Judge: H. Jay Ford, III, Case: 22SMCV02457, Date: 2023-08-22 Tentative Ruling

Case Number: 22SMCV02457    Hearing Date: August 22, 2023    Dept: O

Case Name:  Velaro, Inc. v. LG Electronics Alabama, Inc.

SUBJECT:                MOTION FOR ATTORNEY’S FEES

MOVING PARTY:  Specially Appearing Defendant LG Electronics Alabama, Inc.        

RESP. PARTY:        Plaintiff Velaro, Inc.

TENTATIVE RULING

            Specially Appearing Defendant LG Electronics Alabama, Inc.’s Motion for Attorney’s Fees is GRANTED pursuant to CCP §§1021.5, 1033.5(a)(10) and §15(g) of the Live Chat Agreement.  Defendant to submit a supplemental declaration detailing the amount of fees spent on the motion to dismiss only.  Defendant is limited to recovery of fees incurred in litigating the forum selection clause. 

            Defendant seeks fees pursuant to §15(g) of the Live Chat Agreement.  Pursuant to §15(g) as amended by Amendment No. 7 to the Live Chat Agreement, “The prevailing party in any dispute or proceeding arising hereunder shall be entitled to recover its costs and expenses incurred therein (including reasonable attorney’s fees and expenses).”  Defendant argues it is the prevailing party in this action because it prevailed on its motion to dismiss based on the Alabama forum selection clause. 

Defendant is not the prevailing party pursuant to Civil Code §1717 based on DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5^th 968, 971.  The Supreme Court addressed this precise, narrow issue in DisputeSuite.com:  “Is the defendant in an action arising out of contract entitled to an award of attorney fees under Civil Code section 1717 (section 1717) by virtue of having obtained a dismissal from a California court on the ground that the agreement at issue contained a forum selection clause specifying the courts of another jurisdiction? In the circumstances of this case, we conclude the trial court did not abuse its discretion in finding that defendants were not prevailing parties for purposes of section 1717. Considering that the action had already been refiled in the chosen jurisdiction and the parties' substantive disputes remained unresolved, the court could reasonably conclude neither party had yet achieved its litigation objectives to an extent warranting an award of fees. (See § 1717, subd. (b)(1) [court may determine that there is no party prevailing on the contract]; Hsu v. Abbara (1995) 9 Cal.4th 863, 876, 39 Cal.Rptr.2d 824, 891 P.2d 804 [prevailing party determination is to be made by comparing the parties' relative degrees of success “upon final resolution of the contract claims”].)”  DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968, 971.

Defendant merely obtained a dismissal of this action, but it has yet to prevail on the contract dispute between the parties.  Plaintiff has refiled its claims in Alabama and that action is currently pending.  See Opposition, Dec. of J. Atabek, ¶2.  DisputeSuite.com is directly on point and controlling. Under these facts, Defendant is clearly not the prevailing party under Civil Code §1717.

However, Defendant only argues Civil Code §1717 in the alternative.  Defendant primarily argues it is entitled to recover fees under CCP §§1021, 1032(b) and 1033.5(a).  Defendant argues the language of the attorney’s fees provision is broad enough to include a motion to dismiss based on forum nonconvenience, because it allows for recovery of fees by the prevailing party “in any dispute or proceeding arising hereunder.”

Defendant is only entitled to fees pursuant to CCP §1032(b) and 1033.5(a) if Defendant can identify a contractual, statutory or legal basis for its fee request.  Defendant relies on CCP §1021 as the statutory basis for its fee request and §15(g) as the contractual basis for its fee request. 

Section 1021 states, “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....”  “It is quite clear from the case law interpreting section 1021 that parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves.  Before section 1717 comes into play, it is necessary to determine whether the parties entered an agreement for the payment of attorney fees and, if so, the scope of the attorney fee agreement.”  Maynard v. BTI Group, Inc. (2013) 216 Cal.App.4th 984, 989–990. 

“While it is clear that an attorney fee provision may authorize an award of fees only to the party who prevails on a claim to enforce the terms of the contract containing that provision, it is equally clear that an attorney fee provision need not be so limited. As indicated above, 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.  The attorney fees clause in a contract “may be broad enough to cover tort as well as contract causes of action.  If the attorney fee provision does encompass noncontractual claims, the prevailing party entitled to recover fees normally will be the party whose net recovery is greater, in the sense of most accomplishing its litigation objectives, whether or not that party prevailed on a contract cause of action.”  Id. at 991-992.

As discussed in Maynard, CCP §1021 ordinarily arises where contract and noncontract claims are alleged together and a party cannot claim prevailing party status under CC §1717 on the contract claims.  Defendant relies on Maynard to support its claim that it is entitled to recover its fees, because §15(g) is not limited to the party who prevails in enforcing the contract or to contract claims. 

However, Maynard did not address the very specific fact pattern here, which overlaps with the fact pattern in DisputeSuite:  may Defendant recover as the prevailing party in this action based on its successful motion to dismiss based on the Alabama forum selection clause?  Neither Plaintiff nor Defendant have presented any authority directly addressing this issue. 

Plaintiff argues that Defendant cannot attempt to circumvent Disputesuite.com by relying on CCP §1021 and §15(g).  However, Defendant is not attempting to impermissibly circumvent Disputesuite.com.  Defendant is attempting to distinguish it, as it only deals with whether the facts presented would support a finding of prevailing party Civil Code §1717. 

Plaintiff also argues that the definition of “prevailing party” may not be circumvented by the parties’ contractual definition of “prevailing party.”  Plaintiff relies on Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4^th 698.  In Exxess Electronixx, the Court of Appeals found the parties’ attorney’s fee provision impermissibly circumvented the definition of “prevailing party” under Civil Code §1717, because the attorney’s fee provision allowed for recovery of fees even in cases of voluntary dismissal.  Such a definition directly contradicted Civil Code §1717(b)(2), which states there is no prevailing party on the contract where the action is dismissed by voluntary settlement, and the provision was therefore void.  “Contractual provisions that conflict with the “prevailing party” definition under section 1717 are void.”  Exxess Electronixx, supra, 64 Cal.App.4th at 707.

Exxess Electronixx is distinguishable.  Unlike the fee provision in Exxess Electronixx, section 15(g) does not clearly and directly contradict any aspect of the express definition of “prevailing party” set forth in Civil Code §1717.  

Unfortunately, DisputeSuite.com failed to quote the specific attorney’s fee provision analyzed by the Supreme Court.  The Court therefore cannot analyze whether the language of §15(g) is distinguishable from that analyzed in DisputeSuite.com. 

The Court will not interpret DisputeSuite.com more broadly than the narrow proposition for which it stands.  The Court cannot interpret DisputeSuite.com in a manner that robs parties of their right to agree to whatever attorney’s fees provision they choose under CCP §1021. So long as the definition of prevailing party adopted by the parties does not directly contradict the express definition of “prevailing party” under Civil Code §1717, the parties’ definition of prevailing party is not void.  Plaintiff fails to establish that §15(g) directly contradicts the express definition of prevailing party under CC §1717. 

As such, while the Defendant is clearly precluded from recovery fees under Civil Code §1717 as prevailing party based on DisputeSuite.com, the Court finds that §15(g) is broadly worded and encompasses any dispute under the agreement, including any dispute over the interpretation and enforcement of a specific provision.  Defendant prevailed on its motion to dismiss based on the forum selection clause.  Defendant is therefore entitled to recover those fees incurred in litigating the motion to dismiss only.

Plaintiff asks that the Court reduce the requested fees to $20,000 if it is inclined to award fees.  Plaintiff’s request is intended to limit the award to time spent on the motion to dismiss only. 

Defendant provided a declaration breaking down the fees by attorney, each attorney’s hourly rate and the time spent by each attorney on the case.  Defendant should submit a supplemental declaration limiting the fees requested to the amount of time spent on the motion to dismiss.  The declaration should set forth the attorney, the attorney’s rate and the number of hours spent by the attorney on the motion to dismiss.  Defendant should submit this declaration by ______________________.  Plaintiff may file any objections to that supplemental declaration within 10 days.