In order to be entitled to recover attorneys’ fees, there must either be a statute that authorizes them or a written contract that provides for the prevailing party to receive them from the losing party. What constitutes a “prevailing party” has long been a point of contention between litigants.
California Civil Code section 1717 authorizes a Court to award reasonable attorneys’ fees and costs to a prevailing party if such an award is authorized in a written contract. Also, as a general rule, under Section 1717, there can only be one prevailing party in a lawsuit. However, in the Fourth Appellate District California Court Appeals case of Burkhalter Kessler Clement & George LLP v. Hamilton, filed on January 8, 2018, the Appellate Court found that more then one party may be a prevailing party for the purpose of awarding attorneys’ fees and they do not have to both be on the same side of the litigation.
In Burkhalter, a law firm sub-let a portion of its offices to another company, Eclipse Group, LLC. Eclipse vacated the property before the end of its sublease and failed to pay rent and other costs associated with its sub-tenancy. The Burkhalter firm sued Eclipse. It also sued Jennifer Hamilton, the managing partner of Eclipse, on the alleged basis that Hamilton was the alter ego of Eclipse.
Hamilton successfully moved for judgment on the pleadings and the Burkhalter firm was given leave to amend. The amended Complaint further expounded on the Burkhalter’s alter ego allegation. However, Hamilton successfully demurred and the Burkhalter firm was again given leave to amend. The Second Amended Complaint dropped Hamilton as a defendant and solely named Eclipse, and Burkhalter ultimately won a summary judgment motion against Eclipse on the Second Amended Complaint.
Hamilton filed a motion for attorneys’ fees against the Burkhalter firm based on the claim that she was the prevailing party on the only allegations made against her, alter ego, which the trial court summarily denied. Burkhalter also filed a motion for attorneys’ fees against Eclipse in which Burkhalter claimed it was the prevailing party since it received a summary judgment in its favor against Eclipse.
The Court determined that Burkhalter’s success on the breach of contract claim and recovery of its contractual attorney fees against Eclipse did not prevent Hamilton from recovering her contractual attorneys’ fees against Burkhalter based on application of the general principle that a judgment’s finality must be separately determined based on the plaintiff’s claims against each defendant when there is more than one defendant. Consequently, the Appellate Court reversed the trial court’s denial of prevailing party status to Hamilton and remanded the case to the trial court to determine the amount of reasonable attorneys’ fees to which Hamilton should be entitled.
Before you undertake contract-based litigation, realize the risks. Sometimes a tactic may actually result in liability you would not have otherwise incurred.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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