Section 1717: Trope Staunches Another Fee Request

Founding Shareholder Representing Law Firm Was Disqualified From Fee Recovery.

     Although Civil Code section 1717 is one of the better known fee-shifting statutes, there are restrictions to it. One such restriction pertains to attorneys who elect to represent themselves, with Trope v. Katz, 11 Cal.4^th 274, 277 (1995) establishing that an attorney representing himself in an action cannot recover section 1717 fees. Of course, Trope was just the beginning of the restriction, with subsequent case law establishing how to apply the restriction to different factual situations.

     A nice review of post-Trope decisions in this area, as well as an application to a recurring factual pattern, can be found in the First District, Division Two’s decision in Don L. Beck Associates, Inc. v. Silicon Valley Law Group, Case No. A121080 (1^st Dist., Div. 2 Apr. 14, 2010) (unpublished), which was authored by Justice Haerle.

     From a post-Trope vantage point, the appellate court reviewed these cases:

• PLCM Group Inc. v. Drexler, 22 Cal.4^th 1084, 1093 (2000)—where in-house counsel for a corporate counsel was found to be exempt from the Trope restriction;
• Gilbert v. Master Washer & Stamping Co.. 87 Cal.App.4^th 212, 222. 222 n. 44 (2001)—Trope did not bar a personally named lawyer from fee recovery where he retained other members of his law firm for representation of his personal interests; and
• Witte v. Kaufman, 141 Cal.App.4^th 1201, 1208-1211 (2006)—fee recovery for winning anti-SLAPP motion denied to successful law firm which was represented by its individual attorneys in the motion proceeding.

     So, what were the facts in Silicon Valley Law Group? Briefly summarized, Silicon Valley Group successfully won unpaid attorney’s fees from a former client to the tune of $197,720 as well as defeating client’s malpractice action. The retainer agreement had a fees clause. However, the firm was represented by a member (actually, the founding shareholder) in the cases. When it came time to petition for recovery of $610,721.50 of work by founding shareholder and his paralegal, the law firm was denied recovery altogether by a trial court’s invocation of the Trope restriction. On review, the appellate panel agreed that Trope was properly applied. “[Silicon Valley Law Group] is not an individual person, but rather a law firm comprised of its members. Furthermore, SVLG did not retain a co-worker who was a stranger to the proceedings to represent it in this case. Instead, it was represented by one of its own founding shareholders. Any member of SVLG who represented it in this litigation necessarily represented his or her own interests and thus was not in any way analogous to an independent third party. In other words, SVLG represented itself in these cases.” (Slip Opn., pp. 42-43.) Ouch—Trope lopped off the fee tail of the litigation dog.