First District Recognizes the Distinction In Affirming Trial Court Decision Refusing To Award Fees to a Winning Plaintiff.
Client retained Former Attorneys to represent his interests as a creditor in a bankruptcy proceeding. Client signed a retainer agreement providing that Attorneys would use their best efforts to represent Client’s interests and “[s]hould it become necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys’ fees.” One of Former Attorneys failed to properly submit a proof of claim form, prompting Client’s suit against Former Attorneys for professional malpractice—alleging claims for “negligence and/or breach of contract.” Plaintiff, in pro per, successfully established breach of duty, failed to prove damages, was deemed the prevailing party, and was denied a request for a fee award. The trial court found that the professional liability claim was the crux of the dispute, outside of the scope of being “on the contract” for purposes of a fee award under Civil Code section 1717.
The First District, Division Four, in a 3-0 decision authored by Justice Reardon, affirmed after observing that the interpretation of an unambiguous retainer agreement and section 1717 presented legal questions subject to de novo review. The decision is Wolf v. Glassberg, Pollak & Associates, Case No. A120240 (1st Dist., Div. 4 June 30, 2008) (unpublished).
The panel found that the nature of the right sued on, not the form of the pleading or relief, is paramount in determining whether the action sounds in contract or tort. Because all professional malpractice claims necessarily involve a contractual relationship, section 1717 has been interpreted to only extend to actions “on the contract,” as opposed to actions merely “arising out of” or “related to the contract.” As a matter of law, the Court of Appeal concluded that the legal malpractice action sounded in tort such that it was not “on the contract” for purposes of allowing fee recovery to Client under section 1717, primarily citing Loube v. Loube, 64 Cal.App.4th 421, 429-430 (1998) and Maollem v. Coldwell Banker Com. Group, 25 Cal.App.4th 1827, 1830, 1832 (1994) as support for its affirmance.