Fourth District, Division Three Determines Relevant Clause Is Only For Indemnity, Not Fee Recovery.
In our July 12, 2008 post on indemnity clauses and our August 25, 2008 post on Carr Business, we discussed whether indemnification clauses could give rise to attorney’s fees. The quick answer is that it depends on the wording and placement of the provision in question. However, generally speaking, where the clause is directed at providing protection over third party events, it is difficult to construe the clause as being an attorney’s fees provision in a first party context. These principles did come into play in a very celebrated case that got a lot of publicity and now has come down to decision on appeal—City of Anaheim v. Angels Baseball, L.P., Case No. G037202 (4th Dist., Div. 3 Dec. 19, 2008) (unpublished). (For the whole megillah, click here.)
The opinion makes interesting reading, because it involves contractual interpretation over a lease and whether the language required the use of the name “Anaheim” in the Angels baseball team’s jerseys, tickets, merchandise, souvenirs. Anaheim lost the merits, a judgment affirmed on appeal in a 2-1 opinion with Justices Aronson and O’Leary in the majority and Presiding Justice Sills in dissent. However, Angels appealed the trial court’s decision denying it prevailing party attorney’s fees under the indemnity provision of the same lease. (Although the opinion did not mention the amount, newspaper articles indicated that the Angels spent around $8 million in attorney’s fees litigating the case, not to mention fees on appeal.) Angels separately appealed the adverse fee ruling, but did not prevail.
The indemnity clause was a fairly standard, third-party indemnity provision. (It can be found at Slip Opn., majority, pp. 43-44.)
Initially, Angels argued that Anaheim was judicially estopped to deny the clause did not allow for recovery of fees. The genesis for this argument sprang from Anaheim opposing Angels’ motion to strike Anaheim’s attorney’s fee prayer in its complaint on the grounds the clause was only a pure indemnity clause. Anaheim opposed, with the trial court refusing to strike and leaving the issue open for further proof. So, after losing at trial, Angels indignantly parried back “how dare you now take an inconsistent position, you are estopped.” Not so, said Justice Aronson in writing for the majority. Anaheim was not successful in asserting its position on the merits, because the trial court only reserved the issue for future proceedings. Beyond that, no prejudice was demonstrated in Anaheim’s change in position—after all, it was the Angels which first argued the clause did not give rise to fees, so what’s going on here? Justice Aronson put it this way: “Indeed, [Angels] has changed its position to the same degree and with the same nimbleness that Anaheim has done, with no explanation for its sudden change of heart other than—while engaged in what might be described as a high stakes round of musical chairs—[Angels] happened to be sitting in the right spot when the music stopped.” (Slip Opn., majority, at p. 43.)
With the procedural obstacle having been hurdled, the appellate panel took on the merits of the argument. The language of the clause was not sufficiently explicit to be other than an indemnity provision. “Given the sophistication of the parties and the expertise of their legal advisors who put the lease together, one would assume if the drafters had intended the prevailing party in a dispute over the lease to recover attorney fees, they would have stated this more clearly.” (Slip Opn., majority, at p. 44.) Continental Heller Corp. v. Amtech Mechanical Services, Inc., 53 Cal.App.4th 500, 508-509 (1997) actually undermined Angels’ argument because, unlike its situation, there was a fee clause separate from the indemnity provision that did not refer to indemnity for attorney’s fees incurred in defending actions against the plaintiff. No such separateness existed in the Angels’ situation. “Indeed, the provision requiring the tenant ‘to defend any such action or other legal proceeding with counsel approved by Landlord’ makes no sense in a first party context. The wording of section 36(a) alone does not entitle [Angels] to attorney fees expended in defending the present action.” (Slip Opn., majority, at p. 45.)
The trial court also considered extrinsic evidence that defeated Angels’ construction of the indemnity clause. That proof demonstrated that the parties dropped an express first party attorney fee agreement from the lease in amending it subsequently. This was powerful proof—and it is—that the parties did not intend for fee recovery in a first party context based on the actual bargaining over lease provisions.
BLOG UNDERVIEW—There is a wonderful repartee between the majority and dissenting opinions about the Angels and Boston series, with the dissent lamenting that Boston won this year even though the Angels had the best record in baseball—“It as if the Curse of the Bambino had been taken from Boston and hung on the Angels.” (Slip Opn., dissent, at p. 19.) The majority responded this way: “The dissent queries whether the Angels’ playoff defeat was attributable to a curse. Delving into the occult is beyond the standard of review. But if there is a curse hanging over the Angels, it may well be this lawsuit. Hopefully, our decision today will bring to a close the parties’ long season of conflict.” (Slip Opn., majority, at p. 47.)
