Friday, April 7, 2017
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High Court Upholds Denial of Reciprocal Attorney Fees
Award Held Discretionary Where Dismissal Not on the Merits
By KENNETH OFGANG, Staff Writer
A trial judge may deny an attorney fees motion under Civil Code §1717 where the defendant wins a dismissal other than on the merits and the substantive issues remain to be litigated in a non-California forum, the state Supreme Court ruled yesterday.
The justices unanimously affirmed a decision by this district’s Court of Appeal, upholding Los Angeles Superior Court Judge James Chalfant’s denial of a fee motion by lawyers for Scoreinc.com and its principals.
Score and the individual defendants were sued by DisputeSuite.com, LLC over allegations that the defendants breached their obligations under a license agreement for DisputeSuite’s credit repair software. The defendants moved to dismiss the action based on agreements designating Florida courts as the appropriate forum for litigation between the parties.
Third Agreement
DisputeSuite argued that a third agreement between the parties designated the Los Angeles Superior Court as the appropriate one to hear the case. Chalfant, however, concluded that the disputes set forth in the pleadings arose under the other two agreements and stayed the action to permit DisputeSuit to refile in Florida, which it did.
The judge then dismissed the action here, leading the defendants to move for attorney fees totaling nearly $85,000 under §1717.
The statute effectively makes any contractual attorney fee clause bilateral, and one of the contracts between the parties had such a clause. But Chalfant concluded that because the merits of the dispute were still being litigated, Score was not a prevailing party for purposes of §1717.
The Court of Appeal affirmed, reasoning that because the defendants did not achieve “a final resolution of this contract claims,” they were not the prevailing party and not entitled to attorney fees.
Justice’s Opinion
Justice Kathryn M. Werdegar, writing for the Supreme Court, said there was no abuse of discretion on the part of the trial court judge.
She cited Hsu v. Abbara (1995) 9 Cal.4th 863. The Hsu court held that when the trial court “renders a simple, unqualified decision in favor of the defendant on the only contract claim in the action[,] . . . the defendant, who is unquestionably the sole victor, is the party prevailing on the contract as a matter of law and therefore entitled to reasonable attorney fees under section 1717.”
Where the results are “mixed,” however, the trial judge had discretion to determine that no party has prevailed, the court said. In the present case, Werdegar said, “we conclude the trial court acted within its discretion in determining that Score had not ‘prevail[ed] on the contract’ within the meaning of section 1717, subdivision (b)(1), by moving the litigation to Florida.”
Score, she elaborated, succeeded in enforcing the forum selection clauses, but did not defeat the breach of contract and related claims. It did not obtain the “simple, unqualified win” on the contract claims that the Hsu court spoke of, it “merely obtained a different forum in which to oppose them.”
Prevailing Party
Werdegar cautioned that a party that prevails on wholly procedural grounds may still be awarded attorney fees.
“The flaw in Score’s claim to be the prevailing party here is not that its victory in the California trial court was procedural but that it was not dispositive of the contractual dispute,” the justice said. “By the time of the trial court’s decision on fees, that dispute was already being litigated in a Florida court.”
The case of DisputeSuite.com v. Scoreinc.com, 17 S.O.S. 1808, was argued in the Supreme Court by Robert Cooper of Wilson, Elser, Moskowitz, Edelman & Dicker for the defendants, and James J. Little of J.J. Little & Associates for the plaintiff.
Copyright 2017, Metropolitan News Company