Court of Appeal Affirms Denial of Attorney’s Fees to Prevailing Parties Against the City of Chowchilla.
In our July 12, 2008 post, we discussed when contract indemnification clauses will and will not be interpreted as allowing a recovery of attorney’s fees to litigants in litigation not involving true third-party indemnity issues. The answer came down to the specifics of the wording and headings of the germane contractual clauses. Recently, the Fifth District dealt with a hybrid clause—dealing with both third-party indemnity and contractual performance of work issues—and found it more closely resembled the third-party indemnity clauses not giving rise to fee recovery than peculiar provisions that allowed for fee recovery arising from indemnification obligations.
Carr Business Enterprises, Inc. v. City of Chowchilla, Case No. F051999 (5th Dist. Aug. 20, 2008) (certified for partial publication) involved a referee’s award that went against the City of Chowchilla based upon Carr’s performance under two separate agreements with Chowchilla involving city streets and municipal airport improvement work. Carr moved to fix attorney’s fees pursuant to a provision found in both contracts. The trial court denied the fees request, rolling this determination into a final judgment also encompassing the merits. Chowchilla appealed an award of prejudgment interest, and Carr cross-appealed the denial of fees.
Justice Wiseman, the author on behalf of a 3-0 panel of the Fifth District, first considered whether the cross-appeal was timely, because it was filed 20 days after the Chowchilla appealed but more than 60 days from the judgment itself. It was timely, the appellate panel decided, rejecting the notion that the order denying fees was a separately appealable order such that it had to be appealed 60 days from the judgment. Rather, the order denying the fees was not a post-judgment order (unlike an order granting fees) such that it can only be reviewed on appeal from the judgment. (Lacey v. Bertone, 33 Cal.2d 649, 654 (1949).) Given that Chowchilla appealed from the judgment, Carr likewise had the 20 day cross-appeal extension time to bring the appeal on the fee denial aspect of the judgment.
That brings us to the merits of the appeal on the fee denial order.
The street-improvement contract, in a section entitled "Insurance Requirements for Contractors" and with a heading of "Hold Harmless and Indemnification Agreement," stated: "[Carr] shall indemnify and hold harmless [Chowchilla] … from and against all claims, damages, losses and expenses including the attorney fees arising out of the performance of the work described herein, caused in whole or in part by any negligent act or omission of [Carr], any subcontractor, anyone directly or indirectly employed by any of them or anyone for whose acts any of them may be liable, except where caused by the active negligence, sole negligence, or
willful misconduct of [Chowchilla]." Elsewhere, the street-improvement contract contained a provision under the section title of "Indemnity Agreement" which stated: "[Carr] agrees to indemnify and save harmless [Chowchilla] … for and against all loss or expense (including costs and attorney fees) on account of injury or death of persons employed by [Carr], or his subcontractors, his or their agents or employees; injury to or death of any other person; or injury to, damage or destruction of property, real or personal including loss of use thereof. Upon demand, [Carr] shall defend any suits or actions covered by the terms of this agreement." The airport-improvement contract had essentially identical provisions.
The lower court, siding with Chowchilla, found that these provisions were standard indemnity provisions, which do not authorize attorney’s fees on a dispute arising out of the two contracts. The Fifth District agreed.
After indicating that the "performance of work" language superficially seemed to extend beyond third-party claims, the appellate panel found that similarly-worded language had still been found to be indemnification clauses not giving rise to fees. See, e.g., Myers Building Industries, Ltd. v. Interface Technology, Inc., 13 Cal.App.4th 949, 964 (1993); Meininger v. Larwin-Northern California, Inc., 63 Cal.App.3d 82, 84 (1976); Campbell v. Scripps Bank, 78 Cal.App.4th 1328, 1336 (2000). The trial court found that the headings in the contractual provisions—relating to indemnity—were helpful in the determination, a point not disputed by the Court of Appeal.
In contrast, cases like Baldwin Builders v. Coast Plastering Corp., 125 Cal.App.4th 1339, 1342, 1344 (2005) and Continental Heller Corp. v. Amtech Mechanical Services, Inc., 53 Cal.App.4th 500, 508-509 (1997) found indemnification clauses did give rise to fee exposure because specific language indicated fees could be awarded for suing on the indemnification agreements themselves.
So, how did the Fifth District steer between these two lines of decisions? Answer: it found the provisions were indemnification clauses not allowing for a grant of fees. Justice Wiseman reasoned this way: "We conclude that the language of the indemnity provision here more closely parallels the language found in Myers, Meininger, and Campbell, than the language examined in Baldwin and Continental. Unlike in Baldwin, there is no express language authorizing recovery of fees in an action to enforce the contract. Instead, the language authorizes fees as an expense of litigation that Carr agreed to pay in any action brought by another person arising out of the performance of the contract. The intent was to ensure that Chowchilla did not suffer any damages if, as a result of Carr’s negligence or willful misconduct, it became embroiled in litigation with a third party."