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Theory That There’s No ‘Prevailing Party’ Where Each Side Gets All It Seeks Rejected
Court of Appeal Says Party With Higher Monetary Recovery
Is Entitled to Attorney Fees Under Fee-Shifting Provision
By a MetNews Staff Writer
Div. Three of the Fourth District Court of Appeal yesterday rejected a litigant’s theory that where both the plaintiff and cross-complainant, suing on an agreement, receives an award of the full amount being sought, there is no prevailing party and an award of attorney fees, pursuant to a contractual provision, is inappropriate.
Acting Presiding Justice William W. Bedsworth authored the unpublished opinion. It affirms a $78,484 attorney-fee award of in favor of defendant/cross-complainant New England Country Foods, LLC (“NECF”) and against the plaintiff/cross-defendant VanLaw Food Products, Inc.
The underlying judgment was affirmed in a June 21 opinion by Bedsworth. Yesterday’s decision was confined to the post-judgment fee award by retired Orange Superior Court Judge Robert J. Moss, sitting on assignment.
VanLaw argued that it should not be penalized simply because NECF’s claim was for a higher amount than its claim, each party’s position having been fully vindicated. That’s what counts, it insisted, not the net monetary recovery.
If the rule were otherwise, it reasoned, it would create an incentive for defendants to bring cross-complaints for higher amounts than those sought in complaints, thus deterring plaintiffs with valid causes of action from suing.
Civil Code §1717
Bedsworth pointed out that where a contract provides for an award of attorney fees to the prevailing party, Civil Code §1717(b)(1) says that, generally, “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract,” though the court may find that there is no prevailing party.
He wrote:
“[T]he Legislature utilized a comparative term, ‘greater,’ in the statute, which means a litigant need not win a complete and total victory on all claims in order to be the prevailing party….Nor need a litigant have batted zero in order for the court to order him or her to pay the other side’s fees.
“Here, the trial court knew both sides were suing on the operating agreement. NECF’s cross-complaint was worth more, and it obtained all of the relief it sought. VanLaw obtained all of the relief it sought, but its complaint was worth less. It is a matter of simple mathematics. $115,571.31 is greater than $27,441.25, leaving a net monetary recovery for NECF of $88,130.06.”
He continued:
“It seems fairly clear to us that NECF obtained greater relief in the action on the contract, and it would likely have been an abuse of the court’s discretion not to recognize this….A trial court does indeed have discretion to find no party prevailed….But having such discretion does not mean it must make such a finding.”
‘Litigation Incentives’
The jurist added:
“VanLaw’s heightened concern about litigation incentives seems to us overstated. There are two questions every litigant must answer before suing or choosing to maintain a lawsuit. The first is whether he or she has a meritorious claim, and the second is whether it is worthwhile to pursue it. That second question will always involve consideration of whether the opponent’s claims are meritorious, and the decision whether to go forward with litigation will require a weighing of the risk such claims might succeed. The answers to those questions may change as the litigation proceeds, and they may very well be impacted by the claims and defenses presented by the other side.
“Such is the nature of litigation—each side goes to trial believing it has the better claim, and the outcome is left to the trier of fact. Each side takes a risk. Here, NECF’s cross-complaint may have been brought late, and it may have been worth more money. But if the trial court had ruled against NECF on the cross-complaint, and for VanLaw on the complaint, NECF would owe VanLaw money. The so-called ‘chilling effect’ VanLaw forecasts is merely the wager each litigant must make. An adversary system will always include such wagers.”
The case is VanLaw Food Products v. New England Country Foods, G061375.
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