Indemnity: $47,124 Fee Award Vacated Because Fees Clause Was Not A Real Fees Clause

Fourth District, Division 3 Reverses Fee Award, Because Only An Indemnity Agreement Was Involved.

     Under our category “Indemnity,” we have discussed several cases which explore the difference between an enforceable attorney’s fees clause giving rise to fee recovery and an indemnification clause which does not. Here is one from our local appellate court to add to this list, albeit in the form of an unpublished decision.

     Md7, LLC v. Seidner, Case Nos. G042498/G042755 (4th Dist., Div. 3 Jan. 18, 2011) (unpublished) involved a lease rescission lawsuit that did not turn out well for plaintiff tenant’s assignee. Based on a fee prayer in the complaint and a clause in the underlying lease, defendants moved to recover fees, which the trial court awarded to the tune of $47,125.

     Defendants lost the merits appeal, but did obtain a reversal of the fee award.

     Here are the reasons:

     1. A mere allegation of a right to fees in a pleading does not create an estoppel if the party is not actually entitled to contractual fee recovery (Myers Building Industries, Ltd. v. Interface Technology, Inc., 13 Cal.App.4th 949, 968 (1993)); and

     2. The clause relied on by defendants was not a true fee clause. It read this

way: “Defendants agree to indemnify, defend and hold Cingular harmless

from and against any and all injury, loss, damage or liability (or any claims

in respect of the foregoing), costs or expenses (including reasonable

attorneys’ fees and court costs) arising directly from the actions or failure

to act of defendants or defendants’ breach of any provision of this

Agreement . . . .” Justice Ikola, writing for the 3-0 panel, found this was

an indemnification provision, similar to the one found not to confer

fee entitlement in Myers. (Id. at 965-966, 974.) He reasoned:

“The obligation to pay attorney fees arising from a ‘breach of any provision

of this Agreement’ does not expressly refer to fees incurred in enforcing the

agreement between the parties. Nor must it be construed as such in order

to be meaningful. Instead it extends the scope of the duty to reimburse

costs incurred in defending against third party claims arising from conduct

that breached the lease. It is an integral part of the indemnity clause.”

(Slip Opn., p. 14.)