Monday, March 14, 2011
Court of Appeal for This District Tosses Postjudgment Attorney Fee Award
Panel Says Clause Allowing Award Did Not Extend Past Arbitration Proceedings
By SHERRI M. OKAMOTO, Staff Writer
This district’s Court of Appeal has thrown out a $22,500 attorney fee award in a breach of contract suit against a San Fernando Valley-area investment brokerage by a former employee.
In an unpublished decision Thursday, Div. Three concluded a clause in a contract between Krikorian Investment Services Inc. and Iman Eshaghyan only provided for the recovery of attorney fees incurred in connection with an arbitration.
Eshaghyan signed an employment contract Krikorian Investment in 2005 which provided, in part, that any dispute arising out of the agreement would be subjected to arbitration and set forth the terms governing such a proceeding.
The agreement stated that “all initial costs of arbitration” would be split between the parties, but and the prevailing party “shall be entitled to reimbursement of attorney’s fees, costs, and expenses incurred in connection with the arbitration.”
Another term of the agreement required that Eshaghyan comply with the terms of a policies and procedures manual, and one term contained in the manual which stated that a sales agent would be liable for a proportionate share of any expenses, including attorney fees, incurred by the brokerage firm in connection with a legal dispute arising from a transaction in which the agent was involved.
Eshaghyan filed a complaint against Krikorian Investments and others in July 2007, alleging breach of contract and other counts. No party moved to compel arbitration, and no arbitration was held.
The jury returned a verdict finding in favor of Eshaghyan on the count for breach of contract and awarded him $245,281.25 in damages. Eshaghyan then sought recovery of his attorney fees, contending he was entitled to an award of $155,372.50 pursuant to the terms of his employment contract and the policies and procedures manual
Los Angeles Superior Court Judge Ronald M. Sohigian granted the motion in part, awarding $22,500 in fees against Krikorian Investment in a minute order without indicating which contract he found to have supported the award.
Writing for the appellate court, Justice H. Walter Croskey noted the attorney fee clause in the employment agreement appeared in a paragraph expressly dealing exclusively with arbitration.
“The paragraph begins by stating that any dispute must be resolved by ‘arbitration,’ and then discusses a ‘written demand for arbitration,’ the venue for an ‘[a]rbitration,’ the substantive law that the ‘arbitrator’ must apply, and the ‘costs of arbitration,’ ” before the sentence providing that the prevailing party shall recover attorney fees, costs and expenses “ ‘in connection with the arbitration,’ ” Croskey said.
These repeated references to arbitration, Croskey reasoned, “leave no doubt that the parties intended to provide for the recovery of attorney fees by the prevailing party only in the event of an arbitration and that only fees incurred in connection with an arbitration are recoverable.”
Since no arbitration took place, no fees were incurred “in connection with an arbitration,” as required by the terms of the employment contract, and so the agreement did not authorize the fee award to Eshaghyan, Croskey explained.
Turning to the other possible basis for a fee award, the policies and procedures manual, Croskey again emphasized the placement of the fee provision language in the context of the entire document.
“The provision in the Policies and Procedures Manual appears in a section entitled ‘Agent’s Responsibilities with Regard to Legal Disputes and Litigation,’ ” which “relates exclusively to an action by a third party against the firm arising from a transaction involving the sales agent,” he wrote.
In this context, the justice concluded, the fee language “cannot reasonably be interpreted to apply to an action between the firm and an agent.”
Presiding Justice Joan D. Klein and Justice Richard D. Aldrich joined Croskey in his decision.
Jeremy D. Smith of Krane & Smith represented Krikorian on the appeal, in which Eshaghyan made no appearance.
The case is Eshaghyan v. Krikorian Investment Services, Inc, B221888.
Copyright 2011, Metropolitan News Company