Judge: Daniel S. Murphy, Case: BC661332, Date: 2023-05-26 Tentative Ruling

Case Number: BC661332    Hearing Date: May 26, 2023    Dept: 32

BACKGROUND

            On May 15, 2017, Plaintiffs EFD USA Inc. (EFD) and Georgina Teran (Teran) filed this action against Band Pro Film and Digital, Inc. (Band Pro), Direct Video Warehouse, Inc. (DVWI), Maxpro Leasing, LLC (Maxpro), AKT Enterprises, LLC (AKT), Technijan, Inc. (Technijan), Brandon Brooks (Brooks), Greg Bisel (Bisel), and Amnon Band. EFD is a supplier of motion picture equipment and services to film and television productions. Teran is the founder of EFD. This dispute stems from EFD’s allegations about fraudulent and other improper charges by its major supplier and others regarding equipment financing transactions. The operative First Amended Complaint (FAC) was filed November 21, 2017.

            Plaintiffs settled the matter with Bisel and his related entities Maxpro, AKT, and Technijan (collectively, Bisel Defendants). The settlement addressed: EFD’s claims; AKT’s cross-claim for breach of contract; and a separate lawsuit filed by Bisel regarding an illegally recorded phone call. The matter went to trial before a jury on three claims asserted by EFD against Band Pro, Amnon Band, and Brandon Brooks: (1) fraud; (2) aiding and abetting fraud; and (3) money had and received. According to the verdict rendered on October 19, 2022, the jury found Band Pro and Brooks liable on all three claims, and Amnon Band liable for aiding and abetting fraud. As for damages, the jury attributed $49,481 to Band Pro, $49,481 to Brooks, and $10,995 to Amnon Band, for a total of $109,958. EFD also asserted UCL claims against Band Pro, Amnon Band, Brooks, and DVWI, which were heard as a bench trial.

            On January 30, 2023, the Court issued a statement of decision finding, among other things, that the Bisel settlement completely offset Plaintiff’s trial damages and UCL restitution. Judgment was entered on February 22, 2023, wherein Plaintiffs took nothing on their First Amended Complaint. Plaintiffs’ motions for new trial and vacate judgment were denied on April 18, 2023.

            On April 24, 2023, DVWI filed the instant motion for attorneys’ fees on the grounds that it prevailed against Plaintiffs. Each of the three leases upon which EFD based its UCL claim against DVWI contains an attorneys’ fees provision. Plaintiffs filed their opposition on May 15, 2023. DVWI replied on May 19, 2023.  

LEGAL STANDARD

             “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .” (Code Civ. Proc., § 1021.) Section 1021 “allows the parties to agree that the prevailing party in litigation may recover attorney fees, whether the litigation sounds in contract or in tort.” (Miske v. Coxeter (2012) 204 Cal.App.4th 1249, 1259.)

“In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717(a).)

DISCUSSION

I. Applicability of Civil Code Section 1717

DVWI seeks to recover attorneys’ fees based on an identical provision in the three subject leases. The provision states: “In the event that litigation results from or arises out of this Lease or the performance thereof, the Parties agree to reimburse the prevailing Party’s reasonable attorneys’ fees . . . .” (Band Decl., Ex. D-F.) DVWI argues that it is the prevailing party under Code of Civil Procedure section 1032(a)(4) because Plaintiffs recovered nothing against DVWI on the UCL claim due to the settlement offset, and Plaintiffs dismissed their other claims against DVWI.

Parties are free to agree that the prevailing party in litigation may recover attorneys’ fees, regardless of whether the litigation is based in contract or tort. (Miske, supra, 204 Cal.App.4th at p. 1259.) For noncontract claims, the general provisions of the Code of Civil Procedure govern the recovery of attorneys’ fees. (Maynard v. BTI Group, Inc. (2013) 216 Cal.App.4th 984, 994.) But where an action is “on a contract” and the contract provides for attorneys’ fees to the prevailing party, recovery is governed by Civil Code section 1717. In contract actions, there is no “separate contractual right to recover fees that is not governed by section 1717.” (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 545.) The prevailing party under Code of Civil Procedure section 1032 is not necessarily the prevailing party under Civil Code section 1717. (McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456.) As discussed below, DVWI would not be the prevailing party under Section 1717.  

DVWI argues that Civil Code section 1717 does not apply because this is not an action “on a contract.” “‘[O]n a contract’ does not mean only traditional breach of contract causes of action. Rather, California courts liberally construe ‘on a contract’ to extend to any action as long as an action ‘involves’ a contract and one of the parties would be entitled to recover attorney fees under the contract if that party prevails in its lawsuit.” (Yoon v. CAM IX Trust (2021) 60 Cal.App.5th 388, 393, quoting Mitchell Land & Improvement Co. v. Ristorante Ferrantelli, Inc. (2007) 158 Cal.App.4th 479, 486.) “An action (or cause of action) is ‘on a contract’ for purposes of section 1717 if (1) the action (or cause of action) ‘involves’ an agreement, in the sense that the action (or cause of action) arises out of, is based upon, or relates to an agreement by seeking to define or interpret its terms or to determine or enforce a party's rights or duties under the agreement, and (2) the agreement contains an attorney fees clause.” (Orozco v. WPV San Jose, LLC (2019) 36 Cal.App.5th 375, 408.)

Here, the relevant provision in the leases allows for attorneys’ fees only in litigation that “results from or arises out of this Lease or the performance thereof.” (Band Decl., Ex. D-F.) Only claims that arose from “this lease” (i.e., the three leases with DVWI) would be subject to attorneys’ fees. EFD sought restitution for the inflated amounts it paid on the leases and also accused DVWI of engaging in unlicensed lending because the leases functioned as loans. Therefore, the claim involved an agreement and sought to define its terms or determine the parties’ rights under the agreement. (See Orozco, supra, 36 Cal.App.5th at p. 408.) This makes the action “on a contract” and triggers Civil Code section 1717 to govern the recovery of attorneys’ fees.

II. Prevailing Party Under Section 1717

Under Section 1717, “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section.” (Civ. Code, § 1717(b)(1).) “The prevailing party determination is to be made only upon final resolution of the contract claims and only by a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.” (Mustachio v. Great Western Bank (1996) 48 Cal.App.4th 1145, 1150.)

            Under Section 1717, the Court has discretion to find that neither party prevailed. “Typically, a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought. In other words, the judgment is considered good news and bad news as to each of the parties.” (Deane Gardenhome Assn. v. Denktas (1993) 13 Cal.App.4th 1394, 1398, internal citations omitted.) This occurs in cases where “the opposing litigants could each legitimately claim some success in the litigation” or where “ultimately no relief was awarded to any party.” (Hsu v. Abbara (1995) 9 Cal.4th 863, 875.)

            Here, the Court finds that there is no prevailing party under Section 1717 because both parties partially succeeded in their litigation objectives, and neither party recovered any relief. On the one hand, EFD successfully proved that DVWI engaged in deceptive practices and unlicensed lending. (See January 30, 2023 Stmnt. of Decision, pp. 12-16.) On the other hand, DVWI succeeded in offsetting its liability. (Id. at pp. 5-9.) This constitutes good news and bad news for each of the parties, and each can legitimately claim some success in the litigation. Therefore, there is no prevailing party under Section 1717, and DVWI is not entitled to recover attorneys’ fees.

III. Dismissed Claims

            DVWI argues that it is considered the prevailing party on the claims which EFD dismissed. (See Code Civ. Proc., § 1032(a)(4).) However, the relevant provision in the leases allows for attorneys’ fees only in litigation that “results from or arises out of this Lease or the performance thereof.” (Band Decl., Ex. D-F.) Only claims that arose from “this lease” (i.e., the three leases with DVWI) would be subject to attorneys’ fees. Although EFD dismissed numerous other claims against DVWI, those claims are not covered by any attorneys’ fees provision. Those other claims, even if they involve DVWI, do not arise from the three specific leases where DVWI derives the attorneys’ fees provision. DVWI may be the prevailing party for purposes of other costs, but not for attorneys’ fees. (See McLarand, supra, 231 Cal.App.3d at p. 1456 [the prevailing party under Code of Civil Procedure section 1032 is not necessarily the prevailing party under Civil Code section 1717].)

CONCLUSION

            DVWI’s motion for attorneys’ fees is DENIED.