Fee Clause Interpretation, Poof!, Trade Secrets: Defendant Defeating Contractual Damages Claims Not Entitled To Fee Recovery Where Fees Clause Only Applied To Equitable/injunctive Relief Wins

Results Is That $533,086.19 Fee Award Went POOF! On Appeal.

                The next case is a continuation of a case we earlier posted on, Applied Medical Distribution Corp. v. Jarrells (2024) 100 Cal.App.5^th 556, discussed in our March 11, 2024 post.  There, plaintiff obtained preliminary and then later permanent injunctions against defendant in a trade secret misappropriation case, although losing damages recovery, under an agreement allowing fee recovery to a party obtaining equitable relief.  That exposed defendant to around $554,000 in fees and costs, although the appellate court did reverse some fee determinations so that a remand was available to the defendant—although the remand likely would not reduce the previous fees/costs award to plaintiff.  Before that appeal was decided, defendant went on the offensive and filed his own fee motion for recovering on the damage end of the claims.  The lower court agreed, awarding defendant $533,086.10 in fees under the contractual fees clause such that defendant likely perceived that the fee exposure was a wash.

               That perception can and was negated by an appellate court’s scrutiny of the breadth of the fees clause, which did occur to defendant’s chagrin in Applied Medical Distribution Corp. v. Jarrells, Case No. G062699 (4^th Dist., Div. 3 Nov. 22, 2024) (unpublished), also authored by Justice Gooding as she did with respect to the earlier published opinion.

               The substantive problem was the breadth of the contractual fees and the nature of defendant’s prevailing result in the case.  Plaintiff was the party which prevailed on the equitable, injunctive relief aspect of the case, not defendant.  The fees clause did not encompass recovery by a party defeating a damage claim such that the lower court’s attempt to do equity could not surmount the legal interpretation relating to the limited scope of the fees clause.  Defendant’s fee award was reversed as a matter of law because, even under Civil Code section 1717, plaintiff would not have been entitled to fees against defendant had it prevailed by just winning damages.