Order Granting the People $707,882.50 in Attorney Fees and Costs of $32,673 Goes Up in Smoke, But Not to Worry, Parties Will Get to Light Up Again in Trial Court
In this appeal, R.J. Reynolds Tobacco Company challenged an order awarding attorney fees to the People for enforcing a Consent Decree banning participating tobacco manufacturers from “using or causing to be used” any “cartoon” in the advertising, promoting, labeling or packaging of tobacco products. The Consent Decree contained a unilateral provision: “In any proceeding which results in a finding that a Participating Manufacturer violated this Consent Decree and Final Judgment, the Participating Manufacturer or Participating Manufacturers found to be in violation shall pay the State’s costs and attorneys’ fees incurred by the State of California in such a proceeding.” In re Tobacco Cases I, Case No. D056589 (4th Dist. Div. 1 4/5/11) (certified for publication). But is a Consent Decree entered by the Court the same as a contract, and is a proceeding to enforce a fee provision in a Consent Decree an “action on a contract” triggering recovery of attorney’s fees under Civil Code section 1717 rules and standards?
Note the peculiarities of the attorney’s fees provision in the Consent Decree. First, on its face, it is unilateral, rather than mutual – but if section 1717 applies, then principles of mutuality apply. Second, it does not provide for “reasonable attorney’s fees” – instead,on its face, it provides for fees “incurred.” And the fees incurred by the People are likely going to be incurred at a lower hourly rate than the fees incurred by the attorneys working for Reynolds. Unless, that is, section 1717 applies, for then the prevailing party will recover “reasonable fees.”
The trial judge found section 1717 inapplicable to the unilateral fees provision in the Consent Decree, but alternatively found that even if section 1717 applied, the People prevailed because they won on a “significant issue” in the litigation.
The Court of Appeals agreed with Reynolds that section 1717 applied to the Consent Decree. Because section 1717 applies, the correct legal standard in determining the prevailing party is who recovers “greater relief”, not who wins a “significant issue” – giving Reynolds another opportunity to argue that the People did not prevail. However, because section 1717 applies, the fees – if it is determined that the People are still the prevailing party – will have to be re-calculated, based on “reasonable fees”, rather than on fees actually “incurred” – and this will favor the People. Risky business!
The opinion is authored by Presiding Justice McConnell, with Justices Huffman and McIntyre, concurring.
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