Reason Was That Defense Involving A Contractual Lease Did Not Fall Within “Action” Language Of The Fees Clause.
Although this decision in unpublished, the Second District, Division Two has weighed in on an issue pending before the California Supreme Court in the Mountain Air case, namely, whether developer’s successful invocation of a settlement agreement’s release as a defense entitled it to attorney’s fees where the fees clause only covered “initiation, commencement or prosecution” of any “action or proceeding.” It decided no, the defense did not fall within the recoverability language in LTL Commercial, LLC v. Hammer IRP LTL Associates, LLC, Case Nos. B262176/B263715 (2d Dist., Div. 2 Sept. 1, 2016) (unpublished).
Here, defendant developer won a summary judgment against plaintiff owner based primarily on a settlement agreement release clause. Developer then sought to recover attorney’s fees under a contractual fees clause to the tune of $208,479.30, a request denied by the trial judge and affirmed by the appellate panel in a 3-0 decision by Justice Hoffstadt.
The 2/5 found persuasive the line of reasoning that an “action” does not encompass a defense, as articulated in the Exxess and Gil given that Mountain Air was depublished and of no precedential value given its pendency for state supreme court review. It also found the contrary Windsor decision to be distinguishable, involving a much broader fees clause. Beyond that, the reviewing court found it would be unfair to charge the parties with Windsor’s 2013 interpretation for the 2010 fees clause where earlier decisions found that a defense was not the equivalent of an “action.” Finally, section 1717 was no salvation to developer, given that developer’s negligence claim was not “on the contract,” reinforcing that section 1717 does not “reform” a fees clause breadth but only makes a unilateral clause reciprocal in nature.