Judge: Mark H. Epstein, Case: 23SMCV04284, Date: 2024-12-24 Tentative Ruling

Case Number: 23SMCV04284    Hearing Date: December 24, 2024    Dept: I

This is a fee motion brought by Mashian following Mashian’s successful defense of the case.  (The decision in Mashian’s favor is presently on appeal, but that does not affect the court’s jurisdiction over the fee motion.)  Mashian seeks fees on two theories.  The first is under Civil Code section 1717 on the theory that the retainer agreement between Mashian’s law firm on the one hand and Miles on the other hand had a fee provision.  The other theory is under CCP section 128.5 on the theory that the case was filed in bad faith.  The court turns first to the 128.5 motion. 

CCP section 128.5 allows a party that believes a filing was made in bad faith to seek sanctions, including attorneys’ fees, against the party so filing.  Where possible, the law requires that the moving party provide a safe-harbor by serving the motion at least 30 days before filing such that if the offending paper is withdrawn the motion will not be filed.  Here, Mashian asserts that the safe harbor provision is inapplicable because, post-judgment, it is too late to withdraw anything.  It is true that it is too late to withdraw anything, but that does not fully answer the question.  The court agrees that there is no safe harbor requirement here, as it would be futile.  But that is only because Mashian did not bring the 128.5 motion earlier.  This really devolves to an end run around a malicious prosecution action, which is how the matter ought to be resolved.  That is not to say that there is not some bite to the claim by Mashian.  Miles’ theory here strikes the court as outlandish.  Essentially, the argument is that Mashian’s law firm had a retainer agreement with Miles to do legal work for a fee and it also had a more informal agreement with Viridity (an entity that hoped to enter into a transaction with Miles) whereby Viridity would pay the legal fees.  Miles’ theory is that Mashian’s firm secretly intended to collect the same fee twice—that is, the same work would be billed in full to both Miles and Viridity and the firm would collect a double recovery.  This court just does not buy the notion that the firm secretly intended a double recovery (and then sued Miles and Viridity in order to perfect its fraudulent scheme).  The court viewed, and views, the arrangement such that both Viridity and Miles were responsible for the fee, but that the fee needed to be paid but once, which is why, for example, the retainer Viridity paid was credited against the amount owed.  Such is hardly illegal or unusual.  That said, a 128.5 motion at this stage is the wrong way to get fees.  The 128.5 motion is DENIED.

That leads to the contractual fee provision.  That is an odd one.  Miles points out that Mashian is not actually a party to the contract—Mashian’s law firm is.  But Miles nonetheless brought this action claiming that Mashian violated various duties imposed upon Mashian in part by virtue of the attorney/client relationship.  While it is technically true that the firm was the other party to the agreement, Miles cannot avoid the fee provision in the contract when his suit is based—at least in part—on the contract and the attorney/client relationship.  The doctrine of equitable estoppel would permit Mashian’s motion.  Miles also claims that he is not liable for 1717 fees because his suit sounds in tort, not in contract.  But that does not answer the question.  The question is whether the fee provision is written broadly enough to cover any dispute between the parties related to the representation or is written narrowly so as to cover only breach of contract.  If the former, Miles argument will fail.  The matter was addressed in Yoon v. Cam IX Trust  (2021) 60 Cal.App.5th 388 (as well as many other cases).  There, a promissory note was at issue.  The defense prevailed and sought fees.  Plaintiff opposed asserting that its claims were based in tort only.  The trial court disagreed and the Court of Appeal affirmed.  The reason there was that the torts were based on the contractual relationship and the fee clause was written broadly enough to encompass that claim.  The same applies here.  Miles’ claims, even if they were torts, were based on the contract and the relationship that the contract formed.  (See, e.g., SAC ¶ 28.)  And the clause is written broadly enough to encompass that claim.  The clause states it applies to actions “instituted between Client and Attorney for any reason.”  This is within that clause.

But there is a harder question.  Miles also argues that the clause only applies to arbitrations.  Frankly, this is his strongest claim.  Oddly, the fee provision is not a standalone provision, as (at least in this court’s experience) is more common.  Rather, it is placed in the arbitration paragraph, which is (appropriately enough) entitled “Arbitration.”  That provision states that any “dispute concerning any services rendered or billing or billings submitted by Attorney” shall be resolved by arbitration.  The fee clause, quoted in part above, is the next sentence.  And then the paragraph states that the arbitration award is final and binding.  Read in context, it is certainly a plausible reading of the paragraph that all disputes will be arbitrated, the prevailing party in the arbitration gets fees, and that the arbitration is a binding one.  That is not the only reasonable reading of the clause; the clause can also plausibly be read to say that any dispute will result in fees to the prevailing party whether or not it is arbitrated.  But it could hardly have been written in a less clear manner.  To help understand the clause better, the court has looked to see whether Mashian made any attempt to get the case to arbitration.  That is because one, and perhaps the best, reading of the provision is that any dispute will be decided by arbitration and the prevailing party gets fees, but the fees ought not to be forfeit if the prevailing party was unable to arbitrate.  Here, the court does not see any attempt by Mashian to compel arbitration.  However, this case is one of three related cases, and it could well be that Mashian did try to arbitrate here or in one of the other cases but was unsuccessful or that there was some other reason why, through no fault of his own, Mashian was unable to move the case to an arbitral forum.  The court will inquire as to whether such is the case.  If it is, then the court would be inclined to grant the motion.  If not, the matter is not so simple.  Frankly, were this a more typical contract with a standalone fee shifting provision, the motion would be granted.  But the court must take the contract as it finds the contract.

The contract is poorly and ambiguously written.  And here, Mashian (or his law firm) drafted the agreement, not Miles.  While hardly the most robust maxim of jurisprudence, where other rules of interpretation do not resolve an ambiguity “the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.”  (Civ. Code sec. 1654.)  The court is somewhat at a loss as to why the fee provision was written this way, but it will inquire.  In sum, no one has presented any parol evidence as to this clause’s meaning, and in the court’s view the most plausible reading—especially in light of the ambiguity Mashian’s law firm created—is that fees are recoverable in an arbitration and also in litigation where arbitration was not allowed through no fault of the party seeking fees.  Because this is an argument no one briefed, the court will CONTINUE this motion to allow further briefing on that issue.