Plaintiff’s Action Was “On The Contract” For Purposes Of Civ. Code § 1717, And Fees Provision In Parties’ Contract Was So Broad That It Allowed Award Of Fees To Prevailing Party Whether Action Was Based In Tort Or In Contract.
In Song v. Creative Global Investment, Case Nos. B299422/B301697/B304884 (2d Dist., Div. 2 February 4, 2022) (unpublished), a breach of contract dispute between co-investors in two Coffee Bean and Tea Leaf franchises proceeded to a de novo bench trial after the trial court ordered the arbitration award vacated based on clarification/completeness issues. The bench trial resulted in a $900,000 damages award to plaintiff, plus $3 million in punitive damages. Additionally, the trial court determined plaintiff was the prevailing party and awarded him $86,583 in attorneys’ fees based on the attorney fees provision in the parties’ operating agreements.
As to the fee award, Defendants argued on appeal that it was improper because the trial court’s findings of defendants’ fraud rendered the operating agreements invalid and therefore incapable of being breached. According to defendants, plaintiff could not be the prevailing party since the operating agreements could not be breached. The 2/2 DCA rejected this argument – finding the fees award was supported. First, the panel concluded plaintiff’s action was “on the contract” for purposes of Civ. Code § 1717. Second, the panel found that the fees provision in the parties’ operating agreements was so broadly worded that it allowed for the award of attorney fees to the prevailing party in “any dispute” between the parties that resulted in arbitration or litigation – whether that arbitration or litigation was based in tort or in contract. (See Gil v. Mansano, 121 Cal.App.4th 739, 743 (2004).)