One Party Prevails, But Still Suffers Adverse Judgment of Over $2 Million When Opponent Also Prevailed.
This next case is a sobering reminder that “prevailing party” determinations do not necessarily result in one winner in multi-claim litigation. Even though one party might prevail and obtain a substantial fee/costs award, the other party–if that party prevails too–might outstrip a fee/costs recovery depending on how the facts fall. Bear with us and see.
In Erreca’s, Inc. v. Safeco Ins. Co of America, Case No. D056420 (4th Dist., Div. 1 Apr. 18, 2011) (unpublished), a construction defect case giving rise to prior appellate decisions, an arbitration panel and confirming superior court determined that plaintiff was the prevailing party on a wrongful construction retention claim but that certain defendants prevailed on a breach of contract claim subject to Civil Code section 1717 fee shifting. Plaintiff eventually recovered $1,220,785.01 on the wrongful retention claim (recovering the improperly retained amounts, interest, attorney’s fees and costs). That sounded good, didn’t it? However, that enthusiasm soon dissipated because defendants were awarded $3,228,939.70 in fees and costs for prevailing on a contract claim against plaintiff, meaning that defendants had a net recovery of $2,008,154.69.
The miffed plaintiff appealed.
No reversal to be had on these facts.
Defendants were the prevailing parties because plaintiff had sought over a $7 million recovery on the contract claim, with a practical view of the litigation meaning the defense accomplished what they wanted to in terms of overall exposure. (ComputerXpress, Inc. v. Jackson, 93 Cal.App.4th 993, 1017 (2001).) Although plaintiff tried to argue that its wrongful retention claim was really one under a contractual breach rubric, both the arbitration panel, superior court, and appellate court did not see it that way based upon a review of the pleadings and parties’ positions in proceedings below. Beyond that, the wrongful retention fee statute (Civ. Code, § 3260) is in the nature of a penalty rather than a contractual fee shifting provision such as Civil Code section 1717. No basis to upset the fee award by the arbitration panel.