Second District, Division Seven Overturns Fee Award Where No Explicit Provision Allowed For Fee Recovery When Enforcing Stipulated Settlement.
Under the American rule governing attorney’s fees awards (as codified in Code of Civil Procedure section 1021), a prevailing litigant generally is not entitled to an attorney’s fees award in the absence of express statutory or contractual provisions. (Trope v. Katz, 11 Cal.4th 274, 278 (1995); Carr Business Enterprises, Inc. v. City of Chowchilla, 166 Cal.App.4th 14, 23 (2008).) The absence of a clear contractual provision allowing for recovery of attorney’s fees in a stipulated settlement agreement usually forecloses the potential judgment creditor from recouping fees expended in enforcing the settlement arrangement.
Stansbury v. Bronn, Case No. B197272 (2d Dist., Div. 7 Oct. 27, 2008) (unpublished) illustrates these principles.
There, a trust dispute was settled through a written settlement agreement reached after a day-long mediation. Trustee successfully moved to enforce the settlement agreement under Code of Civil Procedure section 664.6 (the summary enforcement procedure), with the trial court also awarding trustee $ 13,482.79 in attorney’s fees and $351.19 in costs incurred in enforcing the settlement agreement.
Although the losing party lost the merit component of the appeal, the Second District, Division Seven—in a 3-0 opinion authored by Presiding Justice Perluss—reversed the fee award in trustee’s favor. The standard of review was de novo because the case involved contractual interpretation without conflicting extrinsic evidence.
The general rule, the appellate panel reminded us, is that a contract’s silence on the right to recover attorney’s fees means no such fees may be awarded by the court. (Carr Business Enterprises, supra, 166 Cal.App.4th at 23.) Trustee tried to defend the fee award by referring to a settlement provision allowing the recovery of fees and costs that “have been expended in connection with the action or [the settlement] agreement.” This did not work, because the Court of Appeal observed that this provision related solely to fees already incurred at the time the agreement was executed, not fees required to pursue future litigation to enforce the agreement. Because there was no explicit authorization for fee recovery in the settlement agreement, attorney’s fees were not recoverable.
A different matter for the costs award. Unless costs were actually waived in the settlement agreement, they were recoverable. (Code Civ. Proc., sec. 1032(b),(c).)
BLOG OBSERVATION NO. 1—A similar result was reached in Greentree Financial, Inc. v. Execute Sports, Inc., 163 Cal.App.4th 495 (2008), litigated by co-contributor Mike Hensley. There, the Fourth District, Division Three concluded there was no basis for an award of attorney’s fees in enforcing a stipulated settlement based on the lack of an express provision authorizing such an award.
BLOG OBSERVATION NO. 2—Stansbury also has a nice discussion of California’s adherence to objective intent test with respect to contractual interpretation, citing several decisions for the proposition that unexpressed subjective intent is irrelevant to the proper interpretation of a contract. (See, e.g., Cedars-Sinai Medical Center v. Shewry, 137 Cal.App.4th 964, 980 (2006).)