Case of the Month Archive

CC §1717 does not permit an award of attorney's fees for interim orders. . .

In a reversal, the First District held that an award of attorney's fees per CC §1717 is not permitted for a summary adjudication order on a contract claim where other causes of action are still pending since such an order is not a final judgment and CC §1717 does not allow for interim awards of attorney's fees.

The ol' switcheroo. . .
A "group of low-income, mostly elderly, Chinese-speaking [tenants]" were in a contract dispute with the owners of their apartment building (owners). Specifically, the tenants alleged the owners insisted on replacing the existing lease with a 40-page, English-only lease that had been taped to the tenants' doorways and then "proceeded as if [the tenants'] preexisting short-form bilingual leases had been entirely supplanted." The tenants did not agree with the purported new lease and filed a lawsuit against the owners, alleging civil conspiracy, violation of the Fair Employment and Housing Act, violation of Unfair Competition Law, and violation of a San Francisco Rent Ordinance. The tenants also sought declaratory judgment on the issue of the contract dispute.

A year into the lawsuit, the owners filed a motion for summary judgment while the tenants filed a motion for summary adjudication of their declaratory judgment cause of action. In August 2020, the trial court denied the owners' motion and granted the tenants' motion. This left the tenants' other causes of action pending. Arguing that they were the prevailing party on the sole cause of action on the contract, the tenants then moved for attorney's fees pursuant to CC §1717 [prevailing party on contract providing for attorney's fees is entitled to reasonable fees] in the amount of $2.1 million. The owners filed an ex parte application asking the trial court to continue the filing deadlines and hearing date on the fees motion until after a settlement conference and certain pretrial deadlines. After suggesting that the tenants voluntarily continue the hearing date on their fees motion until after trial, the trial court ordered the parties to meet and confer regarding the owners' request for a continuance.

After the parties failed to reach an agreement about the owners' request for a continuance, the owners filed a second ex parte application, this time requesting the hearing on the tenants' fee motion be continued until after entry of a final judgment. The trial court denied the owners' motion and awarded the tenants $1.1 million in fees. The owners appealed, and the First District reversed.

The justices first rejected the tenants' argument that the owners forfeited their challenge to the fee award by failing to raise the issue at trial. After acknowledging the owners' two ex parte applications related to the tenants' request for a fee award, the panel stated that even if the issue was not adequately raised at trial, the panel would still reject the tenants' forfeiture argument since "appellate courts 'have discretion to consider a new theory on appeal when it is purely a matter of applying the law to undisputed facts.'" Brown v. Baren (1999) 74 Cal.App.4th 1303, 1316, 88 Cal.Rptr.2d 758. The panel also rejected the tenants' argument that the appeal will be moot if the trial court enters a final judgment while this appeal is pending, noting that "[t]his argument is hypothetical, because there is not a final judgment."

The summary adjudication order was an interim order, not a final resolution. . .
Next, the panel turned to the owners' argument that the summary adjudication was an interim order, not a final resolution, since several other causes of actions remained pending. The justices agreed for a couple of reasons. First, the summary adjudication order was not appealable. Second, trial courts retain the inherent authority to change a summary adjudication order at any time prior to the entry of judgment. Moreover, CCP §1008(c) provides trial courts with the authority to reconsider and change an order at any time if there has been a change of law. The justices noted that this was done in International Ins. Co. v. Superior Court (1998) 62 Cal.App.4th 784, 72 Cal.Rptr.2d 849, where a summary adjudication order was changed seven years after it was originally entered. For these reasons, the panel concluded the summary adjudication order must not be a final resolution.

The justices next considered whether CC §1717 permits fee awards based on interim resolutions. In deciding that it did not, the panel examined the language of the statute. CC §1717(a) provides, in pertinent part, "the party who is determined to be the party prevailing on the contract…shall be entitled to reasonable attorney's fees in addition to other costs." (Emphasis added.) The same subdivision also provides that "Reasonable attorney's fees shall be filed by the court, and shall be an element of the costs of suit." (Emphasis added.) The justices reasoned that since the attorney's fees are made an element of costs, which are awarded at the end of an action, attorney's fees under CC §1717 must not be available for interim resolutions.

But ambiguity in the statute leads the justices to turn to legislative history. . .
The justices also found that the use of past tense in the definition of "prevailing party" in CC §1717(b)(1) (e.g., "the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract"), "indicates that the determination would be made after a final resolution of the litigation, not merely an interim resolution of only some of the causes of action in the case." However, as the tenants argued, subdivision (b)(1) also provides that the court must determine the party prevailing on the contract "whether or not the suit proceeds to final judgment." The tenants argued that this language supports their interpretation that the fees award must be available before final disposition of a case. The panel noted the ambiguity in the statute required them to examine the legislative history.

After a review of the evolution of CC §1717, the justices noted that the language in question was added to the statute in a 1981 amendment that was intended to abrogate the holding in Samuels v. Sabih (1976) 62 Cal.App.3d 335, 133 Cal.Rptr. 74, which had held that a defendant could not recover attorney's fees under CC §1717 if the action was dismissed for failure to prosecute. The panel concluded that the language in question shows that the Legislature intended "merely to allow for fee awards when litigation concludes in something other than a final resolution, such as a dismissal." But the "amendment still presupposes that the litigation will be over before a trial court can make a fee award."

The tenants also argued that CC §1717(b)(1)'s definition of prevailing party as "the party who recovered a greater relief in the action on the contract" must mean fees can be awarded as soon as the trial court rules on the contract claims, regardless of whether non-contract claims remain pending. Again turning to the legislative history, the panel concluded that the current definition of "prevailing party" in CC §1717(b)(1) was intended to parallel the "prevailing party" language in CCP §1032 and that nowhere in the legislative history is there any indication that interim awards of attorney's fees are permitted upon the resolution of contract claims where other non-contract claims remain pending.

For these reasons, the First District reversed the trial court's order, without prejudice to consideration of a subsequent motion for attorney's fees at the final resolution of the action.