Result Was An Adverse Fee/Cost Award of Over $275,000
In Gupta v. Shue, Case No. B198449 (Apr. 30, 2009) (unpublished), both sides engaged in bitter, protracted litigation over whether each received, by assignment, a general partnership interest in a real estate limited partnership—with the limited partnership caught in the middle of the litigation. After a jury verdict and court judgment so found, the lower court ruled that the general partnership was the prevailing party and it was entitled to an award of fees and costs. Earlier, the Second District, Division 1 reversed one aspect of the judgment and remanded for a prevailing party determination and a fee award analysis, instructing the lower court to also specify the contractual bases for the fee award, to determine if any apportionment was necessary between contract and noncontract claim, and to ensure that any fee award was not excessive. On remand, the trial court determined the general partnership was again the prevailing party and assessed fees of $265,490 and costs of $9,616.60 jointly and severally against the individual litigants unsuccessfully claiming to be the general partners. The fee award on remand was appealed, with the next case being the decision on that award.
The unsuccessful individual litigants did not win on appeal the second time around. In doing so, the appellate panel engaged in a systematic discussion of issues that crop up frequently in cases involving awards of fees under Civil Code section 1717. Here are the most salient issues discussed:
- Contractual basis—The partnership agreement and subsequent agreement had sufficiently broad fees clauses to serve as predicates for a fee award. Because the general partnership would have faced fee exposure had it lost, the nonsignatories were at risk also. (Dell Merk, Inc. v. Franzia, 132 Cal.App.4th 443, 450 (2005).)
- Estoppel—The contesting parties were not estopped from contesting the fee entitlement simply because they prayed for fees in their pleadings. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4th 858, 897-899 (2008); this is a majority view on the issue—see our category “Estoppel” on the lefthand side of this page.)
- Prevailing party—This determination is a pragmatic one, with the lower court justified in concluding that the individuals lost the main battle to be general partners. Their small win of $14,000 on an unjust enrichment claim did not alter the loss on the biggest issue at stake. (Roden v. AmerisourceBergen Corp., 155 Cal.App.4th 1548, 1580 (2007) [Pyrrhic victories usually do not mean that litigants prevailed].)
- Apportionment—Because the interference claims were intertwined with the contract claims, no allocation between contract and noncontract claims was necessary. (Abdallah v. United Savings Bank, 43 Cal.App.4th 1101, 1111 (1996).)
- Amount of fees—The trial court properly reduced the sought-after fees of $398,000 by a third (to $265,490) because there was no need for two attorneys to attend every hearing and every day of an 18-day trial. (El Escorial Owners’ Assn. v. DLC Plastering, Inc., 154 Cal.App.4th 1337, 1366-1367 (2007).)
- Joint and several nature of the award—The trial court has discretion to either apportion or not apportion costs among losing parties. (Acosta v. SI Corp., 129 Cal.App.4th 1370, 1375, 1378-1379.)