Fee Clause Interpretation, Section 1717: Plaintiff Nonparty Manager To An LLC Operating Agreement Not Subject To Attorney’s Fees When Losing Tort Claims Against An LLC Member

Even though Plaintiff Was A Suspended Entity, Retroactive Revival Preserved Ability To Oppose Fees Motion, Which Could Still Not Be Granted If No Fee Entitlement.

           In 9450 Topanga Properties, LLC v. Alpine Consultants, LLC, Case No. B293178 (2d Dist., Div. 4 Dec. 23, 2019) (unpublished), plaintiff manager, not a party to an LLC Operating Agreement with a fees clause applicable between the LLC and members, lost fraud claims brought against a defendant member, with managers having a separate management agreement defining rights and obligations as to the LLC.  Defendant member moved for fees under the Operating Agreement fees clause, with plaintiff opposing even though it was a suspended entity.  Plaintiff later revived its status.  The lower court denied fees to defendant, prompting an appeal.

            The 2/4 DCA affirmed.  With respect to the suspension issue, the retroactive revival validated the prior fee opposition.  (Moofly Productions, LLC v. Favila, 24 Cal.App.5^th 993, 1000 (2018).)  However, given there was no fee entitlement basis, the lower court was correct to deny a meritless motion notwithstanding plaintiff’s status.  Losing plaintiff manager was not a party to the Operating Agreement, so there was no fee entitlement as a matter of substantive law.  Beyond that, the action was grounded in tort, not contractually based, an independent reason justifying denial of fees.