Reciprocal Attorney Fees Statute Analyzed

Metropolitan News-Enterprise
May 24, 2012

Frog Creek Partners, LLC v. Vance Brown, Inc. (cite as 2012 S.O.S. 2550), filed May 24, 2012, First District, Div. Five, determined that under Civil Code section 1717, there may only be one prevailing party entitled to attorney fees on a given contract in a given lawsuit. In this case, plaintiffs succeeded in blocking defendants motion to compel arbitration but defendant ultimately prevailed on its subsequent petition to compel arbitration and in the arbitration.

In determining that the reciprocal attorney fee statute Civil Code Section 1717 only allowed one prevailing party in the same contract in the same lawsuit,the court affirmed the decision of Green v. Mt. Diablo Hospital Dist. (1989) 207 Cal.App.3d 63.

Brown moved for petition to compel arbitration based on his version of the contract but Frog Creek succeeded. Brown appealed but Court of Appeal affirmed. Subsequently, Brown moved for arbitration on Frog Creek’s version of the contract but the trial court denied the petition. Brown appealed and the Court of Appeal reversed and the court directed the trial court to stay proceeding and proceed with arbitration. Fifty days of Arbitration followed wherein Brown succeeded receiving nearly $2 million in damages and $2.5 million in attorneys’ fees for the arbitration proceedings and $600,000 in costs. Both parties sought attorney’s fees for fees incurred prior to litigation (Brown sought $1 million; Frog Creek sought $230,000). Trial court found Frog Creek the prevailing party. An appeal followed.

The Court found that the evolution of the definition of prevailing party in Civil Code Section 1717 supports a conclusion that there may only be one prevailing party on a contract in a given lawsuit. Moreover, cases considering Civil Code Section 1717 attorney fee requests related to disputes over arbitrability support a conclusion that Frog Creek is not entitled to attorney fees for defeating Brown’s petition to compel.

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