Fee Clauses Not Broad Enough to Support Tort Claim Wins, So Case Remanded to Fix Fees And Determine If Any Apportionment Necessary.
Brown Bark III, L.P. v. Haver, Case No. G047198 (4th Dist., Div. 3 Aug. 26, 2013) (unpublished) involved a defendant alleged to be the continuation of a defunct defendant signatory to certain loan agreements with broadly worded fee clauses. Based on the jury verdict on certain tort claims, plaintiff failed to put on any further evidence on the successor liability claims relating to other contractual claims, with the trial court entering judgment against the claimed successor defendant in a subsequent judgment. However, the lower court refused to award attorney’s fees requested by the successor.
This result was reversed on appeal.
Just as unsuccessful alter ego allegations gave rise to fee exposure under Reynolds Metals Co. v. Alperson, 23 Cal.3d 124, 129 (1979), plaintiff’s failure to prevail on the successor liability--based on the theory that defendant was a mere continuation of the contract signatory defendant--accomplished the same end result. Although successor liability is an equitable “procedural” claim, it is still “on the contract” for Civil Code section 1717 purposes because the theory has to be hinged to a substantive claim, in this case the contractual claims.
Plaintiff mainly relied on the unpublished federal decision of Sunnyside Development Co, LLC v. Opsys, Ltd., 2007 WL 2462141 (N.D. Cal. Aug. 29, 2007), which held that successor liability could not be used to support a fee award. The Haver court found Sunnyside unpersuasive and declined to follow it for three reasons, the main ones being that Sunnyside misapprehended the nature of the successor liability theory and did not consider the apt reasoning in Reynolds in the analogous alter ego area.
With respect to the tort claims, the appellate court found that the fees clauses were not worded broadly enough to give rise to fee entitlement by the defendant successor. It remanded to the trial court to determine if any apportionment of fees was necessary on the contract and tort claims as well as the victory at the appellate stage, although observing this was not needed if the claims, proof, and appellate arguments were interrelated.
The 3-0 decision was authored by Justice Aronson.
Congratulations to CalAttorneysFees blogger Mike Hensley, who argued the appeal for appellants, and to colleague Kevin Day, who tried the matter in the superior court.
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