English Rule: Swiss Law Required Remand So That Prevailing Plaintiff Obtained Fee Recovery

Fourth District, Division 3 Holds that Choice-of-Law Clause Drives Fee Result.

     Who says that our California intermediate appellate courts do not face gnarly issues even in a relatively routine breach-of-contract dispute. Not us. The next one had some wild issues, not to mention a Swiss choice-of-law clause—meaning that the English Rule applied to the dispute. Wait until you see how this panned out.

     In Applera Corp. v. MP Biomedicals, LLC, Case No. G038984 (4^th Dist., Div. 3 Apr. 30, 2009) (certified for publication), a patent licensing dispute erupted into a much more complicated controversy between successor parties who raised jurisdictional and standing issues of a complex nature because patent law was at least on the periphery of the dispute. In the end, plaintiff’s $1.125 million contract judgment was affirmed, in a 3-0 decision by the Fourth District, Division 3 (authored by Justice Ikola).

    

  Swiss Cheese.  Madison, Wisconsin.

Library of Congress

 

      However, the trial court denied plaintiff any postjudgment attorney’s fees, prompting a cross-appeal by the prevailing party. That cross-appeal turned out to be a good move.

     The appellate panel reversed and remanded so that the lower court would award fees to plaintiff.

     The basis? Answer: Swiss law mandated a fee award.

     The licensing agreement did contain a Swiss choice-of-law clause. Interestingly enough, Swiss law provides for an award of attorney’s fees to the prevailing party as a matter of course, which coincides with the English Rule on the subject. (However, this starkly contrasts with the American Rule—which requires a statutory or a contractual basis for fee recovery.) The lower court primarily determined that Swiss law would contravene California’s American Rule and that California had a greater interest in determination of the issue.

     The Court of Appeal did not agree, finding that fee recovery under Swiss law offended nothing in California choice-of-law analysis, as set forth in the governing decision of Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4^th 459, 464-465 (1992). Under the germane circumstances, the original contracting parties were from Switzerland and France, such that it made no difference that the successors were not that close to Switzerland. Because the successors in interest did not renegotiate the original contract, they were bound by the contract as they assumed the bargain—classic economic- and contract-based analysis utilized by Justice Ikola on behalf of the 4/3 panel. The contractual selection of Swiss law was no different than inserting a Civil Code section 1717 contractual fees clause or enforcing a foreign judgment that allowed for recovery of fees under the English Rule. (See Java Oil Ltd. v. Sullivan, 168 Cal.App.4^th 1178, 1189-1192 (2008).) So, Swiss law required remand so that fees could be determined in plaintiff’s favor, after resolution of a judicial estoppel argument against the defense—based on lack of prejudice (the issue was raised in postjudgment fee proceedings and the defense had an opportunity to respond).

     BLOG UNDERVIEW—For a nice discussion between the philosophical underpinnings from the English and American Rules on attorney’s fees, see Java Oil Ltd., supra, 168 Cal.App.4^th 1178 itself.