Reason Is That They Were Not Parties To The Purchase Agreement With A Fees Clause.
Defendants must have been very disappointed, after winning an arbitration award which was confirmed as a judgment and after winning attorney’s fees of $13,465 based on a fees clause in a purchase agreement involved in the arbitration, when the Second District, Division 7 earlier determined that the trial court improperly compelled arbitration because they were not parties to the purchase agreement with an arbitration clause. They got even more bad news in Ahern v. Asset Management Consultants, Inc., Case No. 258030 (2d Dist., Div. 5 Sept. 3, 2015) (unpublished).
Division 5 reversed the fee award, too, after determining defendants were nonsignatories to the purchase agreement so as to have no fee entitlement. The problem as the appellate court saw it was the narrowness of the fees clause, applicable only to “either party hereto”—parties to the actual purchase agreement, which did not encompass defendants. Defendants argued that they were assignees entitled to enforce the fees clause, but case law holding that an assignee is not a “party hereto” for purposes of fee recovery was fatal to this argument. (Sessions Payroll Management, Inc. v. Noble Construction Co., 84 Cal.App.4th 671, 681 (2000); Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4th 898, 906 (2008).) Civil Code section 1717’s reciprocity policy did not apply because defendants could never have prevailed for purposes of fee recovery in the first instance.
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