However, Fee Recovery Modified to Allow Recovery Against Only Losing Signatory Defendant.
Plaintiff, after losing her investment in a security, sued various parties involved in its sales and packaging, with a jury ultimately awarding her $196,058.33 on fraud, fiduciary duty breach, negligence, and negligent misrepresentation claims. The lower court then awarded $125,000 (out of a requested $136,027.50) in attorney’s fees against all defendants, a corporate signatory and alleged individual agents/alter egos of the corporate signatory, based on a broad fees clause in a Loan Purchase Agreement. All defendants appealed the fee award.
The fee award was sustained, but modified to delete all but the signatory defendant as far as exposure in Clayton v. Marin Mortgage Bankers Corp., Case No. A139435 (1st Dist., Div. 5 May 30, 2014) (unpublished).
The defense argued that recovery was based on tort claims, which were not “on the contract” under Civil Code section 1717. This contention was rejected because plaintiff’s rescission claim was “on the contract” and required the trial judge to interpret the Loan Purchase Agreement. Given that “on the contract” language in section 1717 is construed liberally, this theory sufficed to allow for fee entitlement.
Losing defendants argued that the trial judge had to apportion between compensable contract and noncompensable noncontract causes of action, but the interrelationship between issues and proof did not show any discretion was abused in not making any allocation between claims.
However, the nonsignatory defendants did get the fee award thrown out against them because of an inadequate record: plaintiff did not present proof that these parties were alter egos or abettors such that they stood in the shoes or were bound by the terms of the Loan Purchase Agreement.
Finally, the amount of fees awarded could not be reversed under the deferential abuse of discretion review standard, especially since the defense did not provide proof or obtain a fee expert opposition declaration showing why fees were unreasonable/duplicative in nature. (Premier Medical Mgt. Systems, Inc. v. CIGA, 163 Cal.App.4th 550, 564 (2008); Bender v. County of Los Angeles, 217 Cal.App.4th 968, 986 (2013).)