Mutuality Principles and Invalidity of 998 Offer Buttressed Correctness of Trial Court’s Fee Awards.
Sargon Enterprises, Inc. v University of Southern California, Case Nos. B202789/B205034 (2d Dist., Div. 1 Feb. 9, 2011) (unpublished) was a hard fought case where plaintiff sued USC for breach of contract. Although lost profits evidence was found to have been erroneously excluded, the appellate court did sustain the trial court’s decisions on fee awards under a contractual fees clause. The fee awards went this way: (1) one individual defendant was awarded $440,000 (out of a requested $1,488,503.33) in fees for prevailing against plaintiff; and (2) plaintiff was awarded $4 million (out of a requested $5 million plus) in fees against USC, even though $1.2 million had previously been awarded. As we earlier indicated, the fee awards were affirmed in entirety.
With respect to plaintiff’s appeal of the fee award against it, section 1717’s mutuality principles gave reciprocity to a fees clause. The trial court apportioned and did so with correct discretion, awarding individual defendant a little under 20% of the fees expended by USC. Fees for services rendered prior to filing a complaint were found properly compensable. (Stokus v. Marsh, 217 Cal.App.3d 647, 655 (1990).)
That brought the appellate court to USC’s cross-appeal of the adverse fee award. Its main argument was that plaintiff was not entitled to fees because plaintiff did not beat a CCP § 998 offer. The problem here was that the 998 offer was invalid because it was tardy and did not contain a signature line for plaintiff’s acceptance as required under section 998. Because the potential lost profit damages of $220 million in the case were large, the substantial fee award of $6.2 million total was no abuse of discretion given the overall complexity and length of the litigation. Finally, USC argued that fees should have been reduced because plaintiff declined an informal settlement offer of an amount greater than that recovered at trial. In response, the appellate court noted that this very contention had been rejected in Greene v. Dillingham Construction N.A., Inc., 101 Cal.App.4th 418, 425-426 (2002) and also “[w]e decline to extend Meister [v. Regents of University of California, 67 Cal.App.4th 437, 452 (1998)] to circumstances where, as here, the section 998 offer failed to give the offeree proper notice that the punitive provisions of the statute would apply if the offer were declined.” (Slip Opn., at p. 37.)
Because the matter was remanded for a new trial on lost profits, nothing indicated that the existing fee award against USC would be changed in anyway. “So we leave the award as it is.”
The opinion was authored by Presiding Justice Mallano. It was 3-0 on the fee issue, but 2-1 on the lost profits issue--with interesting discussions by both the majority and dissent on lost profit damages.
BLOG UNDERVIEW--Los Angeles County Superior Court Judge Terry A. Green was the trial judge whose fee awards were affirmed. He and co-contributor Mike have a common bond--they are both undergraduate alumni of USC.
Tommy Trojan covered in duct tape in preparation for UCLA football game. Source: Wikipedia.
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