Judge: Lynne M. Hobbs, Case: 22STCV15330, Date: 2024-06-26 Tentative Ruling
Case Number: 22STCV15330 Hearing Date: June 26, 2024 Dept: 61
KENNETH CHILDS, et al. vs IRIS AU, et al.
TENTATIVE
Defendants Iris Au, Dream Agency, Inc., and Zort, Inc.’s Motion for Attorney Fees is DENIED.
Plaintiffs to provide notice.
DISCUSSION
“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; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.” (Code Civ. Proc., § 1021.)
“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, subd. (a).) “[T]he party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.” (Civ. Code, § 1717, subd. (b)(1).)
In determining the proper amount of fees to award, courts use the lodestar method. The lodestar figure is calculated by multiplying the total number of reasonable hours expended by the reasonable hourly rate. “Fundamental to its determination . . . [is] a careful compilation of the time spent and reasonable hourly compensation of each attorney . . . in the presentation of the case.” (Serrano v. Priest (1977) 20 Cal.3d 25, 48 (Serrano III).) A reasonable hourly rate must reflect the skill and experience of the attorney. (Id. at p. 49.) “Prevailing parties are compensated for hours reasonably spent on fee-related issues. A fee request that appears unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether.” (Serrano v. Unruh (1982) 32 Cal.3d 621, 635 (Serrano IV).) The Court in Serrano IV also stated that fees associated with preparing the motion to recover attorneys’ fees are recoverable. (See id. at p. 624.)
Defendants Iris Au, Dream Agency, Inc. and Zort, Inc. (Defendants) seek $97,111.29 in attorney fees, representing 209.7 hours of attorney work defending this litigation. (Motion at p. 9.) Defendants rely on an attorney fees provision contained in the services agreement executed between Plaintiff Paramount Investigative Services, Inc. (Paramount) and alleged conspirator Alex Iza, which states:
The Client [Iza] agrees that the Agency [Paramount] may, at its option, charge interest on any amounts more than 30 days overdue at a rate 5% simple interest. The Client also agrees that the Agency may refer to a collection agency any unpaid balances overdue more than sixty (60) days. The Client agrees to be liable for all costs associated with collection including attorney fees and service of process. (Darvish Decl. Exh. A at p. 2, italics added.)
Although this fee provision is unilateral, by its terms allowing only Plaintiffs to collect their fees from a delinquent client, Defendants rely on Civil Code § 1717, which allows a prevailing party in an action on a contract to collect attorney fees pursuant to such a clause, “whether he or she is the party specified in the contract or not.” (Motion at p. 7, quoting Civ. Code § 1717, subd. (a).) Defendants argue that this was an action on a contract, despite the tort nature of the claims alleged, because the damages asserted are based on Plaintiffs’ performance of services under the contract, and Defendants’ failure to pay or interference with payment for those services. (Motion at pp. 7–8.)
Defendants’ argument for fees is unpersuasive, because this action has been voluntarily dismissed, and as such no fees are available under Civil Code § 1717. Plaintiffs dismissed this action on January 11, 2023, prior to hearing on Defendants’ demurrer. Civil Code § 1717 states:
Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section. (Civ. Code § 1717, subd. (b)(2).) As this matter was voluntarily dismissed, no fees are appropriate.
Defendants argue in reply that the above provision does not foreclose all fees per se when a contracts case has been dismissed. They argue that this court must assess the fee provision at issue to determine whether fees may be awarded for defending Plaintiffs’ tort claims. (Reply at pp. 6–9.)
Defendants are correct on the law, but this law does not help them. A voluntary dismissal does not foreclose recovery for litigating tort claims, if the attorney fee provision at issue is broad enough to support such recovery in the absence of Civil Code § 1717:
Under section 1717, the seller defendants are not “part[ies] prevailing on the contract” because that section specifies that there is no party prevailing on the contract when, as here, the plaintiffs have voluntarily dismissed the action, and therefore defendants may not recover the attorney fees they incurred in the defense of the contract claim. But this conclusion does not affect the seller defendants' right to recover as costs the attorney fees they incurred in defense of the tort claims. Because section 1717 does not apply to those claims, it does not bar recovery of attorney fees that were incurred in litigation of those claims and that are otherwise recoverable as a matter of contract law. (Santisas v. Goodin (1998) 17 Cal.4th 599, 619, internal citations omitted.)
Here, Defendants are not entitled to any fees following a voluntary pre-trial dismissal, because the fee provision at issue has no application to them without the operation of Civil Code § 1717. The contract renders the client “liable for all costs associated with collection including attorney fees and service of process.” (Darvish Decl. Exh. A at p. 2.) By its terms it provides no avenue for the client to seek fees of their own — save by the mandatory reciprocity provided to prevailing parties under Civil Code § 1717. But under Civil Code § 1717, there is no prevailing party here, because the matter has been voluntarily dismissed. (Civ. Code § 1717, subd. (b)(2).)
Matters might be different if the attorney fees clause were more expansive in scope and bilateral by its terms, such as the fee provision at issue in Santisas v. Goodin:
In the event legal action is instituted by the Broker(s), or any party to this agreement, or arising out of the execution of this agreement or the sale, or to collect commissions, the prevailing party shall be entitled to receive from the other party a reasonable attorney fee to be determined by the court in which such action is brought. (Santisas, supra, 17 Cal.4th at p. 603.) The fee provision here is not comparable, as the Santisas court acknowledged when it drew a distinction with another case:
We perceive no inconsistency between our conclusion here and the decision in Rosen v. Robert P. Warmington Co. (1988) 201 Cal.App.3d 939, 247 Cal.Rptr. 635, in which the Court of Appeal upheld the trial court's decision denying attorney fees following the dismissal of an action asserting both contract and tort claims arising from a real property lease agreement. The attorney fee provision at issue in that case, unlike the one at issue here, was narrowly drawn to cover only claims “ ‘to recover the possession of the demised premises, collect any money due ... hereunder or enforce any other provision, condition or agreement of this lease....’ ” (Id. at p. 941, fn. 1, 247 Cal.Rptr. 635.) Thus, the defendant had no contractual right under the lease to recover attorney fees incurred in defense of the tort claims. (Id. at p. 622, fn. 9.) The clause at issue here is “narrowly drawn” in a similar fashion.
Defendants are thus not the prevailing parties under Civil Code § 1717, and are not entitled to fees under the contract.
The motion is therefore DENIED.