Alter Ego Theory Supported Fee Entitlement, With Alter Ego Individual Defendant Not Having To Satisfy Mediation Condition Precedent Clause In The Purchase Agreement.
In Pasternack v. McFarland, Case No. D073283 (4th Dist., Div. 1 Aug. 17, 2018) (unpublished), plaintiff brought both contract and tort claims against various businesses and individuals (including alter ego theories against the individuals). There was a purchase agreement with a fees clause, including a provision that a signatory to the agreement had to mediate as a condition precedent to fee recovery. Plaintiff lost against one individual defendant, who subsequently was awarded about $1 million in attorney’s fees against plaintiff based on losing the alter ego theory of recovery.
The Fourth District, Division 1 affirmed the fee recovery. Because plaintiff was seeking to hold the winning defendant based on an alter ego theory arising under the signatory’s purchase agreement, individual defendant was entitled to fee recovery. (Brown Bark III, L.P. v. Haver, 219 Cal.App.4th 809, 823 (2013).) Plaintiff then argued that the alter ego defendant did not satisfy the mediation clause under the purchase agreement, but the appellate court found there was no need for this non-signatory to satisfy an obligation which existed only as to the signatory.