Key Decisions

June 2012 – Only One Prevailing Party

(filed under: | June 16, 2012)

Other Cases Of Interest

There Can Be Only One Prevailing Party In A Lawsuit And Only That Prevailing Party Is Entitled To Attorney’s Fees Under Civil Code Section 1717.

Frog Creek Partners, LLC v. Vance Brown, Inc.
(Cal. Ct. of App., 1st Dist.), filed May 24, 2012 

Vance Brown, Inc. agreed to build a multi-million dollar home for Jeffrey Drazan. Drazan formed his own limited liability company, Frog Creek Partners, to manage the construction project. Frog Creek ended up filing a suit against Brown, seeking damages for breach of contract, conversion, and other causes of action arising out of the construction project.

Brown filed a petition to compel arbitration. Brown also filed a cross-complaint against Frog Creek.

The trial court denied the petition to compel arbitration. The Court of Appeal affirmed.

Brown filed a second petition to compel arbitration. The trial court again denied the petition to compel arbitration. However, the Court of Appeal reversed and ordered that the matter be submitted to arbitration.

An American Arbitration Association panel issued a 65-page decision awarding Brown damages against Frog Creek of $1,905,902.90, plus $2,517,687.31 in attorney fees for the arbitration proceeding and $666,422.78 in costs. The arbitrators declined to rule on whether attorney fees and costs might be awarded for litigation activity before the arbitration. Frog Creek paid the arbitration award in February 2010, and the trial court entered judgment.

Brown filed a motion for attorney fees and costs pursuant to Civil Code section 1717, seeking $998,260 in pre-arbitration and post-arbitration costs and fees, including attorney fees for its unsuccessful petition to compel arbitration and the first appeal. Frog Creek filed a motion for $229,510.75 in attorney fees and costs pursuant to Section 1717 in connection with its successful opposition to that petition and the first appeal. Frog Creek argued it was the “prevailing party” on Brown’s unsuccessful effort to compel arbitration.

The trial court determined that Brown was the prevailing party in the arbitration and awarded Brown pre-arbitration attorney fees of $692,293 and post-arbitration fees of $96,000. The court determined that Frog Creek was the prevailing party on the initial petition to arbitrate and awarded Frog Creek attorney fees of $125,000, including fees for the Frog Creek I appeal. The court denied Brown the $128,000 in attorney fees that Brown had sought for those proceedings. The net award of pre-arbitration and post-arbitration attorney fees to Brown was $663,293.

Brown appealed the reduction in his award.

The Court of Appeal reversed and remanded.

Civil Code section 1717 governs awards of attorney fees based on a contract and authorizes an award of attorney fees “[i]n any action on a contract” to “the party prevailing on the contract” if the contract provides for an award of attorney fees. The party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.

The court held that, under Section 1717, there may only be one prevailing party entitled to attorney fees on a given contract in a given lawsuit. As such, the trial court could not award attorney fees to both parties on the same contract in the same lawsuit. Thus, it directed the trial court to award Brown reasonable attorney fees for the proceedings on its first petition to compel arbitration. It also directed the trial court to award Brown reasonable attorney fees on appeal. However, it noted that the award need not be in the amount requested by Brown.