Filed 9/8/26 Sugarman v. Banc of California CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
STEVEN A. SUGARMAN, B343047
Individually and as Trustee, etc.,
Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. 19STCV36697
v.
BANC OF CALIFORNIA, INC.
Defendant and Appellant.
APPEAL from a post-judgment order of the Superior Court
of Los Angeles County, Wendy Chang, Judge. Affirmed.
Simpson Thacher & Bartlett, Chet A. Kronenberg and
Jonathan C. Sanders for Defendant and Appellant.
Cozen O’Connor, Thomas W. Casparian and Christopher
Paolino for Plaintiffs and Respondents.
_____________________________
INTRODUCTION
Plaintiffs Steven A. Sugarman and his trust sued Banc of
California and several of its board directors and executives in the
wake of a scandal that led to Sugarman’s resignation from his
positions at Banc of California in January 2017.
After years of litigation, plaintiffs voluntarily dismissed
their four remaining causes of action against Banc. Banc filed a
motion for attorney fees and claimed it qualifies as the prevailing
party, notwithstanding the application of Civil Code section 1717,
subdivision (b)(2). Banc argued that California law did not apply,
and for the first time in this litigation since its initiation in 2019,
referred to a New York choice of law provision in an agreement
entered into by the parties in 2010. The trial court found Banc
waived application of the New York choice of law provision
because Banc relied solely on California law throughout all of its
motions and pleadings to date.
Banc appealed the trial court’s ruling.
We find no error. We find Banc waived the application of
New York law. We further find Banc does not qualify as a
“prevailing party” entitled to attorney fees under California law
(Civ. Code, § 1717, subd. (b)(2)), as plaintiffs voluntarily
dismissed their contract claims against Banc.
We affirm the order denying the attorney fee motion.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties
Plaintiff Sugarman is the former chair of the board,
president, and chief executive officer of Banc of California, Inc.
and its national bank subsidiary Banc of California, N.A. (Banc).
Plaintiff The Steven and Ainslie Sugarman Living Trust (Trust),
2
Sugarman’s revocable living trust, held various stock warrants
and common stock in Banc. The Trust is the successor-in-interest
to Banc’s contracts with two of Sugarman’s business enterprises,
COR Capital LLC and COR Advisors LLC. We refer to
Sugarman and the Trust collectively as plaintiffs.
Plaintiffs sued Banc and some of its executives and
members of the board of directors over circumstances
surrounding Sugarman’s resignation. While Banc’s board
directors/executives were defendants in the underlying suit and
respondents in appeal case No. B338610, they are not parties to
this appeal.
B. The First Amended Complaint
On February 19, 2020, plaintiffs filed the 167-page
operative first amended complaint (FAC) with 636 pages of
exhibits attached. The FAC alleged 12 causes of action, some
against Banc, some against its executives/directors, and some
against both: 1) breach of contract; 2) fraudulent inducement to
hold securities; 3) negligent misrepresentation to induce holder to
hold securities; 4) tortious interference with contract; 5) unfair
competition; 6) conspiracy to engage in unfair competition;
7) preventing subsequent employment by misrepresentation;
8) tortious interference with prospective economic advantage;
9) defamation; 10) breach of indemnification agreements;
11) account stated with respect to the separation indemnification
agreement; and 12) breach of covenant of good faith and fair
dealing. All causes of action except the fourth named Banc as a
defendant.
On August 3, 2026, in appeal No. B307753, we directed the
trial court to grant Banc’s April 6, 2020 anti-SLAPP motion to
strike plaintiffs’ second, third, fifth, sixth, seventh, eighth, and
3
ninth causes of action. (Sugarman v. Benett (2021)
73 Cal.App.5th 165, 178.) In this appeal, we concentrate only on
the allegations relevant to the first, tenth, eleventh, and twelfth
causes of action remaining against Banc.
In 2010, Sugarman’s investment firm COR Capital led a
recapitalization of Banc for $60 million with other investors.
Concurrent with the recapitalization, “Sugarman and the entities
he wholly owned with his wife, including the Trust, COR Capital,
LLC and COR Advisors LLC, entered into a series of contracts
with Banc.” At least seven contracts are identified throughout
the FAC: 1) Subscription Agreement with Registration Rights
and Indemnification Rights dated July 16, 2010 (Subscription
Agreement); 2) Consulting and Expense Agreement with Warrant
Agreement, Registration Rights and Indemnification Rights
dated July 16, 2010 (Consulting Agreement); 3) Warrant to
Purchase Common Stock dated November 1, 2010 (Warrant
Agreement); 4) Stock Appreciation Rights Agreement granted
August 21, 2012 inclusive of all subsequent amendments dated
August 21, 2012, December 13, 2013, May 23, 2014, March 2 and
24, 2016 (collectively, SAR Agreement); 5) 2016 employment
agreement; 6) director and officer indemnification right
agreement; and 7) separation agreement with indemnification
rights entered January 23, 2017. These contracts “were each
entered into by Banc as inducements for Mr. Sugarman and the
entities he wholly owned with his wife . . . to provide services and
capital to Banc.”
The Subscription Agreement includes the attorney fee
provision and choice-of-law provision at issue.
4
1. The Subscription Agreement
The Subscription Agreement (attached as an exhibit to the
FAC) provides terms for the purchase and sale of securities and
common stock. The Subscription Agreement identifies the
subscriber as COR Capital LLC with Sugarman’s signature as
the “managing member.” Article X of the Subscription
Agreement, entitled “Miscellaneous,” includes relevant provisions
10.6 and 10.7.
Section 10.6 provides: “In the event of a dispute regarding
this Agreement that results in litigation or arbitration, the
prevailing party, as determined by the finder of facts, shall be
entitled to an award of reasonable attorneys’ fees.”
Section 10.7 provides, in relevant part: “Except to the
extent governed by federal law applicable to national savings
associations, all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be
governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions)
that would cause the application of the laws of any jurisdictions
other than the State of New York.” (Italics added.)
2. The FAC’s First, Tenth, Eleventh, and Twelfth
Causes of Action against Banc
On January 23, 2017, Sugarman resigned and entered into
a separation agreement including a full release and a new
indemnification agreement with Banc and its affiliates. He
“provided a full release to the Banc for its actions which occurred
prior to the execution of the Separation Agreement.”
5
Sugarman had a right to stock based on the appreciation of
1,559,012 shares of Banc common stock upon his departure from
Banc. The SAR Agreement enabled Sugarman to convert his
stock appreciation rights into voting common stock upon his
election to exercise those rights. Misrepresentations by
defendants caused Sugarman to be restricted from exercising his
stock appreciation rights.
The FAC’s first cause of action for breach of the Warrant
Agreement and the Registration Rights Agreement alleges:
Sugarman entered into the Warrant Agreement and the
Registration Rights Agreement with Banc. Sugarman “did all of
the things required of him” under those two agreements. Banc
however “did not perform its obligations” and “breached” those
agreements “by unilaterally altering the terms of the agreements
as to the nature and class of the shares which Mr. Sugarman was
entitled to receive such that [he] could not convert his Warrants
into voting commons stock” and by “failing to allow Mr.
Sugarman to convert his Warrants into Class A voting stock.”
Plaintiffs requested damages “in the amount of not less than
$17 million.” The Warrant Agreement was attached as an exhibit
to the FAC. Section 10 of the Warrant Agreement provides: “This
Warrant shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the
State of New York.”
The FAC’s tenth and eleventh causes of action for breach of
various indemnification agreements contend that Banc’s failure
to indemnify plaintiffs for litigation-related expenses incurred
under various indemnification agreements (i.e., the Separation
Indemnification Agreement, the Consulting Agreement, and the
Subscription Agreement) amounts to breach of contractual
6
obligation by Banc. Plaintiffs requested “damages in the amount
of not less than $150,000.00 plus the attorneys’ fees and expenses
. . . incurred in vindicating his rights under this indemnification
agreements.”
The FAC’s twelfth cause of action for breach of good faith
and fair dealing alleges that Banc and Sugarman were parties to
the SAR Agreement. Banc breached its duty of good faith and
fair dealing with respect to the SAR Agreement by “taking
actions to deprive Mr. Sugarman of the fruits of the agreement,
including but not limited to failing to make appropriate
disclosures . . . and other related actions which unfairly
interfered with Mr. Sugarman’s ability to receive the benefits” of
the SAR Agreement. Plaintiffs requested that “Banc be adjudged
to have breached its obligations of good faith and fair dealing and
be found to owe Mr. Sugarman the full value of the fruits and
benefits of the contracts as if [Banc] had never interfered in an
amount to be proven at trial.” The SAR Agreement, also attached
as an exhibit to the FAC, does not include a New York choice-of-
law clause.
C. Banc’s Anti-SLAPP Motion
On April 6, 2020, Banc filed an anti-SLAPP motion
pursuant to Code of Civil Procedure1 section 425.16 and sought to
strike the FAC’s second, third, fifth, sixth, seventh, eighth, and
ninth causes of action as arising from Banc’s protected speech
and petitioning activity. The motion did not cite to or rely upon
New York law.
1 Undesignated statutory references are to the Code of Civil
Procedure.
7
On September 1, 2020, the trial court granted in part and
denied in part the anti-SLAPP motion. On December 27, 2021, in
case No. B307753 we reversed the denial of the anti-SLAPP
motion. Thus, the second, third, fifth, sixth, seventh, eighth, and
ninth causes of action against Banc were struck in their entirety.
(Sugarman v. Benett, supra, 73 CalApp.5th at p. 178.)
As a result of its victorious anti-SLAPP motion, Banc filed
a renewed motion for attorney fees and costs. On January 24,
2023, the trial court awarded Banc $1,490,057.94 in attorney fees
and $48,207.09 in costs.
D. Banc’s Demurrer
On May 27, 2022, Banc demurred to the first and twelfth
causes of action for failure to state facts sufficient to state a cause
of action per section 430.10, subdivision (e). Banc argued
plaintiffs are collaterally estopped from pursuing the first cause
of action, based on the Court of Appeal’s ruling in favor of Banc
on a similar claim in the appeal, Sugarman Family Partners v.
Banc of California (July 14, 2021, G059219) [nonpub. opn.] (the
SFP litigation).2
2 We also grant plaintiffs’ July 3, 2025 request that we take
judicial notice of Banc’s respondent’s brief dated December 30,
2020 and filed in appeal No. G059219. (Evid. Code, §§ 452,
subd. (d), 459; Cal. Rules of Court, rule 8.252.) In that brief,
Banc states: “This is a breach-of-contract case, not a federal
securities-fraud case, and the relevant contractual language is
clear.” “SFP has advanced only contract claims, governed by
California contract law, alleging that Banc breached its
obligations under the terms of the warrant.” (Boldface and italics
omitted.) In the decision issued in appeal No. G059219 on July
14, 2021, the Court of Appeal ruled: “This is a contract action to
8
On September 9, 2022, the trial court overruled the
demurrer as to both the first and twelfth causes of action.
Sugarman Family Partners is an entity whose principal was
Sugarman’s father, and “there is no dispute that [p]laintiffs, who
[Banc] seeks to assert collateral estoppel against, were not
parties in the SFP Litigation; in that action, the [p]laintiff was
Sugarman Family Partners and the [d]efendant is Banc.”
E. Banc Executives/Board Directors’ Attorney Fee Motion
On October 2, 2023, Banc’s board directors and executives
moved for an award of $1,067,598.50 in attorney fees and
$2,925.67 in costs. On January 4, 2024, plaintiffs filed their
opposition to the attorney fee motion and argued their dispute
does not “regard” the Subscription Agreement and thus does not
trigger the broadly worded attorney fee provision.
Banc’s attorney (Chet A. Kronenberg, Esq.) was present at
the April 18, 2024 hearing on Banc’s executives’ attorney fee
motion. While arguing that Banc’s executives/board directors
“were not agents at the time the contract was made” and “could
not have been within the contemplation of the parties who were
entering into th[e] [transaction],” plaintiffs’ counsel mentioned
the Subscription Agreement’s “language [regarding agency] is not
clear at all from the agreement. This is an agreement, by the
way, which if you look at closely is actually governed not by
California law but New York law, and New York law says fee
shifting provisions like this are strictly construed.”
The trial court awarded $1,062,813.20 in attorney fees and
$2,925.67 in costs to Banc’s board directors and executives jointly
enforce the warrant; it is therefore governed by California
contract law.”
9
and severally, and found they are “prevailing parties as defined
in Code of Civil Procedure section 1032.” The trial court found
“[a]t least one of Plaintiffs’ claims is based directly on
interference with the Subscription Agreement” and that
regardless of “[w]hether or not Plaintiffs’ cause of action was
brought directly on the Registration Rights Agreement, the
fourth cause of action ‘regards’ the Subscription Agreement” due
to the “broad wording” of the attorney fees clause. “The clause
permits recovery for any dispute ‘regarding’ the Subscription
Agreement. The constant cross-referencing of all these
documents to each other, all as part of the same transaction
during Banc’s 2010 recapitalization, demonstrates that each
document ‘regards’ the others.” The trial court further found the
Banc executives “may enforce the attorneys’ fees provision in the
Subscription Agreement” because they “acted as Banc’s agents at
all relevant times.” (Italics and underscoring omitted.)
In appeal No. B338610, plaintiffs asked us to reverse the
attorney fee order, arguing that the trial court misinterpreted the
relevant contracts and misapplied the law governing fee
applications. We disagreed with plaintiffs and issued our
decision on August 3, 2026, affirming the trial court’s attorney fee
award. In doing so, we concluded a dispute “regarding” the
Subscription Agreement resulted in litigation between plaintiffs
and Banc’s board directors/executives, such that the attorney fee
provision of the Subscription Agreement applied. We also
concluded Banc’s executives were empowered to enforce the
attorney fee provision as they are agents of Banc, as previously
decided by this court in the writ proceedings in appeal No.
B324186.
10
F. Banc’s Motion for Summary Judgment
On June 5, 2024, Banc filed a motion for summary
judgment.
As to the first cause of action, Banc claimed it is barred by
collateral estoppel based on the SFP Litigation. As to the tenth
and eleventh causes of action, Banc argued the “plain terms of
the indemnification agreements” demonstrate that the
indemnification terms did not apply to Sugarman. Sugarman
“demands that Banc indemnify Sugarman for legal fees he
incurred relating to two lawsuits against Banc that Sugarman
instigated. . . . . [T]he [Separation Indemnification] Agreement
only provides for indemnification when Sugarman is made a non-
party witness ‘by reason of the fact that [Sugarman] is or was a
director, officer or key employee of the Company.’ None of the
legal fees Sugarman purportedly incurred in either case had
anything to do with his former role at Banc.” (Boldface omitted.)
As to the twelfth cause of action, Banc argued the implied
covenant of good faith and fair dealing “must be tethered to
express provisions of the contract” and that plaintiffs have “not
identified any express provision in the SAR Agreement that
required Banc to make the disclosures [plaintiffs] claimed should
have been made.” (Boldface omitted.)
Banc’s motion for summary judgment cited to and relied on
California case law alone. In support, Banc filed a compendium
of evidence totaling 1600 pages.
The summary judgment motion was scheduled for hearing
on August 20, 2024.
11
G. Dismissal of the FAC
On July 12, 2024, plaintiffs filed a request for dismissal of
the four remaining causes of action against Banc, without
prejudice, which the trial court entered.
H. Banc’s Motion for Attorney Fees
On August 20, 2024, Banc moved for an award of
$3,215,474.50 in attorney fees “pursuant to New York law or, in
the alternative, under California Code of Civil Procedure
§ 1033.5(a)(10) as the prevailing party in this action.”
Banc argued: “Five years into this case and shortly before
the deadline for Plaintiffs to oppose Banc’s summary judgment
motion, Plaintiffs dismissed all four of their remaining claims
‘without prejudice’ in an attempt to avoid an imminent summary
judgment defeat and the obligation to reimburse Banc’s attorney
fees pursuant to a contractual ‘prevailing party’ attorneys’ fees
provision.” Banc contends the “problem” with plaintiffs’ strategy
is that New York law “governs the contract at issue” and that
“New York law is clear that, where a defendant has incurred
substantial expenses to litigate a case and then the plaintiff
voluntarily dismisses the complaint to avoid an adverse
judgment, the defendant is the ‘prevailing party.’ ” Banc
preemptively argues plaintiffs’ anticipated reliance on Civil Code
section 1717, subdivision (b)(2), which bars contractual attorney
fees following a voluntary dismissal of a case, is misplaced
because the Subscription Agreement “contains a New York choice
of law clause.” Banc contends the New York choice of law
provision governs here and that New York “does not have a
parallel statute to [Civil Code] § 1712(b)(2) limiting the recovery
of attorneys’ fees under a contractual prevailing party . . .
12
provision following a voluntary dismissal.” Banc cited to New
York case law as support.
Banc filed the declarations of its counsel—Brian B. Farrell,
Chet A. Kronenberg, and Mark R. McDonald—in support.
Farell’s declaration provides: Since April 2016, he served as the
“Senior Vice President, Deputy General Counsel” at Banc—“a
California state chartered bank.” “Banc’s Class A shares are
traded on the New York Stock Exchange.”
I. Plaintiffs’ Opposition to Attorney Fee Motion
On September 24, 2024, plaintiffs filed their opposition to
the motion for attorney fees. They argued Banc waived the
application of New York law, as it “cited to not one single New
York case on its demurrers or on its summary judgment motion,
urging the Court to dismiss the complaint solely on the basis of
California law. . . . Additionally, in prior attorney’s fees motions[,]
[Banc] cited only to California law.” Plaintiffs argued Banc does
not qualify as a prevailing party (given plaintiffs’ voluntary
dismissal) so that an award of contractual fee shifting is not
available to Banc. Plaintiffs contend “fundamental public policy
. . . requires the application of California law.”
In Sugarman’s declaration filed in support, he states: “It
was my understanding that for the totality of the case[,] Banc
and the court applied California law to all causes of action and
rulings including prior rulings related to motions for legal fees. It
was also my understanding that [Banc’s board directors and
executives] were awarded legal fees under CA law that they
clearly would not have been entitled to under New York law.”
Sugarman’s “dismissal . . . meant that Banc was not a ‘prevailing
party’ and therefore could not claim any Attorney’s Fees under
the terms of any contractual fee shifting provision. I reviewed
13
the Court’s decision relating to prior fee motions and the Court’s
citation to CA law and case precedents to help inform my decision
[to dismiss].” Sugarman has been “a California resident [his]
entire life with no connection to New York.” The Trust was
formed pursuant to California law and the trustees are California
residents. Neither COR Capital LLC or COR Advisors LLC were
registered to do business in New York, nor did they have “any
business, offices, or employees in New York.” Banc’s shares were
not trading on the New York Stock Exchange (NYSE) in 2010.
“Banc did no business in New York at the time of the contracts
and was not even registered to do business in New York until
2014.” “Banc had no employees, branches, loans or operations in
New York in 2010.” Banc’s headquarters were located at Chula
Vista in California. “As to the transactions at issue, the contracts
were performed in California” and “were negotiated in and
between California residents in California.” When Banc issued
the Class B shares, it “did so from California to [Sugarman] in
California.”
Also on September 24, 2024, plaintiffs filed a request for
judicial notice be taken of various documents, including a press
release issued by Banc on May 14, 2014, announcing the move of
its common stock listing from NASDAQ to the NYSE.
On October 1, 2024, Banc filed its reply.
J. Hearing and Ruling
On October 10, 2024, the trial court heard argument and
took the matter under submission.
On November 18, 2024, the trial court issued its ruling
denying Banc’s attorney fee motion: “Consistent with this court’s
April 18, 2024 order, the Court finds that the attorney’s fees
14
clause in the Subscription Agreement governs this motion.”3 The
trial court found Banc “has waived the right to assert [that] New
York law governs this dispute” and did “not adequately justify
why it has not raised the choice of law clause until the post-
dismissal phase of the litigation. If New York law governed this
litigation, it would have been relevant to at least Banc’s summary
judgment motion, if, as Banc now claims, the Subscription
Agreement reaches all of the substantive claims that remain in
this case against it.” The court found “the parties proceeded
through the litigation in this case under California law; thus
Banc impliedly waived the right to invoke New York law
notwithstanding the language of the choice of law provision.”
Additionally, the court found that even if Banc did not waive
application of New York law, that “a choice of law analysis favors
California.” California “ha[s] a materially greater interest than
New York in the determination of this issue”: “the parties are
located in California, Banc is the ‘Banc of California, Inc.’ . . . and
the [trial c]ourt t[ook] judicial notice of the fact that the majority
of banc’s locations are located in California” while “there remain
no locations (branches or operations) in New York state.”
(Boldface omitted.) The trial court also concluded that Banc does
not qualify as a “prevailing party” given plaintiffs’ “valid”
voluntary dismissal of the remaining claims; thus, the terms of
the attorney fee clause in the Subscription Agreement do not
apply to Banc.
Banc filed a timely notice of appeal.
3 On August 3, 2026, this court affirmed the trial court’s
April 18, 2024 order in appeal No. B338610.
15
DISCUSSION
On appeal, Banc argues the trial court’s holdings “are
simply wrong.” Banc contends it “never waived the New York
choice of law provision in the Subscription Agreement.” Banc
contends its previously filed demurrer and summary judgment
motion’s reliance on California law did not amount to a waiver as
those motions cited to California procedural rules and not
substantively on the merits. Banc also argues the trial court
“erred in holding that, even if there was no waiver, Civil Code
§ 1717(b)(2) trumps the New York choice of law provision in the
Subscription Agreement.”
We disagree with Banc. We conclude the trial court did not
err in denying the attorney fee motion.
A. Applicable Law
Under the American rule, each party to a lawsuit ordinarily
pays its own attorney fees; section 1021 codifies this rule: “Except
as attorney’s fees are specifically provided for by statute, the
measure and mode of compensation of attorneys and counselors
at law is left to the agreement, express or implied, of the parties.”
In other words, section 1021 permits parties to “contract out” of
the American rule by executing an agreement that allocates
attorney fees. Thus, parties “ ‘may validly agree that the
prevailing party will be awarded attorney fees incurred in any
litigation between themselves, whether such litigation sounds in
tort or in contract.’ ” (Santisas v. Goodin (1998) 17 Cal.4th 599,
608; Mountain Air Enterprises, LLC v. Sundowner Towers, LLC
(2017) 3 Cal.5th 744, 751; see Miske v. Coxeter (2012) 204
Cal.App.4th 1249, 1259; see Xuereb v. Marcus & Millichap, Inc.
(1992) 3 Cal.App.4th 1338, 1341.)
16
Section 1032, subdivision (b) provides: “Except as otherwise
expressly provided by statute, a prevailing party is entitled as a
matter of right to recover costs in any action or proceeding.”
(Italics added.) Section 1033.5 allows for the recovery of attorney
fees as costs under section 1032 when they are expressly
authorized by contract, statute, or law. (§ 1033.5, subd. (a)(10),
italics added.)
Civil Code section 1717, subdivision (a) provides: “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.” (Italics added.)
Civil Code section 1717, subdivision (b) provides: “(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.” (Civ. Code, § 1717, subd.
(b)(1)–(2), italics added.)
B. Standard of Review
“ ‘Generally, a trial court’s determination that a litigant is a
prevailing party, along with its award of fees and costs, is
17
reviewed for abuse of discretion.’ ” (Lampkin v. County of Los
Angeles (2025) 112 Cal.App.5th 920, 926; Goodman v. Lozano
(2010) 47 Cal.4th 1327, 1332.) However, when the question
presented requires interpretation of a statute or contract, our
review is de novo. (Lampkin, at p. 926; Goodman, at p. 1332;
Saeta v. Superior Court (2004) 117 Cal.App.4th 261, 267.) In
other words, it is a discretionary trial court decision on the
propriety or amount of statutory attorney fees to be awarded, but
a determination of the legal basis for an attorney fee award is a
question of law to be reviewed de novo. (Mountain Air, supra,
3 Cal.5th at p. 751; Cargill, Inc. v. Souza (2011) 201 Cal.App.4th
962, 966; see Connerly v. State Personnel Bd. (2006) 37 Cal.4th
1169, 1175 [“Under some circumstances, this may be a mixed
question of law and fact and, if factual questions predominate,
may warrant a deferential standard of review.”].)
In reviewing a trial court’s attorney fee award, we “ ‘accept
the trial court’s resolution of credibility and conflicting
substantial evidence, and its choice of reasonable inferences from
the evidence.’ ” (Sukumar v. City of San Diego (2017)
14 Cal.App.5th 451, 464; City of San Clemente v. Department of
Transportation (2023) 92 Cal.App.5th 1131, 1149.) “[A] trial
court abuses its discretion when factual findings critical to its
decision are not supported by substantial evidence.” (Sukumar,
at p. 464.)
C. The Subscription Agreement’s Attorney Fee Provision
Applies to this Litigation
When the parties briefed this appeal, this court’s decision
in appeal No. B338610 had not yet been issued and thus there
remained a question as to whether or not the Subscription
Agreement’s attorney fee provision applied to this litigation. The
18
provision, found in section 10.6 of the Subscription Agreement,
provides: “In the event of a dispute regarding this Agreement that
results in litigation or arbitration, the prevailing party, as
determined by the finder of facts, shall be entitled to an award of
reasonable attorneys’ fees.” (Italics added.)
On August 3, 2026, this court issued its opinion affirming
the trial court’s April 18, 2024 order granting Banc’s board
directors/executives’ motion for attorney fees. In so doing, this
court found: “So, as long as the litigation between the parties
regards a dispute regarding the Subscription Agreement, then
the attorney fee provision applies and permits recovery of fees by
the prevailing party. We also conclude the fee provision’s
reference to ‘litigation’ resulting from ‘a dispute regarding th[e]
[Subscription Agreement]’ encompasses the entire controversy
and is not limited to specific claims or causes of action arising
from the contract. If such a limitation exists, it must come from
other words in the attorney fees provision, and no such limitation
exists here.” This court further found the FAC cites many
provisions directly from the Subscription Agreement, which was
attached as an exhibit to the FAC, and “is indicative that the
dispute, to some extent, regards the Subscription Agreement.”
More specifically, the FAC’s first cause of action alleges a
breach of the Warrant Agreement and the Registration Rights
Agreement—the latter which this court found in appeal
No. B338610 formed part of Schedule III of the Subscription
Agreement (actually entitled Subscription Agreement with
Registration Rights and Indemnification Rights dated July 16,
2010). The FAC’s reference to the Registration Rights Agreement
that forms part of the Subscription Agreement, means this claim
19
alleges a dispute “regarding” the Subscription Agreement,
triggering the application of the attorney fee provision.
Similarly, the FAC’s tenth and eleventh causes of action for
Banc’s failure to indemnify plaintiffs for litigation expenses and
breach of various indemnification agreements, expressly specify a
breach of the indemnification provisions found in the
Subscription Agreement in addition to the Separation
Indemnification Agreement and the Consulting Agreement.
Allegations of Banc’s breach of the Subscription Agreement
necessarily qualify this claim as a dispute “regarding” the
Subscription Agreement, imposing the application of its attorney
fee provision in section 10.6.
The FAC’s twelfth cause of action alleged Banc’s breach of
good faith and fair dealing in connection with the SAR
Agreement. While this cause of action does not allege a breach of
the Subscription Agreement, consistent with this court’s August
3, 2026 decision in appeal No. B338610, we find the Subscription
Agreement’s attorney fee provision still applies—“Given the
extremely broad and unambiguous language of the attorney fee
provision in the Subscription Agreement, coupled with the
wording of and exhibits to plaintiffs’ FAC. . . , we find the
litigation between the parties is a dispute ‘regarding’ the
Subscription Agreement”—triggering the application of section
10.6’s attorney fee provision. The provision allows for the
prevailing party in “a dispute regarding this Agreement that
results in litigation” to be entitled to a fee award. As apparent,
the litigation is to an extent a dispute concerning the
Subscription Agreement.
Thus, the attorney fees provision applies.
20
D. Banc Does Not Qualify as a “Prevailing Party”
Next, a question arises as to whether Banc may rely on the
Subscription Agreement’s attorney fee provision in support of its
motion for attorney fees. “In the event of a dispute regarding this
Agreement that results in litigation or arbitration, the prevailing
party, as determined by the finder of facts, shall be entitled to an
award of reasonable attorneys’ fees.” (Italics added.) Whether or
not Banc qualifies as a “prevailing party” depends on whether we
apply California law or New York law to the Subscription
Agreement’s attorney fee provision.
Under California law, application of Civil Code section
1717, subdivision (b) precludes Banc from qualifying as a “party
prevailing on the contract” following plaintiffs’ voluntary
dismissal of the action against Banc. (See § 1717,
subd. (b)(1)-(2).)
In contrast, New York law does not have any parallel
statute limiting the recovery of attorney fees; rather, the “issue of
who is a prevailing party is largely a factual determination” left
to the trial court. (Tullett Prebon Financial Services v. BGC
Financial, L.P. (N.Y. App. Div. 2013) 111 A.D.3d 480, 482; see
McAllister v. Dowling (N.Y. App. Div. 1995) 221 A.D.2d 443, 444.)
“ ‘Only a prevailing party is entitled to recover an attorney’s fee,
and, to be considered a prevailing party, a party must be
successful with respect to the central relief sought.’ ” (Kefalas v.
Valiotis (N.Y. App. Div. 2021) 197 A.D.3d 698, 703.) Such a
determination requires an initial consideration of the true scope
of the dispute litigated, followed by a comparison of what was
achieved within that scope. (Ibid.)
21
Banc contends New York law applies, relying on the fact
that “the contract with the prevailing party attorneys’ fee
provision contains a New York choice of law provision.” Section
10.7 of the Subscription Agreement provides, in relevant part,
that “all questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be
governed by the internal laws of the State of New York, without
giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdictions
other than the State of New York.” (Italics added.) Banc
contends: “It is well established that for [Civil Code] § 1717(b)(2)
to apply, California law needs to govern the contract, and in this
case, California law does not govern due to the New York choice
of law provision.” (Italics added.)
Plaintiffs, on the other hand, argue California law applies:
“Seeking to avoid [Civil Code] § 1717(b)(2), Banc argued . . . that
the [Subscription Agreement’s] New York choice-of-law provision
should govern this case and be applicable to contractual claims
regarding the [Subscription Agreement]. The [trial] court
correctly rejected this argument, reasoning that Banc waived the
right to invoke the provision.” (Italics added.)
To resolve whether we apply California law versus New
York law in defining what a “prevailing party” is, we must
determine whether Banc waived application of the New York
choice-of-law provision.
1. Banc Waived the Application of New York Law
Banc contends it “could not have waived the New York
choice of law provision in the Subscription Agreement because no
prior motion practice by Banc in the case had turned on or even
22
involved any choice of law issue concerning the Subscription
Agreement.” Banc argues the trial court “committed legal error”
by finding waiver and urges this court to review the trial court’s
waiver determination de novo.
Plaintiffs retort that the waiver ruling “is supported by
substantial evidence because, inter alia: (1) Banc relied
exclusively on California law on all relevant issues and motions;
(2) Banc did not object to applying California law to the
[Subscription Agreement’s] fee provision . . . on a motion brought
by Banc’s co-defendants . . . even though Banc had every
opportunity to object and Banc was the real party in interest on
that motion; (3) . . . the court made its choice-of-law ruling on
[April 18, 2024] on [Banc’s co-defendants’] motion” by applying
California law.
We begin with a discussion of the applicable standard of
review, a standard on which the parties disagree. Banc seeks to
obtain de novo review, claiming the facts are not disputed and
thus we are free to substitute our view for that of the trial court.
Plaintiffs disagree and contend we are required to apply the
substantial evidence standard of review given the record before
us. We agree with plaintiffs.
“ ‘Generally, the determination of waiver is a question of
fact, and the trial court’s finding, if supported by sufficient
evidence, is binding on the appellate court. [Citations.] “When,
however, the facts are undisputed and only one inference may
reasonably be drawn, the issue is one of law and the reviewing
court is not bound by the trial court’s ruling.” ’ ” (Davis v. Shiekh
Shoes, LLC (2022) 84 Cal.App.5th 956, 962 (Davis).)
23
Here, “the essential facts may not be in dispute, in the
sense that no one doubts that party X did or did not do act Y on
date Z. Nevertheless, even if there is no difference in opinion on
such events or non[-]occurrences, the inferences to be drawn from
the essential facts are conflicting. And where conflicting
inferences may be drawn, the issue is reduced to whether the
trial court’s finding of waiver is supported by substantial
evidence.” (Davis, supra, 84 Cal.App.5th at pp. 962–963; see
Davis v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205,
211; see also 9 Witkin, Cal. Procedure. (6th ed. 2022) Appeal,
§ 396.) Here, the critical facts permit conflicting inferences. The
undisputed fact that Banc has never invoked New York law since
the conception of the case in 2019; conflicting inferences include
whether Banc misled plaintiffs about its intent to rely on New
York law in applying the Subscription Agreement’s attorney fee
provision and thus waived its application (as alleged by plaintiffs)
versus whether Banc remained silent about the choice-of-law
provision until the attorney provision was directly invoked in this
case by Banc (as alleged by Banc). We agree that the appropriate
test is substantial evidence. In applying that standard of review,
we infer all necessary findings supported by substantial evidence
and construe any reasonable inference in the manner most
favorable to the ruling, resolving any and all ambiguities to
support an affirmance. (Davis, at p. 963.)
The trial court’s ruling that Banc “impliedly waived the
right to invoke New York law notwithstanding the language of
the choice of law provision” is indeed amply supported by
substantial evidence.
24
First and foremost, Banc litigated the entire case pursuant
to California law, which, in and of itself, lends support to the
finding that Banc waived application of New York law.
Banc disagrees and contends its previously filed pleadings
and motions “never waived the New York choice of law provision
in the Subscription Agreement.” Banc argues its demurrer
“moved to dismiss [plaintiffs’] first cause of action based on
collateral estoppel—a California procedural rule governed by
California law—and cited California law in support of dismissal
of [plaintiffs’] twelfth cause of action because the [SAR]
agreement does not contain a New York choice of law provision.”
This seems disingenuous at best, as Banc is arguing on the one
hand that the entire litigation, including the twelfth cause of
action, falls under the purview of the Subscription Agreement
(and its attorney fee provision) because plaintiffs’ claims against
Banc amount to a “dispute regarding this [Subscription]
Agreement that results in litigation” ; yet, on the other hand,
Banc argues it need not have cited to New York law in connection
with the twelfth cause of action as there was no New York choice
of law provision in the SAR Agreement (i.e., not subject to the
Subscription Agreement’s choice-of-law provision).
If, as Banc argues, New York law governs the substantive
claims in this case pursuant to the Subscription Agreement’s
choice-of-law provision, then Banc should have raised New York
law in connection with the arguments made in its May 27, 2022
demurrer or June 5, 2024 summary judgment motion, none of
which raised solely procedural arguments. Banc’s contention
amounts to this—it wishes for the FAC’s four remaining causes of
action to be subject to the Subscription Agreement’s attorney fee
provision, such that Banc may apply for an attorney fee award,
25
but does not wish for the claims to be subject to the Subscription
Agreement’s choice-of-law provision, unless it benefits Banc’s
position on a claim by claim basis. Significantly, Banc has failed
to demonstrate or explain how its summary judgment motion and
demurrer as to the FAC’s causes of action involving the
Subscription Agreement do not amount to a “question[]
concerning the construction, validity, enforcement and
interpretation of th[e Subscription] Agreement” such that it
“shall be governed by the internal laws of the State of New York”
as expressed in section 10.7 of the Subscription Agreement.
Banc’s failure to raise New York law in its demurrer and
summary judgment motion qualifies as substantial evidence in
support of the trial court’s waiver finding.
Moreover, Banc remained silent when this exact issue was
raised by plaintiffs’ counsel in opposing the attorney fee motion
filed by Banc’s executives and board directors. Banc’s executives
argued California law applied in their fee motion, both in
underlying proceedings and on appeal in B338610. At the April
18, 2024 hearing, plaintiffs’ counsel raised the choice-of-law
provision and said: The Subscription Agreement “is an
agreement, by the way, which if you look at closely is actually
governed not by California law but New York law, and New York
law says fee shifting provisions like this are strictly construed.”
Neither Banc, whose counsel Chet A. Kronenberg personally
appeared at the hearing, nor Banc’s executives stated anything in
response or raised any issue with the choice-of-law provision
then. “[C]ontractual waiver generally requires ‘an existing right,
a knowledge of its existence, and an actual intention to relinquish
it, or conduct so inconsistent with the intent to enforce the right as
to induce a reasonable belief that it has been relinquished,’ with
26
no required showing of prejudice.” (Armstrong v. Michaels Stores,
Inc. (9th Cir. 2023) 59 F.4th 1011, 1014, italics added.)
If Banc, which appeared through counsel as a real party in
interest (with a duty to indemnify its executives/board directors),
disagreed with its agents’ position that California law governed
the fee motion, it had an opportunity to say so when plaintiffs’
counsel expressly raised the contractual choice-of-law provision
at the hearing. (See Killian v. Millard (1991) 228 Cal.App.3d
1601, 1605 [“A real party in interest ordinarily is defined as the
person possessing the right sued upon by reason of the
substantive law.”].) Banc’s failure to do so supports the inference
that it knowingly acquiesced in that position and thereby waived
any right to assert otherwise. (See In re Domestic Partnership of
Torres Campos & Munoz (2026) 118 Cal.App.5th 1112, 1125 [The
party “failed to . . . call the court’s attention to the issue. The
forfeiture rule applies to a party’s failure to object . . . when it
had an opportunity to do so.”].) A “ ‘[r]eal party in interest’ ” has
been generally defined as “ ‘any person or entity whose interest
will be directly affected by the proceeding.’ ” (Sonoma County
Nuclear Free Zone v. Superior Court (1987) 189 Cal.App.3d 167,
173.) So, Banc’s contention that proceedings in the same action,
arising from the same operative complaint and underlying
agreement, and involving Banc’s co-defendants who are also
Banc’s agents (its executives and board directors) have no
bearing on Banc itself, is untenable. Having remained silent
while its executives and board directors advocated application of
California law, Banc should not now be permitted to take a
contrary position that it failed to assert when the issue was
squarely presented to the court.
27
All of the foregoing qualifies as substantial evidence in
support of the trial court’s waiver finding. Banc’s consistent
reliance on California law throughout the entire case is
substantial evidence of ponderable legal significance that Banc
waived application of the New York choice-of-law provision.
Banc contends the “lone case relied upon by the Superior
Court to find waiver involved wildly different circumstances.”
Not so different, we find. In Nagrampa v. MailCoups, Inc. (9th
Cir. 2006) 469 F.3d 1257, defendant MailCoups initiated
arbitration against plaintiff Nagrampa after she allegedly
breached a franchise agreement. (Id. at p. 1265.) The district
court ruled: “Although the choice of law clause in article 36.17 of
the franchise agreement provides that the governing law is that
of the State of Massachusetts, both parties have proceeded
throughout the district court and on appeal on the assumption
that the franchise agreement is governed by California law. As a
result, the district court applied California law in determining
whether the arbitration provision is unconscionable. We will
follow suit because the parties through their course of conduct
have waived the provision of the agreement that specifies the
application of Massachusetts law. See 13 Williston on Contracts
§ 39:27 (4th ed. 2005) (stating that parties to a contract impliedly
waive a term through a course of conduct clearly manifesting an
intention to waive the term). This principle is recognized both in
California, Daugherty Co. v. Kimberly-Clark Corp., 14 Cal.App.3d
151, 158, 92 Cal.Rptr. 120 (1971), and in Massachusetts, see
Porter v. Harrington, 262 Mass. 203, 159 N.E. 530, 531 (Mass.
1928).” (Nagrampa, at p. 1267.) Similarly, the reviewing court in
Brandwein v. Butler (2013) 218 Cal.App.4th 1485 addressed an
analogous scenario and ruled: “The parties cite only California
28
law in addressing the propriety of the trial court’s dismissal of
the Brandwein's bad faith claim, even though they acknowledge
that the nature of the Underwriters’ duty to act in good faith
toward Brandwein is defined by the insurance agreement, and
that agreement expressly provides that it is governed by New
York law. Nevertheless, because neither the parties nor the trial
court focused on New York law, we will proceed with our analysis,
as they did, under California law.” (Id. at p. 1515, fn. 17; see
13 Williston on Contracts (4th ed. 2000) § 39:27, pp. 620–621
[parties to a contract impliedly waive a term through a course of
conduct clearly manifesting an intention to waive the term].)
Having found that substantial evidence supports the trial
court’s finding that Banc waived application of the New York
choice-of-law provision in section 10.7 of the Subscription
Agreement, we conclude California law governs. Thus, Civil
Code section 1717, subdivision (b)(2) operates to preclude Banc
from qualifying as a “prevailing party” entitled to an attorney fee
award, given the fact that “there is no party prevailing on the
contract . . . [w]here an action has been voluntarily dismissed”
(Civ. Code, § 1717, subd. (b)(1)–(2)), as it was here via plaintiffs’
July 12, 2024 request for voluntary dismissal.
Because of our ruling finding that there was in fact a
waiver or forfeiture by Banc as to New York choice of law, we
need not address Banc’s additional argument whether Civil Code
section 1717, subdivision (b)(2) trumps New York choice of law
provision absent a waiver. That argument is moot.
29
DISPOSITION
The trial court’s order denying Banc’s motion for attorney
fees is affirmed. Costs awarded to plaintiffs.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
STRATTON, P. J.
We concur:
WILEY, J.
VIRAMONTES, J.
30