Key Decisions

October 2012 – Party Prevails By Showing The Court Lacks Jurisdiction

(filed under: Key Decisions Archive | October 24, 2012)

Other Cases Of Interest

A Party That Prevails By Showing The Court Lacks Jurisdiction May Be Entitled To Prevailing Party Attorney Fees

Kandy Kiss of California, Inc. v. Tex-Ellent, Inc.
(Cal. Ct. of App., 2d Dist.), filed September 21, 2012

Tex-Ellent, Inc. does business as Paramount Textiles. It provided a sample of fabric to Kandy Kiss for consideration for use in Kandy Kiss’ clothing line. The purchase order included a provision whereby Paramount would indemnify Kandy Kiss in the event of any claim and would pay attorney’s fees in the event of litigation.

When Kandy Kiss decided to use the fabric, Paramount directed it to buy the fabric directly from the manufacturer.

Kandy Kiss, Paramount and others were sued for copyright infringement in federal court and lost.

Kandy Kiss then sued Paramount in state court for indemnity. Paramount moved to dismiss the case. It argued that since the case was based on federal copyright law, only the federal court had jurisdiction. The trial court agreed and granted Paramount’s motion. Paramount then sought an award of attorney’s fees as the prevailing party. The trial court awarded Paramount its attorney’s fees.

Kandy Kiss appealed the fee award. However, rather than appealing the order dismissing its action, Kandy Kiss filed a new action in federal court.

Paramount moved for summary judgment in the federal court. It argued that it had no contract with Kandy Kiss and therefore had no contractual duty to indemnify it. The court agreed and dismissed Kandy Kiss’ second lawsuit. It then denied Paramount’s request for attorney’s fees.

As to Kandy Kiss’ appeal of the fee award in the state court case, the Court of Appeal affirmed. Although the trial court had determined it did not have jurisdiction over the dispute, that did not mean it did not have jurisdiction to award attorney’s fees to the prevailing party. It also ruled that because Paramount obtained a dismissal of the action against it, it was the prevailing party.

The court rejected Kandy Kiss’ argument that because the federal court had determined that there was no contract and that as a result Paramount was not entitled to attorney’s fees for prevailing in the federal lawsuit, Paramount should not be able to recover attorney’s fees in the state lawsuit. The court noted that Kandy Kiss raised this argument by way of a request for judicial notice in its appeal rather than by seeking leave to file supplemental briefing. The court held since this deprived Paramount of the opportunity to respond to the argument.

In the state trial court, Kandy Kiss had asserted that there was a contract under which it was entitled to indemnity and attorney’s fees. The court ruled that it could not later “reverse field” when its goals had changed.

The court also ruled that Paramount was entitled to its attorney’s fees for resisting Kandy Kiss’ appeal.