…. Smart Move – Fee Award Entombed On Appeal.
Tomb of General Ulysses S. Grant, Riverside Drive, NYC. 1897. Library of Congress.
In U.S. Grant Hotel Ventures, LLC v. American Property Management Corp., Case No. D066490 (4th Dist., Div. 1 Feb. 19, 2016) (unpublished), parties got into a hotel management imbroglio where plaintiff sued defendants, and one defendant brought a cross-complaint in a back-and-forth matter, even in two prior appellate decisions, resulting “kinda” in a mixed decision. “Kinda” is the operative word. Plaintiff won a $1.35 million verdict on a contractual breach, fiduciary breach and conversion counts, while cross-complainant/defendant won $3.2 million (after a post-trial remittitur) on wrongful fee termination/failure to pay damages and liquidated damages claims.
Now, here is the part we blog on. Both sides moved for attorney’s fees recovery, and both sides won. Cross-complainant won $3.35 million in fee recovery under Civil Code section 1717 based upon a fees clause in a Managing Agreement on its cross-complaint, while plaintiff on its complaint was awarded $4.2 million under the Operating Agreement based on a fees clause against the defense (with CCP § 1021 being the operative provision which allows fee recovery based on the bargain between the parties). “Kinda, kinda” again a split, although we would note something that is interesting (but not likely surprising to attorneys or judges)—the fee recovery in both disputes still exceeded the merits dispute recovery by both sides in the overall controversy.
However, interesting enough, defendant/cross-complainant appealed the fee recovery to plaintiff on the complaint. That was a good move.
The entire $4.2 million fee award went POOF! even though the Operating Agreement fees clause was broad enough to allow for recovery on tort claims. The rub was that plaintiff was not a party to the Operating Agreement, no provisions in the Agreement showed it a party to the contract, no Corporations Code statutes allowed for independent fee recovery apart from the Operating Agreement, and there were no basis for recovery on a third-party beneficiary theory. So, the end result—if our math is right—was that plaintiff was much, much unhappier after the appellate decision: before the decision, it was only $1 million in the minus to the cross-complainant when the merits judgment and fee award were totaled; but afterwards, plaintiff was $5.2 million behind when its fee award went POOF!