Second District Panel Splits 2-1 on Whether Contractual Clause Allowed for Fee Recovery From Post-Arbitration Judicial Proceeding Win Before the “Dispute” Was Finally Resolved.
The next case illustrates how even appellate jurists will come to different conclusions when construing a contractual fees clause where the matter is one for de novo review based on the absence of parol evidence. The key question was how to construe the breadth of the term “dispute.”
Attorney’s fees were the central battleground at issue in Siljan, Inc. v. Filet Menu, Inc., Case No. B207383 (2d Dist., Div. 5 Feb. 11, 2009) (unpublished). In a prior appellate opinion, the Court of Appeal had reversed an arbitration award to a successful defendant and awarded costs on appeal to plaintiffs based on the absence of an enforceable arbitration agreement. Plaintiffs then requested the trial court to award attorney’s fees incurred in the prior appeal for having won the post-arbitration judicial proceedings to have the award vacated. Although acknowledging that there was a reversal, the trial court ruled that any fee award was premature until the matter was finally concluded. Plaintiffs appealed again.
Plaintiffs’ first argument was that the prior award of costs on appeal gave it entitlement to attorney’s fees. Not so. The appellate court only awarded routine costs for prevailing on appeal, a determination that had no bearing on whether fees were properly awarded also. (Butler-Rupp v. Lourdeaux, 154 Cal.App.4th 918, 927 (2007).)
However, plaintiffs did prevail on their second argument that fees were properly awarded to them as prevailing parties in the post-arbitration judicial proceeding. The fees clauses provided: “In any dispute between the parties [the plaintiffs] agree to pay attorney and collection expenses whether the matter proceeds to court (or arbitration at [defendant’s] discretion according to the rules of the American Arbitration Association) or not.” The issue for the majority, in a 2-1 decision authored by Presiding Justice Turner, was whether the post-arbitration proceeding was a “dispute” for purposes of the fees clause, which had to be interpreted reciprocally under Civil Code section 1717 (albeit worded as one-sided in nature). The backdrop for resolution of this issue was the majority’s recognition that (1) a successful petition to vacate an arbitration award allows the award of mandatory fees under Code of Civil Procedure section 1293.2 (Carole Ring & Associates v. Nicastro, 87 Cal.App.4th 253, 260 (2001)); and (2) attorney’s fees are recoverable as costs on appeal under section 1293.2 if there was a contractual right to an award of fees (Villinger/Nicholls Develop. Co. v. Meleyco, 31 Cal.App.4th 321, 329 (1995)).
The majority found that “dispute” could encompass a post-arbitration proceeding because, in line with the common dictionary definition of the word, it evinced a “difference in opinion” between the parties on enforceability of the arbitration award. Furthermore, the resolution of the issue was a final determination that there was no right to arbitrate. The majority remanded to the trial court to determine the fees awardable from the prior appeal plus fees for winning the instant appeal.
In dissent, Justice Mosk would have affirmed the trial court’s conclusion that a fee award was premature. He believed that “dispute” could not be construed as broadly as the majority did, a conclusion he buttressed by noting the result might have been different had “proceeding” been used instead in the fees clause. “The point is that the contractual dispute was not resolved in this action, and therefore there is not yet any prevailing party for purposes of attorney fees. I believe that generally what parties agree to in their contract should govern their rights and obligations—party autonomy. That is the essence of our law that the American rule governing attorney fees is not applicable when the parties have contracted as to attorney fee awards.”