Fourth District, Division 2 Likes Profit Concepts Management Reasoning.
Our inaugural post way back in May 2008 discussed Profit Concepts Management., Inc. v. Griffith, 162 Cal.App.4th 950 (2008) [one of our Top 10 Cases of 2008]. This case held that a victor on a motion to quash for lack of personal jurisdiction—even though further litigation might be likely in a different forum—was a prevailing party under Civil Code section 1717 with respect to recovery of attorney’s fees. The jurisprudence is still evolving in this area, although numerous cases have held that discrete proceeding wins can give rise to award of 1717 fees. Now, the Fourth District, Division 2 has added yet another procedural context in which fees can be awarded—significantly adopting the reasoning in Profit Concepts Management.
In Imperial Cabinets, Inc. v. Regency Highlands, Inc., Case No. E047131 (4th Dist., Div. 2 Sept. 3, 2009) (unpublished), a defendant (a successor general contractor who assumed a contract with an attorney’s fees and arbitration clauses) obtained a dismissal with prejudice of subcontractor plaintiff’s breach of contract claim because plaintiff finally provided on the eve of trial a copy of the subcontract showing there was an arbitration clause. The trial court decided that the matter should go to arbitration and dismissed the action with prejudice. However, the lower court refused to award defendant its requested $36,900 in fees and $2,974.15 in costs under Civil Code section 1717 for obtaining a dismissal of the court action.
Defendant appealed. Guess what?
It obtained a reversal of the fee award denial.
Because no exercise of discretion or disputed facts happened to be involved, de novo review of the legal issue was in order.
Even though defendant was a nonsignatory to the contract, it clearly was liable under successor liability theories. That led to the crucial issue—was the dismissal with prejudice, even though the matter might be further “litigated” in arbitration, a discrete proceeding that gave rise to 1717 fees or was it premature to award fees until the arbitration determined a final winner?
The Fourth District, Division 2 came down in defendant’s favor. The appellate court found persuasive the reasoning in Profit Concepts Management, having no difficulty applying it to the facts before it. “Both cases were dismissed on procedural grounds rather than on the merits; both plaintiffs retained another option for vindicating their rights.” (Slip Opn., p. 15.) They also found the dismissal based on failure to arbitrate was akin to other discrete proceedings where a defendant won but further litigation might occur. (See, e.g., Otay River Constructors v. San Diego Expressway, 158 Cal.App.4th 796, 807 (2008) [successful motion to compel arbitration]; Acosta v. Kerrigan, 150 Cal.App.4th 1124, 1132 (2007) [successful motion to compel arbitration]; Cano v. Glover, 143 Cal.App.4th 326, 330-332 (2006) [dismissal with prejudice for failing to name litigant in fourth amended complaint].) Otherwise, a litigant like defendant would be placed in “perpetual limbo” for purposes of claiming fees even though it won an important discrete court proceeding that displaced the matter from court. The end result was a remand to determine the costs and fees to be awarded defendant as the prevailing party.