CALIFORNIA ATTORNEY'S FEES

Prevailing Party, Section 1717: Alter Ego Defendants Obtaining Dismissal Of Declaratory Relief Action Were Entitled To Attorney’s Fees Under A Fees Clause Between Plaintiff And The Signatory Defendant

$58,223 Was The Fee Award, With A Credit For Smaller CCP § 128.7 Sanctions.

               In ATM Professional, Inc. v. Repiping.com, Inc., Case No. B331046 (2d Dist., Div. 3 Mar. 26, 2025) (unpublished), alter ego defendants obtained a dismissal (based on failure to name an indispensable party, the contract signatory) in a declaratory relief complaint when the underlying contract had a fees clause.  The court awarded prevailing party fees of $58,223 to the successful alter ego defendants under Civil Code section 1717, even though the defendants granted a credit for a smaller CCP § 128.7 fees sanctions award.  Plaintiff’s appeal was unsuccessful because:  (1) a declaratory relief action is “on the contract” under Civil Code section 1717; (2) defendants were prevailing parties because they achieved their litigation objectives in obtaining a dismissal of the action; (3) no mediation condition precedents were unsatisfied because the claims were not directed at alter ego defendants; and (4) the assertion that fees were awarded for duplicative work was unsupported by specific objections to the requested fees. 

Prevailing Party, Section 1717: Tenant Prevailed Under Civil Code Section 1717 Based On A Contractual Fees Clause By Defeating Landlord’s Unlawful Detainer Action

Tenant Proved There Was A Defective 3 Day Notice For Nonpayment, Because Tenant Did Not Contest It Was Claiming Occupancy Of Unleased Areas--$122,855 Was The Fee Award.

                Big Washington LLC v. Superdudes, LLC, Case No. F086483 (5^th Dist. Dec. 20, 2024) (unpublished) shows how highly contested unlawful detainer actions can produce a substantial award to a prevailing party (in this case, the tenant) to the tune of $122,855.

               Plaintiff landlord filed an unlawful detainer action against defendant tenant for nonpayment of rent, based on the claim tenant was not paying for areas not encompassed within a lease (with tenant not claiming any rights in those areas).  Tenant eventually was granted a summary judgment based on a defective 3-day notice to pay or quit, with tenant later awarded $122,855 in fees for 473.5 hours applying the local market rate.

               Landlord appealed, but did not obtain a change in the fee award.  Landlord argued that CCP § 1032 (the routine costs provision) applied, but the appellate court properly observed that specific fee statutes govern the interpretation of what litigant prevails.  Given that tenant beat the unlawful detainer action and retained possession of the commercial premises, tenant was the prevailing party by achieving its primary litigation objectives. 

Private Attorney General, Section 1717: Attorney Representing Himself, And Showing No Separate Retainer With Wife, Was Denied Attorney’s Fees For Prevailing Against Lender On Default Interest Penalty Dispute

Trope Generally Barred Fees, Plus Husband Could Not Show His Financial Interest Allowing For CCP § 1021.5 Fees.

               In Honchariw v. FJM Private Mortgage Fund, LLC, Case No. A169447 (1^st Dist., Div. 3 Dec. 20, 2024) (unpublished), husband represented himself and his wife, although he had no evidence of an attorney-client relationship with his wife, against a lender, winning an appellate reversal of a post-arbitration award confirming an arbitration result involving default interest which was ultimately determined to be a penalty in a prior appellate court decision.  Husband then moved for nearly $600,000 in attorney’s fees based on lender document contractual clauses and the private attorney general statute (CCP § 1021.5).

                The lower court denied the request, a conclusion affirmed by the 1/3 DCA.

               On the contractual fee front, the problem was that husband could not surmount the obstacle that his efforts and those for his wife were barred because he represented himself in pro per, falling within the Trope v. Katz prohibition.  Although an attorney-client relationship could exist between spouses, he failed to establish one and did not show that any extra time was spent in representing his wife.  On the § 1021.5 argument, husband did not show that he and his wife did not have a large financial incentive to justify broader fees:  they would have been liable for $30,000 in default interest, they would have been liable for fees and costs to lender had it won, and they sought $5 million in punitive damages in the overall lawsuit.  Although the fees and costs “incurred” were significant (if allowable, but they were not), no burden by them was shown as far as financial costs given that husband represented both and had no separate indicia that he represented wife in a true attorney-client relationship—another way of saying that they could not prove any allowable financial burden based on the self-representation. 

Section 1717: Nonsignatories, When Sued As If They Were Parties, Were Entitled To Prevailing Party Fees Under Contractual Fees Clause Pursuant To Civil Code Section 1717

Case Counsels Against Suing Brokers And Agents Under Boilerplate “Agent/Employee” Pleading Allegations As If They Are Parties.

               The result in Dow v. Burrell, Case No. B330855 (2d Dist., Div. 8 Nov. 22, 2024) (unpublished) is a case where a disgruntled residential buyer plaintiff sued seller (who was defaulted) and his brokers, agents, and their affiliates (who did successfully contest) various charges associated with the purchase and sales agreement.  Plaintiff sued the brokers, agents, and their affiliates as if they were parties and further included boilerplate allegations that they were seller’s agents and employees.  The lower court granted these defendants’ motions for attorney’s fees under the contractual fees clause because they prevailed by defensing plaintiff buyer’s contract claims. 

               The 2/8 DCA affirmed.  Because these defendants were sued as if they were true parties, even though they were non-signatories, they were entitled to fees under Reynolds Metals (our Leading Case No. 5). 

Section 1717: Where Damages Award Was Based On A Sole Contract, Lack Of Fees Clause In The Contract Showed No Fee Entitlement

$40,230 Fee Award Was Stricken.

 

                Defendants/cross-complainants defeated plaintiffs’ complaint and obtained cross-complaint damages based on a 2018 construction contract with no attorney’s fees clause, even though the trial judge awarded them $40,230 in fees.  The appellate court in 9 Star Construction v. Dimapasok, Case No. E080273 (4th Dist., Div. 2 Oct. 25, 2024) (unpublished) struck the fee award on a simple basis—no fee entitlement basis was shown, confirmed by the lack of authority for fees as substantiated by the absence of support for same in defendants/cross-complainants’ closing trial brief.

Landlord/Tenant, Mediation, Reasonableness Of Fees, Section 1717: Most Of $363,696.70 Contractual Fee Award Affirmed In Landlord/Tenant Dispute

However, N.Y. Attorneys’ Time After California Counsel Retained Must Be Stricken Because He Was Not Licensed In California.

               In Thaunhaeuser v. TKH Zum, LLC, Case No. B321283 (2d Dist., Div. 8 Oct. 11, 2024) (unpublished), the lower court entered a $114,000 compensatory judgment against landlord and in favor of tenant under a property condition/security deposit lawsuit.  Later, based on a contractual fees clause under the lease, the lower court awarded $363,696.70 to prevailing tenant, including some services which were performed by a New York attorney not licensed in California before California counsel was retained by tenant.  The 2/8 DCA rejected most of landlord’s arguments on appeal, except for one which required a modification to the fee award.

               Landlord argued tenant did not satisfy the mediation condition precedent provision of the lease, but the record belied this argument:  tenant did send a letter asking for mediation dates as well as made a settlement offer which landlord rejected.  The presence of the alternative settlement offer did not override tenant’s attempts to engage in mediation.

               However, the fees of the New York attorney were ordered stricken for work postdating the retention of California counsel.  New York counsel was actively advising tenant such that he needed to be licensed and failed to seek pro hac vice admission, with the appellate panel expressing doubt that California Supreme Court’s Birbrower, 17 Cal.4^th 119 opinion allowed a non-licensed attorney in a firm with a California attorney to avoid the problem and also indicating doubt that a non-licensed attorney could avoid problems by associating in with a California attorney in a lawsuit.  A remand was required to modify the judgment to exclude the non-compensable time.

               The size of the award was no abuse of discretion:  375 hours for four years of litigation was reasonable, with $750 per hour being acceptable for the California retained counsel who had many years of litigation experience in the landlord/tenant area.

Section 1717: Defendant Obtaining Reversal Of Interference Claim Because It Was Based Entirely On Contract Was Properly Awarded Section 1717 Fees

After The Successful Appeal, Defendant Awarded $604,700 In Fees.

               In the Civil Code section 1717 area, only contract-based claims are allowable for recovery purposes, with tort claims usually not qualifying.  However, that “usually” caveat has an important section:  where a tort is based on a duty created solely by a contract, enforcement of that contract does give rise to section 1717 exposure. 

               That is what happened in Drink Tank Ventures, LLC v. Real Soda in Real Bottles, Ltd., Case No. B328365 (2d Dist., Div. 2 Sept. 26, 2024) (unpublished).

               Plaintiff convinced a jury to award it $350,000 in compensatory damages on a prospective advantage interference claim premised entirely on a breach of contract, with the appellate court reversing it as a matter of law because there was no independent wrong other than just a breach of contract (which also vacated the lower court’s fee award of $280,700 to plaintiff).  Prevailing defendant sought section 1717 fees on remand, being awarded $604,700 (out of a $906,825 “ask”). 

               The 2/2 DCA affirmed.  Recognizing that tort actions generally are not compensable under section 1717, the gravamen of plaintiff’s contract instead was a tort claim resting on a duty created by contract such that fees were properly awarded to defendant.  (Artnz Contracting Co. v. St. Paul Fire & Marine Ins. Co., 47 Cal.App.4^th 464, 478-479.)

Section 1717: Individual Suing As A “DBA” Or Suing On Behalf Of A Corporate Entity Property Saddled With Attorney’s Fee For Losing A Suit With Contractual Fee Exposure

Nonsignatories Stepping Into the Shoes Of Contractual Signatories Can Be Liable For Fees.

               In Del Rio v. Weis, Case No. A167335 (1^st Dist., Div. 1 Sept. 17, 2024) (unpublished), Mr. Del Rio sued Homeowners for breach of a home remodel construction contract between Mr. Del Rio’s business, JODT, and Homeowners.  Homeowners won and were granted attorney’s fees under a contractual fees clause.  On appeal, Mr. Del Rio argued he was not personally liable for fees because he was not, individually, a party to the contract.  His appeal was unsuccessful.  First, he sued as Mr. Del Rio dba JODR such that he alleged he was a party to the contract.  Second, he—as a nonsignatory—stood in the shoes of the contractual signatory because he sued on its behalf and was liable for fees accordingly.

Section 1717, Section 998: Because Plaintiff Voluntarily Dismissed Its Unlawful Detainer Action Without Prejudice, Santisas Prevented Recovery Of Contractual Attorney’s Fees By The Other Side Despite The Winning 998 Offer

However, Plaintiff Did Pay The Other Side $118,372.65 In Routine Costs.

               In Riverside Mining Limited v. Quality Aggregates, Case No. E081228 (4^th Dist., Div. 2 Aug. 19, 2024) (published), Quality leased 73 acres from Riverside Mining, operating a quarry on the land.  Quality brought a civil lawsuit against Riverside Mining for infringing its leasehold, while Riverside Mining countered by filing an unlawful detainer action against Quality.  Quality offered to compromise under a CCP § 998 offer by having Riverside Mining dismiss the UD action with prejudice, each side to bear their own fees and costs.  Riverside Mining did not accept the offer and, after substantial discovery but before trial, it voluntarily dismissed its UD action without prejudice.  Riverside Mining paid $118,372.65 in routine costs to Quality (inclusive of expert witness expenses) based on the winning 998 offer, but successfully resisted Quality’s motion for an attorney’s fees award of $199,514.38 (inclusive of a 1.25 multiplier).

               The 4/2 DCA affirmed the fee denial, agreeing that the lower court properly applied the reasoning of Ford Motor Credit Co. v. Hunsberger, 163 Cal.App.4^th 1526, 1533 (2008).  Because the unlawful detainer action was contractual in nature, Ford found that Civil Code section 1717(b)(2) blocked recovery of fees because CCP § 998 does not expressly authorize a fees award and section 1717(b)(2) effectively “trumped” section 998 in disallowing fees based on the voluntary dismissal. 

               BLOG HAT TIP—We note that Susan Allison of Jeffer Mangels Butler & Mitchell was one of the winning appellate attorneys.  Co-contributor Mike worked with her and other Jeffer attorneys during a Pomona Superior Court trial.  Congratulations, Susan.

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. 

Fee Clause Interpretation, Section 1717: Prevailing Defendant’s Dismissal Of Cross-Complaint After Winning Did Not Give Rise To Fee Exposure

Santisas Rule Applied, With Dismissed Cross-Complaint Only Raising Contractual Claims.

               In Colaco v. Marcum LLP, Case No. B326252 (2d Dist., Div. 2 July 30, 2024) (unpublished), plaintiff sued his accounting firm for misrepresentation after losing money in some investments, with the defendant obtaining summary judgment and then voluntarily dismissing a cross-complaint containing indemnity and declaratory relief cross-claims.  Although the accounting firm’s engagement letters had broad fee clauses, the lower court denied plaintiff’s request to be awarded attorney’s fees under Civil Code section 1717.  The 2/2 DCA affirmed under the Santisas v. Goodin, 17 Cal.4^th 599, 602 (1998) rule applicable to voluntarily dismissed contract claims.  Plaintiff could not distance himself from admissions that he was suing “on the contract,” and he could not articulate persuasively how the dismissed cross-claims were tort claims falling outside of Santisas. 

Fee Clause Interpretation, Judgment Enforcement, Section 1717: $70,635 Attorney’s Fees Award Favorable To Nonsignatory To A Contract, Reversed As A Matter Of Law

Plaintiffs’ Claims Against Nonsignatory Did Not Seek To Enforce The Contract, With No Judgment Enforcement Fees Available To The Nonsignatory.

               Crooymans v. Foumberg, Case No. B325110 (2d Dist., Div. 3 June 18, 2024) (unpublished) is a stark reminder that a nonsignatory to a contract, more often than not, does not face fee exposure under a contractual fees clause when that litigant was not a party to the underlying contract.

               In this case, plaintiffs obtained a favorable arbitration award against their late-father’s tax planning attorney, with a separate $1.7 million fee component embedded in the award under an attorney engagement letter with a fees clause.  But the relevant part of the case is that plaintiffs sued defendant Foumberg, a nonsignatory to the attorney engagement agreement, because he did some estate planning transfers for the tax planning attorney and his wife, with plaintiff claiming he was a shill for the judgment creditor attorney.  Foumberg won on a demurrer on the merits (not at issue) and then moved for attorney’s fees under Civil Code section 1717 based on the engagement letter to which he was not party.  The lower court awarded him $70,635 in attorney’s fees, prompting an appeal.

               The 2/3 DCA panel reversed as a matter of law.  The primary flaw was that Foumberg, a nonsignatory to the attorney engagement letter with a fees clause, was not sued under that agreement—the “on the contract” requirement of section 1717 was not satisfied.  In fact, the merger doctrine applicable when a judgment is entered which extinguishes contractual rights all the more so dictated the conclusion that no contractual fee recovery was available:  this meant plaintiff could not recover fees against Foumberg, so he could not do so either.  (Chelios v. Kaye, 219 Cal.App.3d 75, 79-80 (1990), abrogated by statute in Code Civ. Proc., § 685.040 in some regards; GrayI CPB, LLC v. SCC Acquisitions, Inc., 233 Cal.App.4^th 882, 890 (2015).)  Plaintiffs argued that Foumberg had alter ego exposure, but this did not resonate for two reasons:  (1) plaintiffs attempted “reverse piercing” which is not generally allowed; and (2) plaintiffs were attempting recovery on a tort—not contract—claim which was not within the scope of the attorney engagement contractual fees clause, relying on the reasoning in Brown Bark III, L.P. v. Haver, 219 Cal.App.4^th 809, 828-829 (2013).  Finally, because plaintiffs argued Foumberg was accountable for fees as an alter ego, the appellate panel found that plaintiffs had not sued the attorney under traditional alter ego analysis, had sought unconventional reverse piercing, and had obtained a judgment against attorney which was based on tort rather than on a contract. 

Allocation, Fee Clause Interpretation, Section 1717: Intervening Insurer Not Responsible For Fees To Prevailing Party, While Litigant Losing Alter Ego Arguments Was Responsible For Fees

Lower Court Also Did Not Err By Awarding Insurer Rate Fees To A Prevailing Party, Apportioning Out Noncompensable Fees.

               Yee v. Weinberg, Case No. A163850 et al. (1^st Dist., Div. 4 Mar. 5, 2024) (unpublished) is a situation where a plaintiff landlord prevailed against defendant tenant, with landlord receiving some fees (but none against the intervening insurer eventually withdrawing from the case), but with landlord having to pay fees to defendants not proven to be alter egos.  Some of the winning defendants were awarded fees, but at lower rates charged by the insurance carrier and with some apportionment done by the lower court.

               All of the fee determinations were affirmed on appeal.  The insurer was not responsible for fees because (1) there was no contract or statute allowing fee entitlement to landlord, and (2) insurer’s dismissal of its intervention complaint was a contractual dismissal which invoked the Santisas fee bar.  The fee award to the alter ego defendants was no fluke because plaintiff failed to prove they were alter egos, which invoked Reynolds Metals as the fee entitlement basis.  Defendants complaining about the lower court’s reduction in fee requests, through cross-appeals, showed no abuse of discretion in allowing compensation only at the rates charged by the insurance carrier’s counsel and apportioning out fees which were not compensable.

Estoppel, Fee Clause Interpretation, Section 1717: Lower Court’s Denial Of Attorney’s Fees To Prevailing Plaintiffs In CC&R Flag Pole Placement Dispute Was An Abuse Of Discretion

Judicial Estoppel Applied And Plaintiffs Were The Unqualified Winners.

               In Rowan v. Hilliard, Case No. D081687 (4^th Dist., Div. 1 Feb. 29, 2024) (unpublished), plaintiffs prevailed against defendants/cross-complainants in a flag pole placement dispute under CC&Rs, which had a fees clause giving the lower court the authority (“shall have the authority”) to award reasonable attorney’s fees to the prevailing party.  The trial judge found that this clause was only discretionary even though plaintiffs prevailed.

               The 4/1 DCA reversed.  It initially determined that defendants were judicially estopped from denying the fee clause applied, because they previously convinced a judge to award fees after winning a summary judgment motion (a win reversed earlier by the appellate court).  Further, it was an abuse of discretion not to award fees because plaintiffs were the unqualified winners and Civil Code section 1717 applied so they were entitled to fees.

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.

Fee Clause Interpretation, Section 1717: Lower Court Erred In Denying Fees To A Parties’ Successor Under An Easement Settlement Agreement

Fees Clause Did Encompass The Parties And Their Successors.

            In Elusive 8307, LLC v. Canterman, Case No. B321096 (2d Dist., Div. 4 Jan. 3, 2024) (unpublished), prior owners of plaintiff's and defendant's adjacent properties entered into a settlement agreement granting an easement to plaintiff over a portion of defendant’s property.  Plaintiff lost an easement interpretation dispute with defendant, but defendant was denied attorney’s fees under an attorney’s fees provision in the settlement agreement.  The 2/4 DCA panel reversed.  Plaintiff did seek to interpret the easement settlement agreement so that its claims were founded “on the contract” under Civil Code section 1717.  Because both parties were successors-in-interest under the settlement agreement, that meant the fees clause was binding on subsequent parties.

Section 1717, Unlicensed Contractors: Unlicensed Contractor Obtaining $28,413 Contractual Fee Award Was Affirmed On Appeal Because It Was “On The Contract”

Breadth Of Clause Led To The Result.

            Co-contributor Mike had wished we had this decision many moons ago because the Second District, in an unpublished decision before the law had evolved, denied fees to an unlicensed contractor only seeking attorney’s fees, not construction compensation, in an arbitration proceeding.

            In Rodgers v. HB Construction, Inc., Case No. B317068 (2d Dist., Div. 5 Dec. 27, 2023) (unpublished), owner lost a case involving court and arbitration proceedings against an unlicensed contractor for a remodel of a Hermosa Beach office building.  The case allegations involved a contract with a broad fees clause, although the thrust of the suit was for tort or unlicensed contractor allegations.  Unlicensed contractor moved for contractual attorney’s fees of $149,378.50, but contractor was only awarded fees of $28,413, after prevailing with different entities in an arbitration and after plaintiff owner dismissed the litigation without prejudice. 

            The other side appealed, but to no avail.  Even though plaintiff voluntarily dismissed his complaint without prejudice, that did not divest the lower court from making a fees award.  The “arising out of or relating to this contract” language was broad enough to encompass the overall contractor dispute, including those under the Business and Professions Code licensure issues.  The real kicker was,  although the prevailing party was an unlicensed contractor, that only related to “compensation” under the contract rather than fees because the contract between clients and unlicensed contractors is not automatically rendered void.  Fee award affirmed.

Deeds Of Trust, Section 1717: $31,617 Attorney’s Fees Award Under Deed Of Trust Fees Clause Affirmed Against A Nonsignatory Who Was An Alter Ego In A Fraudulent Conveyance DOT Case

DOT Fees Clause Was Broad, Encompassing The Tort Claim For Fraudulent Conveyance. 

            In the deed of trust area, whether a lender can obtain recovery of contractual attorney’s fees after prevailing in a case depends on its breadth:  if it is broad, lender likely prevails; if it is narrow (such as only saying the fees get added to the loan debt), the lender likely loses.

            Lender was on the “happy” side of that equation in Northpoint Capital Fund, LLC v. McClenahan, Case No. H050514 (6^th Dist. Nov. 30, 2023) (unpublished) based on a broadly worded DOT fees clause.

            There, lender prevailed in a matter alleging that certain defendants conspired or aided and abetted in a scheme to fraudulently transfer a deed of trust, which the lower court agreed with by vacating the subsequent DOT and ruling in favor of lender.   McClenahan, one of the parties, was found to be an alter ego, even though he did not sign the fraudulent DOT.  The original DOT had a broad contractual fees clause that the borrower agreed to pay reasonable attorney’s fees “in any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee.”  The lower court awarded lender $31,617 in attorney’s fees under the DOT fees clause against McClenahan.

            McClenahan’s efforts to overturn the fee award were unsuccessful.  Because he was established as the alter ego of the borrower, McClenahan faced fee exposure under Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129 (1979) [our Leading Case #5].  Because Civil Code section 1717 “on the contract” language is construed liberally, the breadth of the clause encompassed the fraudulent DOT conveyance win by lender.

Section 1717: Plaintiff’s Dismissal Of Lawsuit Predicated On Overpayment Under Notes With A Contractual Fee Clause Did Not Give Rise To Civil Code § 1717 Exposure

$20,041.50 Defense Fee Award Under Section 1717 Reversed As A Matter Of Law.

            In Shetty v. Doshi, Case No. B321391 (2d Dist., Div. 4 Aug. 17, 2023) (unpublished), plaintiff brought an action claiming he overpaid on a promissory note and was subject to a usurious interest, although also bringing Financial Code and unfair competition claims grounded on the same theories.  Plaintiff dismissed the complaint without prejudice, with the defense moving for attorney’s fees under a note fees clause stating “[i]n any action to enforce the Note, the prevailing party shall receive attorney fees.”  The lower court awarded the defense $20,031.50 in fees under Civil Code section 1717.

            The 2/4 DCA reversed as a matter of law for two reasons: (1) plaintiff’s claims were “on the contract” given the gist of the claims and liberal construction of section 1717’s “on the contract” language such that their dismissals prevented the defense from being eligible to recover 1717 fees (Barnhart, Inc. v. CMC Fabricators, Inc., 211 Cal.App.4^th 230, 241-242 (2012); Shadoan v. World Savings & Loan Assn., 219 Cal.App.3d 97, 100-101, 107, 109 (1990)); and (2) the fee clause “to enforce the Note” language was narrow and would not encompass any noncontractual claims if they were characterized as not being “on the contract” anyway (Gil v. Mansano, 121 Cal.App.4^th 739, 742-744 (2004); Exxess Electronix v. Heger Realty Corp., 64 Cal.App.4^th 698, 709 (1998)). 

Section 1717: Dismissal Of Complaint Alleging Breach Of Contract, Whether Based On Contract Or Breach Of A Contractual Duty, Did Not Result In Fee Exposure Under Section 1717

Santisas (Our Leading Case #6) Dictated The Result.

            In Rubin v. Cho, Case No. A165667 (1^st Dist., Div. 5 July 6, 2023) (unpublished), close to trial, plaintiff dismissed a breach of contract complaint alleging the seller of a house failed to disclose all known material facts and defects affecting the property and make other disclosures required by law under the purchase agreement.  Seller moved for attorney’s fees under a contractual fees clause.  Both the trial and appellate court found that the gravamen of the complaint was “on the contract” such that the dismissal of the complaint did not lead to fee exposure based on Santisas v. Goodin, 17 Cal.4^th 599, 602 (1998).  Plaintiff’s efforts to recast the complaint as being based on torts or arguing the contract was being disavowed did not resonate with the appellate court. 

Section 1717: Denial Of Fees To Prevailing Creditor Was Correct Because Substantive Claims Were Not Based On A Note With A Fee Clause

Fee Entitlement Found Missing.

            In Port Blue LLC v. Perlstein, Case No. B313030 (2d Dist., Div. 1 June 27, 2023) (unpublished), the trial judge denied contractual fees under a note to a prevailing creditor.  That result was affirmed on appeal because the rescission, money had/received, and declaratory relief claims were not based on the note with a fees clause versus other documents with no fee recovery.

Section 1717: $19,468.85 Fees Award Reversed As A Matter Of Law Because There Was No Contract With A Fee Clause

Fee Entitlement Was Missing In This Case.

            In Fischer v. Ponce, Case No. B314254 (2d Dist., Div. 1 June 23, 2023) (unpublished), a party obtained judgment after a demurrer was sustained without leave, a determination affirmed on appeal.  The lower court then granted the prevailing party $19,468.85 in attorney’s fees.  That award was reversed as a matter of law on appeal.  The reason?  The agreements sued on had no fees clause; while there was an unsigned, proposed lease with a fees clause, that was insufficient as a predicate for a fees award.

Fee Clause Interpretation, Section 1717: Second District Reverses Fee Awards Totaling $680,104.12 As A Matter Of Law

One Award Reversed Because It Only Covered An Arbitration/Ensuing Litigation Even Though No Arbitration Occurred, And Other Award Overturned Because It Was Unclear That Fiduciary Breach Claim Was Not Barred By Santisas.

            San Jose Nihonmachi, LLC v. Miraido Corp., Case No. B323093 (2d Dist., Div. 1 Jan. 4, 2023) (unpublished) shows how the absence of fee entitlement can lead to a reversal of substantial fee awards: in this case fee awards totaling $680,104.12, awards in favor of two different defendant groups.

            The first reversed award of $287,380.75 evaporated based on the narrowness of the fees clause, which covered only prevailing parties in “such arbitration and ensuing legal action.”  Given the parties bypassed litigation and only used the court process, the absence of arbitration occurring was dispositive.  (Kalai v. Gray, 109 Cal.App.4^th 768, 777 (2003).)

            The second overturned award of $392,723.37 involved a voluntary dismissal without prejudice by plaintiff/appellant of an action, invoking a fees clause that was not limited to just arbitration/post-arbitration activities.  Plaintiff did dismiss certain contract claims before they were adjudicated, which did not give rise to fee exposure under Santisas v. Goodin, 17 Cal.4^th 599, 622 (1998).)  The issue on appeal concerned whether a dismissed breach of fiduciary duty claims was based on contract or in tort (because Santisas will not bar fee exposure where a tort is within the ambit of a broadly-worded fees clause).  The appellate court determined that it was “unclear” whether the fiduciary duty claim was not based on contract rather than tort, with any uncertainty meaning that it was “on the contract” and barred by Santisas.  (Kangarlou v. Progressive Title Ins. Co., Inc., 128 Cal.App.4^th 1174, 1178-1179 (2005).)  This last holding provides some discovery tips for the defense to smoke out whether plaintiff’s claims are based in contract or just tort, or both. 

Section 1717: $74,930.80 Fee Award And $18,339.56 Costs Award Against Prevailing Party Neighbors In Equitable Servitude Dispute Affirmed On Appeal

Equitable Servitude in an Amended Declaration if a Contract Under Civil Code Section 1717.

         In DeBevoise v. Robinson, Case Nos. D078207/D078679 (4^th Dist., Div. 1 Dec. 29, 2022) (unpublished), neighbors got involved in an equitable easement dispute, with plaintiffs/cross-defendants getting equitable easement relief and also obtaining a prevailing party contractual fees award under an Amended Declaration running with the land to the tune of $74,930.80 in attorney’s fees and $18,339.56 in costs.  (This was a drastic reduction from the requested $433,814 in fees and $33,837.73 in costs after the trial judge commented that this was one of the worst fee applications he had been presented with.)  The non-prevailing parties appealed, arguing there was no fee entitlement.  But there was, according to the appellate court.  The Amended Declaration was an equitable servitude which is an enforceable contract giving rise to fee exposure, such that entitlement did lie.  (Mackinder v. OSCA Development Co., 151 Cal.App.3d 728, 738 (1984).)

Section 1717: Plaintiff’s Failure To Raise Fee Entitlement Challenge And Failure To Oppose A Fee Motion Was A Waiver On Appeal

No Vital Public Policy Argument Presented To Prevent The Waiver Conclusion.

            One of the most fundamental rules of appellate advocacy is waiver.  Generally, if an argument or objection is not presented at the trial court level, the appellate court will not review it.   The appellate court does have discretion to review a question of law, but it needs to be of vital public policy importance or necessary to a consideration based on the equities of the case.

            Appellant in Patacsil v. Perez, Case No. C095195 (3d Dist. Dec. 21, 2022) (unpublished) found his appellate fee entitlement issues to be forfeited.  The reason was simple:  appellant did not oppose the fee motion and no compelling need was shown to justify consideration of the entitlement issue on appeal.  Be careful of waiver arguments; make a careful record of challenges at the superior court level.

Section 1717: $360,965.50 Contractual Fee Award Sustained In Real Estate Case

Award Was The Defense “Full Ask.”

            After plaintiff lost a real estate case at the trial court level, the judge awarded the defense $360,965.50 in contractual attorney’s fees, the full ask of the defense in Tri-west Homes II, LP v. Ostayan, Case No. B307708 (2d Dist., Div. 2 Dec. 21, 2022) (unpublished).  The merits determination was affirmed on appeal, which also meant the fees award was affirmed.

Section 1717: $547,532.33 Contractual Fee Award Against Otis Elevator Based On Litigant’s Cross-Complaint Affirmed On Appeal In Duty To Defend Situation

It Was Irrelevant Who Paid The Fees, Law Of The Case Sustained The Award Based On Earlier Appellate Opinion, And Duty To Defend Ruling Was “On The Contract.”

            In Sierra Pacific Properties, Inc. v. Otis Elevator Co., Case Nos. A162854 et al. (1^st Dist., Div. 5 Nov. 21, 2022) (unpublished), Otis Elevator was not happy that it suffered a $547,532.33 contractual, Civil Code section 1717 based fees/costs award based on an adverse judgment on an opponent’s duty to defend cross-complaint after the appellate court earlier reversed a judgment in Otis Elevator’s favor.  Unfortunately, those are the breaks in contested litigation and appeals in the California state system.  Otis Elevator appealed, but its arguments were rejected as follows: (1) it did not matter who paid the fees for purposes of fee entitlement under the contractual fees clause (Sonoma Land Trust v. Thompson, 63 Cal.App.5^th 978, 984-985 (2021)); (2) the other side was the prevailing party under law of the case based on the earlier appellate court decision on the duty to defend reversal issue; and (3) the duty to defend was “on the contract,” an independent reason to conclude Otis Elevator’s opponent was the prevailing party.

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. 

Section 1717: $321,338.54 Contractual Fee Award To Prevailing Party In Administrative Mandamus Proceeding

Mandamus Was “On The Contract” Under Section 1717 And Decision Was Final To Defeat Prematurity Argument.

            In The Traveler Indemnity Co. v. Lara, Case No. B306897 (2d Dist., Div. 7 Nov. 3, 2022) (published), insurance company lost an Insurance Commissioner administrative mandate proceeding concerning whether certain workers compensation agreements issued to it were unenforceable vis-à-vis the insured.  The lower court then assessed $321,338.54 in attorney’s fees against insurance company based on a contractual fees clause in the agreements for insured’s administrative proceeding work.  Insurance company’s arguments on appeal did not overturn the fee award.

            Administrative proceeding work was within the scope of the fees clause.  An administrative mandamus was “on the contract” under Civil Code section 1717 where the main issue was whether the agreement was unenforceable.  The fee award was not premature despite the existing of further litigation because the mandamus determination was a final determination in insured’s favor.

Section 1717: Defendant Nonsignatories To Settlement Agreement Defeating Contract Claims Entitled To Section 1717 Fees

After All, Defendants Did Show The Contract Was Inapplicable To Them, Such That The Hsu Decision Governed.

            One of our leading cases is Hsu v. Abbara, 9 Cal.4^th 863, 870 [Leading Case #2] holds that a party is entitled to Civil Code section 1717 attorney’s fees when the party prevails on grounds the contract is inapplicable, invalid, unenforceable, or nonexistent, if the opposing party would have entitled to fees had it prevailed.  The 2/8 DCA, in McLean v. Rosman, Case No. B308260 (2d Dist., Div. 8 Oct. 5, 2022) (unpublished), found Hsu dispositive, affirming a lower court award of fees to defendants where they showed that a settlement agreement, with a fees clause, was inapplicable to them because they never signed it and the plaintiffs had failed to perfect a lien by recording the settlement.  The panel also observed that Canal-Randolph Anaheim, Inc. v. Wilkoski, 78 Cal.App.3d 477, 486 (1978), which held that section 1717 does not apply to a person not a party to the contract, was impliedly overruled by Hsu. 

Section 1717: $70,882.50 Attorney’s Fees Award Based On A Construction Subcontract Is Affirmed On Appeal

Neither Legal Entitlement Nor Fee Amount Arguments Prevailed On Appeal.

            Plaintiff subcontractor brought a third-party beneficiary action against general contractor which was resolved adversely on res judicata and statute of limitations grounds in a situation where there was a subcontract with a contractual fees clause encompassing “actual” attorney’s fees incurred.  With a few subtractions from the claimed request, the lower court awarded prevailing general contractor $70,882.50 in contractual attorney’s fees.

            That result was affirmed by the Fifth District in Ayala Boring, Inc. v. HPS Mechanical, Inc., Case No. F082276 (5^th Dist. Aug. 16, 2022) (unpublished).  Fee entitlement was present based on the complaint allegations referencing a subcontract with a fees clause, even though in a footnote the appellate panel indicated that it was unlikely that “actual” instead of “reasonable” fees could be awarded under Civil Code section 1717.  As to the amount, the award was not shocking given the detailed substantiation of hourly rates and fee work by the fee claimant.

Section 1717: Interim Award Of Contractual Fees Under Civil Code Section 1717 Are Not Allowable Unless All The Claims In An Action Are Resolved

Premature Award Of $1.1 Million In Fees By Group Of Plaintiffs Reversed.

            A group of tenant plaintiffs in Chen v. Valstock Ventures, LLC, Case No. A161885 (1^st Dist., Div. 4 July 29, 2022) (published) won about $1.1 million in an interim fee award against a defendant after winning a summary adjudication motion on their declaratory relief contract claim.  However, tenants had remaining non-contract claims to be resolved.  The 1/4 DCA reversed.  After an examination of the language and policies underlying Civil Code section 1717, the Rules of Court, and other statutes, it determined that interim section 1717 fee awards are impermissible, especially given that a summary adjudication order is not appealable and that section 1717 envisions a final judgment, dismissal, or other final disposition before fee requests can be pursued. 

Section 1717: If You Claim A Redlined Draft Agreement Is The Contract And You Lose, Fee Exposure Can Occur

4/1 DCA Affirms Fee Award Where Pleadings Made It Clear That Redlined Draft Agreement Was The Operative Contract By Losing Plaintiff.

            Plaintiff lost a demurrer without leave founded upon contractual breach, duty to negotiate in good faith, and promissory estoppel claims, a determination affirmed on appeal because the letter of intent made it clear there was no agreement until a formal contract was agreed to and signed and because there was a draft redlined agreement with multiple changes which was never accepted.  The lower court then awarded $104,545 in attorney’s fees, the full request, based on a contractual fees clause in the redlined draft and under Civil Code section 1717.

            The fee award was upheld by the 4/1 DCA in Evans v. Bosa Development California II, Inc., Case Nos. D078272/D078818 (4^th Dist., Div. 1 July 27, 2022) (unpublished).  The LOI showed there was no duty to negotiate in good faith, although the redlined draft agreement showed that this did take place.  Defendant beat the contractual breach and derivative promissory estoppel claims such that it proved the nonexistence of the contract, entitling the defense to fees under section 1717.  (Hom v. Petrou, 67 Cal.App.5^th 459, 465 (2021).

Allocation, Section 1717: $125,000 Fee Award To A Defendant Winning At The Pleading Stage Affirmed On Appeal

This Decision Has A Nice Discussion Of The Policies Underlying Civil Code Section 1717.

            There is a nice discussion of the policies underlying Civil Code section 1717 and the claims which trigger fee exposure under this statute in Engage BDR, LLC v. Amobee, Inc., Case No. B309263 (2d Dist., Div. 8 July 7, 2022) (unpublished).

            There, a Master Agreement formed the backdrop for plaintiff’s contract, usury, and declaratory relief claims, with that Agreement containing a fees clause which had no recitation that each party to the contract was represented by counsel.  The trial judge sustained demurrers and entered judgment in favor of defendant, later awarding about $125,000 in attorney’s fees and declining to apportion the fees.

            The 2/8 DCA, in an opinion authored by Justice Wiley, affirmed. 

            Initially, the panel explored how Civil Code section 1717 expands a contractual attorney’s fees clause: (1) the first way is reciprocity, with a unilateral fees clause deemed to apply to both parties; and (2) the second way is “broadened scope,” which means a narrow fees clause applies to the entire contract unless the contract specifies that counsel represented the parties; and, if not, section 1717 broadens the fees provision absent the recitation.

            It then examined whether plaintiff’s claims were “on the contract,” determining that the contract breach claims obviously were, the usury/restitution claims were (Del Mar v. Caspe, 222 Cal.App.3d 1316, 1335 (1990)), the economic duress claim relating to entry into the contract were, and the declaratory relief claims related to the contracts (City and County of San Francisco v. Union Pacific Railroad Co., 50 Cal.App.4^th 987, 999-1000 (1996)). 

            The fees clause was broadened because there was no specific recitation that the parties were represented by counsel.  Although there were some other more amorphous references, section 1717 requires that parties of roughly equal power need to make this recitation to demonstrate legal sophistication so that the fees clause is narrowed in scope.  The “broadened scope” rationale applied.

            No apportionment was required because all of plaintiff’s claims involved shared common issues.  Also, because plaintiff did not specifically identify what attorney billings were duplicative until a supplemental brief which was filed too late and not entertained, plaintiff waived its challenges to the reasonableness of the fees requested by defendant.

            BLOG OBSERVATION—Although appellate jurists are good writers, we will note that Justice Wiley has a distinctive writing style.  We would put him in company, on that front, with his contemporaries such as Justices Manella, Ashmann-Gerst, Perluss, Gilbert, Yegan, and Bedsworth.

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.

Section 1717: Defendants’ Successful Defense That Plaintiff Failed To Prove The Existence Of Two Contracts Allowed Them To Obtain Contractual Fees Under Section 1717

Section 1717 Does Not Mandate That The Alleged Contract Be Entered Into Evidence.

            Civil Code section 1717 is a fee shifting statute that renders unilateral fee clauses bilateral under its mutuality-based principles.  This statute likely has the most jurisprudence of any fee shifting statute in California published and unpublished decisions.  It applies where a party proves that a contract is inapplicable, invalid, unenforceable, or nonexistent.  (Hsu v. Abbara, 9 Cal.4^th 863, 870-871 (1995) [our Leading Case No. 2].)

            Plaintiff in JHM Ventures v. Cavalier Closeouts, Inc., Case No. B305724 (2d Dist., Div. 3 June 1, 2022) (unpublished) felt the sting of section 1717 after defendants “defensed” its claims upon a determination that plaintiff failed to prove the existence of two of the alleged contracts, although there was a written agreement with a fees clause.  Because plaintiff would have been entitled to fees had it recovered, the lower court awarded defendants $110,920 in attorney’s fees.  On appeal, the 2/3 DCA sustained the fee award.  Hsu controlled, as well as the earlier opinion in Jones v. Drain, 149 Cal.App.3d 484, 489-490 (1983).  Losing plaintiff suggested that section 1717 mandated that a copy of the alleged contract be entered into evidence, but that suggestion was rejected because it contains no such mandate and it would gut section 1717’s applicability to both written and oral contracts. 

Section 1717: On Rehearing, 2/6 DCA Decides That Void Indemnity Agreement With Fees Clause In A Public Agency Contract Does Not Allow For Fees Recovery By Other Litigants

Illegal Contract Was No Different Than Public Contract Void Due To Lack Of Authority.

            On February 6, 2022, we posted on a case for which rehearing was granted. The case is San Luis Obispo Local Agency Formation Comm’n v. Central Coast Development Co., Case No. B304144 (2d Dist., Div. 6 May 5, 2022) (published).  We can report there was no change in result.

            There, earlier proceedings had determined that an indemnity agreement in a public agency contract was not supported by consideration and the governmental agency had no statutory standing to impose the indemnity agreement at all.  In a word, it was an illegal contract.  However, the trial judge awarded substantial fees of $172,850 to the City and $428,864 to the developer under that contract.  But all of that went away on appeal.  The reason was that voidability of a contract as to a public agency meant that it could neither enforce nor be liable on the contract, including fee recovery.  The illegality of the contract was akin to an authorized public agency contract, so that no fees could be assessed against the public agency based on overriding public policies relating to unauthorized or illegal contracts.  Even more so, here, because the developer brought a meritless action against the governmental entity such that there was equity in not allowing the entity to be saddled with fees.

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.

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).)

Section 1717: Trial Court’s Order Awarding Prevailing Plaintiff $159,792.98 In Attorneys’ Fees And Costs Affirmed On Appeal Even Though Note Providing Basis For Fees Award Was Not Formally Admitted Into Evidence

The Trial Court Had Effectively Admitted The Note Into Evidence As The Note Had Been Marked As Evidence, The Parties Had Elicited Testimony About It At Trial, And Neither Party Disputed Its Authenticity Or Objected To Its Admissibility.

            In Amirnezhad v. Ghayam, Case No. B306361 (2d Dist., Div. 8 May 4, 2022) (unpublished), defendant appealed the judgment entered against him in an action involving his restaurant partnership with plaintiff.  Included in the judgment was an order that defendant pay plaintiff $159,792.98 in attorneys’ fees and costs.  Defendant argued that the trial court had no basis for the award of attorneys’ fees because the Note giving rise to a fees award was introduced, but not admitted, at trial.  Although Defendant forfeited this argument by failing to support it with any authority, the 2/8 DCA explained that the trial court had effectively admitted the Note into evidence, and that there was no error in relying on the Note under the circumstances.  The Note had been marked as evidence and counsel for both parties elicited testimony about it – with neither party disputing the Note’s authenticity or objecting to its admissibility. (Dodson v. Greuner, 28 Cal.App.2d 418 (1938) [note that had never been formally admitted into evidence deemed admitted where the court and the parties had each treated the note as being in evidence].)