Also, Customer Sent 998 Offer Not Beaten by Alarm Company.
Justice Fybel, on behalf of a 3-0 panel of our local Santa Ana appellate court in Emergency Technologies, Inc. v. Garcia, Case No. G045685 (4th Dist., Div. 3 May 4, 2012) (unpublished), affirmed a $41,162 fee award to a customer arising out of an alarm company’s attempt to recover $11,343.31. (You know, we sound like a broken record, but here is one where the fee award was almost four times more than the original amount in controversy. It gets worse when you consider the alarm company’s rejection of customer’s 998 offer–but read on to find out what happened. Clients and litigators, unless someone is being unreasonable, have to focus on fee exposure in these contexts; and, if you are going to thrash it out nevertheless, someone needs to talk about Sonoma Risk insurance protection.)
Above: The alarm bell on the Court House. Stockton. 1866. Library of Congress.
Alarm company sued customer under a contract with a fees clause for recovery of $11,343.31. Before trial, customer served an unaccepted 998 offer for $3,123.97 plus costs and fees incurred by alarm company before the offer. (Customer showed us that she had an attorney understanding 998 offer calculus.) Well, the problem for alarm company at trial was that it was not a licensed alarm company as required under Business and Professions Code sections 7592 and 7599.34. The lower court found the contract was unenforceable and later awarded customer $41,162 in attorney’s fees, prompting an appeal by alarm company.
Alarm company was unsuccessful. And, actually, the reason was quite simple: Civil Code section 1717’s “mutuality” rules applies where a contract is found to be unenforceable. Put another way, it does not go POOF!, but the defense on the enforceability of the agreement triggers application of the fees clause. Fee award affirmed, much to the chagrin of the alarm company.
