Sixth District Finds That Stock Option and Voting Trust Agreements Were Not Interrelated and Never Sued Upon In Winning Litigant’s Complaint.
Under Civil Code section 1717, one needs a written agreement with a fee clause for potential attorney’s fees recovery. Many times, there are several agreements involved in an overall transaction, some with fee clauses and some containing none. The focal question on determining fee entitlement is whether the agreements with fee clauses were an integral part of a single interrelated transaction or simply peripheral to the dispute centering upon another agreement without a fees clause. The case we next explore discusses this issue, determining that two subsidiary agreements with fees clauses were not integrated and too peripheral to give rise to fee recovery by a winning litigant.
In Pellegrini v. Weiss, Case Nos. H029772 & H029988 (6th Dist., July 29, 2008) (certified for publication), Weiss and Pellegrini entered into a joint venture agreement for the purchase and development of real property in the Aptos hills called Telford Ranch. Pellegrini filed suit primarily for breach of contract and fiduciary duty, and Weiss counterclaimed for restitution and rescission. Pellegrini and Weiss were parties to three agreements—a Memorandum of Understanding (MOU) with no fees clause, a stock option agreement with a fees clause, and a voting trust agreement with a fees clause. Pellegrini’s suit sought enforcement of the MOU; he did not sue for a breach of the other two agreements. Pellegrini obtained a $300,000 jury verdict. The trial court denied Pellegrini’s motion for attorney’s fees.
Both parties appealed. Except for a slight modification for interest calculation, the results in the lower court were affirmed. Pellegrini lost his bid to recoup attorney’s fees from Weiss.
Because only legal questions were presented, Pellegrini reviewed the issues de novo, but came to the same result. The Court of Appeal, in a 3-0 opinion authored by Presiding Justice Rushing, determined that Pelligrini’s suit focused on the MOU without an attorney’s fees clause. Both the stock option and voting trust agreements were between unrelated persons, on one side, and Weiss and Pelligrini, on the other. Pelligrini never sued for a breach of the two agreements containing fee clauses in his complaint. Based on similar reasoning found in Pilcher v. Wheeler, 2 Cal.App.4th 352 (1992), the appellate panel found the two agreements with fee clauses were peripheral to the dispute and not intended to be integrated into the MOU with the fees clause.