Appellate Court Agrees With Trial Court Analysis, Which Departed From Contrary S.D. Cal. Federal Decision.
Plaintiff search engine optimization firm sued defendant marketing firm for breach of contract, prompting defendant to countersue plaintiff (as a cross-defendant) for breach of contract and for a violation of Penal Code section 502 (a computer hacking claim which is given civil claim status through the statute). A trial judge rejected all claims and awarded plaintiff (the prevailing cross-defendant) attorney’s fees under Penal Code section 502(e)’s fee entitlement provision allowing discretion to a court to award fees for claim involving an alleged violation “pursuant” to section 502.
Defendant/cross-complainant appealed, relying on Swearington v. Haas Automation, Inc., 2010 U.S. Dist. LEXIS 36963 at *7 (S.D. Cal. 2010), which held that the section 502 fee provision only applies to prevailing plaintiffs (or counter- or cross-complainants). The lower court disagreed with this federal decision in awarding fees to the prevailing cross-defendant.
The result was affirmed by a 3-0 panel decision in US Source LLC v. Chelliah, Case No. G049481 (4th Dist., Div. 3 Dec. 10, 2014) (unpublished), authored by Justice Bedsworth.
In essence, the appellate panel determined that the “pursuant” language in section 502(e) was broad, not being trumped by some unclear legislative history to the contrary. Judge Munoz, the lower court awarding fees (although he is now a retired neutral), got it right. This decision is must reading on the scope of section 502(e) as far as which side can be discretionarily awarded fees as a prevailing party.