Practice Tip: Using a Prevailing Party's Pre-trial Conduct to Reduce Attorneys' Fees

• Publication year: 2014
• Author: By Jody M. Burgess

Practice Tip: Using a Prevailing Party's Pre-Trial Conduct to Reduce Attorneys' Fees

By Jody M. Burgess

©2014 All Rights Reserved.

I. INTRODUCTION

Post-trial motions in any lawsuit stemming from a real estate contract will undoubtedly involve an analysis of the prevailing party's right to attorneys' fees. Such analysis typically includes the reasonableness of the requested fee award by focusing on the hours worked, rate charged, and case challenges. These factors are certainly necessary when analyzing the appropriateness of any fee award, but equally important is the need to consider the pre-trial behavior of the adversary to determine whether the award of attorneys' fees should be reduced on principles of equity. In the Second District Court of Appeals case of EnPalm, LLC v. Teitler Family Trust,¹ the defendant unequivocally won the trial (and was found to be the prevailing party) but later suffered a ninety percent reduction in his recovery of attorneys' fees because his pre-trial conduct unnecessarily increased litigation.

Current real estate contracts generated by the California Association of Realtors contain a prevailing party attorneys' fees provision for legal actions arising under the contract. Such actions often include allegations of failure to disclose, negligent misrepresentation, and fraud; all of which are torts that suggest the presence of pre-trail conduct that could result in a reduction of any fee award otherwise due to the prevailing party. Such pre-trial conduct must be investigated, analyzed, and established at trial to aid any post-trial motion work involving attorneys' fees.

II. ANALYZING A CONTRACTUAL RIGHT TO RECOVER ATTORNEYS' FEES

A. Considerations Before Litigation

An attorneys' fees provision must be analyzed at the outset of any contract dispute to ensure its scope is understood and what acts, if any, may trigger a litigant's right to recover attorneys' fees if litigation arises. The California Association of Realtors Commercial Property Purchase Agreement and Joint Escrow Instructions, for example, currently contain a mediation provision requiring the plaintiff to offer to mediate any dispute before filing a lawsuit, and his or her failure to do so can waive any right to recover attorneys' fees in any resulting litigation.² Other contracts may similarly limit or entirely remove a litigant's ability to recover an award of attorneys' fees, which is why each clause should be independently analyzed when contemplating litigation. Equally important to that analysis is the need to understand the scope of California Civil Code section 1717, which served as the statutory basis to recover attorneys' fees as provided in EnPalm, LLC v. Teitler Family Trust.³

California Civil Code section 1717 governs the recovery of attorneys' fees authorized by the express terms of a contract. Section 1717 provides that "the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorneys' fees in addition to other costs."⁴ Section 1717 has been operative for years, yet many attorneys overlook the scope of such recovery as outlined in the statute. For example, the statute affords the defendant a right to recover attorneys' fees if a contract claim is defeated by proving the contract was invalid or nonexistent.⁵ In a recent trial, our client was able to prove he was not a guarantor under the contract sued upon by the plaintiff and that no contractual relationship existed to impose payment of the outstanding sums owed. The plaintiff had asked for a considerable sum of money and further prayed for an award of attorneys' fees. At trial, the alleged guarantee was found unenforceable against our client because no contractual relationship existed. The court deemed our client the prevailing party and awarded attorneys' fees to our client based on the proposition that, "[w]hen a defendant beats recovery by the plaintiff on the only contract claim in the action, the defendant is the party prevailing on the contract under section 1717 as a matter of law."⁶ This is true even if the defendant proves the contract never existed⁷—a point of law that should be carefully considered by a plaintiff or cross-complainant when pursuing the recovery of attorneys' fees on weak or otherwise difficult facts.

B. Determining the Prevailing Party

Determining the prevailing party is generally left to the sound discretion of the trial court,⁸ and this determination may prove difficult in equitable causes of action. Other cases are not so challenging, especially where one party obtains a simple, unqualified win on a claim for breach of contract...