Pursuant To Section 1717, Defendant Was Not The Prevailing Party As It Lost The Sole Cause Of Action In The Case – With The Jury Awarding $45,050 In Damages To Plaintiff For Defendant’s Breach Of The Written Lease Contract.
Waterwood Enterprises, LLC v. City of Long Beach, Case No. B296830 (2d Dist., Div. 1 December 18, 2020) (published) includes a nice discussion on the proper legal standard for determination of a prevailing party for purposes of attorney fees where neither party achieved a simple, unqualified win on the contract claim(s) based on a contract containing a fees provision.
In this case, plaintiff sued its former commercial tenant, City of Long Beach, alleging a single cause of action for breach of a written contract – seeking at least $150,000 for property damage. In its answer, City denied owing anything to plaintiff and raised 18 affirmative defenses. Each party served the other with § 998 offers which were rejected. At trial, City admitted that it owed some amount to plaintiff for asphalt damage, but not for any other damages claimed by plaintiff. The jury returned a verdict in plaintiff’s favor and awarded it $45,050 in damages, but did not identify the repairs for which it awarded damages.
Both parties moved post-trial for fees and costs, with each arguing they were the prevailing party. Plaintiff sought $307,068.50 in fees, plus $15,000 for fees on fees for bringing the fees motion, and $12,000 in costs. City argued it had achieved its main litigation objective to pay “for some, but not all, of the claimed repairs.” City sought $172,375 in fees, $17,673.50 in costs, and $39,483.50 in expert fees. The trial court found plaintiff was the prevailing party under Code Civ. Proc. § 1032 for having achieved a net monetary recovery, and awarded it costs of $19,905.04. But, looking to the parties’ pre-litigation settlement discussions and § 998 settlement offers, the trial court found City was the prevailing party for the purpose of awarding attorney fees. In awarding City $172,375 in fees, the trial court reasoned that City’s 998 offer was closer to the jury’s damages award than plaintiff’s 998 offer. Under the amended judgment – which added interest, fees and costs awards – plaintiff ended up owing City $105,432.90.
Plaintiff appealed and the 2/1 DCA reversed as to City’s attorney fees award. On remand, the appellate panel limited the trial court’s discretion to finding either that plaintiff was the prevailing party, or there was no prevailing party for the purposes of awarding fees.
Section § 1717 governs the determination of prevailing party in an action on a contract containing a fees provision. The trial court abused its discretion in determining City was the prevailing party by relying on wholly unsupported facts, improper legal criteria, and applying the wrong legal standard. Trial courts may not consider the parties’ settlement communications in determining the prevailing party under § 1717. Additionally, although § 998 may permit fee awards in certain circumstances even when a party was not the prevailing party under § 1717, such circumstances require that the party’s § 998 offer exceeded the judgment. City’s 998 offer did not beat the jury’s damages award. To achieve prevailing party status under § 1717, based on City’s claim its objective was to pay only for some asphalt repair, City would have had to admit and pay its debt prior to the trial – something that did not happen.
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