Section 1717: Third District Reverses Denial of § 1717 Attorney Fees To Alter Ego Defendant Who Prevailed Against Tort Claims Following Plaintiff’s Voluntary Dismissal Of Breach Of Contract Claim

Court Of Appeal Followed Reasoning In MSY Trading.

            Two alter ego defendants moved for Civ. Code § 1717 attorney fees subsequent to prevailing on the tort causes of action against them after plaintiff voluntarily dismissed its breach of contract claims.  The trial court determined that there was no basis for reciprocal fees on the tort causes of action under § 1717 and denied. 

            One defendant appealed, and the Third District reversed in 347 Group, Inc. v. Philip Hawkins Architect, Inc., Case No. C091273 (3d Dist., December 7, 2020) (published).

            Following the reasoning in MSY Trading Inc. v. Saleen Automotive, Inc., 51 Cal.App.5th 395 (2020) [discussed in our June 30, 2020 post], the appellate panel found that, contrary to plaintiff’s contention, plaintiff’s post-judgment alter ego action was an action on the contract where it sought to establish liability for the underlying judgment on a contract.   If plaintiff had prevailed in its post-judgment action to have defendant deemed an alter ego of judgment debtor, defendant would have been liable for attorney fees pursuant to the fees provision in the underlying contract.  Based on the reciprocal remedy provided by § 1717 to a nonsignatory defendant sued on a contract as if a party to it, defendant was entitled to fees for prevailing in the alter ego action.