Fee Clause Interpretation: 4/3 DCA Affirms Substantial Fees Award Against Tenants In A Dana Point Harbor Slip Dispute

Lower Court Cut Fees Request In Half, Which Was Erroneous, But Respondent’s Failure To Appeal Means The Reduction Did Not Aggrieve Appellants, the Tenants.

               In Papageorges v. Dana Point Harbor Partners, Case No. G063688 (4^th Dist., Div. 3 June 20, 2025) (unpublished), the upshot from this opinion is that a respondent may want to cross-appeal when a lower court reverses a “full fees grant” tentative decision and instead grants about a 50% reduction in its final order, when that final order is appealed by the other side.

               Here, tenants of a slip in Dana Point Harbor sued for what they claimed were improper slip rent increases, arguing that a Master Lease between defendant DPHP and City of Dana Point made tenants third-party beneficiaries.  DPHP and tenants were parties to a Slip License Agreement (SLA) having a broad fees clause mandating fee recovery to the prevailing party in “litigation relating to the subject matter of this Agreement.”  The lower court granted summary judgment to DPHP, concluding tenants were not third-party beneficiaries of the Master Lease and the slip fees did not otherwise violate the SLA.  DPHP filed a fees motion, seeking recovery of all fees defending the lawsuit to the tune of $365,651.  The lower court’s tentative was to grant the request; but, after oral argument, it cut the fee request by roughly 50% to apportion the recoverable fees to those incurred in defending the SLA related causes of action.  Only Tenants appealed.

               The 4/3 DCA determined that DPHP was the prevailing party based on the broad fees clause because both the Master Lease Agreement and SLA were encompassed in the language of the clause, which was mutual in nature (CCP § 1021)—such that the lower court erred in relying on Civil Code section 1717, but that was no problem because there was fee entitlement anyway.  However, the appellate panel determined that the 50/50 allocation was erroneous because the “subject matter” language covered both the Master Lease and SLA.  Even though DPHP was entitled to all its requested fees, it did not appeal such that tenants were not aggrieved by the lower court’s error, leading to an affirmance of 50/50 allocation fee order.  Acting Presiding Justice Sanchez authored this opinion.