Prevailing Party: Broadly-Worded Fees Clause Gave Rise To Fee Exposure Even Under Santisas

Sixth District Also Resolves Joinder, Motion Timeliness, and Apportionment Issues.

     The next case is a virtual “issue cross-over” study for such subjects as prevailing party after a dismissal without prejudice (Santisas issue); joinder; motion timeliness; and apportionment. Walewski v. Williams, Case No. H033026 (6^th Dist. Oct. 8, 2009) (unpublished) is worth reading to see how each of these issues panned out.

     Plaintiffs, LLC minority members, sued defendants managing members for breach of contract and breach of statutory/common law fiduciary duties arising out of the sale of a commercial building that was the LLC’s sole asset. Early into the litigation, plaintiffs lost an effort to prohibit disbursement of the sale proceeds to defendants, prompting plaintiffs to voluntarily dismiss their case without prejudice. The LLC’s operating agreement contained a fees provision covering “any dispute between the Company and Members or among the Members” that goes to litigation or arbitration. One defendant moved to recover fees, with the other two defendants filing a joinder in the first motion. The trial court awarded defendants $22,867 in fees/costs to defendant #1 and $10,093.30 in fees/costs to joining defendants, after deducting $7,000 in inappropriate charges. Disgruntled plaintiffs appealed—but lost.

     Argument #1 was that the joinder constituted an inappropriate way to move for fee recovery. No way, said the appellate panel. As long as the underlying fee motion was timely (and it was), joinder in another’s motion satisfies the noticed-motion requirement where the joinder specifies what relief the joining party seeks and presents admissible evidence to support that request, both requirements of which were satisfied by the joinder in the case before it. (Barak v. The Quisenberry Law Firm, 135 Cal.App.4^th 654, 660-661 (2006).)

     Argument #2 was that the joinder was untimely filed, but that contention failed given that plaintiffs never sent notice of entry of dismissal such that defendants had the much longer 180 days after entry of judgment in which to “join” for fee recovery. (Cal. Rules of Court, rules 8.104(a)(3), 3.1702(b)(1).)

     Argument #3 was that defendants were not the prevailing party after a voluntary dismissal based upon the reasoning of Santisas v. Goodin, 17 Cal.4^th 599 (1998) [one of our Leading Cases]. However, the flaw with this argument is that there was a broadly-worded fees clauses covering all disputes. This triggered a Santisas exception for tort or noncontractual claims that are dismissed but could give rise to fee recovery if the underlying contract allowed for such recoupment—the very situation in Walewski. In such a situation, the trial court has discretion to determine who prevailed and then award fees. Because plaintiffs lost their main objective early on in the case, the lower court did not err in determining that defendants prevailed.

     Argument #4 was that the trial court failed to explicitly allocate fees between the contract and noncontract claims. However, apportionment is not required when fees are incurred for representation on an issue common to a claim in which fees are recoverable and one in which they are not allowed. (Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129-130 (1979) [another of our Leading Cases]; Yield Dynamics, Inc. v. TEA Systems Corp., 154 Cal.App.4^th 547, 580 (2007).) Plaintiffs themselves had characterized their claims as “interrelated” and “overlapping,” so this concession pretty much sealed that failure to allocate was no abuse of discretion.