First District Overturns Substantial Fee Award Based on Misreading of Prior Appeal Decisions in the Same Case.
We have to hand it to Justice Simons of the First District, Division Five. Faced with a complicated set of facts and a substantial fee winner, he—as author on behalf of a 3-0 panel—correctly steered through potentially dangerous waters and bravely reversed a “prevailing party” determination that was based on an overly restrictive review of the litigation spawning the fee award.
Usually, a “prevailing party” determination is not made based only on interim rulings. Rather, a determination of the “unqualified winner” is postponed until there is a final result of the litigation (which may include the results of an appeal). See Butler-Rupp v. Lourdeaux, 154 Cal.App.4th 918, 928 (2007), citing Hsu v. Abbara, 9 Cal.4th 863, 876 (1995) (one of our Leading Cases). These principles were fully in play in Shih v. Lien, Case No. A114380 (1st Dist., Div. 5 June 12, 2008) (unpublished) (authored by Simons, J.).
The underlying case was a joint venture contract dispute between Woo and Lien, with operative agreements containing attorney’s fees clauses. Woo sued, and Lien responded with a cross-complaint. Following a bench trial, the court issued a clear win to Lien on both actions and awarded Lien costs and fees pursuant to Civil Code section 1717. Woo appealed, and the First District affirmed most of the judgment but reversed a determination on Woo’s declaratory relief count and related rulings on the claims in Lien’s cross-complaint. The appellate court found there was no prevailing party on appeal, ordering each side to bear its own costs on appeal. In line with this opinion, the First District also reversed the fee/costs award and ordered the parties to bear their own costs on appeal.
On remand, the trial court found in favor of Woo on the claims reinstated previously by the Court of Appeal in its reversals. The lower court confirmed Lien won on the first five claims of Woo’s complaint. Cross-motions for fee followed (as we have said before, the tail that wags the litigation dog). The trial court declared Woo the prevailing party, based on its construction of the First District’s opinions that it could not focus on any determinations made prior to the issuance of the remittiturs in the prior appeals. Woo was awarded $440,000 in attorney’s fees and $13,224.22 in costs.
You know what happens next—Lien appeals from the fee/costs award to Woo.
On this appeal, the First District, Division Five reversed.
Citing Mustachio v. Great Western Bank, 48 Cal.App.4th 1145, 1149-1150 (1996), Justice Simons reasoned that the trial court retains discretion to award attorney fees incurred on appeal to the eventual prevailing party even when there is no order by the appellate court or even when the reviewing court orders the parties to bear their own costs. (BLOG NOTE—We will explore this principle in more depth in a future post.) The First District panel then observed that the trial court had misconstrued its prior opinions as depriving it of the authority to determine the prevailing part for pre-remittitur periods of time. Thus, the lower court did have discretion to determine fees for prior periods of time regardless of the “each side bear costs” directives in the previous First District opinions.
Next, the First District found that the trial court erroneously bifurcated the litigation into pre-appeal and post-appeal stages, rather than examine the results in the entire litigation chain of events. The Court of Appeal found that the lower court determined prevailing party in each of the two stages, finding no prevailing party in the pre-appeal stage and finding Woo the prevailing party in the post-appeal stage—corroborated by the fact that the trial judge awarded Woo only fees and costs for post-appeal activity. “This confirms that the trial court did not determine the prevailing party based on the final outcome of the litigation, as required under Hsu, supra, 9 Cal.4th at page 876, but instead divided the litigation into two distinct phases and determined prevailing party status for each phase.” (Slip Opn., at p. 8.)
The First District reversed and remanded with instructions for the trial judge to determine the prevailing party, if any, based only on the final results of the whole litigation. Also, Lien was awarded costs on appeal.
Given the gnarly procedural context of Shih, the First District did a nice job of reminding us all that the prevailing party determination for fee and costs purposes depends on the final, final result, not results reached in interim phases and not results based on a truncated parsing of the litigation into phases.