Civil Code Section 1717: Restrictions on Prevailing Party Fee Awards

  Civil Code section 1717, which authorizes an award of attorney fees to the prevailing party in a contract action, was intended to establish uniform treatment of fee recovery in actions on contracts containing attorney fee provisions and to eliminate distinctions between fee awards based on contract or statute. Thus, restrictive language in a contractual attorney fee provision will not always be given effect as equitable and public policy considerations under section 1717 prevail over technical rules of statutory construction. Continue reading

Law Firm Represented by Of Counsel Cannot Recover Attorney’s Fees As Prevailing Party

  It is well settled law in California that when a law firm is the prevailing party in a lawsuit and it is represented by one of its partners, members, or associates, it cannot recover attorney fees even though the litigation is based on a contract with a prevailing party attorney fee provision.

  Can a law firm, however, recover attorney fees under a prevailing party clause when the firm is a successful litigant represented by “of counsel”? The Second Appellate District says: “No.”

  In Sands & Associates v. Juknavorian the court held that because the relationship between a law firm and “of counsel” is close, personal, regular, and continuous, a law firm and “of counsel” constitute a single, de facto firm, and thus a law firm cannot recover attorney fees under a prevailing party clause when, as a successful litigant, it is represented by “of counsel.”

Did Caterpillar’s Attorneys Commit Malpractice When They Served a 998 Offer?

  In Wohlgemuth v. Caterpillar, plaintiffs purchased a new motor home that had an engine manufactured and warranted by Caterpillar. Plaintiffs claimed the engine was defective and sued Caterpillar under the Song-Beverly Consumer Warranty Act, alleging Caterpillar failed to repair the defects after a reasonable number of attempts. Shortly before trial, Caterpillar served and filed the following Code of Civil Procedure section 998 offer:

“Pursuant and subject to the provisions of Code of Civil Procedure § 998, defendant Caterpillar Inc., without admitting liability, hereby offers to pay to plaintiffs . . . the total sum of Fifty Thousand Dollars ($50,000.00), in exchange for the dismissal with prejudice of the entire action and general release of all claims as to this defendant.”

  Plaintiffs filed an acceptance of the offer and a dismissal. Thereafter, plaintiffs moved for attorney fees under the Song-Beverly Act. The trial court found plaintiffs to be the prevailing parties and awarded attorney fees to plaintiffs in the amount of $117,625 and costs in the amount of $7,737.08. Affirmed. Continue reading

Cross-Complaint is Separate Action Subject to Mediation Requirement

  Unpublished opinions, while not a source of law which can be cited, point to published opinions and are valuable in understanding different scenarios in which well settled law has been applied. They also contain legal arguments which have been successful on appeal. I regularly review them. I am surprised how frequently they aid to my understanding of issues which are presented in my current cases.

  One such case is the unpublished opinion in Castleton Real Estate v. Tai-Fu California Partnership. Castleton sued Tai-Fu for real estate commissions under an exclusive listing agreement for the sale of real property. The agreement contained an attorney fee provision and also required mediation. The trial court found Castleton’s failure to request mediation before filing its complaint, as required by the fee provision, barred recovery of fees for both prosecution of its complaint and defending against the cross-complaint filed by Tai-Fu. On appeal, Castleton contended it was entitled to fees for its defense against the cross-complaint, as that initiated a separate action. The appellate court agreed. Continue reading

Written Fee Agreement Not Required to Recover Statutory Probate Fees

   California law generally provides with respect to hourly and flat fee agreements, except in an emergency or when the client is a corporation, that when it is reasonably foreseeable that total expense to a client, including attorney fees, will exceed $1,000, the contract for services in the case shall be in writing. In the event there is no written contract when one is required, or the agreement fails to comply in some other respect with Business and Professions Code section 6148, the agreement is voidable at the client’s option. If the agreement is voided by a client, the attorney is nonetheless entitled to a reasonable fee. Continue reading

Fee Award to HOA Reversed Though Plaintiff’s Action Frivolous

   There was an interesting twist in a case brought by a homeowner against his HOA last week. The homeowner brought a civil action, asserting violations of association rules and the relevant statutory scheme. The trial court granted a second demurrer without leave to amend and granted the HOA attorney’s fees of approximately $15,000 pursuant to Civil Code section 1636.09(b). The trial court specifically found that the homeowner’s causes of action under Civil Code section 1636.9 were frivolous because the homeowner knew when the action was filed they were barred by the one-year statute of limitations. The appellate court reluctantly reversed the fee award in That v. Alders Maintenance Assn. Continue reading

Mediate Claims Against Homeowner Associations

   I received an email a few weeks ago from a homeowner who wanted to file suit against his homeowner association. I suggested that he might want to review the CC&Rs which may require an alternate method of dispute resolution, and which usually contain an attorney fee and cost provision. I also advised him of Civil Code section 1354 which provides that in any action to enforce the governing documents of a common interest development — the pevailing party shall be awarded reasonable attorney’s fees and costs. Continue reading

Do Not Blindly Request Attorneys’ Fees in Arbitration

   Arbitration is frequently touted as a less expensive and faster procedure to resolve disputes, preferable to resolution in court. Many contracts require it, and those that do frequently specify the American Arbitration Association as the forum. Parties, who are not bound by a prior agreement to arbitrate, may nonetheless agree to arbitration once a dispute arises.

   Under California law, an attorney fee award to the prevailing party is available only when authorized by statute or pursuant to written agreement. While many contracts have an attorney fee provision, many do not. Whether or not a contract contains such a provision, or whether attorneys’ fees are authorized by statute, should always be considered before a party resorts to the court for resolution — likewise, it should always be considered before any arbitration filing.

   The commercial rules of the AAA, for example, modify this result in one important respect. Rule R-43 provides for “an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.” The important change is, of course, that if all parties request such an award, the award may include an award of attorneys’ fees to the prevailing party, whether or not it is otherwise authorized.

   If not authorized by law or prior agreement, it is wise to think twice before requesting attorneys’ fees in arbitration. There is, perhaps, no right choice except in hindsight. But if the issue is never considered and attorneys’ fees are blindly requested, I see a  potential malpractice claim on the horizon.

   Michael Daymude consults with clients and accepts cases involving contractual disputes subject to arbitration, including disputes before the American Arbitration Association. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael at 818.971.9409.

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Mediate Disputes Under Standard Residential Purchase Agreement!

    The California standard form residential purchase agreement provides that in most disputes the prevailing party may recover legal fees.  However, this right is subject to a condition. Paragraph 17A reads: “If, for any dispute . . . to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after [the making of] a request . . . , then that party shall not be entitled to recover attorney’s fees . . . .”

   After a lawsuit is filed and the defendant prevails, the issue then becomes whether there has been refusal by defendant to mediate when attorney’s fees are sought. In Cullen v. Corwin the issue was whether defendants Corwin, who prevailed on summary judgment due to the running of the statute of limitations, were excused from the mediation requirement. Continue reading