CALIFORNIA ATTORNEY'S FEES

Quashing/Lack of Jurisdiction: 2/2 DCA Decides That Parties Quashing Service In California Case Based On Florida Forum Selection Clause Not Entitled To Contractual Fees

 

We Now Have A Firm Split—2/2 And 6^th DCAs Are At Odds With 4/3 DCA In This Area.

    Fault line.  Aerial view of the San Andreas Fault.  Carol M. Highsmith, photographer.  2013.  Library of Congress.

     DisputeSuite.com, LLC v. Scoreinc.com, Case No. B248694 (2d Dist., Div. 2 April 14, 2015) (published) may be destined for California Supreme Court review, because we read it as a concrete split of opinion by different intermediate courts of appeal.

     What happened here is that defendants obtained a dismissal of a California case pursuant to a Florida forum-selection clause based on a motion to quash service. They then moved for contractual attorney’s fees based on a fees clause (to the tune of $84,640), only to be rebuffed by the trial judge.

     The 2/2 DCA affirmed the fee denial order. The key issue for the appellate panel was whether a final resolution of the contractual claims was reached under Civil Code section 1717. Following the Sixth District decision in Estate of Drummond, 149 Cal.App.4^th 46, 51 (2007), the DisputeSuite.com panel agreed only an interim victory was obtained until the merits were resolved in Florida. Although not coming out and expressly saying, the court disagreed with the contrary analysis of the Fourth District, Division 3 in Profit Concepts Management, Inc. v. Griffith, 162 Cal.App.4^th 950, 956 (2008) [see our May 11, 2008 post] and PNEC Corp. v. Meyer, 190 Cal.App.4^th 66, 73 (2010) [see our November 18, 2010 post]—finding a relocation of an active contract dispute from one forum to another was not the equivalent of a final resolution of the contract claims such that a fee recovery was premature.

Section 1717 And Prevailing Party: Fourth District, Division 3 Extends Profit Concepts Holding to Forum Non Conveniens Dismissal

Personal Jurisdiction Quash Grounds Not Seen Different From Forum Dismissal.

     I guess we can wax nostalgic, but why or why not? The great thing about our blog is we report on continuing jurisprudence which, like a river, continues on and on each day.

     In our first post going back to May 11, 2008, we reported on Profit Concepts Management, Inc. v. Griffith, 162 Cal.App.4th 950 (2008), a Fourth District, Division 3 opinion authored by Justice Fybel. Profit Concepts, which has been frequently cited, held that a defendant who successfully moved to quash service for lack of personal jurisdiction (IPJ) was a prevailing party under Civil Code section 1717 for fee recovery if there was a relevant fee clause allowing for such recovery. Well, what happens if a similarly-situated defendant wins, but on forum non conveniens (FNC) grounds? Same result. Stay tuned.

     Yes, according to the Fourth District, Division 3 in PNEC Corp. v. Meyer, Case No. G042297 (4th Dist., Div. 3 Nov. 17, 2010) (certified for publication), in a 3-0 decision authored by Justice Ikola. The result was that the defendant gained fee recovery of $21,677.25, pretty close to the full amount requested.

     Justice Ikola found no real reason to differentiate between dismissals based on IPJ versus NFC. After all, it was consonant with other California authorities awarding attorney’s fees where the court did not reach a final, on-the-merits ruling on a contract claim. (Slip Opn., p. 7.) In fact, the appellate court disagreed with Estate of Drummond, 149 Cal.App.4th 46, 53-54 (2007) to extent it disagreed with Profit Concepts. Even further, it also disagreed with some federal cases critical of Profit Concepts, finding that “Profit Concepts [is] persuasive and [we] opt to follow it.” (Slip Opn., p. 9.)

CCP Section 998: Making A 998 Offer After Filing A Motion To Quash For Lack of Jurisdiction Does Not Constitute A “General Appearance”

Fourth District, Division 1 Construes the Type of “Acts” Which Will Waive Jurisdictional Challenges.

     For our purposes, the Fourth District, Division 1 has decided that Italian defendants’ making of a pretrial offer under Code of Civil Procedure section 998 does not waive motion to quash jurisdictional challenges, if the 998 offer was made after the filing of a motion to quash.  The opinion so deciding is Air Machine Com SRL v. Superior Court (Sukumar), Case No. D054878 (4^th Dist., Div. 1 July 2, 2010) (certified for publication).

     However, we think this decision is must reading in the general/special appearance substantive arena. This may expand the conduct – defensive or otherwise – that will not expose a defendant to waiver principles while challenging service on jurisdictional grounds.

Supplemental Jurisdiction Dismissal: Attorney’s Fees Not Allowable Because Dismissed Claims Could Be Refiled And No Alteration In Legal Relationship Between The Parties

 

Ninth Circuit Refrains from Deciding One Issue, Finds No Fee Entitlement After Without Prejudice Dismissal, and Cites Federal Case That May Vary From California State Law on an Inconvenient Forum Dismissal.

     Avery v. First Resolution Management Corp., Case No. 07-35726 (9^th Cir. Apr. 2, 2009) (for publication) presented several thorny issues on whether fee entitlement to a counter-defendant followed in the aftermath of a district court’s decision to dismiss a defendant’s state law-based counterclaim without prejudice (based on failure to exercise supplemental jurisdiction). The Ninth Circuit decided “no entitlement.”

Trial Court Retains Jurisdiction To Award Attorney's Fees to Prevailing Defendant After Granting A Motion To Quash Based Upon Lack of Personal Jurisdiction

Sixth District Affirms Grant of $34,492 in Attorney's Fees.

            Our first post was on May 11, 2008, surveying Profit Concepts Mgt., Inc. v. Griffith, 162 Cal.App.4^th 950, 955-956 (2008).  In that case, Justice Fybel of our local Santa Ana-based Court of Appeal affirmed an award of attorney's fees to a defendant who successfully moved to quash service for lack of personal jurisdiction.  Now, we can report that the Sixth District backed that result, squarely deciding that the trial court has jurisdiction to award fees in such a situation.

            In Shisler v. Sanfer Sports Cars. Inc., Case No. H032027 (6^th Dist. Sept. 25, 2008) (certified for publication) (Shisler II), the Sixth District held that a trial court still has power to rule upon a collateral motion for attorney's fees after granting a motion to quash for lack of personal jurisdiction.  The Sixth District did note that the same result was reached in Profit Concepts, even though the jurisdictional issue was not explicitly considered.  The appellate panel found support in Frank Annino & Sons Constr., Inc. v. McArthur Restaurant, Inc., 215 Cal.App.3d 353, 357 (1989) and Berard Construction Co. v. Municipal Court, 49 Cal.App.3d 710, 715-716 (1975), even though distinguishing Berard in one major respect—a distinction of Berard also noted previously by Justice Fybel in Profit Concepts.

            With the jurisdictional issue resolved, the appeal centered upon whether there was a statutory basis for awarding fees to defendant.  There were two potential bases:  California's Consumer Legal Remedies Act (CLRA), Civ. Code, § 1750 et seq., or the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Fla. Stat. § 501.201.  Here is how those inquiries panned out:

·       CLRA – No.  Civil Code section 1780(d) only allows a fees award to a prevailing defendant upon a showing of subjective bad faith (Corbett v. Hayward Dodge, Inc., 119 Cal.App.4^th 915, 924 (2004)), which was precluded because the trial court found there was no subjective bad faith.  (BLOG CROSS-OVER—We previously explored a similar result reached by Justice Ikola, on behalf of the Fourth District, Division Three, in the unpublished decision of Olson v. Irvine Imports, discussed in our September 25, 2008 post.)

·       FDUTPA – Yes.  Because the motion to quash ruling was tantamount to a final judgment and the appellate process had been exhausted by plaintiff in unsuccessfully challenging the result in Shisler I, the Florida fee-shifting provision in FDUTPA was sufficiently broad to allow defendant entitlement to fees.  Because plaintiff's lawsuit indicated that Florida law governed, the FDUTPA provisions were substantive in nature so as to be a predicate for a fee award. (Cf.  Miller v. Union Pac. R.R. Co., 147 Cal.App.4^th 451, 458 (2007).) 

So, in the end, defendant's fee award was affirmed. 

Quash Service for Lack of Jurisdiction, Win Attorney's Fees

FOURTH DISTRICT, DIVISION THREE COURT OF APPEAL DETERMINES

THAT CONTRACTUAL ATTORNEYS FEES AWARDABLE UPON A FAVORABLE MOTION TO QUASH A CALIFORNIA ACTION.

            On May 5, 2008, the Fourth District, Division Three Court of Appeal decided in Profit Concepts Management, Inc. v. Griffith, Case No. G039077 that an Oklahoma ex-employee winning a motion to quash service of a California action for lack of personal jurisdiction against a California-based employer was entitled to an award of attorneys fees as the prevailing party under a contract containing an attorneys fees clause. 

            Procedurally speaking, the lower court quashed service and dismissed the action in entirety.  The appellate court first observed that there was no need for a final judgment, distinguishing an earlier case that relied on an older version of Civil Code section 1717 which had a final judgment requirement, unlike the current version which has no such requirement.  Instead, the Profit Concepts Mgt. court analogized the situation to cases where section 1717 fees were awardable due to a dismissal of an action based on violation of the five-year-to-trial rule.  The Court of Appeal summarized its conclusion in these words:  “The case in California has been finally resolved.  What was awarded on Profit Concepts’s complaint?  Zero.  Thus, the contract claim was finally resolved within the meaning of Hsu v. Abbara [(1995) 9 Cal.4^th 863, 876], and that case does not use the terms ‘merits.’”  (Slip Op. at p. 7.)

            The interesting question is whether the result might have differed had the case been stayed rather dismissed.  Many courts stay, rather than dismiss, an action upon granting of a motion to quash service.  There are decisions holding that there can be no prevailing party under section 1717 until final disposition of the parties’ substantive rights.  See, e.g., Lachkar v. Lachkar (1986) 182 Cal.App.3d 641 (obtaining an order compelling arbitration does not entitle a litigant to fees because there is no determination of substantive rights).  If stayed litigation pending completion of an arbitration results in no fee winner, the same argument can be advanced that a stayed case pending completion of an adjudication of substantive rights in a different state also means there can be no winner.

             The procedural posture of the dismissal in Profits Concepts Mgt. was certainly an important factor leading to the award of fees under section 1717.

            

FOURTH DISTRICT, DIVISION THREE COURT OF APPEAL DETERMINES

THAT CONTRACTUAL ATTORNEYS FEES AWARDABLE UPON A FAVORABLE MOTION TO QUASH A CALIFORNIA ACTION.

            On May 5, 2008, the Fourth District, Division Three Court of Appeal decided in Profit Concepts Management, Inc. v. Griffith, Case No. G039077 that an Oklahoma ex-employee winning a motion to quash service of a California action for lack of personal jurisdiction against a California-based employer was entitled to an award of attorneys fees as the prevailing party under a contract containing an attorneys fees clause. 

            Procedurally speaking, the lower court quashed service and dismissed the action in entirety.  The appellate court first observed that there was no need for a final judgment, distinguishing an earlier case that relied on an older version of Civil Code section 1717 which had a final judgment requirement, unlike the current version which has no such requirement.  Instead, the Profit Concepts Mgt. court analogized the situation to cases where section 1717 fees were awardable due to a dismissal of an action based on violation of the five-year-to-trial rule.  The Court of Appeal summarized its conclusion in these words:  “The case in California has been finally resolved.  What was awarded on Profit Concepts’s complaint?  Zero.  Thus, the contract claim was finally resolved within the meaning of Hsu v. Abbara [(1995) 9 Cal.4^th 863, 876], and that case does not use the terms ‘merits.’”  (Slip Op. at p. 7.)

            The interesting question is whether the result might have differed had the case been stayed rather dismissed.  Many courts stay, rather than dismiss, an action upon granting of a motion to quash service.  There are decisions holding that there can be no prevailing party under section 1717 until final disposition of the parties’ substantive rights.  See, e.g., Lachkar v. Lachkar (1986) 182 Cal.App.3d 641 (obtaining an order compelling arbitration does not entitle a litigant to fees because there is no determination of substantive rights).  If stayed litigation pending completion of an arbitration results in no fee winner, the same argument can be advanced that a stayed case pending completion of an adjudication of substantive rights in a different state also means there can be no winner.

             The procedural posture of the dismissal in Profits Concepts Mgt. was certainly an important factor leading to the award of fees under section 1717.