Indemnity, Prevailing Party, Section 1717: Trial Court Erred In Denying Contractual Fees To Owner And General Contractor’s Surety Such That A Remand Was Required—There Was A Fees Clause, Not Just An Indemnity Provision

However, Appellate Court Acknowledged That Results Were Decidedly Mixed, But Any Prevailing Party Determination Was To Be Made By Lower Court

            Driving multiple trips to the appellate court were the parties’ claims for attorney’s fees, something we have seen often and one of the things which inspired this blog.

            In John Russo Industrial Sheetmetal, Inc. v. City of Los Angeles Dept. of Airports, Case Nos. A151597/A151682 (1st Dist., Div. 5 April 23, 2019) (unpublished), owner won $1 against general contractor’s construction bond surety after a 6-week jury trial, while the general contractor actually won attorney’s fees under a frivolous False Claims Act count. However, both owner and surety moved for contractual attorney’s fees under a clause of the governing contract. The trial judge denied fees to both sides, determining that the clause was an indemnity clause rather than a real fees clause.

            The appellate court reversed. It determined that the clause was a fees clause based on these factors: (1) the section did not focus exclusively on third-party claims, but applied to a situation where owner was “made a party to any litigation commenced by” general contractor; (2) the section was labeled “Attorney’s Fees”; and (3) there was a separate indemnity provision separate and apart from the fees provision. Based on Civil Code section 1717 reciprocity principles, the bond surety was also entitled to the benefit of the fees clause. (First National Ins. Co. v. Cam Painting, Inc., 173 Cal.App.4th 1355, 1367 (2009).)

            However, the 1/5 DCA did give some telling remand reasoning. Although leaving it to the trial court to determine if there was any prevailing party, it did observe that “the results were decidedly mixed”—owner won only one dollar (compared to the $3.4 million it was seeking as damages), while the surety was found jointly/severally liable to owner for the one dollar but owner lost its claim for enforcement of the performance bond. If we were to predict things, there is going to be no prevailing party in this situation after remand—just sayin’. . . ., and not meaning to be clairvoyant.

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