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In Gaggero v. First Federal Bank of California, Case No. B207273 (2d Dist., Div. 1 Nov. 30, 2009) (unpublished), Borrower voluntarily dismissed with prejudice his equitable, statutory and breach of contract claims, on the eve of a jury trial, after the trial court held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.
Issue #1 was Borrower’s appeal of the substantial fee/costs award in favor of Lender and refusal to award Lender fees on the unsuccessful contract claim. The trial court did properly not award fees on the dismissed contract claim based on Santisas v. Goodin, 17 Cal.4th 599, 617 (1998) [one of our Leading Cases]. The Court of Appeal rejected that the Santisas rule was limited to just pretrial dismissals. (Marina Glencoe, L.P. v. Neue Sentimental Film AG, 168 Cal.App.4th 874, 877.) In interesting dicta, the appellate panel did go on to question the equity of Santisas under the facts before it—“a case such as the one before us in which the dismissal occurs in the shadow of the action’s impending doom.” (Slip Opn., at p. 6.) However, it was error to award fees to Lender for prevailing on the noncontract claims. The loan documents with fees clauses were not broad enough to authorize fee awards for the germane noncontract counts, because the provisions had no broad “any dispute under the agreement” language but were narrowly targeted for specific violations under the notes and trust deeds. (Slip Opn., at pp. 8-9, listing cases allowing fee recovery where the fees clause was broader in nature.)
Issue #2 was Lender’s claim that it should have been awarded $161,299.71 in expert witness fees based upon Borrower’s rejection of a prior 998 offer in which Borrower had to agree that he would take nothing from the bank. No dice, said the appellate court, because the lower court correctly ruled the 998 offer was token in nature and not made in good faith. (Wear v. Calderon, 121 Cal.App.3d 818, 821 (1981).) Lender offered Borrower no money; and, had Borrower accepted the offer (instead of just dismissing the contract claim with no exposure), Borrower would have been exposed to greater attorney’s fees that what he actually was charged with below (before reversal on appeal). This “zero sum” game approach by the defense in structuring the 998 offer was correctly rejected by the lower court.
Issue #3 was Lender complaining that the trial court erred in striking such routine costs as expenses for trial exhibits, messenger services, parking and mileage for court appearances and witness locator services. Wrong. It was within the trial court’s discretion to determine if the trial exhibits were reasonably helpful to the trier of fact (Seever v. Copley Press, Inc., 141 Cal.App.4th 1550, 1557-1560 (2006) and if the other expenses were reasonably necessary as opposed to merely convenient or beneficial to the conduct of the litigation (Code Civ. Proc., sec. 1033.5(c)(2); Ladas v. California State Auto Assn., 19 Cal.App.4th 761, 775-776 (1993)). Nothing demonstrated any abuse of discretion in denying these routine costs.
End result--$1.5 million fee award went POOF!
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