Fee Award Remanded For A Restudy, But A 50% Reduction For Overlitigation By Prevailing Party Likely Stands On Remand.
To take us back to law school days, contra proferentem is Latin for interpreting a contract against the drafter. That principle was at play in contractual interpretation of the scope of a lender fees clause in Cavalry SPV I, LLC v. Watkins, Case No. D072299 (4th Dist., Di. 1 July 1, 2019) (published).
Lender prevailed in a debt collection dispute, including turning back tort and other claims based on borrower’s cross-complaint (counterclaims). The operative fees clause said this: “Collection Costs. To the extent permitted by law you are liable to us for our legal costs if we refer collection of your account to a lawyer who is not our salaried employee. These costs may include reasonable attorney’s fees. They may also include costs and expenses of any legal action.” Based on this clause, the lower court awarded lender its costs of prevailing on the debt and in defensing plaintiff’s cross-claims. The fee award was $134,604.86, with reductions for overlitigation by the lender.
The 4/1 DCA reversed and remanded based on the conclusion that fees clause did not allow for recovery of work relating to the defense of counterclaims. The appellate court agreed that the provision was not broad enough to encompass this work, because the counterclaims were much more than a legal action “to collect on the account.” Given the clause appeared in a one-sided adhesion contract, the terms had to be construed against lender. However, because the matter had to be remanded anyway, the appellate court did not adopt the 50% reduction for overlitigation per se, although indicating that it could be considered again upon the “re-do.”