Will this one-sided prevailing-party fee clause be enforced as written, and who pays fees if the case settles or is dismissed?
Not as written. Civil Code § 1717(a) makes a contractual provision for fees incurred to enforce the contract reciprocal: in an action on a contract, the party prevailing ON THE CONTRACT is entitled to reasonable fees whether or not it is the party the contract names, and, in a contract entered into after the section's effective date, a provision waiving the section's fee right is void. Under § 1717(b)(2) there is NO prevailing party where the action has been voluntarily dismissed or dismissed pursuant to a settlement, so no § 1717 fees follow a settlement. Section 1717 governs only contract claims, however: where a voluntarily dismissed action also asserts causes of action that do not sound in contract, those causes of action are not covered by § 1717, and the fee provision, DEPENDING UPON ITS WORDING, may afford the defendant a contractual right, not affected by § 1717, to recover the fees incurred litigating them, which is how Santisas itself came out: the seller defendants were held entitled to recover as costs the fees they incurred defending the tort claims and § 1717 did not bar that recovery, but § 1717 DID bar the fees incurred defending the breach-of-contract claim.
The trap
A drafter who writes the fee clause to run only in its own favour gets mutuality it did not want, and a drafter who assumes a dismissal produces a fee award gets nothing on the contract claim. Subdivision (b) writes one route back: where the defendant alleges in the answer that it tendered the plaintiff the full amount to which the plaintiff was entitled and thereupon deposits that amount in court, and the allegation is found to be true, the defendant IS deemed the party prevailing on the contract, so a tender made and deposited is worth more to a defendant than a dismissal. The line that decides real cases is the contract/tort split: the same clause yields no fees on the contract count after a voluntary dismissal and, if the clause's wording reaches tort claims, fees on the tort counts, Santisas left open how fees on issues common to both are apportioned, which is why 'in any action arising out of this agreement' and 'in any action on this contract' are not interchangeable in California.
5 authorities
- statuteCal. Civ. Code § 1717enactment date not established
The words that state the rule
(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. Where a contract provides for attorney’s fees, as set forth above, that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract. Reasonable attorney’s fees shall be fixed by the court, and shall be an element of the costs of suit. Attorney’s fees provided for by this section shall not be subject to waiver by the parties to any contract which is entered into after the effective date of this section. Any provision in any such contract which provides for a waiver of attorney’s fees is void.
- statuteCal. Civ. Code § 1717enactment date not established
The words that state the rule
(b) (1) The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section. (2) Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section. Where the defendant alleges in his or her answer that he or she tendered to the plaintiff the full amount to which he or she was entitled, and thereupon deposits in court for the plaintiff, the amount so tendered, and the allegation is found to be true, then the defendant is deemed to be a party prevailing on the contract within the meaning of this section. Where a deposit has been made pursuant to this section, the court shall, on the application of any party to the action, order the deposit to be invested in an insured, interest-bearing account. Interest on the amount shall be allocated to the parties in the same proportion as the original funds are allocated.
The words that state the rule
As set forth above, we conclude that contractual attorney fee provisions are generally enforceable in voluntary pretrial dismissal cases except as barred by section 1717. 9 Applying this rule to the facts presented here, we further conclude that the seller defendants are entitled under the attorney fee provision of the purchase agreement to recover as costs the amount they incurred in attorney fees to defend the tort claims asserted against them in this action, and that section 1717 does not bar recovery of these fees. But we *623 also conclude that section 1717 does bar the recovery of attorney fees incurred in the defense of the breach of contract claim. 10 The judgment of the Court of Appeal is reversed and the cause is remanded to that court for further proceedings consistent with this opinion.
The words that state the rule
If the voluntarily dismissed action also asserts causes of action that do not sound in contract, those causes of action are not covered by section 1717, and the attorney fee provision, depending upon its wording, may afford the defendant a contractual right, not affected by section 1717, to recover attorney fees incurred in litigating those causes of action.
The words that state the rule
We foresee that upon remand a question may arise regarding defendants’ right to recover as costs attorney fees they incurred to litigate issues common to the contract and tort claims. (Cf. Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d 124, 129-130 .) Because the Court of Appeal did not address this allocation issue, and because the parties did not brief it in this court, we decline to express any opinion here on its proper resolution.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.