$3,800 Damage Award Garners $37,100 Fee Recovery.
Under Civil Code section 1717 (a fee shifting statute tethered to a contractual fees clause), do fee awards have to be somewhat proportionate to the damages recovered by a prevailing party? The answer will come from reading our discussion of the next case.
DC Painting, Inc. v. Summers, Case No. D055330 (4th Dist., Div. 1 Dec. 17, 2010) (unpublished) involved a situation where a painting contractor won a $3,800 damages award against a commercial property owner in a situation where there was a contract between the parties having a fees clause. Contractor’s counsel had earlier sent a letter indicating what was owed and warning that fees/costs could result if plaintiff had to sue and won (with contractor later also suing to foreclose a mechanic’s lien aside from suing for breach of contract). Owner, shortly before trial, served a Code of Civil Procedure section 998 offer, offering to compromise for $4,701, even though contractor had incurred over $30,000 in fees/costs for trial preparation and from restarting efforts when the trial was continued until a different date. After winning the compensatory damages award of $3,800, contractor moved to recover fees of $69,735. The lower court awarded contractor fees of $37,100.
Owner appealed the fee award.
Unsuccessfully.
Owner first argued that contractor failed to provide the notice required under Code of Civil Procedure section 1033(b)(1)-(2), which does provides that (1) a lower court has discretion in setting fees/costs where a limited civil matter could have been brought in small claims court vis-a-vis the ultimate judgment, and (2) costs and fees can be awarded in a small claims type of case that is prosecuted in a limited civil court only if plaintiff provides a pre-litigation written notice that the legal action might result in a judgment complete with fee and costs recovery. The appellate court rebuffed this challenge because (1) the mechanic’s lien foreclosure action could not be brought in small claims court, and (2) contractor’s lawyer’s letter did satisfy the section 1033(b)(2) requirements.
The problem with owner’s contention that the 998 offer precluded fee recovery was that the offer did not factor in plaintiff’s preoffer costs and fees into the equation. (Heritage Engineering Const., Inc. v. City of Industry, 65 Cal.App.4th 1435, 1441 (1998).) Because $20,000 of the $30,000 in trial preparation costs had been incurred at the time of the $4,701 offer, 998 did not preclude the ensuing fee award.
The Court of Appeal also found that contractor was clearly the prevailing party, and nothing required that contractor accept a pre-trial check offered by owner which was less than the contract amount. Civil Code section 1486 provides “an offer of partial performance is of no effect,” such that contractor rightfully rejected it, especially given that owner argued at trial that nothing was owed.
Owner finally argued that the amount of the fee award was “madness”
(yep, that is an apparent quote from owner’s appellate brief). No madness at all, said the appellate court. Section 1717 does not require any specified proportionality, with the ratio of the fees to the principal amount awarded not being determinative. (See, e.g., Stokus v. Marsh, 217 Cal.App.3d 647, 651 (1990) [$75,000 fee recovery reasonable where plaintiff only recovered $6,166 in damages].)