Prevailing Party/Section 1717: Guarantor Of Arbitration Award Was Properly Hit With $85,500 In Attorney’s Fees

 

Arbitration Award Winner Did Prevail In Subsequent Action, Despite Uncertainty As to Whether Fees Were Damages or Post-trial Costs.

     Whyaduck Productions, Inc. v. Block, Case No. B245051 (2d Dist., Div. 7 Apr. 9, 2014) (unpublished) is a case which somewhat flummoxed the appellate court given a sparse record and the position of the non-prevailing party below when it came to how attorney’s fees should be claimed. In the end, the award of fees was affirmed.

     What happened here is that the principal of a respondent in an arbitration award agreed to guaranty an adverse arbitration award in return for the dropping of fraud/alter ego claims. Eventually, an adverse arbitration award was entered with only sporadic payments made in satisfaction of the award, leading the prevailing claimant to bring a separate suit against the guarantor based on the guaranty. However, during the pendency of the action, the guarantor paid what was eventually awarded as the base amount due under the guaranty. So, what was left? Ta da—you guessed it, guarantor’s claim that it was entitled to attorney’s fees for prevailing under a guaranty fees clause. There was a fair amount of confusion on whether the fees were damages under the guaranty or post-trial costs, although the guarantor claimed they should be handled via a post-trial motion, a procedure the lower court acceded to by awarding $85,500 in fees to claimant as prevailing party.

     Guarantor’s appeal did not change the result. There was a lurking legal issue of whether the claimant could truly prevail, because it obtained a net monetary recovery, when guarantor had already directly paid or where the amount entered as the base judgment had already been satisfied. However, guarantor had argued that fees could be claimed as costs after trial, so it was unfair for guarantor to shift courses and argue that the fees should have been sought as damages. Equity decided the result here, with claimant achieving its litigation objective by forcing a satisfaction of the arbitration award during the pendency of the action. Fee award affirmed.