998/Allocation: Fee Awards Do Not Have To Be Proportional To Damages Award

 

2d Dist., Division 6 So Holds In Two Unpublished Opinions, Besides Facing Other Issues.

Weiss v. Cope, Case No. B24970 (2d Dist., Div. 6 Nov. 22, 2010) (unpublished)

     In this one, plaintiff rejected defendant’s 998 offer. However, plaintiff’s total judgment--the sum of the jury award and $100,000 in attorney’s fees awarded by the trial court pursuant to Code of Civil Procedure section 1021.4 (a fee-shifting statute allowing the trial court to award fees to a prevailing party in an action against a defendant based upon defendant’s commission of a felony)--beat the 998 offer and made plaintiff the prevailing party, with the fee award putting plaintiff over the top. This meant that defendant was not entitled to recover post-offer costs. (Steele v. Jensen Instrument Co., 59 Cal.App.4th 326, 330 (1997).) The defense appeal of the fee award was unsuccessful, because (1) fees do not need to be proportionate to damages (here, $100,000 in fees versus $49,000 in damages); (2) the fee award was reasonable (the trial court substantially cut down the $242,000 fee request); and (3) the section 1021.4 fee entitlement statute was remedial and not punitive in nature (Marron v. Superior Court, 108 Cal.App.4th 1045, 1065 (2003)).

Asphalt Professionals, Inc. v. T.O. IX, LLC, Case No. B230927 (2d Dist., Div. 6 Nov. 22, 2011) (unpublished)

     This one began with a bang: “This case is before us once again. It teaches a lesson: A surfeit of litigation over a relatively modest damage claim can produce an abundance of attorney’s fees far in excess of that claimed and payable by the losing side.”

     Defendant appealed a $1.65 million fee award (out of a requested $1,682,195) in a breach of construction contract case where trial court found defendant had no legitimate defense for not paying and used six different law firms during the course of the case. The fee award was sustained, rejecting these arguments otherwise: (1) no apportionment was required because the contract, fraud, and alter ego claims were all interrelated; (2) it was appropriate for the trial court to award interim fees in the bifurcated first phase of the case (Sundance v. Municipal Court, 192 Cal.App.3d 268, 271 (1987)); (3) proportionality is not required between fees and the damages award (with plaintiff obtaining a $320,000 substantial damages award--see Harman v. City and County of San Francisco, 158 Cal.App.4th 407, 421 (2007)); (4) the hourly rate used in the lodestar analysis was commensurate with those rates cited in the National Law Journal annual surveys; and (5) the fees were not excessive because the case was vigorously contested, with the defense spending about the same as the plaintiff in litigating the case.

     Both 3-0 decisions were authored with panache by Presiding Justice Gilbert.

Retainer Agreements/Section 1717: Second District, Division 6 Finds Trope Fee Waiver Unenforceable

 

No Lock On Trope Waiver, But Court Finds Fees For Other Attorneys May Not Be Barred By Trope; Nonsignatory Entitled to Fees Based on Alter Ego Theory.

     Here is an interesting unpublished decision from the Second District, Division 6--interesting because it parts company with the holding in Lockton v. O’Rourke, 184 Cal.App.4th 1051 (2010), which validated a retainer agreement that allowed compensation of attorney litigating a fee dispute (a Trope waiver clause).

     Biggins v. Madison, Case No. B220202 (2d Dist., Div. 6 Nov. 22, 2011) (unpublished) involved a situation where plaintiff attorney was denied fees under an attorney-client retainer agreement even though he won damages in a dispute he litigated (along with other attorneys representing his interests) over the proper division of attorney’s fees between client and various attorneys after a settlement of a matter governed by a contingency agreement. Plaintiff was denied attorney’s fees for winning damages based on Trope--he represented himself. Plaintiff said “no way,” because my client retainer agreement had a Trope waiver clause (allowing compensation to the attorney representing himself in a fee dispute)--a waiver validated in Lockton. The Second District, Division 6 disagreed: “We decline to follow Lockton. As we have stated, section 1717 prohibits such one-sided attorney fee agreements.” However, the matter was remanded, because the lower court did not consider whether other attorneys representing winning attorney were worthy of compensation (falling outside the Trope preclusion).

     A nonsignatory party was awarded $66,875.45 in fees under Civil Code section 1717. This fee award was affirmed because plaintiff alleged a signatory defendant was the alter ego of the nonsignatory party and, had plaintiff prevailed on this theory, the nonsignatory would have been liable for fees under Reynolds Metals (one of our Leading Cases).

Section 1717/Deadlines: Prevailing Landlord Forfeited Fee Entitlement By Not Filing Noticed Motion For Fees

 

Merely Objecting to Preliminary View in Statement of Decision Not Enough.

     Landlord won modest damages in case, but was denied an award of attorney’s fees in a statement of decision giving a preliminary view on the prevailing party issue, a statement drawing objections by both sides and resulting in an eventual judgment stating both sides would bear their own fees/costs.

     Landlord appealed the fee denial in Pace v. Orozco, Case No. B225816 (2d Dist., Div. 4 Nov. 22, 2011) (unpublished). The denial stuck on appeal. Reason? Landlord never filed a noticed fee motion, which forfeited the fee entitlement claim on appeal. (Hydratec, Inc. v. Sun Valley 260 Orchard & Vineyard Co., 223 Cal.App.3d 924, 929 (1990).) In so reasoning, the appellate court distinguished Dorman v. DWLC Corp., 35 Cal.App.4th 1808 (1995) because the forfeiture issue was not raised in a case garnering a reversal of a fee denial under a similar factual pattern.

Section 1717: Reciprocity Principles Did Justify Substantial Fee Awards

 

$8.6 Million and $3.1 Million Defense Fee Recoveries Affirmed on Appeal.

     For those of you wanting to justify substantial fee awards under Civil Code section 1717, Linear Technology Corp. v. Tokyo Electron, Ltd., Case No. H035713 (6th Dist. Nov. 22, 2011) (certified for publication) is must reading.

     There, in a breach of contract action claiming defendants did not back up patent infringement indemnities, plaintiff lost and one set of defendants was awarded $5,200,931.62 (out of a requested $8,616,419.37) in attorney’s fees while another set of defendants garnered $3,145,498 (out of a requested $3,258,757) in fees. Plaintiff appealed.

     However, the appellate court affirmed the fee awards under the reciprocity principles at play under contractual fees clauses and their complementary statutory authorization, section 1717. The purchase agreements did have a fees clause, and “[a] prevailing defendant should not be required to undergo a mini-trial to establish the merit of the losing plaintiff’s hypothetical fee claim under the contract on which the plaintiff sued.” (Slip Opn., p. 12.)

Construction/Prompt Payment Statutes/Section 1717: $528,410.24 In Fees/Costs Awarded To Winning Defendant/Cross-Complainant Under Contractual Fees Clause

 

Prompt Payment Statute Did Not Mean Fees Went to Plaintiff Winning Some Money.

     In Angotti & Reilly v. Alexander Group, Case Nos. A127917/A128743 (1st Dist., Div. 2 Nov. 21, 2011) (unpublished), plaintiff sued for unpaid contractor fees under a construction contract with a fees clause, and defendant/cross-complainant countersued for defective work. Plaintiff obtained a $99,000 verdict for services rendered (not breach of contract), and defendant was awarded $129,700 for plaintiff’s breach of contract under the cross-complaint. The trial court awarded defendant/cross-complainant $528,410.54 in fees and costs, because cross-complainant received more in damages.

     The appellate court affirmed, rebuffing plaintiff’s argument that it was mandatory that fees be awarded to plaintiff for its win under the construction prompt payment statutes. (We have blogged on this before; go to the home page search function and enter “prompt payment statutes” if you want to see our previous posts in this area.) The fee-shifting statute can be preempted if the contract of the parties expressly provides otherwise in writing, something that did occur here through the execution of certain change orders taking plaintiff’s dispute out of the prompt payment statutes. Fees/costs were properly denied as to plaintiff, with the adverse award against it being a big one.

Indemnity/Section 1717: Indemnity Fee Award Affirmed; Section 1717 Award Reversed After Voluntarily Dismissal of Some Claims

 

Longstanding Case May Be Finally Resolved Except for Appeal Costs for Two Parties.

     In our February 20, 2009 post, we looked at a complicated, multi-party construction dispute that produced some interesting fee rulings. That case was Jeld-Wen, Inc. v. Pacific Coast Roofing Corp. Because the 2009 appellate opinion remanded for reconsideration of certain issues, the close-to-final chapter to the litigation saga looks like it has come down in Jeld-Wen, Inc. v. Pacific Coast Roofing Corp., Case No. D056204 (4th Dist., Div. 1 Nov. 17, 2011) (unpublished)--a 72-page opinion whose highlights we now summarize.

     Certain fee awards under the indemnity costs provisions of Code of Civil Procedure section 1038 were affirmed. Earlier, they were reversed because a summary adjudication (versus summary judgment) does not give rise to entitlement under section 1038. However, after remand, a development occurred in the form of a voluntarily dismissal of a remaining claim that effectively turned the summary adjudication into a summary judgment. So, the defense indemnity costs were appropriate. The dismissal did not deprive the trial court of the ability to adjudge fee requests, and the cost award was still recoverable even though an insurance carrier paid those costs (put another way, they were still “incurred” under Lolley v. Campbell, 28 Cal.4th 367, 373 (2002)). Also, attorney declarations on time expeded were sufficient, since contemporaneous time records are not a substantiation requirement in state court cases--unlike the counterpart rule in federal courts. (Martino v. Denevi, 182 Cal.App.3d 553, 559 (1986).)

     However, the section 1717 fee award had to be overturned, because the voluntary dismissal did preclude such an award under section 1717. (Kelley v. Bredelis, 45 Cal.App.4th 1819, 1837 (1996).)

    Although there are other tidbits on somewhat unique procedural issues, these are the highlights -- did we do good on summarizing a 72-page decision? However, two parties did get costs on appeal (which might include fees), so there may be one more appeal in the hopper for us to blog on in the future.

Two-Fer: Special Fee Shifting Statute/Section 1717 Unpublished Cases

 

Construction Lender Gets Fees For Successfully Defending Bonded Stop Notice Claim.

     In North County Acoustics, Inc. v. Bank of America, N.A., Case No. D057720 (4th Dist., Div. 1 Oct. 27, 2011) (unpublished), subcontractor was hit with an adverse attorney’s fees award of $42,455.05 after losing a stop notice contest with a construction lender after lender obtained summary adjudication on the ground that the stop notice was not adequately bonded. Civil Code section 3174 does allow attorney’s fees to a prevailing party in a bonded stop notice action. The appellate court affirmed the fee award, which was made after a 20% reduction in the request for fees by the trial court, because lender did win on the stop notice claim and lender’s settlement of a related mechanic’s lien claim did not impact the fee award.

“Of Counsel” Attorney Independently Obligated to Winning Probate Attorney Entitled to Fee Recovery

     Dzwonkowski v. Spinella, Case No. G044336 (4th Dist., Div. 3 Oct. 27, 2011) (unpublished) was a situation where a client in a probate matter was sued for nonpayment of probate attorney’s fees by an “of counsel” attorney who had an independent office near probate attorney’s practice. Probate attorney won after a fee arbitration where he was represented by “of counsel,” with the trial court also awarding post-arbitration fees of $16,344.41. Disgruntled client appealed, raising the Trope bar. However, because the probate attorney had an independent contractual obligation to pay “of counsel” for his work no matter what, the post-arbitration fees were fully collectible. “Of counsel” was independent of probate attorney who had a separate contractual obligation to “of counsel” to pay for his work, so that the holding in Farmers Ins. Exch. v. Law Offices of Conrado Sayas, 250 F.3d 1234 (9th Cir. 2001) was more appropriate in allowing fees based upon such a separate relationship (as opposed to Trope). Justice Fybel of our local appellate court penned the 3-0 panel decision in Spinella.

Section 1717: Discrete Claims Adjudged In Defendant’s Favor Gave Rise To Fee Exposure To Voluntary Dismissal By Plaintiff Of Suit After Adjudication

 

Fifth District Rules in a “Novel Situation for the Application” of Section 1717.

     This next one is sure to engender some further jurisprudence in the Civil Code section 1717 area, with the appellate court acknowledging it presented “a novel situation for the application of section 1717.”

     CDF Firefighters v. Maldonado, Case No. F061183 (Oct. 26, 2011) (certified for publication) involved a situation where a defendant union member invalidated a $22,789.96 fine levied by plaintiff labor union after six years of litigation and a defendant win upon a partial judgment on the pleadings. However, the trial court denied the motion for judgment on the pleadings as to a $743 fine, with plaintiff dismissing the complaint with prejudice on the entire complaint against defendant afterwards.

     What happened next?

Prevailing Party/Section 1717: Landlord Prevailed Where It Recovered All Of Monetary Damages Sought And Despite Dismissing Action At Court’s Insistence Later

 

$83,153 Fee Award Sustained Against Losing Tenant.

     Landlord sued tenant for unpaid rent under a prior settlement agreement under which the lease was terminated, tenant would vacate the premises in “turn key” condition, and assign certain FF&E (furniture, fixtures, and equipment) as well as its liquor license. The agreement also specified that landlord could bring an action against tenant for the unpaid rent plus damages at a specified per diem rate. The settlement agreement importantly provided for an attorney’s fees award to the prevailing party in the event of litigation. Landlord sued after tenant failed to perform under the settlement agreement, with the parties agreeing to a stipulation that led to the release of significant writ of possession funds being held by the sheriff (which satisfied the unpaid rent claim) and specified that tenant would pay all claims for daily damages/interest.

      Landlord then moved to recover $94,653 pursuant to Civil Code section 1717 and Code of Civil Procedure section 1033.5, which was granted in the sum of $83,154--prompting an appeal by tenant. Later, landlord dismissed the action with lower court imprimatur after it determined that landlord had obtained all necessary relief so there was nothing left to do.

     Tenant was unsuccessful in Rose Garden Associates Danville, LLC v. ResMex Partners, LLC, Case No. A130562 (1st Dist., Div. 3 Oct. 7, 2011) (unpublished).

     The fact that there was no judgment was irrelevant, because section 1717 does allow for fee recovery “whether or not the suit proceeds to final judgment” so that the settlement agreement clause was a solid anchor for landlord’s entitlement. Also, even though there were some niggling issues left on the FF&E feature of the settlement, landlord certainly prevailed by getting all of its monetary relief such that the fee motion was ripe for determination given the overwhelming recovery achieved by landlord. The dismissal did not lead to a different result, because the court actually entered the dismissal and tenant had taken a 180 degree opposite position on its effect in the lower court.

Section 1717: $24,190 Fee Award Affirmed Under Bail Bond Agreement With Broad Fees Clause

 

Reciprocity Principles of Section 1717 Prevailed.

     In Montana Bail Bonds, Inc. v. Mark, Case No. B228772 (2d Dist., Div. 2 Sept. 29, 2011) (unpublished), appellant plaintiff lost a suit against respondent defendants for failure to pay bail bond premiums where there was a bail bond agreement with a broadly worded fees clause. The trial court awarded respondents attorney’s fees of $24,190 under Civil Code section 1717.

     Appellant’s appeal was unsuccessful. Had appellant successfully enforced the written and oral contractual agreements against respondents, appellant would have been entitled to 1717 fees. This triggered the reciprocity principle behind section 1717, meaning that “what is sauce for the goose is sauce for the gander.” That translated to respondents being entitled to 1717 fees because they won.

Section 1717: Aggregate Fees/Costs Award of $675,000 In Easement Dispute With Fees Clause Affirmed

 

However, Award Againt Nonsignatory Reversed.

     We have done numerous posts over the last 3 plus years on attorney’s fees under Civil Code section 1717. If two lessons have emerged, it is to pay attention to the breadth of the attorney’s fees clause and your status in the litigation (signatory, third party beneficiary, assignee, etc.) with respect to whether you will recoup your fees.

     These lessons are reinforced in the unpublished decision of Concord Shopping Center Assn. v. Contra Costa County Harvest Church, Inc., Case Nos. A128116/A129626 (1st Dist., Div. 2 Sept. 26, 2011) (unpublished).

     The basic facts were that two warring sides in an easement dispute in an evolving construction project (with retail stores no less) pummeled each other in court. However, one side definitely got the upper hand, based on a 1984 agreement with an attorney’s fees clause. The prevailing parties did obtain lots of fees, in variant amounts, against the losing parties, including a nonsignatory party. Losers appealed the fee awards.

     The primary signatories under the 1984 agreement lost, because the non-fee claims were intertwined with the fee claims such that apportionment was not necessary.

     However, nonsignatory won, using a case that we commend to all litigants in this area--Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4th 858, 897 (2008). Blickman Turkus is a great case in the nonsignatory area, leading to the appellate court reversing the award against the nonsignatory reason. Reason? The applicable fees clause only applied to “parties” seeking to enforce an agreement, which did not reach the nonsignatory. Reversed as to nonsignatory, but affirmed as to the rest.

Section 1717: Winner In CEQA Action Cannot Recover Section 1717 Fees In Mere Postjudgment Fee Proceeding In The CEQA Action

 

Separate Contractual Action Necessary to Support 1717 Fee Recovery.

     In a follow-up to a CEQA action centering primarily on the arroyo toad (bufo microscaphus californicus), the winning developer sought attorney’s fees in the CEQA action through a postjudgment hearing. The basis was an indemnity clause (which did allow for fee recovery) by which the Silverado Modjeska Recreation and Parks District agreed not to appeal or litigate developer’s plans for project development, which developer claimed was “breached” by the CEQA action joined in by District. The trial court granted developer’s fee request against the District.

     The Fourth District, Division 1, in Silverado Modjeska Recreation and Parks Dist. v. County of Orange, Case No. D055150 (4th Dist., Div. 1 July 8, 2011) (certified for publication) reversed, essentially on due process grounds.

     The primary flaw was that section 1717 is only triggered after a prevailing fee claimant pleads and proves a contractual breach rather than using a win in a separate CEQA action to then use as a vehicle for a postjudgment fee request. Simply put, there was no correct “action” brought under section 1717 such that District was deprived of the opportunity to fully litigate the issue of breach and engage in discovery on the issue of the parties’ contractual intent. “. . . we are not aware of any authority that would support the proposition that a trial court may adjudicate a breach of contract in the first instance in ruling on a postjudgment motion for contractual attorney fees in an action that was not an action on the contract.” (Slip Opn., p. 39.)

 

 

 

 

 

 

 

 

Left:  Madame Helena Modjeska       Right:  Arroyo Toad   Source:  Wikipedia.

Section 1717: Where Demurrer Ruling Reversed With Leave To Amend, $55,607.50 Fee Award Falls Also

 

Premature to Award Fee Until Dust Settles and Winner Can Be Declared.

     The next case we look at has interesting facts.

     Freeman, Freeman & Smiley, a Los Angeles law firm, sued its landlord after landlord allowed a third party to display supergraphic advertisements on the outside of the leased building in which it was leasing space. The advertisements consisted, among other things, of a giant taco ad for Del Taco and a movie about World War II Germany depicting the main character in a Nazi uniform. The law firm, obviously feeling that the ads were out of character with its business, sued to get relief from the ads. The trial court sustained landlord’s demurrer without leave to amend and awarded it $55,607.50 in attorney’s fees presumably under a fees clause in the lease.

     On appeal, law firm obtained a reversal of the demurrer ruling such that it was allowed leave to re-plead its complaint claims against landlord in Freeman, Freeman & Smiley v. SMIII Sepulveda Center, Case Nos. B215981/B221831 (2d Dist., Div. 8 July 6, 2011) (unpublished).

     That reversal also impacted the fees award adversely, because the lower court must await the final resolution of the claims before determining the prevailing party and awarding attorney’s fees. (Poseidon Development, Inc. v. Woodland Lane Estates, LLC, 152 Cal.App.4th 1106, 1120 (2007).) Fee award reversed as premature, one way or the other.

Prevailing Party/Section 1717: Trope Restriction Applies To Non-Section 1717 Contexts

 

Bad News for Attorneys . . . Co-Counsel Cannot Try to Circumvent Limitation By Representing Each Other In De Novo Collection Matter Following Fee Arbitration.

     Here is a somewhat of a wild one, where two attorneys co-counseling for the same clients were denied fee recovery after a successful jury verdict, following on the heels of a fee arbitration award de novo request by attorneys’ former client. The restriction in Trope v. Katz, 11 Cal.4th 274 (1995) was found dispositive, a restriction that generally denies Civil Code section 1717 fees to a self-represented lawyer-litigant in a contractual action against a former client.

     In Law Office of Edward M. Higginbotham v. Horejsi, Case No. A128521 (1st Dist., Div. 2 June 24, 2011) (unpublished), two attorneys representing client eventually won a jury verdict against client after he rejected an adverse fee arbitration award and then requested a trial de novo, in a situation where each attorney represented the other. The two attorneys then sought recovery of attorney’s fees from client for their de novo win under Business and Professions Code section 6204(d), which allows for a discretionary award to a repeat fee arbitration prevailing party. However, the trial court denied fees by virtue of the Trope restriction, triggering an appeal by the disappointed attorneys.

Section 1717/Prevailing Party: Only Winning Fee Recovery Issue On Appeal Does Not Make One A Prevailing Party

 

Plaintiff Won Below, But Denied Fees Based on Trope, With Affirmance on Fee Recovery Not Making Defendant the Prevailing Party.

     The next case is an elegant, short unpublished decision that demonstrates Civil Code section 1717 “prevailing party” status must be based upon consideration of the whole lawsuit, not just an appellate win on a non-merits fee recovery issue.

     Law Offices of Nejadpour & Associates v. Gonzalez, Case No. B226082 (2d Dist., Div. 5 June 13, 2011) (unpublished) involved an attorney who successfully sued an ex-client and recovered a $23,029.60 judgment. However, attorney was denied the request for attorney’s fees based upon the Trope restriction--attorney used an employee with whom the firm did not have an attorney-client relationship, a determination precluding a fee award and one affirmed in a prior appellate decision. Ex-client did obtain appellate costs, but also moved to recoup fees--a request that was granted by the lower court.

     The fee award was reversed, in a 3-0 panel decision authored by Acting Presiding Justice Armstrong, because the matter was a legal issue reviewed on a de novo basis.

     Wood v. Santa Monica Escrow Co., 176 Cal.App.4th 802, 804, 808 (2009) was dispositive in this particular cause. Much like Gonzalez, Wood held that a party prevailing on appeal is not necessarily the prevailing party for purposes of a 1717 award. The winning of the appeal on the fee recovery issue did not negate that attorney did win and obtain a money judgment against client in the lower court proceedings. Although ex-client prevailed on appeal, attorney prevailed in the whole lawsuit, such that a fee award to ex-client was not sustainable.

Section 1717: “Practical Liability” Approach to 1717 Fee Recovery Rejected

Fact that Trust Deed Holder Might Have to Pay Fees Assessed Against Homeowners Did Not Trigger 1717 Fee Recovery.

     Diamond Heights Village Assn., Inc. v. Financial Freedom Services Funding Corp., Case Nos. A126145 et al. (1st Dist., Div. 4 June 7, 2011) (certified for publication) is a good addition to Civil Code section 1717 jurisprudence, rejecting a “practical liability” approach when it comes to triggering 1717 recovery.

     There, HOA had a plea of attorney’s fees against homeowners of a condominium unit based on CC&Rs, but did not sue Financial Freedom (holder of a trust deed on the unit based on a reverse mortgage) under CC&Rs. Instead, HOA disputed that FF’s lien was senior in nature. FF prevailed in the lien foreclosure action, and unsuccessfully requested attorney’s fees under various CC&Rs fees clauses--prompting an appeal.

     The fee denial was affirmed because HOA never sued FF under the CC&Rs. However, relying on Saucedo v. Mercury Sav. & Loan Assn., 111 Cal.App.3d 307 (1980), FF argued that if HOA had prevailed against the homeowners, it would have been entitled to fees and FF would have to pay off this debt eventually out of sale proceeds. The appellate court was not impressed by this “practical liability” approach towards 1717 fee recovery, finding the situation closer to Clar v. Cacciola, 193 Cal.App.3d 1032, 1037-39 (1987) where 1717 fees were denied in a trust deed priority dispute. The “practical liability” approach was rejected as too speculative in nature for fee recovery purposes.

Section 1717: Broadly Worded Fee Clause Meant Fees Had To Be Apportioned When Lease Only Signed By One Of The Defendants

 

Wild Landlord-Tenant Dispute Gives Rise to Reversal of $212,685 Fee Award Against Both Signing and Nonsigning Defendants.

     Robertson v. Sapir, Case No. B224458 (2d Dist., Div. 3 May 24, 2011) (unpublished) was a “wild” landlord-tenant dispute including reported accusations of landlord’s brother (a tenant in a boarding room type of arrangement) bothering a nearby female plaintiff tenant, calling her a “French bitch”, smearing feces on a car windshield of another tenant, and chasing another tenant’s boyfriend on a couple of occasions at least. This behavior did reap plaintiff tenants respective favorable jury verdicts ranging from $3,900-$8,000 against various of the defendants on divergent tort and inhabitability claims. However, to show you how fees are the tail that wag the litigation dog, the lower court awarded plaintiffs’ counsel postjudgment attorney’s fees of $212,685 (100% of the requests) as against a lease signatory defendant and signatory’s father, with father as agent signing the lease on behalf of the named signatory. Both appealed the fee award.

     The appellate court reversed on several grounds. First, the record showed that father signed the lease on behalf of the signatory, who was bound as a principal for fee exposure based on a broadly worded fees clause encompassing both tort and contract claims. However, the agent himself--even if his conduct was wrongful--could only be liable for tort rather than contractually-based exposure. That meant that father was off the hook for the fee award. Second, with respect to the principal signatory, fees needed to be apportioned because a lot of the work related to the brother’s actions rather than signatory’s conduct, making a substantial fee award for all work an unfair “hit” for the signatory alone. Also, there were 998 offers that needed to be reevaluated after the reversal. Finally, the award to counsel for plaintiffs was unwarranted because the attorneys were not parties to the lease, with the appellate court unaware of any authority for making such an award pursuant to Civil Code section 1717.

Section 1717: Work Authorization Fee Clause Justified $102,025 Fee Award

Work Authorization Was Part of the Contract, Sustaining Fee Recovery.

     Cooley’s General Pest and Termite Control, Inc. v. Westlake Bay Homeowners Assn., Case No. B221937 (2d Dist., Div. 6 May 24, 2011) (unpublished) is a case where an HOA was hit with a $102,025 attorney’s fees award under Civil Code section 1717. (Could have been worse, because plaintiff termite company requested $129,217.35 in feees.) HOA sought to rescind a termite eradication contract, but lost. Termite company won fees based on a fees clause in a work authorization attached to 31 inspection reports submitted to HOA.

     HOA’s appeal of the fee award did not succeed. In response to the argument that the work authorization was not a contract, the appellate court responded “get out of here” (but in much more refined reasoning--after all, we have to keep everyone awake once in a while). The overall “deal” showed that the work authorization was part and parcel of the contractual bargain, with integrated documents being considered part of the gestalt. Fee award affirmed.

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).

Section 1717 and Prevailing Parties: Fourth District, Division One, Rules that Civil Code Section 1717’s Prevailing Party Standard, Mutuality Principle, and Reasonable Fees Standard Apply to an Attorney’s Fees Provision in a Consent Decree

Order Granting the People $707,882.50 in Attorney Fees and Costs of $32,673 Goes Up in Smoke, But Not to Worry, Parties Will Get to Light Up Again in Trial Court

     In this appeal, R.J. Reynolds Tobacco Company challenged an order awarding attorney fees to the People for enforcing a Consent Decree banning participating tobacco manufacturers from “using or causing to be used” any “cartoon” in the advertising, promoting, labeling or packaging of tobacco products.  The Consent Decree contained a unilateral provision:  “In any proceeding which results in a finding that a Participating Manufacturer violated this Consent Decree and Final Judgment, the Participating Manufacturer or Participating Manufacturers found to be in violation shall pay the State’s costs and attorneys’ fees incurred by the State of California in such a proceeding.” In re Tobacco Cases I, Case No. D056589  (4th Dist. Div. 1 4/5/11) (certified for publication).  But is a Consent Decree entered by the Court the same as a contract, and is a proceeding to enforce a fee provision in a Consent Decree an “action on a contract” triggering recovery of attorney’s fees under Civil Code section 1717 rules and standards?

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.

Judicial Arbitration: Two Attorney’s Fees Of About $35,000 Each To Different Defendant Groups Affirmed After Plaintiffs Dismissed Complaint After De Novo Trial Request

 

Arbitration Award Reinstated, Which Meant Substance of Attorney’s Fees Award Not Reviewable Absent Trial De Novo Request.

     Here is one of the first decisions we have summarized dealing with a fee award in a judicial arbitration award which became binding after plaintiffs dismissed a complaint without prejudice after filing a trial de novo request. The impact was that the arbitration award was reinstated, and the substance of the fee award was not reviewable (although the appellate court decided it was correct substantively, too).

     Lee v. Kwong, Case No. A126027/A126670 (1st Dist., Div. 5 Mar. 29, 2011) (certified for partial publication; fee discussion not published) was a situation where plaintiffs suffered an unfavorable judicial arbitration award, complete with adverse fee orders of about $35,000 each in favor of different defendant groups, and filed a trial de novo request, only to later voluntarily dismiss the complaint without prejudice. The defense moved to reinstate the arbitration award, complete with the fee award--a request that was granted. Plaintiffs separately appealed the merits and fee components of the award.

Section 1717: 70% Lopsided Landlord Win In Lawsuit Meant Trial Court Abused Discretion In Not Awarding Contractual Attorney’s Fees

 

Discretion Only Goes So Far, Says Our Local Appellate Court

     Presiding Justice Sills, on behalf of a 3-0 panel of our local appellate court, determined in La Cuesta v. Benham, Case No. G043788 (4th Dist., Div. 3 Mar. 29, 2011) (certified for publication) that discretion can only go so far when a litigant wins a lopsided victory. With that, contractual fees should have been awarded under Civil Code section 1717 based on a contractual fees clause in a lease.

     Landlord recovered possession and 70% of his claimed damages, even though tenant claimed nothing was owed. The lower court rebuffed landlord’s attempt to recoup $42,000 in fees by finding he was not the “prevailing party” under section 1717.

     Reversed and remanded to award fees to landlord.

     Although only a simple unqualified win allows entitlement to fees under section 1717, the trial court abused its discretion because the landlord’s win was lopsided so that “greater” relief was indeed obtained against tenant. (Silver Creek, LLC v. BlackRock Realty Advisors, Inc., 173 Cal.App.4th 1533, 1541 (2009).) “We note: Essentially, the Silver Creek court was thus condemning the simple ‘good news bad news’ approach to section 1717 when it is done without reflection on the relative litigation success of the respective parties.” (Slip Opn., p. 13.) Since landlord obtained repossession and compensation for the tenant’s occupation, “[i]t [was] not enough to hide the difference under the cover of an abuse-of-discretion standard.” (Id.)

Prevailing Party/Section 998/Section 1717: Defendant Prevailed Under Section 1717 Because Earlier Appellate Court Decision Found Reversal And No Need For Retrial

 

Plaintiff’s Voluntary Dismissal Without Effect; Offset for Prior Settlements Meant No Change in Result Due to Her Prior 998 Offer.

     A trifecta of issues was considered by the appellate court in Goldstein v. Williams, Case No. D057826 (Mar. 24, 2011) (unpublished).

     In this one, plaintiff sued for breach of contract and in tort for claimed residential condominium nondisclosures. Eventually, she prevailed on a negligent misrepresentation theory, but the appellate court in an earlier opinion reversed her win on the contractual breach claim in a way that found no retrial was necessary given that no new evidence could be introduced to get around the absence of a contract claim as a matter of law. Defendant moved for fee recovery under Civil Code section 1717 (given the presence of a fees clause in the purchase agreement), with the lower court awarding her $34,375 in fees. Plaintiff appealed.

     None of her three arguments for reversal hit the persuasiveness target.

     Given that the prior reversal was one in which no retrial occurred, defendant did prevail on the merits. Plaintiff’s subsequent dismissal of the contract claim without prejudice, on remand, had no effect given that the appellate court had legally ruled on the merits of the case as a matter of law. Finally, when prior settlements with other defendants were considered, plaintiff had a zero verdict that did not exceed her prior CCP § 998 offer, which meant the lower court had discretion to determine she did not prevail under Goodman v. Lozano, 47 Cal.4th 1327, 1333 (2010). No discretion was abused in finding that plaintiff was not entitled to fees based on her 998 offer. Fee award to defendant affirmed.

Prevailing Party/Section 1717: Court’s OSC Dismissal of Entire Action, Both Complaint And Cross-Complaint, Meant No Contractual Fees Were Recoverable

. . . However, Remand For Fee Recovery Evaluation on Dismissed Tort Claim.

     For you folks entertaining voluntarily dismissals of actions, must reading in this area--if you are bothered about attorney’s fees exposure--is our state supreme court’s decision in Santisas v. Goodin, 17 Cal.4th 599, 602, 607-608 (1998) [one of our Leading Cases]. We don’t hide the ball on this blog, so it basically means that a voluntary dismissal cuts off fee exposure on contractual claims but that exposure might remain for non-contract claims depending on the breadth of the fees clause. (Yep, a lot to take in, but it is the law). Santisas principles were at play in the next case.

     G&B Development Co., LLC v. MKA Cabazon Partnership, LP, Case No. E049570 (4th Dist., Div. 2 Mar. 23, 2011) (unpublished) is a situation where a trial court denied postjudgment fees under Civil Code section 1717 after a court’s OSC hearing to dismiss for failure to prosecute where the parties agreed upon a dismissal of an entire action if the dismissal included both plaintiff’s complaint and defendant’s cross-complaint. Defendant was dismayed in not obtaining an award of fees, and appealed.

Ethics/Section 1717: Joseph P. Wohrle Pens Recent Article “Identifying Key Issues In Attorney’s Fees Litigation”

March 2011 Article in The Advocate Magazine Explores Central Fee Issues.

     For readers wanting a recent primer on key issues in attorney’s fees litigation, we commend for reading Joseph P. Wohrle’s article “Identifying Key Issues in Attorney’s Fees Litigation” which is published in the March 2011 edition of Advocate Magazine.

     Mr. Wohrle, a partner in Santa Monica-based Allen + Wohrle, LLP and an adjunct professor of law at Loyola Law School, covers these topics:

*”Who gets a fee award?”

*Theories of recovery of attorney’s fees.

*Recovery of attorney’s fees under Civil Code section 1717 (broken down, in turn, to look at these subtopics: substantive aspects of Civil Code section 1717; bilateral application of contractual fees clauses as a matter of law; was the claim upon which fees are being sought “on the contract”?; “prevailing party” determination; calculating the amount of the award: the “lodestar”; and procedural aspects of Civil Code section 1717).

Section 1717/Costs: Another Two-Fer . . . . Gotta Have A Substantive Basis To Claim Recovery Of Attorney’s Fees Or Expert Witness Fees As Costs

ABC-Learn, Inc. v. Coronado, Case No. B219107 (2d Dist., Div. 2 March 2, 2011)

(Unpublished).

     In this one, a prevailing defendant appealed a lower court’s denial of his request to recoup $136,140 in attorney’s fees under a commercial lease dispute involving a lease agreement and unsigned purchase agreement/joint escrow instructions. The problem here was that California   follows the American rule on fee awards, meaning there must be a statute or contract expressly authorizing them. Unfortunately, the controversy centered on a lease agreement with no fees clause. Given this reality, no dice on fees even though the unsigned documents did have a fees clause.

Behr v. Redmond, Case No. E048333 (4th Dist., Div. 2 March 2, 2011) (Unpublished).

     This case involved a gnarly suit for damages based on tortious transmission of genital herpes, with the plaintiff recovering some substantial compensatory and punitive damages after a jury trial. For our purposes, plaintiff was awarded $12,865 in costs for expert witness fees. Defendant successfully appealed, because plaintiff really had no argument for them given the absence of demonstrating that a CCP § 998 offer was served--the only real basis for such an award in a case of this sort. Costs award reversed.

Section 1717: Breach Of Implied Covenant Claim, Contractually Based, Gives Rise To Fee Exposure

Second District, Division 6 So Holds In Suit Against Mortgage Lender.

     The Second District, Division 6, in Smith v. Home Loan Funding, Inc., Case No. B219372 (2d Dist., Div. 6 Feb. 24, 2011) (certified for publication), has held that a breach of the implied covenant of good faith and fair dealing claim is contract-based, upholding the basis for a fee award against a losing mortgage lender to the tune of $26,342.50. Civil Code section 1717 so allowed and there was case authority supporting use of the implied covenant theory as a fee predicate where the implied covenant was in an agreement that was part and parcel of the parties’ overall bargain. (Sawyer v. Bank of America, 83 Cal.App.3d 135, 140 (1978).)

Section 1717: Recent Article In The Recorder Discuss Fee Shifting Under Civil Code Section 1717

Article Highlights Possible Division on Contractual Claim Partial Dismissals Under Section 1717.

     Robert Freitas and Siddhartha Venkatesan, in a February 16, 2011 article entitled “Recovering Attorneys Fees” in The Recorder (e-newsletter available through Law.com), have written a nice, short article on recovering attorney’s fees under Civil Code section. Among under topics, they discuss fee recovery, prevailing party determinations, fee reasonableness, and practical considerations.

     One particular part of the article caught our attention, so we share it with you.

     Civil Code section 1717(b)(2) provides: “Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” The authors note that there may be a division in appellate thinking on the breadth of this carve-out. One published section 1717 decision, Ford Motor Credit Co. v. Hunsberger, 163 Cal.App.4th 1526, 1532 (4th Dist., Div. 1 2008), held that the entire action did not have to be voluntarily dismissed, but that section 1717(b)(2) applied even if other causes of action remained against a party or if other parties remained in the wake of a voluntary dismissal of a potential fee-entitling contractual claim. However, in a non-section 1717 context, Carver v. Chevron U.S.A., Inc., 97 Cal.App.4th 132, 151 (4th Dist., Div. 1 2002), the same appellate court found that dismissal of only one cause of action intertwined with the defense of other actions carrying potential fee entitlement did not trigger (b)(2) because the “entire action” was not dismissed. See also Huang v. Shyan, 2003 WL 1016917 at * (2d Dist., Div. 5 Mar. 11, 2003) (unpublished) [following Carver in section 1717 context; failure to dismiss entire action meant fees were allowable]. As the authors of the article suggest, some care must be given to “pruning” claims from the case if the goal is to avoid fee exposure under Civil Code section 1717(b)(2).

     BLOG UNDERVIEW--Justice Huffman wrote Carver and concurred in Hunsberger, such that it will be interesting to see how the 4/1 appellate court lines up on this particular issue in the future.

Sections 1717/998: Substantial Fee Awards To One Defendant And To Plaintiff As Against Other Defendants Sustained By Second District, Division One

Mutuality Principles and Invalidity of 998 Offer Buttressed Correctness of Trial Court’s Fee Awards.

     Sargon Enterprises, Inc. v University of Southern California, Case Nos. B202789/B205034 (2d Dist., Div. 1 Feb. 9, 2011) (unpublished) was a hard fought case where plaintiff sued USC for breach of contract. Although lost profits evidence was found to have been erroneously excluded, the appellate court did sustain the trial court’s decisions on fee awards under a contractual fees clause. The fee awards went this way: (1) one individual defendant was awarded $440,000 (out of a requested $1,488,503.33) in fees for prevailing against plaintiff; and (2) plaintiff was awarded $4 million (out of a requested $5 million plus) in fees against USC, even though $1.2 million had previously been awarded. As we earlier indicated, the fee awards were affirmed in entirety.

     With respect to plaintiff’s appeal of the fee award against it, section 1717’s mutuality principles gave reciprocity to a fees clause. The trial court apportioned and did so with correct discretion, awarding individual defendant a little under 20% of the fees expended by USC. Fees for services rendered prior to filing a complaint were found properly compensable. (Stokus v. Marsh, 217 Cal.App.3d 647, 655 (1990).)

     That brought the appellate court to USC’s cross-appeal of the adverse fee award. Its main argument was that plaintiff was not entitled to fees because plaintiff did not beat a CCP § 998 offer. The problem here was that the 998 offer was invalid because it was tardy and did not contain a signature line for plaintiff’s acceptance as required under section 998. Because the potential lost profit damages of $220 million in the case were large, the substantial fee award of $6.2 million total was no abuse of discretion given the overall complexity and length of the litigation. Finally, USC argued that fees should have been reduced because plaintiff declined an informal settlement offer of an amount greater than that recovered at trial. In response, the appellate court noted that this very contention had been rejected in Greene v. Dillingham Construction N.A., Inc., 101 Cal.App.4th 418, 425-426 (2002) and also “[w]e decline to extend Meister [v. Regents of University of California, 67 Cal.App.4th 437, 452 (1998)] to circumstances where, as here, the section 998 offer failed to give the offeree proper notice that the punitive provisions of the statute would apply if the offer were declined.” (Slip Opn., at p. 37.)

     Because the matter was remanded for a new trial on lost profits, nothing indicated that the existing fee award against USC would be changed in anyway. “So we leave the award as it is.”

     The opinion was authored by Presiding Justice Mallano. It was 3-0 on the fee issue, but 2-1 on the lost profits issue--with interesting discussions by both the majority and dissent on lost profit damages.

     BLOG UNDERVIEW--Los Angeles County Superior Court Judge Terry A. Green was the trial judge whose fee awards were affirmed. He and co-contributor Mike have a common bond--they are both undergraduate alumni of USC.

 

Tommy Trojan covered in duct tape in preparation for UCLA football game.   Source:  Wikipedia.

Section 1717: Breach Of Fiduciary Duty Claim Was Not “On The Contract” For Civil Code Section 1717 Purposes

Defendant’s Fee Award Reversed Because Plaintiff’s Pleadings Based on Statutory Corporations Code Duty, Not a Contract With a Fees Clause.

     Tabibian v. Waldman, Case No. B220760 (2d Dist., Div. 7 Feb. 9, 2011) (unpublished) is a case where plaintiff sued for breach of fiduciary duty/loyalty under Corporations Code section 309 even though there was an LLC operating agreement with a fees clause. However, no breach of contract claim was brought. Defendant prevailed and was awarded $50,000 (out of a requested $87,875) in attorney’s fees under Civil Code section 1717, based on the operating agreement’s fees clause.

     The fee award was reversed. Reason? The action was not “on the contract,” but was a statutory breach of duty claim. The crucial focus was on plaintiff’s pleading, which established no contract claim was involved. (Kangarlou v. Progressive Title Co., Inc., 128 Cal.App.4th 1174, 1178-1179 (2005).)

Reasonableness Of Fees: Appellate Court Affirms $611,544.75 Fee Award Where Compensatory Damages Were Only $271,682

No Proportionality Required Under Section 1717; Defense Expenditure Of More Proved Reasonableness.

     In Big Ring Holdings, LLC v. Van Ness Mgt., LLC, Case No. A126692 (1st Dist., Div. 2 Jan. 26, 2011) (unpublished), plaintiff tenant was awarded $271,682 in damages for a leaking ceiling in a dispute over a yet-to-be-opened laundromat where there was a lease with a fees clause. Later, the trial court awarded prevailing plaintiff attorney’s fees of $611,544.75 (out of a requested $635,445.25) for three years of litigation toil. The defense appealed.

     The defense did not succeed on appeal.

     The trial court properly calculated the lodestar and then determined its reasonableness (including any reductions) under the Ketchum v. Moses methodology. It also properly allowed recoupment of fees spent on a dismissed alter ego claim.

     The appellate court also rejected the notion that Civil Code section 1717 fees had to bear some set percentage to a compensatory damages award.

     Finally, the reasonableness argument of the defense was undermined when it implicitly conceded the issue by submitting some proof indicating that the defense expenditures exceeded those of the plaintiff.

 

  Leaking roof. 1827.  Library of Congress.

Section 1717: Wife’s Defeat Of Contractual Action On Technicality Still Entitled Her To Fee Recovery

 

Broad Fee Clause and Compulsory Cross-Complaint Issue Sealed the Deal.

     You knew that this next case would be interesting when the appellate court said the following: “The records make it abundantly clear, however, that the litigation became extremely contentious, and even the parties’ lawyers became infected with the rancor and ceased to act reasonably or with professional civility.” Whew! And the appellate court even urged the parties to reach a global resolution notwithstanding how it ruled.

     The case is Rosen v. Cook, Case No. A123548 (1st Dist., Div. 1 Jan. 11, 2011) (unpublished). As germane to this blog, wife defeated a contractual claim, which had a broad fees clause in a trust deed, based on the failure to bring the claim as a compulsory cross-complaint. The appellate court found that Civil Code section 1717 mutuality principles were invoked, with it being material that wife prevailed on a technicality for fee recovery purposes.

     The Court of Appeal, although it could fix fees, found the better practice was to remand to the trial court for determination. (Center for Biological Diversity v. County of San Bernardino, 185 Cal.App.4th 866, 901 (2010).) However, one got the distinct impression that it still wanted the parties to see if they could settle this 6-year-long litigation epic.

Prevailing Party: $79,267.65 Winner Of Contract Dispute After Jury Trial Garners $261,176.50 Fee Award And $22,312.87 Costs Award

Fee Award Does Not Have to be Proportional to Damages Award for Civil Code Section 1717 “Prevailing Party” Purposes.

     Here is one which, yet again, reiterates that trial courts have tremendous discretion in determining the “prevailing party” under Civil Code section 1717 as well as the amount of damages to be awarded--which do not have to be proportionate to the damages award.

     Monarch Consulting, Inc. v. Karkehabadi, Case No. B214178 (2d Dist., Div. 2 Jan. 6, 2011) (unpublished) concerned a defendant who lost a contract dispute with plaintiff to the tune of $79,267.65 (about half of what plaintiff sought). The trial court then determined plaintiff had prevailed under a contractual fees clause, assessing against defendant a fee award of $261,176.50 plus $22,312.87 in costs.

     After losing a merits based appeal of certain issues, defendant challenged the “prevailing party” fee determination of the lower court. That was not persuasive, either.

     Hsu v. Abbara, 9 Cal.4th 863, 876 (1995) [one of our Leading Cases], which bases prevailing party status on a comparative analysis of the success or failure of litigation objectives by each side, “does not suggest that the trial court’s prevailing party determination need be inflexibly applied based on the monetary award,” preferring instead resort to an “equitable considerations” compass. (Slip Opn., p. 15.) Even though plaintiff did not get every penny that he requested, the lower court was well within its discretion in awarding the fees that it did--especially after a hard fought battle that went to a jury for eventual resolution.