CALIFORNIA ATTORNEY'S FEES

Prevailing Party, Section 1717: Defendants Winning A Demurrer Dismissal Without Leave Was Contractually Prevailing Party Under Section 1717

Conspiracy And Unjust Enrichment Claims Fell Within An Operating Agreement Contractual Dispute Ambit.

               Many contractual fee disputes depend on whether the claims were “on the contract” under Civil Code section 1717; and if so, who prevailed.  In Zhou v. Hotel Winters, LLC, Case No. C099278 (3d Dist. Aug. 2, 2024) (unpublished), defendants won a demurrer without leave resulting in a dismissal, a merits determination affirmed on appeal, in a case involving conspiracy and unjust enrichment claims under a broad fee dispute contractual clause.  Defendants obtained a $45,000 attorney’s fees award (out of a requested $134,396.25 fee claim), although $625 hourly rates were reduced to $450 for principal attorneys.  The Third District affirmed:  defendants won by showing that the operating agreement was inapplicable, invalid, unenforceable, or nonexistent given that the conspiracy and unjust enrichment claims were “on the contract” under section 1717.  Also, the dismissal based on the demurrer being sustained without leave was a merits determination rather than just a premature or interim victory. 

Civil Rights, Prevailing Party: Plaintiff Entitled to Prevailing Party Fees Under The California Voting Rights Act Of 2001

Although Unintentional, School District Continued To Defend The Legality Of Its At-Large Elections Even Though Plaintiff Was Able To Show A Violation Of The Act, Obtain An Injunction, And Force Trustee-Area Election Based On Plaintiff’s Proposed Map.

               Although the amount of the fee award is not mentioned, the 4/1 DCA affirmed the award in favor of Plaintiff and against School District in Southwest Voter Registration Education Project v. Ramona Unified School Dist., Case No. D081500 (4^th Dist., Div. 1 July 11, 2024) (unpublished).  There, Plaintiff proved a violation of California’s Voting Rights Act of 2001, which statutory scheme has a prevailing party fee-shifting provision under Elections Code section 14030.  In line with the lower court’s determinations, the appellate court agreed Plaintiff had obtained its primary litigation objectives by obtaining an injunction against District’s at-large elections and forcing trustee-area elections based on plaintiff’s proposed map.  We would speculate that the fee award was somewhat substantial in nature.

Homeowner Associations, Prevailing Party: Homeowner Only Achieving Marginal Success, But Not Removing Quorum Requirements Or Board Member Removals, Was Not A Pragmatic Prevailing Party

Davis-Stirling Act And CC&R Provisions Did Not Require A Fee Award To Homeowner.

               In Mays v. Oakview Homeowners Assn., Case Nos. D083707 et al. (4^th Dist., Div. 1 June 17, 2024) (unpublished), homeowner received a fairly limited mandate win to direct the HOA to conduct an election to replace board directors whose terms had expired.  However, the main litigation objectives of her proceeding—getting rid of a quorum requirement and removing certain directors—did not happen.  Homeowner moved for attorney’s fees of $57,775.81 plus a positive 1.5 multiplier under the Davis-Stirling Act and the CC&Rs.  The lower court denied the motion.

               Homeowner’s appeal on the fee denial was not successful.  The CC&Rs only related to delinquent assessments, not broader homeowner-HOA disputes.  On the Davis-Stirling Act fee request, the lower court did not abuse its discretion in deciding that homeowner did not achieve her main litigation objectives—the additional relief she requested and did not win on—results which properly led to a denial of fees to homeowner. 

Prevailing Party, Special Fee Shifting Statutes: Court Of Appeal Reverses, As A Matter Of Law, Fee Denial To Mobile Home Park Because Voluntary Dismissal By Plaintiff Of MRL Claims Made Mobile Home Park A Prevailing Party

On Remand, Reasonableness Of Fees And Allocation On MRL Claims Were The Charge Of The Lower Court.

               In Stooksberry v. El Rova Mobile Home Park, LLC, Case No B329202 (2d Dist., Div. 1 May 29, 2024) (unpublished), plaintiff resident dismissed a complaint alleging late payment of rent, fee increases, and other claims arising under the Mobilehome Residency Law (Civ. Code, § 798 et seq.) (MRL), which has a prevailing party clause which is bilateral in nature.  The lower court denied fees to the mobile home park, but that was reversed as a matter of law.  The problem for the mobilehome homeowner was that two of his claims did arise under the MRL, despite trying to argue otherwise.  Even worse, the MRL scheme does allow attorney’s fees to a party where the litigation is dismissed in the defense favor (Civ. Code, § 798.85.), with caselaw extending the dismissal to a voluntary dismissal.  That resulted in a remand to determine what fees were owed to the mobile home park, keeping in mind the lower court had to face reasonableness and allocation principles given only two claims were adversely against mobile home park owner under the MRL.

Prevailing Party: Defendant Was The Prevailing Party When Plaintiffs Were Not Awarded Damages Out Of A Requested $667,000 On Contractual Indemnification/Duty To Defend Claims

Plaintiff’s Obtaining A Declaration Of A Limited Duty Of Indemnify And Defense To Two Of Three Underlying Actions Was Eclipsed By Defeat Of Damages Claims And Defendant’s Obtaining Summary Adjudication That The Duty To Indemnity And To Defendant Was Cut Off By A Prior Date For Most Of The Alleged Duties.

            We know that an “unqualified win” makes a litigant a prevailing party under Hsu v. Abbara, 9 Cal.4^th 863 (1995) [Our Leading Case N. 2].)  However, when this situation does not exist, a lower court had considerable discretion to determine what party prevailed, if any, based on a pragmatic assessment of what party has realized its litigation objectives.  (Santisas v. Goodin, 17 Cal.4^th 599, 622 (1998).)   This type of discretionary call was at issue on appeal in Garcia v. Bank of Stockton, Case No. F085536 (5^th Dist. May 10, 2024) (unpublished).

            There, plaintiffs sought to enforce certain indemnity and duty to defend obligations under agreements with defendant bank.  The lower court granted defendant’s summary adjudication motion after determining that some of these obligations expired on a date certain under the agreements.  After a bench trial on the remaining issues, the lower court determined that plaintiff had failed to prove damages even though seeking $667,000 from defendant, with the merit determinations affirmed in an earlier appellate opinion.  (Along the way, plaintiffs did win a declaration that partial indemnity/duty obligations were at issue, even though the recorded suggest defendant did not really contest it vigorously.). Defendant then moved for contractual prevailing party attorney’s fees, with the lower court awarding some amount although the sum is not mentioned in the second appellate opinion.

            The Fifth District affirmed the fee award in plaintiffs’ second appeal.  It could no discern no abuse of discretion based on these circumstances: (1) defendant’s victory in neutralizing a significant damages award and in obtaining a pretrial summary adjudication award limiting indemnity/duty to defend obligations were predominant; whereas (2) plaintiffs’ partial indemnity/defend win was a limited one and dwarfed by the “no damages” determination against them.

Fee Clause Interpretation, Prevailing Party, Section 1717: Lower Court Erroneously Denied Attorney’s Fees To Plaintiff Who Obtained A Majority Of What She Wanted In A Loan Agreement Case With A Fees Clause Only Covering A Judicial Foreclosure Case

Under Civil Code Section 1717, Lack of Recital Saying Contract Was Negotiated/Executed With Counsel Representation Kept The Clause From Applying Narrowly, With The Matter Remanded For Purposes Of Determining If Plaintiff Was The Prevailing Party For Fees Even Though Plaintiff Did Not Pursue Routine Costs Recovery.

            In Andrade v. Western Riverside Council of Governments, Case No. D080978 (4^th Dist., Div. 1 Feb. 20, 2024) (published), plaintiff filed a lawsuit against the Council and others claiming she had been fraudulently enrolled in a PACE energy program resulting in a lien and increased property tax assessments, pleading multiple contractual theories for rescission, restitution, damages, and declarations that the agreements were partially or wholly unenforceable.  After an investigation through a state department confirming contractor fraud, the Council voluntarily released its lien and reimbursed plaintiff for the increased property tax assessments.  Plaintiff obtained much of the relief she wanted through Council’s actions, but never obtained a declaration that the agreements were unenforceable.  The operative loan agreements between plaintiff and Council had a narrow fees clause applying only to a judicial foreclosure action prosecuted by Council, something which did not occur.  The lower court denied plaintiff’s attorney’s fees request, determining that the fees clauses did not apply because no judicial foreclosure action was pursued by Council.  (Plaintiff ultimately did not pursue a costs recovery.)

            Initially, the appellate court agreed that the action was a contract because it concerned whether the loan agreements were valid and enforceable, with plaintiff’s theory of invalidating the contracts being “on the contract” under Civil Code section 1717 and with dicta in Xuereb/Dintino decisions not altering that conclusion.  Second, although acknowledging that the fees clause was narrow and applied only to judicial foreclosure actions, the 4/1 DCA panel relied on section 1717(a) to conclude that the fee provision applies to the entire contract unless the parties expressly recite that the agreement was negotiated/executed by parties represented by counsel somewhere in the contract or fees clause—that recital was not present, and the appellate court deemed that this recital was necessary to prevent the agreement from being a “lopsided arrangement that section 1717 prohibits.”  Finally, given its prior conclusions, the appellate court remanded to have the lower court determine if plaintiff “prevailed” for fees under section 1717:  after all, even though she won a lot, she did not prevail across-the-board such that a pragmatic inquiry was necessary on remand.

BLOG OBSERVATION—This case suggests that in fee clauses, transactional attorneys need to include the negotiation/execution recital or be at risk that a narrow fee clause will not be enforced where the fee motion issues on based on the entire contract.  Huge drafting tip here.

Employment, Fee Clause Interpretation, Prevailing Party, Settlement, Special Fee Shifting Statutes: Denial Of Labor Code Section 1194 Attorney Fees To Plaintiffs Who Incurred Post-Settlement Fees After Employer Breached The Settlement Agreement Reversed

Because The Fees Provision In The Parties’ Settlement Agreement Did Not Address Fees Incurred Post-Settlement, Plaintiffs Were Entitled To Recovery Under Section 1194, But Only As To Fees Incurred In Conducting Discovery And Litigating To Trial, Not In Enforcing The Settlement Agreement.

            In Lorta v. Bishop, Case No. G062166 (4^th Dist., Div. 3 February 13, 2024) (unpublished), five employees, who had sued their employer for recovery of wages, filed a motion seeking attorney fees of $331,261.25 – based on a $265,009 lodestar and a 1.25 multiplier – after employer failed to comply with the parties’ stipulation for settlement.  Plaintiffs incurred the fees post-settlement by conducting discovery and preparing for trial, and by enforcing the settlement agreement, and claimed entitlement to the fees under Labor Code sections 1194 and 226, and Code Civ. Proc. section 1021.5.  Defendant argued that because there was no trial or determination by the trial court on the merits of Plaintiffs’ claims, Plaintiffs were not prevailing parties under sections 1194, 226, and 1021.5, and not entitled to statutory fees.  Defendant further argued that Plaintiffs had prevailed only in enforcing the settlement agreement, which amounted to a breach of contract claim, and the settlement agreement provided that each party would bear its own fees and costs.  The trial court agreed and denied Plaintiffs’ motion for fees.

            Plaintiffs appealed and obtained a reversal and remand as to fee recovery under section 1194 – a one-way fee-shifting statute that allows employees to recover fees in a successful action for minimum wage or overtime. 

            In an opinion authored by Justice Sanchez, the 4/3 DCA found that the settlement agreement was silent as to any fees incurred after the settlement agreement – thereby entitling Plaintiffs to post-settlement attorney fees under section 1194 insofar as those fees were not incurred to enforce the settlement agreement.  In reaching this conclusion, the panel determined that the settlement agreement had the same effect as a judgment as defined under Code Civ. Proc., § 577 and constituted a recovery in a civil action within the meaning of section 1194.

Equity, Prevailing Party: $54,914.25 Fee Award For Replacement Referee Interim Victory Was Premature

Based On Unique Circumstances Of The Litigation, Fee Request Was Premature Until The Overall Merits Were Decided.

            Equity does factor in attorney’s fees awards, as Hot Rods, LLC v. Northrop Grumman Systems Corp., Case No. G061449 (4^th Dist., Div. 3 Jan. 25, 2024) (unpublished) makes clear.

            This contentious litigation between the parties involved multiple proceedings and appeals over parties’ responsibilities for environmental contamination of an Anaheim property, which produced some wins and losses for both sides.  The current appeal focused on a $54,914.25 fee award for one party prevailing on an interim victory of obtaining a replacement referee.  However, given that the merits of the motions were not addressed, the 4/3 DCA, in an opinion authored by Justice Moore, reversed because it was premature, with a remand to see what happened at later junctures of the litigation to determine who prevails.

Prevailing Party, Probate: $61,557 Fee Award To Removed Trustee For His Attorney’s Work On Trust Petition Affirmed On Appeal

Trustee and Challenging Beneficiaries Got Mixed Results, So Trustee Entitled To Fees, Inclusive Of “Fees On Fees.”

            In Farnocchia v. Harms, Case No. A164639 (1^st Dist., Div. 1 Nov. 29, 2023) (unpublished), two beneficiaries of a trust filed a petition to remove Harms as trustee, for an accounting, and for breach of fiduciary duty.  Although trustee was removed and provided asset documentation acceptable to the beneficiaries, the petition was resolved by a stipulation through which the asset information was deemed adequate, and no finding of fiduciary duty breach was made.  The lower court then granted trustee’s attorney’s fees in the amount of $61,557 for the work of the attorney helping trustee reach the stipulation resolving the petition, including “fees on fees” on the fee entitlement issue.  Beneficiaries appealed the order, but it was affirmed on appeal.

            Initially, the Court of Appeal provided a nice review of the situations giving rise to fee entitlement under these circumstances.  “In People ex rel. Harris v. Shine (2017) 16 Cal.App.5th 524, our colleagues in Division Five summarized when such fees are appropriate:

“ ‘ “The underlying principle which guides the court in allowing costs and attorneys’ fees incidental to litigation out of a trust estate is that such litigation is a benefit and a service to the trust,” ’ and not for the personal benefit of the trustee. [Citation.] Courts have found a trustee’s legal services were for the benefit of the trust, and thus payable from trust funds, where the attorneys helped prepare an accounting [citation]; successfully defended an accounting [citation]; litigated to preserve trust assets [citation]; successfully defended against a petition to invalidate the trust [citation]; or successfully defended against a petition to remove or surcharge the trustee [citation].

“Fee awards have been denied or reduced where the attorneys helped prepare an inaccurate accounting [citation]; unsuccessfully defended an accounting [citation]; or unsuccessfully defended a petition to remove or surcharge the trustee [citation]. Where the results of such proceedings were mixed, courts have either awarded fees based on the trustee’s overall success in the proceeding [citation] or apportioned fees according to the trustee’s success [citation]. [¶] Fee awards have also been found inappropriate where the trustee acts from personal interest or motive. [Citations.]

“In short, the costs of a successful defense to a removal or surcharge petition are generally chargeable against the trust even though the trustee personally benefits as a result. [Citation.] However, a trustee is not entitled to indemnity for fees incurred in an unsuccessful defense of such a petition absent an additional showing that ‘the trustee subjectively believed that the expense was necessary or appropriate to carry out the purpose of the trust and that belief was objectively reasonable.’ ” (Id. at pp. 534–535.)

            The appellate court found that beneficiaries were not necessarily the prevailing party because although they got Harms removed as trustee and obtained asset information, the trustee did successfully defend against the accounting challenges, and no breach of fiduciary findings were made.  This mixed result allowed recoverable compensation for the work of trustee’s attorneys in reaching a stipulation with respect to beneficiaries’ petition.  Furthermore, trustee was entitled to “fees on fees” in demonstrating fee entitlement before the lower court.  (Estate of Griffith, 97 Cal.App.2d 651, 656 (1950).)

Prevailing Party: Where Defendants Prevailed On Dispositive Motions In Limine And Motion For Judgment On The Pleadings, Dismissal Without Prejudice By Plaintiffs Did Not End The Ability For Any Party To Seek Prevailing Party Fees

Case Involved The Claim That Individual Defendants Were Guarantors Under A Lease.

            In Canales v. Superior Court, Case Nos. B321796 et al. (2d Dist., Div. 4 Nov. 16, 2023) (unpublished), on the day of trial, the lower court indicated tentative decisions to grant the defense motions in limine and its own sua sponte motion for judgment on the pleadings in a case where plaintiff claimed defendants were guarantors under a commercial lease.  Plaintiff then dismissed its complaint without prejudice, a request granted by the lower court and led it to deny attorney’s fees to the defense as the prevailing party.

            The 2/4 DCA reversed on both fronts.  The principal reason was that the trial had commenced so that only a with prejudice dismissal could be entered.  So, that meant who prevailed as far as fee exposure was an open issue which had to be explored on remand.

Fee Clause Interpretation, Prevailing Party: Where Plaintiff Under An Ejectment Claim Obtained Possession Before Voluntarily Dismissing Complaint, Defendants Could Not Be The Prevailing Parties

Interpretation Of The Lease Language Led To That Result. 

            In A & N Industrial Properties, LLC v. Bart & Judy’s Bakery, Inc., Case No. B322730 (2d Dist., Div. 4 Nov. 13, 2023) (unpublished), plaintiff landlord sued a delinquent holdover tenant for breach of contract, common counts, breach of guaranty, and ejectment under a lease with a prevailing party fees clause.  After the complaint was filed, defendant tenant notified landlord that possession of the premises was being tendered back, which inspired landlord to dismiss its suit without prejudice.  Under Santisas (our Leading Case No. 6), no fees were recoverable on the contract claim.  However, tenant argued it was the prevailing party on the noncontractual ejectment claim, and the lower agreed by awarding it attorney’s fees.  The 2/4 DCA reversed as a matter of law because tenant did not prevail since landlord achieved its objective of obtaining possession from tenant.

Lodestar, Prevailing Party: Reversal Of Judgment For Cross-Complainant And Increased Recovery For Plaintiffs Made Plaintiffs The Prevailing Party So A Fee Order Remand Was Necessary

Given Some Reductions For The Cross-Complaint And Other Issues, Fee Award Had To Be Reassessed—Initial Award Was $388,541, A 50% Reduction From The Original Request.

            In Perera v. Moine, Case No. B319315 (2d Dist., Div. 7 Sept. 18, 2023) (unpublished), plaintiffs were the prevailing party in a breach of contract dispute (based on an initial $750,700.16 compensatory award to plaintiffs after some reductions, including a reduction for a $61,000 on the defendant’s cross-complaint), with the lower court awarding $388,541 in attorney’s fees under a contractual fees clause—a 50% reduction from the $788,072 “ask” for excessive hours for a one-week bench trial, unreasonable charges, and duplication by having too many attorneys working on the case.  In a contemporaneous decision, the 2/7 DCA determined that no recovery was allowable on the cross-complaint and more recovery was owed to plaintiffs, which resulted in a remand of the fee award as described below.

            Defendant argued that plaintiffs were not the prevailing parties, but that was not the case.  If anything, they were more so given the contemporaneous opinion which increased plaintiffs’ recovery by more than $300,000.

            Given the reversal, a remand was necessary on the fee recovery.  The appellate court did not express any opinion on whether the original trial judge’s (Judge Terry Green’s) reductions were or were not appropriate.  It did observe that he has retired from the bench such that the fee motion should be adjudicated before a new judge who was urged to make an order indicating the amount of the award under lodestar principles, recognizing that no statement of decision is mandatory in fee proceedings.

            BLOG OBSERVATION—Judge Green (Ret.) is now a neutral with Signature Resolution.

Homeowner Associations, Prevailing Party: HOA’s $139,977 Attorney’s Fees Award, Made After Homeowners Dismissed Their Lawsuit Without Prejudice And Did Not Pursue Arbitration Before The Case Dismissal, Was Properly Granted

“Prevailing Party” Definition Under Davis-Stirling Act Different Than Under Civil Code § 1717.

            In Matus v. Freedom West Homes Corp., Case No. A165736 (1^st Dist., Div. 2 Aug. 21, 2023) (unpublished), a group of homeowner plaintiffs filed a lawsuit against HOA, which was ordered into arbitration.  Plaintiffs dismissed their court case without prejudice 15 months later, with the record reflecting they had not initiated arbitration but were thinking about doing so.  The lower court awarded HOA $139,977 attorney’s fees as the “prevailing party” under the Davis-Stirling Act fee shifting provision, Civil Code § 5975(c). 

            The appellate court affirmed the fee award.  HOA did achieve its litigation goals by obtaining dismissal of the lawsuit, with nothing in the record showing that plaintiffs had commenced an arbitration.  The Court of Appeal acknowledged there is no rigid rule on who is a prevailing party under section 5975(c) when there is a without prejudice dismissal of a lawsuit, with such a determination vested within the discretion of the lower court—no abuse of discretion occurred here given plaintiff’s delay in even attempting to commence arbitration. 

            Plaintiffs, on appeal, tried to argue that Civil Code section 1717 principles applied because there was no final merits adjudication, but the appellate court made three observations in rejecting this argument: (1) section 1717 principles do not apply to the Davis-Stirling Act statutory fee shifting provision (Parrott v. Mooring Townhomes Assn., Inc., 112 Cal.App.4^th 873, 878-880 (2003)); (2) prevailing party fees under section 1717 would not be recoverable under the Santisas case [our Leading Case No. 6], but that is not dispositive of the analysis under statutory fee shifting provisions; and (3) section 1717 case law supported the lower court’s conclusion to award fees (Roberts v. Packard, Packard & Johnson, 217 Cal.App.4^th 822, 829-830, 833 (2013)). 

Prevailing Party: Cross-Complainant Winning More Than Plaintiff Was The Prevailing Party For Fee Recovery Purposes

Cross-Complainant Obtained An $88,130.06 Net Recovery, Such That A Subsequent $90,013 Prevailing Party Fee Determination Was No Abuse Of Discretion.

            In VanLaw Food Products, Inc. v. New England Counry Foods, LLC, Case No. G061375 (4^th Dist., Div. 3 July 6, 2023) (unpublished), plaintiff received $27,441.25 under its complaint, and cross-complaint received $115,571.31 on its cross-complaint, with the lower court determining that the $88,130.06 edge for cross-complainant meant it was the prevailing party under a contractual fees clause.  That resulted in a fee award of $90,013 in cross-complainant’s favor.

            This determination was affirmed in a 3-0 decision by Acting Presiding Justice Bedsworth.  The prevailing party determination was no abuse of discretion under the circumstances.  But we will quote some ending comments from Justice “Beds” which are worthy of consideration by litigants and their attorneys: 

            “There are two questions every litigant must answer before suing or choosing to maintain a lawsuit. The first is whether he or she has a meritorious claim, and the second is whether it is worthwhile to pursue it. That second question will always involve consideration of whether the opponent’s claims are meritorious, and the decision whether to go forward with litigation will require a weighing of the risk such claims might succeed. The answers to those questions may change as the litigation proceeds, and they may very well be impacted by the claims and defenses presented by the other side.

            “Such is the nature of litigation – each side goes to trial believing it has the better claim, and the outcome is left to the trier of fact. Each side takes a risk. Here, NECF’s cross-complaint may have been brought late, and it may have been worth more money. But if the trial court had ruled against NECF on the cross-complaint, and for [Plaintiff] VanLaw on the complaint, NECF would owe VanLaw money. The so-called ‘chilling effect’ VanLaw forecasts is merely the wager each litigant must make. An adversary system will always include such wagers.”

Prevailing Party: Tenant’s Successful Demurrer, Resulting In A Dismissal Of A Case Without Prejudice To Refiling A Future Complaint, Did Not Entitle Tenant To Prevailing Party Fees

An Interim Dismissal Without Prejudice Did Not Dispositively Determine Who Prevailed.

            Tenant, during the COVID-19 pandemic, successfully demurred to a landlord complaint on the basis that the lawsuit was premature given pandemic rules which did not allow the suit to be filed when it was.  The demurrer was sustained without prejudice to filing a later complaint.  Tenant moved for contractual attorney’s fees as the prevailing party, a request denied by the trial court.

            That denial was affirmed on appeal in Ghukassian v. Wolfberg, Case No. E078304 (4^th Dist., Div. 2 May 11, 2023) (unpublished).  Tenant’s problem was that the interim dismissal was without prejudice to refiling a future complaint, nowhere close to a dispositive ruling on the merits.  That meant the prevailing party request was premature.  (City of West Hollywood v. Kihagi, 16 Cal.App.5^th 739, 753 (2017); Estate of Drummond, 149 Cal.App.4^th 46, 49, 51, 53 (2007).)

Costs, Prevailing Party: Party Achieving Partial Success, And Reversal Of Prior Fee Prevailing Party Adverse Against It, Was Not Entitled To Fees On Remand Because Lower Court Properly Determined It Did Not Prevail

The Appellate Win Did Not Allow For Prevailing Party Fees, Because The Ultimate Litigation Outcome Result Was Dispositive—No One Prevailed.

            The next case, Waterwood Enterprises, LLC v. City of Long Beach, Case No. B316269 (2d Dist., Div. 1 Apr. 26, 2023) (unpublished) had a topsy-turvy procedural history, but it at long last has seemed to have reached its end.

            Waterwood won a $45,000 compensatory verdict, after requesting damages of around $235,000, against City of Long Beach.  However, when it came time to consider attorney’s fees, the lower court denied fees to Waterwood and awarded $230,000 in contractual fees to City after considering some settlement offers and other matters which the appellate court in a prior appeal determined to be in error, determining that a remand was in order to see if Waterwood prevailed or if no one prevailed. 

            On remand, Waterwood requested fees of over $348,000 for trial court efforts as well as $81,461 in fees for prevailing on the prior appeal.  The lower court determined that the case was a mixed positive result for Waterwood, denying both lower court and appellate fees.  Those determinations were affirmed on appeal, because the trial judge had considerably discretion to determine no one prevailed under Hsu v. Abbara (Our Leading Case No. 2).  With respect to denial of appellate fees, one cannot segregate appellate wins but has to examine who prevails in the overall matter, with the lower court determining that did not happen.  (Wood v. Santa Monica Escrow Co., 176 Cal.App.4^th 802, 804, 806, 808 (2009).)

            However, Waterwood was entitled to appellate routine costs as the prevailing party, with the lower court clerk erring by failing to enter judgment on that issue after the filing of a timely costs memorandum.  However, no interest was due before entry of judgment because Waterwood never raised the issue before the lower court to get to a judgment before this appeal was decided. 

Prevailing Party: Where Cross-Complaint Was Dismissed Without Prejudice And Subject To A Tolling Agreement, Trial Court Did Not Abuse Its Discretion To Determine There Was No Prevailing Party For A Fee Recovery—As Yet

Costs Prevailing Party Determination Was Not Dispositive As To Fee Prevailing Party Determination.

            Davis v. Philpott Meeks, LP, Case No. B316618 (2d Dist., Div. 7 Apr. 17, 2023) (unpublished) was a situation where plaintiff filed an unlawful detainer complaint, generating various cross-complaints for premises liability and indemnity.  Certain cross-claimants dismissed their cross-complaints without prejudice and subject to a one-year statute of limitations tolling agreement.  One of the cross-complainants sought over $300,000 in attorney’s fees under a management agreement, which fees were denied by the lower court based on the tolling agreement.  The appellate court affirmed.  It rejected the argument that because the prevailing cross-claimant was entitled to routine costs, that party was also the prevailing party for purposes of attorney’s fees.  Given that no judgment was entered against the adverse parties based on the tolling agreement, it was no abuse of discretion for the lower court to determine that there was no prevailing party—as of now!

Arbitration, Prevailing Party: Attorney Fees And Costs Award Of $334,458.41 Affirmed Against Plaintiff Attorney Who Achieved, Under A Confirmed Arbitration Award, A Monetary Recovery Of A Small Bit Of The $3,720 In Fees He Sought From Defendant Client

The Award Was Governed By The Statutory Fee Provisions Provided For By The Mandatory Fee Arbitration Act, Not The Parties’ Contract Fee Provision.

            Under the MFAA (Bus. & Prof. Code, § 6200 et seq.), enacted to eliminate bargaining power disparity between attorneys and clients trying to resolve fee disputes, neither party to a fee arbitration may recover fees or costs incurred in the arbitration proceeding, with exception to the filing fee.  However, under § 6203(c) a party bringing a meritorious petition and obtaining judgment confirming, correcting, or vacating an MFAA arbitration award is a prevailing party and may recover reasonable fees and costs, including fees and costs on appeal.  Additionally, under § 6204(d), reasonable attorney fees and costs may be awarded to the prevailing party in a trial after arbitration.  Under section 6204(d), the party seeking trial after arbitration is the prevailing party if successful in obtaining a judgment more favorable than that provided by the arbitration award.  Otherwise, the other party is the prevailing party.

            In Soni v. Cartograph, Inc., Case No. B316270 (2d Dist., Div. 5 April 5, 2023) (published), plaintiff attorney petitioned for MFAA fee arbitration after defendant client challenged about $3,720 of the fees charged by attorney as being incurred for unauthorized work.  Ultimately, after client agreed not to dispute $380 of the fees, and after applying client’s credit balance from his previous overpayment and after the allocation of arbitration filing fees, attorney received an arbitration award in the net amount of $2.50.

            Afterward, attorney filed an action seeking a trial, and client petitioned to have the arbitration award confirmed.  The trial court denied client’s petition and entered judgment in favor of attorney in the amount of $2,890, plus prejudgment interest, costs, and $79,898 in attorney fees. This was reversed on appeal – with the appellate court concluding in a published opinion that the arbitration award was binding and should have been confirmed because attorney failed to file his action for trial within 30 days after service of the arbitration award. (§ 6204(a)-(c).)

            On remand, both parties sought prevailing party attorney fees – with attorney seeking $543,365 under the fees provision of the parties’ contract based on his net monetary recovery under the arbitration award, and client seeking $339,603 under the fees provision of the parties’ contract and under § 6203(c).  Following a hearing on the competing fees requests, the trial court determined that the MFAA fee provisions at §§ 6203(c) and 6204(d) governed – not the parties’ contract fee provision.  After some deductions for duplicative work, the trial court awarded client $334,458.41 in attorney fees and costs. 

            Attorney appealed, but the 2/5 DCA affirmed – concluding that application of the parties’ contract fee provision was precluded by the policies underlying the MFAA fee provisions to promote the finality of arbitration awards and discourage frivolous additional litigation.

Arbitration, Prevailing Party, Reasonableness Of Fees: Client Who Reversed Post-MFAA De Novo Trial Results And Who Confirmed The Prior Arbitration Award Was The Prevailing Party

Because Client Had To Hire Appellate Attorneys Reversing The De Novo Trial Results, Client Was Awarded $334,458.11 In Fees/Costs—Affirmed By The Appellate Court.

            Soni v. Cartograph, Inc., Case No. B316270 (2d Dist., Div. 5 Mar. 23, 2023) (unpublished) is quite a megillah of an arbitration/litigation odyssey about a client-attorney dispute over fees.  Looks like the odyssey has finally come to a close.

            Although the overall alleged fee delinquency was relatively small, client took attorney through a mandatory fee arbitration proceeding under the Mandatory Fee Arbitration Act (MFAA), resulting in a net award of $2.50 to attorney.  Thirty-three days after service of the arbitration award, attorney filed a civil action against client seeking about $27,500.  Attorney won that litigation, although only obtaining a $2,890 judgment, plus interest as well as fees and costs to be determined.  Attorney requested $281,191.65 in contractual fees, with the lower court awarding $79,898.  However, client appealed the judgment, and it was reversed on appeal because attorney failed to file its action within a 30-day deadline period, reversing a denial of client’s motion to confirm the award. 

            Upon remand, the lower court granted client’s petition to confirm the arbitration award.  Both sides claimed to be prevailing parties, filing dueling fee motions.  The trial judge found that client prevailed, awarding client $328,166.50 in fees under the MFAA, Business and Professions Code sections 6203 and 6204.

            Attorney was miffed, appealing but obtaining no change in result.  Client was the prevailing party under section 6203(c) because client successfully confirmed the arbitration award, notwithstanding the tortured history by which client finally got to this final reckoning.  The appellate panel also rejected the argument that the language of the contractual fees provision governed, because the MFAA controlled over the parties’ contract provision.  Finally, the amount of the award was no abuse of discretion, given appellate expertise was necessary and given client’s attorneys worked half as many hours as attorney’s attorneys.

Costs, Prevailing Party, Private Attorney General, Section 998, Trespass: Prevailing Defendant/Cross-Complainant Obtains Attorney’s Fees Under Trespass Fee Shifting Statute Despite Receiving Nominal Damages And Also Receives Routine Costs

Losing Plaintiff/Cross-Defendant Denied Private Attorney General Fee Request In Opinion With Several Cross-Over Issues. 

            Direct Action Everywhere SF Bay Area etc. v. Diestel Turkey Ranch, Case No. A162702 (1^st Dist., Div. 2 Mar. 1, 2023) (unpublished) is an opinion with many cross-over issues as identified in our main title to this post.

            In this one, plaintiff sued defendant for alleged false advertising and unfair competition violations, with defendant cross-complaining against plaintiff, as a cross-defendant, for trespass, conversion, and unfair competition.  Defendant won on both suits after an 8-day bench trial.  The lower court also determined that defendant was the prevailing party, awarding defendant/cross-complainant routine costs of $68,734.37 minus $4,950 in mediator expenses and $72,848.25 in attorney’s fees under CCP § 1021.9 (the trespass fee-shifting statute).  The lower court denied plaintiff’s request for $1,541,000 in private attorney general fees under CCP § 1021.5. 

            On appeal, the costs and fee rulings were all affirmed.  Plaintiff argued that nominal damages will not support a trespass fees award (citing treatises to that effect), but the appellate court disagreed:  “section 1021.9 does not delineate between the type of damages awarded in a trespass action, but rather states that a party ‘shall be’ entitled to its fees and costs when it prevails in an action for damages to its personal or real property resulting from trespass.”  In this case, the lower court determined that plaintiff trespassed six times resulting in the loss of two turkeys such that tangible damages did occur, awarding $8.00 in damages and a permanent injunction.  That sufficed for 1021.9 purposes:  cross-complainant suffered tangible harm even though cross-complainant failed to adduce proof of the trespass loss.  Plaintiff argued fees were unwarranted because this could have been brought as a small claims or a limited case (citing Chavez, our Leading Case #13), but that argument failed because a case praying for a permanent injunction must be brought as an unlimited matter.  Plaintiff ended by contending that cross-complainant did not beat its CCP § 998 offer, but that lacked merit because cross-complainant’s pre-offer costs well exceeded the offer on the cross-complaint and plaintiff’s 998 offer only offered a temporal permanent injunction versus the unlimited permanent injunction obtained by cross-complainant.

            With respect to plaintiff’s 1021.5 request, that was dispatched because plaintiff was not successful and was no catalyst for any changes.

            On the routine costs side, the lower court’s rulings were correct, reminding litigants and practitioners that court reporter costs are recoverable (even if the transcript costs are not) and deposition costs for witnesses not testifying at trial are allowable in the lower court’s discretion.

Prevailing Party: $78,500 Attorney’s Fees/Costs Award Affirmed Against Non-Prevailing Party Admitting In A Summary Judgment Non-Opposition That Conceded Their Cross-Claims Had No Merit

Admissions In The Summary Judgment Proceeding Were Preclusive.

            The next case, Blue Fountain Pools and Spas, Inc. v. Zauss, Case No. E077923 (4^th Dist., Div. 2 Jan. 30, 2023) (unpublished), cautions litigants that admissions in law and motion non-oppositions can have preclusive results in later fee motions.  In this one, cross-complainants admitted in a summary judgment non-opposition that their cross-claims lacked merit.  Later, the trial judge granted the prevailing cross-defendants $78,500 in contractual fees and costs.  That result “stuck” on appeal because the admissions showed there was a final victory on the cross-claims, not just an “interim win.” 

Prevailing Party: Lower Court Can Look At Success On Phases Of Litigation To Determine If Party Prevailed On Junctures Of The Litigation For Purposes Of Prevailing Party Determination

Prevailing Party Obtained No Fees For Property Rescission Work, But Did Obtain Partial Fees For Compensatory Damages/Offset Phase Of The Case.

            This case, Nosrati v. Gonzalez, Case No. B317588 (2d Dist., Div. 7 Jan. 13, 2023) (unpublished) shows how a trial judge can award a prevailing party in some phases of the litigation “prevailing party” fees even though that party did not prevail in an earlier phase.

            Residential buyers sued sellers for failure to disclose defects in a home they sold to buyers.  Shortly before trial, sellers accepted buyers’ demand for rescission, and buyers won compensatory damages, minus offsets, and prejudgment interest against seller.  Buyers moved for attorney’s fees based on a purchase agreement contractual clause to the tune of $260,412.87.  The lower court awarded them only $88,297.26, with sellers appealing on the basis that buyers should not have been declared the prevailing parties.

            The 2/7 DCA affirmed.  Based on admissions in a legal malpractice action, the lower court properly credited that buyers did not want rescission such that they should not obtain fees for this relief which totaled $178,619.  However, buyers did prevail in the compensatory damages phase, with nothing in the law not allowing the lower court to award reasonable attorney’s fees for prevailing in the second phase of the litigation.  The phased-nature of the case did not prevent “prevailing party” fees in the phase where buyers did accomplish their litigation objectives. 

Prevailing Party, Reasonableness Of Fees, Section 1717: $200,000 Fee Award To Prevailing Defendant Affirmed Because Tort Claims Allowed For Recovery, Post-Dismissal, Under Santisas

Settlement With Other Parties Did Not Impact Analysis Of Fee Reasonableness As To The Prevailing Defendant.

            Carp Property, LLC v. Corona, Case No. B316354 (2d Dist., Div. 6 Nov. 17, 2022) (unpublished) was a situation where plaintiff litigated a matter for two years where there was a contractual fees clause in an operative agreement, suing for over $2.1 million.  Plaintiff settled with some defendants for a total of $90,000 and then dismissed the prevailing defendant after that party rejected a “walkaway” settlement in exchange for a waiver of costs.  Prevailing defendant moved for $228,000 in Civil Code section 1717 fees, but the lower court awarded $200,000 after trimming the request for block billing and for higher-level attorneys performing lower level tasks.

            The appellate court affirmed the fee award.  Plaintiff dismissed both contract and tort claims, but the dismissed tort claims were inextricably intertwined with the contract claims and the broadly worded attorney’s fees provision allowed for tort claim recovery, an exception to the Santisas v. Goodin, 17 Cal.4^th 599, 621 (1998) “general rule” relating to dismissal of contractual claims.  It then found that the $90,000 settlement with some defendants did determine fee reasonableness as far as the work done by the other prevailing defendant here.  The trial court also trimmed about $28,000 from the fee request, such that some of plaintiff’s arguments for a reduction were credited—meaning the fee award was no abuse of discretion and did not shock the conscience. 

Prevailing Party, Special Fee Shifting Statutes: Trial Court’s Determination That There Was No Prevailing Party Under Civ. Code Section 8800 In Prompt Payment Action Affirmed, But Reversal For Same Determination Under Code Civ. Proc., Section 1032

Determination Of Prevailing Party Under Section 8800 Is Left To The Trial Court’s Broad Discretion, But The Trial Court Abused Its Discretion In Determining There Was No Prevailing Party Under Section 1032 Where Plaintiff Was The Only Party With A Net Monetary Recovery.

            Civil Code section 8800 is a prompt payment statute governing progress payments that an owner shall pay the direct contractor.  Section 8800(c) entitles the prevailing party in an action for collection of the amount wrongfully withheld to costs and reasonable attorney’s fees. 

            In Vought Construction Inc. v. Stock, Case No. A164823 (1^st Dist., Div. 4 October 24, 2022) (published), plaintiff sought the balance due for renovations it performed on defendant’s home, an additional amount for a change order, and penalties for Civil Code section 8800 violations (prompt payment statute).  Defendant agreed with the balance due, but disputed the additional amount sought by contractor, and also claimed a liquidated damages offset for delay.  The parties’ contract did not contain an attorney’s fees provision, so the parties relied on the fees/costs recovery allowed pursuant to section 8800.

            Following a four-day bench trial, the trial court found that each party had acted in good faith, and that contractor failed to prove homeowner had violated section 8800.  Additionally, the trial court found that contractor was entitled to roughly half of the additional amount it sought for a change order, and homeowner was entitled to roughly half of the liquidated damages offset he sought.  Based on the trial court’s findings, it also determined that neither party achieved prevailing party status for recovery of fees and costs under either section 8800 or costs under Code Civ. Proc., section 1032.

            Contractor argued on appeal that based on a practical evaluation of the litigation as a whole, the trial court abused its discretion by not finding it to be the prevailing party under section 8800.  The appellate panel disagreed.  Section 8800 does not define prevailing party and, contrary to contractor’s argument, section 1032 does not govern as to the definition of prevailing party.  Rather, determination as to whether a party has achieved prevailing party status under section 8800 is left to the trial court’s broad discretion which is made on a practical level.  Given the outcome in the case – with the trial court’s determination that section 8800 had not been violated as each party had acted in good faith, and with each party achieving roughly one-half of what they sought – the 1/4 DCA found no abuse of discretion with the trial court’s ruling on prevailing party as to section 8800.

            However, the appellate panel disagreed with the trial court’s ruling under section 1032.  Section 1032’s definition of prevailing party includes “the party with a net monetary recovery.”  In this case, contractor was the only party with a net monetary recovery, and was therefore entitled to recover its costs.  The trial court erred in considering homeowner’s setoff claim in determining the prevailing party under section 1032 as the homeowner had no net monetary recovery.   

Interpleader, Prevailing Party: 2/7 DCA Affirms Trial Court’s Denial Of Attorney Fees And Costs Sought Against Interpleading Plaintiff By Defendant Who Obtained Summary Judgment

Defendant In An Interpleader Action Cannot Be The Prevailing Party As To The Interpleader Because There Are No True Adverse Interests, And Claims Of Collusion Between Between Interpleader And Other Defendant Must Be Made During Initial Phase Of Proceeding.

            In Grupo Deco California v. Downs, Case Nos. B305748/B308965 (2d Dist., Div. 7 October 17, 2022) (unpublished), commercial tenant filed a complaint in interpleader against the two separate parties claiming entitlement to the rent payments – the trustee of a revocable trust, and an LLC.  After the trial court ruled in favor of the Trustee, granting her motion for summary judgment, she moved pursuant to the lease agreement and Code Civ. Proc. §§ 1032 and 1033.5 as the prevailing party for attorney fees and costs jointly and severally against the LLC and the interpleader plaintiff/stakeholder. The trial court awarded some fees/costs against the LLC, but ruled that fees/costs were not recoverable against the interpleader – finding that a defendant in an interpleader action cannot be the prevailing party “because there are no true adverse interests”; and because there was no net monetary recovery against interpleader.  Trustee appealed.

            The 2/7 DCA agreed with the trial court’s finding and affirmed – citing its holding in Cantu v. Resolution Trust Corp., 4 Cal.App.4^th 857, 881 (1992) [“An interpleader action is not adversarial as between a claimant and the stakeholder and, hence, Cantu [the claimant] could not prevail against Lincoln [the stakeholder], or vice versa.”]. 

            The panel also found, just as the trial court had, that Trustee was not entitled to fees based on her argument that interpleader had colluded with the LLC.  “[A]n interpleader action may not be maintained ‘“upon the mere pretext or suspicion of double vexation.”’’’ (Placer Foreclosure, Inc. v. Aflalo, 23 Cal.App.5th 1109, 1113(2018); accord, Westamerica Bank v. City of Berkeley, 201 Cal.App.4th 598, 608 (2011) [the interpleader plaintiff “‘must allege facts showing a reasonable probability of double vexation’ [citation] or a ‘valid threat of double vexation’”].)  However, such a challenge or objection is forfeited if it is not made during the initial phase of the proceeding.  Nothing in the record indicated that Trustee ever demurred to the complaint in interpleader or formally challenged interpleader’s right to interplead the rent funds. 

Prevailing Party, Special Fee Shifting Statutes: Denial Of Attorney’s Fees To Requester Who Received Information Under CPRA After Petitioning For Writ Of Mandate Affirmed On Appeal

Requester’s Litigation Was Not The Catalyst For The Disclosure Of The Information Requester Sought Under The CPRA.

            Under the California Public Records Act (CPRA), a trial court “shall award court costs and reasonable attorney’s fees to the requester should the requester prevail in litigation filed pursuant to this section.” (Gov. Code § 6259(d).)  However, determination as to whether the requester prevailed is left to the trial court’s discretion.

            In Austin v. Trustees of the Cal. State University, Case No. D078950 (4^th Dist., Div. 1 October 11, 2022) (unpublished), requester received the crime victim’s name he sought from California State University (San Marcos) after filing a petition for writ of mandate alleging denial of the CPRA request.  However, the trial court denied requester’s motion for attorney’s fees – finding requester’s litigation was not the catalyst for the disclosure of the victim’s name, and that the denial of his CPRA request was the result of requester’s failure to follow the publicly posted process for his request and submitting the request to the wrong department.  Once requester’s CPRA request made its way to the correct department, the information was provided – a result that could have been achieved without litigation.  As a result, the trial court found that requester had not prevailed within the meaning of the CPRA, and was not entitled to recover fees.  The 4/1 DCA found the trial court’s fee order was supported by substantial evidence, which showed that the litigation was not the motivating factor behind the disclosure of the information requester sought, and affirmed.

Costs, Prevailing Party: $2.15 Million Fee Order Affirmed, But $205,480.27 In Not Court-Ordered Electronic Document Hosting Charges, Denied, Were Ordered For Consideration On Remand

Decision Looks Like It Recognizes That The Modern Costs Of ESI Discovery Expenses May Be Compensable In The Lower Court’s Discretion.

            In Russo v. Andrews, Case No. A155999 et al. (1^st Dist., Div. 5 Sept. 28, 2022) (unpublished), defendants beat plaintiff in a contentious LLC operating agreement dispute, with defendants awarded damages and equitable relief on their cross-complaint except for one cause of action.  The fees order and one aspect of a cost award were at issue on appeal.

            The trial judge awarded defendants $2.15 million as prevailing parties.  The appellate court agreed, because the defendants/cross-complainants achieved their primary litigation objectives on capital contributions, dilution, and management ouster issues.

            That took the Court of Appeal to the trial judge’s denial of $205,480.77 in non-court-ordered electronic document hosting charges which were requested by the defense, an issue which had to be remanded.  That cost was neither allowed nor prohibited under the CCP § 1033.5 regime such that the lower court had discretion on the issue.  However, the record showed that the trial judge believed it did not have discretion, so the matter went back.  However, the panel made it clear that electronic hosting charges, even those just voluntarily done without a court order, may be fair game for a costs award.

Prevailing Party: Lower Court’s Determination That Cross-Defendant Did Not Prevail In Lawsuit, Where Cross-Defendant Paid Some Settlement Funds To Plaintiff and Dueling Summary Adjudication/Motions Were Granted, Was No Abuse Of Discretion

Cross-Defendant Did Not Obtain Its Crucial Litigation Objectives.

            Catalina Media Development, LLC v. Thyssenkrupp Elevator Corp., Case Nos. B306012/B309162 (2d Dist., Div. 1 July 20, 2022) (unpublished) demonstrates how a discretionary no “prevailing party” determination is not easily overturned unless it is lopsided in nature.

            In this one, a servicer responsible for elevator maintenance was sued on cross claims by the owner of a building when a personal injury plaintiff allegedly was injured in an elevator incident. The servicer lost a summary adjudication motion on the duty to defend under a contractual indemnification clause vis-à-vis owner, both sides settled with plaintiff (servicer paid $99,000 and owner $11,000), and owner lost a summary judgment by servicer under which servicer had no ultimate liability to owner.  The lower court granted routine costs to servicer and against owner based on the summary judgment on owner’s cross-complaint, but it denied any attorney’s fees to servicer.

            Servicer’s appeal of the “no prevailing party” determination as to fees did not result in any change.  With respect to main litigation objectives, servicer did not achieve them because (1) it did not get its legal defense costs paid; (2) it did not beat back the obligation to pay owner’s defense costs under a duty to defend analysis; and (3) it did have to pay plaintiff some settlement moneys.  The dueling rulings on the summary adjudication/judgment motions was evidence that the parties got mixed results.   

POOF!, Prevailing Party: Court Of Appeal Determines That Defendant Did Not Prevail Such That $454,071.50 Fee And Additional Costs Award To County Went POOF!

This Was A 2-1 Decision; Dissenting Justice Would Have Given Deference To Trial Court’s Reversed Prevailing Party Determination.

            Just to show how prevailing party determinations can be to subject to different interpretations, we now post on Youssef v. County of Los Angeles, Case Nos. B302773/B306187 (2d Dist., Div. 1 July 15, 2022) (unpublished).  The equities clearly figured into the result on appeal.

            What happened here is that plaintiff filed suit against L.A. County for failure to live up to the terms of a wrongful termination settlement agreement, failing to classify his termination as a voluntary resignation in its computer systems.  Along the way, County stipulated that it had not complied and agreed to provide a direct human resource contact to divulge no more than basic information about his former employment with the County.  However, a jury found that plaintiff suffered no damages and County did not breach the settlement agreement by providing information to prospective employers.  The lower court granted $454.071.50 in attorney’s fees to County as the prevailing party and against plaintiff under a settlement agreement fees clause, as well awarding routine costs to County.

            The 2/1 DCA reversed the fees and costs awards as a matter of law, in a 2-1 opinion.  The majority decided that the County’s stipulation effectively granted plaintiff injunctive relief and that County had admitted that it breached the settlement agreement, which occurred years into the litigation.  Although plaintiff failed to obtain damages, he achieved his main goal to require the County to comply with the settlement agreement.  That meant that no party prevailed such that the huge fee award against plaintiff was unjust.  The dissenting justice saw things differently:  plaintiff did not garner damages and the County was vindicated as to prospective employer liability—such results vindicated the lower court’s prevailing party determination even though the majority came to the opposite result.

            BLOG OBSERVATION—The result in this case reminds me of what Retired Judge Tevrizian (now an independent neutral) used to sometimes say about cases where an attorney’s fees award was a matter of discretion, “pocketbook” may mean that fees are not awarded under the right circumstances.  That seemed to be the case here. 

Prevailing Party, Section 1717: Performance Bond Surety Protecting Contractor Was Not The Prevailing Party Under Civil Code Section 1717 Where City Defensed Contractor’s Contract Claims And Surety Held City’s Contractual Recovery To Just $1.00

Lopsided Results May Make One A Prevailing Party, But The Outcome Was Mixed So The Lower Court Had Discretion To Determine No Side Prevailed.

            In the Civil Code section 1717 area, a prevailing party is one which has only “good news” as far as prevailing in litigation.  Anything else, unless a result is overwhelmingly lopsided, means the lower court has discretion to determine what side prevailed or to determine no one prevailed.

            Whether the outcome was “lopsided” was the prime issue considered on appeal in City of Los Angeles Dept. of Airports v. U.S. Specialty Ins. Co., Case No. A162183 (1^st Dist., Div. 5 June 15, 2022) (published). 

            What happened is that contractor basically claimed that L.A. city was at fault in breaching a contract with contractor (although performance bond surety was protecting contractor’s interest as it had to under the performance bond).  In turn, city claimed contractor was at fault and independently sought $3.4 million in damages under its own contract claim against contractor.  At the end of the day, contractor lost its claims, and city won its contract claim to the nominal tune of $1.00.  After a prior appeal determined that a contractual provision was a real fees clause rather than an indemnity provision, both sides moved for fees.  The lower court denied both requests, determining the outcome was mixed so that no one prevailed.

            Surety appealed the fee denial, but that determination was affirmed on appeal by the 1/5 DCA.  Keeping in mind that contractor and performance bond surety were “lockstep” in the litigation, no abuse of discretion was committed by the lower court.  After all, contractor lost its claims while city vindicated that it was not at fault as well as won on its contract claim, albeit only gaining a $1 pyrrhic victory.   Even though surety did beat back the $3.4 million damages claim by city, surety did not vindicate contractor’s claims.  The results were mixed; this specific case was not “lopsided” under the circumstances to dictate a legal determination that surety prevailed for section 1717 purposes. 

            We will note that the lower court did a good job of defining surety’s litigation objectives so that the appellate court had a nice compass to use when deciding the case.  This counsels litigation practitioners to develop a good record and aid the lower court in articulating the litigation objectives when a prevailing party contest is at issue—this will provide a “road map” for jurists considering the issue at all levels of judicial scrutiny.

Prevailing Party, Section 1717: 2/4 DCA Affirms Trial Court’s Denial Of $216,610 In Section 1717 Attorneys’ Fees To Prevailing Defendant Who Entered Into A Contract With Plaintiff That Contained An Attorneys’ Fees Clause

There Was No Basis For Section 1717 Attorneys’ Fees Because Plaintiff’s Action Was Not On The Contract, And Defendant Failed To Apportion Fees For Its Successful Cross-Complaint On The Contract.

            Plaintiff retained defendant law firm to defend him in a legal malpractice lawsuit, and the parties entered into a retainer agreement which contained an attorneys’ fees clause. Plaintiff subsequently sued defendant for professional negligence, breach of contract, and breach of fiduciary duty, and defendant counter-sued for breach of contract.  Following a bench trial, judgment was entered in favor of defendant, but the trial court denied defendant’s motion for $216,610 in attorneys’ fees it sought pursuant to Civ. Code section 1717 for fees it incurred in defending against plaintiff’s claims.  Defendant appealed in Rosen v. Century Law Group, Case No. B309991 (2d Dist., Div. 4 May 16, 2022) (unpublished).

            Agreeing with the trial court’s conclusion that the “gravamen of the case was the underlying legal malpractice claim,” and citing Loube v. Loube, 64 Cal.App.4^th 421 (1998), the 2/4 DCA affirmed. The fees clause in the parties’ retainer agreement was narrowly drawn and mirrored the language of section 1717, but plaintiff’s action was not on the contract.  In fact, plaintiff’s breach of contract claim was entirely premised on the malpractice claim – alleging that the breach of contract was defendant’s failure to provide plaintiff with competent legal services.  Defendant’s contention that it was entitled to prevailing party fees on its successful cross-complaint for breach of contract also failed because defendant did not provide the trial court with evidence allowing it to apportion fees for defendant’s cross-complaint.

Experts, Prevailing Party, Section 998: Attorneys’ Fees Totaling Over $3.7 Million Plus Costs Totaling $367,192.84 Awarded To Two Prevailing Party Defendants Affirmed On Appeal.

Costs Award To One Defendant Included $209,886.89 In Expert Witness Fees Because Plaintiff Had Rejected And Failed To Beat That Defendant’s Section 998 Offer Of $50,000 Plus Waiver Of Fees And Costs.

            This next case provides a cautionary tale about the importance of giving careful consideration to reasonable section 998 offers – especially when they include a waiver of fees and costs. In SwiftAir v. Row, Case No. B306166 (2d Dist., Div. 7 May 12, 2022) (unpublished), Southwest Airlines and Row 44, the company that operated Southwest’s inflight WiFi service, defeated plaintiff’s lawsuit against them over Southwest’s decision not to license plaintiff’s software platform. Afterward, defendants each sought prevailing party attorneys’ fees and costs pursuant to the fees provisions in their contracts with plaintiff.  Southwest also claimed entitlement to fees and costs under Code Civ. Proc., § 998 because plaintiff had rejected and failed to beat Southwest’s section 998 offer of $50,000 and a waiver of fees and costs. The trial court concluded defendants were the prevailing parties and granted their motions – awarding Southwest $1,501,988.80 in attorneys’ fees and $309,362.40 in costs, which included $209,886.89 in expert fees that plaintiff unsuccessfully moved to strike, and awarded Row $2,216,117.50 in attorneys’ fees and $57,830.44 in costs.

            Plaintiff appealed – arguing that the trial court erred in its prevailing party determination because the trial court’s orders on defendants’ motion for summary adjudication and on plaintiff’s motions for judgment notwithstanding the verdict and for new trial were made in error.  This argument went nowhere because the 2/7 DCA concluded that the trial court did not err in its MSA, JNOV and new trial orders – leaving only plaintiff’s argument that the trial court erred by awarding Southwest $209,886.89 in expert witness fees because Southwest’s section 998 offer was unreasonable, and the experts were not ordered by the trial court. The 2/7 DCA found no merit to this argument.  First, section 998 (c)(1) provides an exception to the general rule that fees for experts not ordered by the trial court are not recoverable as costs. Second, although only settlement offers made in good faith – those that are reasonable under the circumstances of the case and sufficiently specific – are effective under section 998, the judgment of no liability against Southwest and its entitlement to prevailing party fees and costs was prima facie evidence that the offer, which was not a token or nominal offer, was reasonable.  (See Covert v. FCA USA, LLC, 73 Cal.App.5th 821, 832-833 (2022).) 

Prevailing Party: Sixth District Affirms $320,100 In Attorneys’ Fee Awarded Pursuant To Contractual Attorney Fee Provisions To Successors In Interest Defendants Prevailing Against Action Sounding In Tort And Contract

As They Were Entitled, Under Code Of Civil Procedure Section 1021, Original Parties To The Contract Entered Into A Fee Arrangement Obligating Payment Of Fees To The Prevailing Party Whether The Underlying Litigation Sounded In Tort Or Contract.

            In Cook v. Trebino, Case Nos. H047830/H048498 (6^th Dist., May 10, 2022) (unpublished), two sisters each received a 50 percent ownership in a property that had been in their family since the late 1800’s.  Over the years, for her alleged share of property expenses, one sister signed various promissory notes and a deed of trust to the other sister and her husband.  Eventually, sister signed a grant deed conveying her interest to the other sister’s and her husband’s living trust in exchange for $70,000 plus cancelation of her debt to them.  After sister and husband passed, the successors to their interest in the property notified other sister’s children that they now owned the property.  Sister’s children sued – alleging numerous causes of action, including quiet title, undue influence, and fraud.  Following a bench trial, the trial court found in favor of defendants on their statute of limitations affirmative defense.  Following entry of judgment, defendants successfully moved for an award of various costs and attorney fees pursuant to provisions in the promissory notes and deed of trust. The award included $320,100 in attorneys’ fees which plaintiffs appealed.

            On appeal, plaintiffs raised numerous challenges to the fees award, but each failed – with the Sixth District determining that the sisters were entitled, under Code of Civ. Proc. section 1021, to enter into a fee arrangement that obligated payment of fees to the prevailing party – whether the underlying litigation sounded in tort or contract.  Here, defendants were the prevailing party and had two contractual bases for the fees award.  First, defendants’ defense fell within the terms of the promissory notes’ fee provision as plaintiffs sought to rescind the grant deed and unwind the transaction by challenging the validity of the promissory notes.  Second, the broad fee provision of the deed of trust was also applicable because the underlying dispute required defendants to appear and enforce their rights under the deed of trust.  Contrary to plaintiffs’ argument, defendants’ entitlement to fees under the contractual fees provisions did not depend on whether the notes and deed were litigated on the merits.  Rather, entitlement was based on the prevailing party determination. (Mepco Services, Inc. v. Saddleback Valley Unified School Dist., 189 Cal.App.4th 1027, 1047 (2010); and Maynard v. BTI Group, Inc., 216 Cal.App.4th 984, 990 (2013).) 

            As for plaintiffs’ argument that defendants were excluded from collecting fees under the fees provisions because they were not parties to the notes or deed, the Sixth District found there was no meaningful dispute.  The fees provisions did not contain language that indicated an intent to exclude successors in interest from the scope of the fees provisions.   Finally, substantial evidence supported the trial court’s finding that sister’s estate and living trust were responsible parties under the fees provisions as sister had transferred her interest in the property into her revocable living trust, had then transferred in her capacity as trustee of her living trust that interest to her sister and sister’s husband , and because two of the plaintiffs had initiated the action as trustees of the sister’s trust and remained parties to the conclusion of the action. 

Prevailing Party, Reasonableness of Fees, Section 1717: Section 1717 Fees Award Of About $40,000 Affirmed For Plaintiff Who Had Fraud Claim Dismissed By Trial Court And Received Only A Portion Of Requested Damages After Bench Trial

A One-Sided Fees Provision Entitled Plaintiff To Reciprocal Prevailing Party Fees Under Section 1717, And A Trial Court’s Determination As To Reasonableness Of Fees Will Not Be Disturbed Absent A Showing That The Trial Court Is Clearly Wrong.

            In Hernandez v. Thottam, Case No. B306547 (2d Dist., Div. 4 May 10, 2022) (unpublished), plaintiff leased a unit that was without power due to a recent fire, but vacated the unit several months into the lease and sued her commercial landlord for fraud and breach of contract based on his failure to restore power to the unit.  Plaintiff was awarded $13,200 in damages following a one-day bench trial.  Additionally, the trial court concluded plaintiff was the prevailing party and awarded her about $40,000 in attorney fees– out of her request for approximately $55,000 – under Civil Code § 1717 after construing the lease against the landlord (who was an inactive attorney) as the drafting party, and concluding that the lease would have entitled landlord to attorney fees.

            Landlord appealed – claiming that the lease precluded attorney fees, that plaintiff could not be deemed a prevailing party because the trial court had denied her motion for summary judgment and had dismissed her claim for fraud, and alternatively, that the amount awarded was excessive. 

            The 2/4 DCA affirmed – finding the attorney fees award “well within the court’s discretion.”  First, the lease contained conflicting fees provisions – one stating each side was responsible for its own attorney fees, and the other requiring that plaintiff pay landlord “costs, damages, and expenses (including any and all reasonable attorney fees and expenses incurred by the [landlord]) suffered by [landlord] by reason of [plaintiff’s] defaults.”  These conflicting provisions were properly construed against the drafting party, and the one-sided fees provision provided plaintiff with a reciprocal right to fees under Civil Code § 1717.  Second, a party’s failure to obtain summary judgment is irrelevant to prevailing party status, as is a party’s success or failure on non-contract claims – with prevailing party status based on comparison of the relief awarded on the contract claims.  Finally, as to the reasonableness of the fees, each of landlord’s challenges failed because there is no requirement that each motion or opposition has to be successful to be compensable, trial courts have discretion to award fees based on declarations of counsel without the inclusion of contemporaneous invoices, and the trial court exercised its discretion to reduce the hours worked by plaintiff’s attorneys and nothing in the record suggested it made the reductions arbitrarily or without examination of the time billed.  The trial judge is in the best position to determine the reasonableness of the fees requested for services provided in his/her court, and unless an appellate court is convinced that the trial court is clearly wrong in determining the reasonableness of the claimed fees, for which the trial court has broad discretion, the trial court’s determination will not be disturbed.  (Building a Better Redondo, Inc. v. City of Redondo Beach, 203 Cal.App.4th 852, 870-873 (2012).)

Costs, Prevailing Party, Section 1717, Section 998: Fifth District Deals With Various Prevailing Party Issues For Costs And Fees Award To Litigants Who Both Claimed To Have Prevailed

Plaintiff Winning Some Money Entitled To Routine Costs, But Defense Entitled To Prevailing Party Fees And Some Other Routine Costs Relating To Fee And Expert Witness Work, Some Other CCP § 998.

            Mike Murphy’s Enterprises, Inc. v. Fineline Industries, Inc., Case No. F080503 (5^th Dist. Apr. 13, 2022) (unpublished) is a good opinion to show the logical analysis of determining routine costs and fees awards where there is a mixed result and a CCP § 998 offer is involved.  Here is what the appellate court developed as the analytical framework:  (1) a court determines the prevailing party for a purpose of routine costs under CCP § 1032, with the prevailing party for 1032 purposes obtaining at least its preoffer costs; (2) if a party qualifies as a prevailing party under § 1032, the court turns to whether the prevailing party’s net monetary recovery exceeds any qualifying but rejected § 998 offer (which entails taking the amount awarded and adding preoffer interest and any properly requested costs), with costs including attorney’s fees if allowed by statute or contract); (3) in conjunction with the 998 analysis, the court must determine if the plaintiff is the prevailing party under section 1717 such that those preoffer fees may be included in the 998 net recovery analysis; (4) the court then considers the contractual provisions, the effect of section 1717 on the fees provisions, and finally the effect of the rejected 998 settlement offer such that if the net recovery is greater, the plaintiff is the prevailing party for the whole case or if the net recovery is lower, defendant will be treated as the prevailing party at all times after the settlement was made.

            In the actual case, plaintiff lost many of his contractual theories to defendant, but did win about $63,000 on his contractual claim.  Earlier in the case, defendant sent a 998 offer for $85,000 which was not accepted.  Eventually, the lower court determined defendant was the prevailing party for both fees and costs, especially under 998, awarding it about $564,300 in fees, costs, and expert witness fees—when offset against the $63,000 award to plaintiff, defendant had a favorable judgment of $501,284.95.  Plaintiff appealed.

            The Fifth District affirmed most of the trial judge’s awards, except for a routine costs award denial to plaintiff and except for taxing some of defendant’s routine costs a little.  Plaintiff was the prevailing 1032 party because it did receive positive money, such that it was entitled to its preoffer costs.  However, the trial judge was correct in determining that plaintiff properly excluded preoffer fees because he did determine that defendant was the prevailing party on the contract under section 1717, not plaintiff, in a mixed-results case—meaning that plaintiff did not have the net recovery for purposes of preoffer fees or postoffer costs.  Then, because defendant was entitled to fees and costs as prevailing party under both sections 1717 and CCP § 998, the appellate court only disagreed with the trial judge in minor respects, finding these costs were not recoverable: (1) past discovery sanctions; (2) filing costs in a separate federal action (which cannot be deemed costs awarded to a prevailing state court party); and (3) some County of Tulare production fees.  It did find that items such as CourtCall expenses and pro hac vice costs were proper.  In the end, it remanded to award plaintiff preoffer costs and to strike some defense costs items, but otherwise enter judgment pretty close to what occurred before the trial judge.

Prevailing Party, Section 1717: Despite Some Partial Appellate Issue Reversals, Plaintiff Water Authority Prevailed Under A Contractual Fees Clause So As To Be Entitled To Fees And Costs For Achieving Litigation Success On Important Water Rate Issues

Prevailing On “Water Rates Not Set Pursuant To Law” Issue Drove The Conclusion.

            Without going into a detailed discussion of the prolonged dispute between the parties, San Diego County Water Authority v. Metropolitan Water Dist. of Southern California, Case No. A162168 (1^st Dist., Div. 3 Mar. 17, 2022) (unpublished) shows that a “prevailing party” determination under Civil Code section 1717 focuses on the importance of litigation objectives rather than some collateral losses along the way.

            Briefly put, plaintiff won an initial judgment that defendant’s water rates charged under an exchange agreement, which had a contractual fees clause, were legally noncompliant and awarded a $234 million judgment to plaintiff.  The lower court then awarded about $9 million in contractual attorney’s fees to plaintiff, but only for phase one work of a two-phased trial.  In a prior appeal, the appellate court reversed some issue findings on the water rates, but it did affirm that the rates were noncompliant in certain areas.  It also determined that contractual fees should be awarded for both phases of the trial.  On remand, plaintiff obtained a $44 million judgment on the contract plus ancillary declaratory relief as to rate noncompliance.  Because the judgment benefited plaintiff, its ratepayers, and others in the defendant’s service area, the lower court determined plaintiff was the prevailing party for fees and costs.  (The amount of the fees award is not described, but the requested costs were $326,918.34—so the fee award had to be substantial.)

            The 1/3 DCA affirmed the fees and costs awards.  The water rate adjudication did fall within the exchange agreement such that contractual fee entitlement was clear.  Plaintiff did prevail based on winning some important water rate challenges benefiting both themselves and others.  Costs were properly awarded because they are expressly allowed under section 1717, such that no separate routine costs analysis under CCP § 1032 needed to be engaged in. 

Prevailing Party, Section 1717: Attorneys’ Fees Award To Prevailing Plaintiff Upheld On Appeal Despite Invalidation Of Contract Between The Parties Due To Defendants’ Fraud.

Plaintiff’s Action Was “On The Contract” For Purposes Of Civ. Code § 1717, And Fees Provision In Parties’ Contract Was So Broad That It Allowed Award Of Fees To Prevailing Party Whether Action Was Based In Tort Or In Contract.

            In Song v. Creative Global Investment, Case Nos. B299422/B301697/B304884 (2d Dist., Div. 2 February 4, 2022) (unpublished), a breach of contract dispute between co-investors in two Coffee Bean and Tea Leaf franchises proceeded to a de novo bench trial after the trial court ordered the arbitration award vacated based on clarification/completeness issues.  The bench trial resulted in a $900,000 damages award to plaintiff, plus $3 million in punitive damages.  Additionally, the trial court determined plaintiff was the prevailing party and awarded him $86,583 in attorneys’ fees based on the attorney fees provision in the parties’ operating agreements.

            As to the fee award, Defendants argued on appeal that it was improper because the trial court’s findings of defendants’ fraud rendered the operating agreements invalid and therefore incapable of being breached. According to defendants, plaintiff could not be the prevailing party since the operating agreements could not be breached.  The 2/2 DCA rejected this argument – finding the fees award was supported.  First, the panel concluded plaintiff’s action was “on the contract” for purposes of Civ. Code § 1717.  Second, the panel found that the fees provision in the parties’ operating agreements was so broadly worded that it allowed for the award of attorney fees to the prevailing party in “any dispute” between the parties that resulted in arbitration or litigation – whether that arbitration or litigation was based in tort or in contract. (See Gil v. Mansano, 121 Cal.App.4th 739, 743 (2004).)

Prevailing Party, SLAPP: 4/3 DCA Affirms Trial Court’s Determination That Cross-Defendants Achieving Partial Success On SLAPP Motion Were Prevailing Parties And Entitled To Attorney Fees.

Determination Of Prevailing Party Status In SLAPP Motion Lies Within The Broad Discretion Of The Trial Court, And Will Not Be Overturned Absent A Showing Of Abuse Of That Discretion.

            In Harris v. Powerdrive Oil and Gas Company, Case No. G059623 (4^th Dist., Div. 3 February 4, 2022) (unpublished), the trial court partially granted cross-defendants’ special motion to strike (Code Civ. Proc., § 425.16, the anti-SLAPP statute), then awarded cross-defendants $2,335 in attorney fees and costs.

            Cross-complainants appealed – arguing that cross-defendants’ partial SLAPP victory did not warrant the award of attorney fees because cross-defendants were not the prevailing party as the results of their SLAPP motion was insignificant and did not result in a practical benefit.  This, cross-defendants claimed, was an exception to the mandatory fee recovery in a SLAPP motion.  To support their argument, cross-complainants’ cited Richmond Compassionate Care Collective v. 7 Stars Holistic Foundation, 33 Cal.App.5th 38, 45 (2019) [discussed in our March 18, 2019 post], and Mann v. Quality Old Time Serv., Inc., 139 Cal.App.4th 328 (2006). However, as the 4/3 DCA explained – in a 3-0 opinion authored by Acting Presiding Justice Moore – when quoting from the two cases, cross-complainants failed to include the language about the trial court’s discretion.  Determination as to prevailing party in a SLAPP motion lies within the “‘broad discretion’” of the trial court, and a decision based on the trial court’s broad discretion will not be overturned absent a showing by the challenging party that the trial court abused its discretion. (Mann v. Quality Old Time Serv., Inc., 139 Cal.App.4th  at pp. 340-341.)  Cross-complainants provided no evidence of abuse of discretion, and the panel affirmed.

Prevailing Party, Section 1717: Where Defendant Obtained Injunctive Relief Against Plaintiff In Nonsolicitation Restriction Litigation, Section 1717 Fees And Costs Were Justified

$596,114 In Fees And $84,125 In Costs Affirmed On Appeal.

            In Blue Mountain Enterprises, LLC v. Owen, Case Nos. A157054/A158783 (1^st Dist., Div. 1 Jan. 28, 2022) (published), plaintiff obtained a TRO, preliminary injunction, and permanent injunction in hard-fought litigation against a defendant who transferred his ownership interest in real estate/construction related business to plaintiff, but was found to have breached nonsolicitation restrictions in two agreements (one of which had a fees clause) by establishing a competing construction services company after being terminated as an employee by plaintiff.  The trial judge awarded prevailing party fees to plaintiff, under the contractual fees clause, in the amount of $596,114 as well as costs of $84,125.  The defense appeal was unsuccessful.

            Plaintiff did achieve one of its primary litigation objectives by obtaining injunctive relief against defendant, even though no monetary relief was obtained.  Defendant ran up fees after the grant of the preliminary injunction, so plaintiff had no choice but to litigate through the permanent injunction stage.  With respect to the amount of fees awarded, the trial judge looked at every single billing entry to make sure an award was justified and did make a major “haircut” from the requested fees.

            BLOG HAT TIP—Co-contributor Mike notes that the successful attorneys on appeal were Joshua R. Mandell and Haley C. Greenberg of Akerman.  Mike has had the opportunity to litigate against and work with Mr. Mandell, who is a consummate professional (along with Ms. Greenberg).  Also, the appellate court did rely on Strategix, Ltd. v. Infocrossing West, Inc., 142 Cal.App.4^th 1068 (2006), a nonsolicitation decision in which co-contributor Mike was lead counsel on appeal, in coming to its result on the merits.  Good job, Josh and Haley! 

Prevailing Party, Section 1717, Section 998: 1/4 DCA Reverses Trial Court’s Denial Of Section 998 Fees To Defendant Who Entered Handwritten Agreement To Transfer Real Property Valued At More Than His 998 Offer.

Plaintiffs Voluntarily Dismissed Action Without Terms Of Handwritten Agreement Being Met And Property Was Never Transferred.

            In Debenedetti v. Debenedetti, Case No. A162074 (1^st Dist., Div. 4 January 24, 2022) (unpublished), plaintiff brothers, who were successor co-trustees of their father’s trust, filed an action against their brother for breach of a promissory note securing a $157,000 loan the trust had made to him. Defendant made a Code of Civil Procedure § 998 offer to settle the action for $99,500 – inclusive of all fees, costs and interest – but the parties ended up signing a handwritten agreement several days later.  The handwritten agreement provided that the action would be settled with the transfer from defendant to the trust of real property valued at more than $157,000.  Transfer of the property was contingent upon a satisfactory inspection of the property to take place within 45 days, and the handwritten agreement was to be replaced with a formal written agreement incorporating the same terms within 10 days. One year later, plaintiffs responded to the trial court’s order to show cause, re dismissal of the action, with a request for voluntary dismissal without prejudice – which the trial court granted. 

            Afterward, plaintiffs and defendant filed competing costs memorandums and motions to tax.  Additionally, defendant sought attorney fees as the prevailing party under section 998 as plaintiffs had recovered nothing because no formal written agreement was ever signed, the inspection never happened, and the property was never transferred. Additionally, defendant sought reimbursement of fees under Civil Code § 1717 based on the attorney-fee provision of the underlying promissory note.  However, based on the handwritten agreement, the trial court awarded no costs and denied defendant’s motion for fees. 

            Defendant appealed the fees denial – arguing he was entitled to fees under both section 1717 and section 998. The 1/4 DCA disagreed with defendant’s section 1717 argument – finding his claim barred under subdivision (b)(2), which states, “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”  However, defendant’s section 998 argument resulted in a reversal and remand for determination of the amount and reasonableness of fees defendant incurred post-998 offer. Because plaintiffs did not accept defendant’s section 998 offer and failed to obtain a more favorable judgment – with no formal settlement agreement ever signed and the property never transferred – defendant was entitled to recovery of costs from the time of the offer.  Citing Mon Chong Loong Trading Corp. v Superior Court, 218 Cal.App.4th 87, 93-94 (2013), the panel found defendant’s entitlement to fees was triggered when plaintiffs voluntarily dismissed the action, and irrespective of prevailing party findings under section 1717 where the dismissed action is on a contract that provides for attorney fees. (Scott Co. v Blount, Inc., 20 Cal.4th 1103, 1114 (1999) [“Under section 998, the defendant’s entitlement to costs derives not from its status as a prevailing party but from the plaintiff’s failure to accept a reasonable settlement offer.”].)