Owners Did Not Prevail Because Contractor Withdrew Cross-Claim During Deposition and Never Pursued Recovery Under It.
Courts like to encourage narrowing of disputes by litigants. The next case illustrates how a non-prevailing contractor avoided attorney’s fees exposure under Civil Code section 3260(g), which authorizes fees/costs to the prevailing party involving a claim that retention payments were improperly withheld to a contractor, by withdrawing the 3260 claim during litigation.
In Li v. Wu, Case No. B196993 c/w B198266 (2d Dist., Div. 3 Jan. 15, 2009) (unpublished), contractor cross-sued property owners on several theories, including 3260 [retention payments] and 3260.1 claim [progress payments]. However, at contractor’s deposition, his counsel discussed the applicability of the “prompt payment” statutes, with contractor indicating that relief under the statutes was not being pursued. These statutes were not mentioned in trial briefing, and no time was spent on them during trial. The jury was not asked to make findings under these statutory claims. After owners prevailed at trial, they sought attorney’s fees under section 3260(g). The trial court found that there was no prevailing party based on contractor’s withdrawal of the “prompt payment” statutory claims.
The Second District, Division 3, in a 3-0 opinion authored by Justice Croskey, affirmed the denial of fees to owners. Under section 3260, the trial court had discretion to determine who “prevailed” for purposes of a fees award, which includes determining that there was no prevailing party based on a pragmatic evaluation of the entire litigation. (Brawley v. J.C. Interiors, Inc., 161 Cal.App.4th 1126, 1137 (2008).) Here, each side’s conduct indicated that contractor’s “prompt payment” claims had been withdrawn, which means no one prevailed for purposes of a fee award under section 3260(g). Owners did try to argue that they won because contractor never technically dismissed the claims pursuant to Code of Civil Procedure section 581. This fell on deaf appellate ears: “While the owners may be correct, it is irrelevant. The prevailing party determination is to be a practical one, not a hyper-technical one. It is apparent that the statutory cause of action was not pursued, and the trial court therefore did not err in concluding that there was no prevailing party.” (Slip Opn., at p. 22.)
BLOG UNDERVIEW #1—Civil Code section 3260.1 provides that the penalty specified in section 3260(g) for wrongfully withholding retention contractor payments also applies to wrongful withholding of progress payments. Justice Croskey, in a footnote, observed that one case has suggested that this provision may incorporate the same penalty, but not the right of the prevailing party to attorney’s fees under section 3260(g). See Murray’s Iron Works, Inc. v. Boyce, 158 Cal.App.4th 1279, 1299 n. 14 (2008).
BLOG UNDERVIEW #2—Owners also argued they were entitled to fees because they were drawn into someone else’s fight. This argument did not go very far: “Equitable concerns simply do not constitute a legal basis for fee-shifting.” (Slip Opn., at p. 22 n. 13.)