Sixth District Rejected 1717 Mutuality Challenge, But Did Remand For Determination of Reasonable Fee After Proof Failure.
Here is a very interesting one at the top of a new year in the retainer agreement/Civil Code section 1717/reasonableness of fees areas.
Palmer v. Taylor, Case No. H033644 (6th Dist. Jan. 4, 2011) (unpublished) was a situation where client successfully voided a contingency agreement under Business and Professions Code section 6147 with an attorney, such that client prevailed on a contractual count brought by attorney seeking to recoup fees under a written retainer agreement. However, attorney eventually prevailed after a trial on the quantum meruit count against the client (the same one defeating attorney’s contractual claim), recovering $55,000 out of requested fees of $147,455. Now comes the fee rub. Client then recovered $239,825.50 in attorney’s fees and costs (all of the requested amount) under a fees provision in the contingency fee agreement pursuant to Civil Code section 1717. Attorney, although recovering something, was miffed, and appealed the substantial fee award in favor of client.
The Sixth District reversed, but only with respect to the amount of the fee order.
Clearly, client was the prevailing party on the contract claim, with there being no need to consider his success or failure on other non-contract claims adjudicated at later phases of the litigation.
The most interesting argument by attorney was that client’s voiding of the contingency fee agreement somehow divested client of his ability to seek fees under the fees clause in the agreement. No go, said the appellate court. Because the Legislature was silent on the impact of voiding a contingency agreement with respect to Civil Code section 1717, the appellate court presumed section 1717 should govern. Attorney argued that 1717 mutuality would be subverted when Business and Professions Code section 6147 voiding occurs, but the Court of Appeal did not see it that way. If a client exercises the voiding option at the outset, then fees incurred on the contractual count will be minimal for everyone; however, if the client does not choose the voiding option and the contract count proceeds, the prevailing party on that count–”whoever that may be”–would be entitled to recover fees, whether that party be the attorney or client.
Nonetheless, the matter was reversed based on client’s failure below to demonstrate the reasonableness of the fees being sought, a burden which never shifted to attorney as the opposing party. Client tried to recover all fees for everything, without any apportionment. This client could not do, so the cause was remanded with directions to determine the amount of fees reasonably expended by client in his defense against the breach of contract action.