Fifth District Drops Some Tantalizing Dicta About The Causal Relationship Necessary to Conclude Disputes “Arise Out of a Contract” for Purposes of Awarding Fees.
Although one might think that unpublished decisions only involve mundane issues of legal application, our posts have shown that they frequently confront novel issues or provide dicta indicating departure from the reasoning of colleagues in other appellate districts. The latter situation is what we see in Kurtz v. Wizbowski, Case No. F053776 (5th Dist. June 30, 2008) (unpublished), a 3-0 decision authored by Justice Wiseman of the Fifth District.
In Kurtz, the appellate court determined that although an arbitration agreement amending the sale contract said nothing about recovery of arbitration fees, the original sales contract had a broadly-worded fee clause allowing for fees expended in judicial proceedings to compel arbitration and enforce the resultant arbitration award arising from a settlement agreement between each side which was instrumental in consummating the sale in the first place. (The fees clause was paragraph 22 of the standard CAR residential sales contract, which provided “In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller …”). Justice Wiseman reasoned that the expansive “arising out of” language is essentially the same as “to which this Agreement gives rise” verbiage found to cover both contractual or tort disputes generated by the entire purchase agreement in Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338, 1343-1344 (1992). However, the Court of Appeal then proceeded to provide interesting dicta that may produce a different result depending on the particular circumstances. It stated:
“We need not go as far as the Xuereb court, however. To resolve this case, we do not need to say that every dispute of which a contract is a but-for cause is a dispute that arises from the contract. The causal relationship was stronger here. Defendant signed a settlement agreement that required her to do only one thing—pay $22,500—and then immediately refused to do it.
The fees were for proceedings needed to obtain relief from defendant’s total repudiation of the settlement agreement, a repudiation which left the alleged harm on which the original dispute was based completely unremedied. Circumstances might exist in which proceedings to enforce a settlement agreement might not arise from the contract at the root of the original dispute. If the settlement agreement in this case had included provisions on some collateral or subsidiary matter—for instance, if it had altered the provision in the sale contract stating that a stove and refrigerators were included in the sale price—proceedings to resolve a subsequent dispute over that matter would not necessarily fall within the attorneys’ fees clause of the original contract, even though the original contract might be a but-for cause of that dispute. Even if the causal relationship would not be strong enough to bring proceedings within an attorneys’ fees clause in a situation like that, we hold it was strong enough here.” (Slip Opn., at pp. 4-5.)
Defendant also complained that the fee substantiation—counsel’s declaration and attorney bills—were inadequate, even though counsel apportioned out time relating only to the judicial proceedings. Wrong, said the appellate court, observing: “[Tbe attorney] declaration and the supporting bills formed the evidentiary basis for the court’s award. This is the type of evidence upon which attorneys’ fees awards are normally based, and the evidence was sufficient.” (Slip Opn., at p. 5.)
Winning plaintiffs, although they only defended against defendant’s appeal, asked for fees incurred in the arbitration. The appellate panel found they were not entitled to relief, because plaintiffs filed no cross-appeal and cannot raise such an independent claim of error in response to defendant’s appeal. (Slip Opn., at p. 7.)
(SIDE NOTE—Mike Hensley was on the Cal. State University Fresno forensics squad for two years, and one of his teammates was Justice Wiseman, known at that time as Ms. Becky Case. Justice Hill, another jurist on the Fifth District, was also a year behind Mike at Fresno’s Bullard High. Greetings to both of you.)