Wednesday, December 28, 2016
C.A. Reverses $1.5 Million Attorney-Fee Award
By a MetNews Staff Writer
The Court of Appeal for this district has reversed a $1.5 million award of attorney fees pursuant a contractual provision for fees to the prevailing party because the contract in question was not between the plaintiff and the defendants.
It also reversed a $650,000 punitive-damage award, but upheld a $1.2 million award of compensatory damages.
The opinion, filed Friday, was not certified for publication. Los Angeles Superior Court Judge Gregory Alarcon presided over the trial.
Plaintiff Glovia International, Inc., gained a jury verdict for damages based on the unauthorized use of its software by Maxima Technologies & Systems, LLC, a subsidiary of Actuant Corporation. The software was licensed in 1996 to Datcon Instruments Company, which became Maxima Technologies, Inc.
Glovia’s theory was that defendant Maxima Technologies & Systems, LLC was a different entity from its now-nonexistent licensee, Maxima Technologies, Inc., and that the software had been converted.
Reversal of the attorney-fee award hinged on the rule that fee-shifting is reliant upon the existence of a contractual provision calling for it.
Opinion by Kumar
Writing for Div. Five, Acting Justice Sanjay T. Kumar, a Los Angeles Superior Court judge sitting on assignment, said:
“Here, Glovia did not bring an action on a contract—i.e., to enforce the contract’s terms….Instead, it brought an action claiming Actuant and Maxima were not valid holders of a license, a claim upon which it prevailed. Thus, as Glovia succeeded in proving it was not a party to a contract (i.e., license agreement) with Actuant or Maxima that contained an attorney fees clause, it was not entitled to its attorney fees.”
Kumar went on to say that Glovia “apparently contends that even though its action sought to establish that defendants were not parties to the license agreements, it is entitled to attorney fees…pursuant to the reciprocal provisions in [Civil Code] section 1717 which provides that if one party is entitled to attorney fees, under a contract, if it prevails, so is the other party.
He said Glovia’s assertion is that the “defendants requested attorney fees in their respective answers,” and are therefore bound to pay such fees to Glovia as the prevailing party.
The jurist responded:
“Because Glovia does not identify the affirmative defenses through which it claims defendants asserted the license agreements, we do not decide whether such an assertion would implicate section 1717’s provisions.”
No Punitive Damages
Kumar said the punitive-damage award must fall because “Glovia’s showing concerning Maxima’s ability to pay punitive damages was deficient.”
“Glovia contends the relevant inquiry is whether Maxima was able to pay the punitive damages award of $650,000 and Maxima did not claim in the trial court or on appeal that the award is ‘beyond its ability to pay.’ It was Glovia’s burden to demonstrate Maxima’s ability to pay the award, not Maxima’s burden to prove its inability.”
The compensatory damages were based on what the licensing fee would have been for a new customer, plus interest from 2003, when the old Maxima entity was converted into the present one. The defendants argued that damages should have been pegged to the amount of a discounted fee which Glovia customarily assessed when there was an assignment of a license.
“In effect, Maxima argues that having used Glovia’s software without permission for over 10 years, refused to pay Glovia’s offered license assignment fee once Glovia discovered Maxima’s conversion, and taken its chances at trial and losing, it should only have been assessed as damages a discounted license fee—presumably the assignment fee Glovia would have charged Maxima Technologies, Inc. had Maxima Technologies, Inc. requested an assignment when it was ‘converted’ into Maxima. Defendants cite no authority for the proposition that, as a matter of law, a party whose software has been converted may recover compensatory damages only in the amount it would have charged a favored customer had such a customer requested to assign its license for the same software.”
The case is Glovia International v. Actuant Corp., B267175.
Teresa C. Chow, Richard M. Knoth, and Michael J. Montgomery of Baker & Hostetler were attorneys for Glovia. Theodore E. Bacon, David John Masutani and William M. Hensley of AlvaradoSmith represented the defendants.
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