Wherry v. Award, Inc.
Filed 6/28/12 Wherry v. Award, Inc. CA4/3
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH
APPELLATE DISTRICT
DIVISION
THREE
KARENA WHERRY et al.,
Plaintiffs and Respondents,
v.
AWARD, INC., et al.,
Defendants and Appellants.
G045520
(Super. Ct. No. 30-2008-00108123)
O P I N I O N
Appeal from an order of
the Superior Court
of
County, Kirk H. Nakamura, Judge. Reversed.
Law Office of Michael A.
Conger, Michael A. Conger; and Richard H. Benes for Defendants and Appellants.
Law Offices of Jason L.
Oliver; Jason L. Oliver; Law Offices of John W. Dalton and John W. Dalton for
Plaintiffs and Respondents.
* * *
This is the third time
this case has been before us. In the
most recent opinion we affirmed the denial of a
defendants Award, Inc., Award-Superstars, Century 21 Superstars, and Gregory
Britton, the latter not a party to this appeal.
(Wherry v. Award, Inc. (2011)
192 Cal.App.4th 1242, 1245; Wherry 1.) After the remittitur was issued, the trial
court granted the motion filed by plaintiffs Karena Wherry and Rocelyn Traieh
for attorney fees incurred in defeating the motion.
Defendants appeal on
several grounds, claiming the contractual provision that was the basis of the
fee award was unenforceable because we found it unconscionable in
judicial and collateral estoppel; the motion was premature absent a prevailing
party in the underlying action; the motion was untimely; and the amount of the
award was excessive in violation of the court’s discretion. We conclude that, although the attorney fees
provision is not unconscionable but is enforceable, plaintiffs are not entitled
to fees at this stage of the case.
FACTS
The substantive facts
leading to the dispute in this action are set out in Wherry 1 and we do not repeat them at length. Suffice it to say that plaintiffs each
entered into an independent contractor
agreement (agreement) with defendant Award, Inc., to work as a real estate
salesperson. The contracts contained an
arbitration paragraph that provided all disputes between plaintiffs and Award,
Inc., would be arbitrated using procedures set out in the bylaws of the
California Association of REALTORS®.
After plaintiffs and defendant severed their relationships, plaintiffs
sued defendants under the California Fair Employment and Housing Act (Gov.
Code, § 12900 et seq.; FEHA) for sexual harassment, gender discrimination,
and retaliation. The trial court denied
defendants’ petition to compel arbitration, and we affirmed that order on
appeal. (Wherry 1, supra, 192 Cal.App.4th at p. 1245.)
After remittitur issued
both plaintiffs filed a motion for attorney fees, essentially relying on the
attorney fees provision in the agreement and Civil Code section 1717 (all
further references to this statute are designated as section 1717). The court denied the motion as to defendant
Britton but granted it as to all other defendants, awarding the sum of just
over $163,000, the amount plaintiffs sought less any amounts actually or
possibly attributed to work done for Britton.
DISCUSSION
Validity of Attorney Fees Provision
A main premise of
defendants’ appeal is the claim that in our prior opinion we completely
invalidated the attorney fees paragraph in the agreements. That is a misreading of Wherry 1.
Each attorney fees
provision states: “In any action,
proceeding, or arbitration between [defendants] and [plaintiffs] arising from
or related to this [a]greement, the prevailing [party] shall be entitled to
reasonable attorney fees and costs.” In
unconscionable, we relied in part on this paragraph. (Wherry
1, supra, 192 Cal.App.4th at p. 1249.)
As we explained, in a FEHA action, a plaintiff who prevails generally is
entitled to attorney fees but a prevailing defendant may recover fees only if
the court finds the case was filed in bad faith or frivolous. (Ibid.) The attorney fees provision in the agreements
did not limit defendants’ right to recover fees, thus making the arbitration
requirement unconscionable and as a result unenforceable under
Services, Inc. (2000) 24 Cal.4th 83.
(Wherry 1, supra, 192
Cal.App.4th at p. 1249.) We did not,
however, rule that the attorney fees provision was unenforceable
generally. In the context of the entire
agreement, there are disputes that would be subject to an award of attorney
fees, including, perhaps, the one at hand.
Nor is the award barred
by judicial or collateral estoppel or the law of the case doctrine. Judicial estoppel bars a party from taking a
position after succeeding on a contradictory position earlier in the case. (Jackson
v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183.) Defendants assert that in the writ petition
in the trial court and in their respondents’ brief in Wherry 1 plaintiffs argued the fee provision was unenforceable but
actually they merely claimed what we ultimately held, that defendants’
contractual unlimited right to attorney fees was a factor in holding the
Likewise, collateral
estoppel is inapplicable.
enforceability of the attorney fees provision.
(Lucido v. Superior Court (1990)
51 Cal.3d 335, 341-342 [necessary element of collateral estoppel is litigation
of “identical issue”].) Similarly the
law of the case does not bar enforcement of the attorney fees provision because
in Wherry 1 we did not hold as a
provision was unenforceable. (
103 Cal.App.4th 298, 309 [law of the case applies when court of appeal
“‘“stat[es] a rule of law necessary to the decision of the
case . . . and makes it determinative of the rights of the
same parties in any subsequent retrial or appeal in the same case”’”].)
Plaintiffs as Prevailing Parties
The
other core issue in this appeal is whether plaintiffs are entitled to attorney
fees as the prevailing parties.
Plaintiffs assert they are, pointing to the language of the agreements
and Civil Code section 1717. We
review the issue de novo. (
Cal.App.4th 66, 69.)
As noted above, each
agreement states that the prevailing party is entitled to attorney fees “[i]n
any action, proceeding, or arbitration” between the parties “arising from or
related to this [a]greement.”
Section 1717, subdivision (a), declares: “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.” Section 1717,
subdivision (b)(1) defines the the prevailing party as the one “who recovered a
greater relief . . . on the contract.”
The dispute here is
whether plaintiffs may recover fees before the main action is resolved. Relying on several cases, including
defendants claim plaintiffs have not yet “prevailed” because the lawsuit is
still pending. According to
is to be made only upon final resolution of the contract claims and only by ‘a
comparison of the extent to which each party ha[s] succeeded and failed to
succeed in its contentions.’
[Citation.]” (
determination, “the trial court is to compare the relief awarded on the
contract claim or claims with the parties’ demands on those same claims and
their litigation objectives as disclosed by the pleadings, trial briefs,
opening statements, and similar sources.”
(Ibid.)
We
conclude that the award of attorney fees to plaintiffs at this stage in the
proceedings was premature. The
underlying action, in which the petition to arbitrate was filed, has not been
concluded and thus, under section 1717, there is not yet a prevailing party. “[A]ttorney fees should be awarded to the
party who prevails on a petition to compel arbitration only when the resolution
of that petition terminates the entire ‘action on the contract.’” (Frog
Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515,
531-532 (Frog Creek).)
The
court in Frog Creek conducted an
exhaustive examination and thorough analysis of the development of the law
dealing with the question facing us.
Although the issue was not identical to the one at bar, the case is
instructive.
In
Frog Creek, at the time the plaintiff
filed a lawsuit for breach of contract and other causes of action, there were
two versions of the underlying contract, each of which contained an alternative
dispute resolution provision. When the defendant
filed a petition to compel arbitration the court denied it because the
plaintiff had not signed the contract on which the defendant relied; the Court
of Appeal affirmed that decision. The
defendant then filed another petition based on the contract the plaintiff had
signed. When the trial court again
denied the petition, the Court of Appeal reversed and the case ultimately
proceeded to arbitration, resulting in an award in the defendant’s favor.
The
defendant then filed a motion for attorney fees, seeking to recover, in part,
the fees incurred for its first petition to arbitrate. The plaintiff also filed a motion for
attorney fees under section 1717 based on its success in defeating the first
petition to arbitrate. The trial court
awarded the defendant fees because it was the prevailing party in the
arbitration but also ruled the plaintiff was entitled to attorney fees because
it had defeated the defendant’s original petition to arbitrate.
The appellate court
reversed, holding that the defendant, not the plaintiff, was entitled to
attorney fees in connection with the first petition to arbitrate. (Frog
Creek, supra, 206 Cal.App.4th at p. 536.)
The basis for the holding was that, under section 1717, “there may only
be one prevailing party entitled to attorney fees on a given contract in a
given lawsuit.” (Ibid., fn. omitted.) Here,
because the case has not yet concluded, there is a possibility defendants will
prevail overall in the action, thus potentially giving them the right to
recover fees.
Plaintiffs point to
cases that allow recovery of attorney fees before the case is concluded,
including Otay River Constructors v. San
Diego Expressway (2008) 158 Cal.App.4th 796 (Otay), Turner v. Schultz
(2009) 175 Cal.App.4th 974 (Turner),
Cal.App.4th 1124, Benjamin, Weill &
Mazer v. Kors (2011) 195 Cal.App.4th 40 (Kors), and Christensen v.
Dewor Developments (1983) 33 Cal.3d 778.
But they are all distinguishable.
In Otay, the plaintiff filed a separate petition to compel arbitration
before a suit on the underlying dispute was filed. After the court denied it, it also denied the
defendant’s motion for attorney fees, finding it was not a prevailing party
because there was additional litigation to come. (Otay,
supra, 158 Cal.App.4th at p. 801.)
The appellate court reversed, holding that under section 1717 the
petition “was an ‘action on the contract’” for which the defendant had secured
a “‘“simple, unqualified win”’ on the only contract claim at issue in the
[discrete] action—whether to compel arbitration . . . . [Citations.]”
This made the defendant the prevailing party and thus entitled to
attorney fees. (Id. at p. 807.)
In Turner, the plaintiff sued the defendants, for among other things,
fraud in the inducement to enter into the agreement, which contained an
arbitration provision. He also filed a
separate declaratory relief action seeking a determination the defendants were
barred from arbitrating the action. The
trial court entered judgment for the defendants in that action and granted
their motion for attorney fees pursuant to the contract.
The court of appeal
affirmed the fee award, even though the underlying dispute had not been
concluded, relying in part on Otay
and reasoning that “the only issue before the court—whether the arbitration
should be allowed to proceed—was resolved in [the] defendants’ favor in this
discrete legal proceeding.
[Citation.]” (
Frog Creek echoes this point of view, stating “when a party defeats
an independent petition to compel arbitration, the action is terminated and the
prevailing party on the petition is entitled to fees under Civil Code section
1717.” (Frog Creek, supra, 206 Cal.App.4th at p. 533, italics
omitted.) But that is not the case here,
where there is no discrete action; instead the defendants filed a petition to
compel arbitration in plaintiffs’ already existing lawsuit. Thus, Otay
and Turner do not support the order.
Kors did award fees to the defendant who prevailed on a petition to
compel arbitration filed within an existing lawsuit before the action was
litigated on the merits. (
47-48, 80.) But as support for the award
it relied on Otay and
(Id. at pp. 76-78.) As we have seen, awards in those cases resulted
from a determination there was a prevailing party in a discrete contract
action. Thus, in the context of this
case we decline to follow Kors.
Plaintiffs dispute a
rule that would require a separate action be filed in order to recover fees but
deny fees to the prevailing party in a petition to compel arbitration in an
existing action. They claim
not consistent with what actually happened in those cases and is a fine point
we will not put on their holdings.
We also reject
plaintiffs’ argument that “adopting” such a rule would provide an incentive for
parties to file more independent lawsuits in the hopes of securing an immediate
award of attorney fees rather than waiting until the conclusion on the merits
of the lawsuit. First this rule already
exists. Our case is not breaking any new
ground on this issue, and there is nothing before us to suggest such a rush to
the courthouse to file separate cases to compel arbitration. Second, while some parties may perceive an
incentive, there is also the concomitant risk of being forced to pay attorney
fees in the event the other party prevails in the action and defeats an order
for arbitration. (See
538, fn. 18 [for a discussion and rejection of this argument].)
Nor does
position. It was decided solely on
contractual language and did not involve section 1717, as does our case. (Acosta
v. Kerrigan, supra, 150 Cal.App.4th at p. 1132 & fn. 16.)
Finally
issue before us. There the trial court
denied the plaintiffs’ petition to compel arbitration, finding they had waived
the right to arbitrate by filing a complaint.
The defendants’ motion for attorney fees pursuant to a provision in the
contract at issue was denied. On appeal,
the court reversed the attorney fees ruling.
But the issue was whether the defendants had complied with section
1717’s procedural requirements. (
33 Cal.3d at p. 786.) The question of
entitlement to fees was not raised or discussed. (Santisas
v. Goodin (1998) 17 Cal.4th 599, 620 [case authority only for issues raised
and decided].) Granted, the court
appeared to assume defendants were entitled to the fees, but the case had been
dismissed, albeit without prejudice, and therefore, unless a new complaint was
filed, the action was concluded. That is
not the status of the case at issue.
We agree with the court
in Frog Creek, which confirmed that
“defeating a petition to compel arbitration filed in a pending contract action
does not justify a grant of fees under . . . section 1717
where the merits of the contract claims remain pending in that action.” (Frog
Creek, supra, 206 Cal.App.4th at p. 535.)
An “‘action on the contract’ refers to the contract claims in the
lawsuit as a whole rather than each discrete contractual cause of action or
claim that arises in the course of the lawsuit.” (Id. at
p. 540.)
Plaintiffs also maintain
that, because this is a FEHA action, there are no other contract issues in the
case and thus defendants will not be entitled to attorney fees even if they
prevail. They again rely on
plaintiff defeated a petition to compel arbitration and was awarded fees before
the underlying action was fully litigated.
We have already disagreed with the holding in Kors, as explained above.
But there is another reason this argument does not persuade.
Defendants assert their
affirmative defense that plaintiffs are independent contractors is based on a
provision in the agreements giving a party the right to terminate the
association with the other “with or without cause” and thus is a defense based
on the contract. Plaintiffs argue this
defense has nothing to do with the agreements.
Without deciding that
dispute, it may be that there are no more contract issues to be determined, but
it is certainly possible that plaintiffs or defendants will amend their
pleadings to include a contract claim.
under . . . section 1717, there may only be one prevailing
party entitled to attorney fees on a given contract in a given lawsuit.” (Frog
Creek, supra, 206 Cal.App.4th at p. 520, fn. omitted.) Awarding fees now would allow for the
possibility of two prevailing parties if defendants succeeded on any additional
contract claims.
Of course, if the matter
is tried without any additional contract claims, then plaintiffs are the prevailing
parties on the contract. But if there
are additional claims, the court must determine who prevailed on contract
claims as a whole, if anyone, and decide on a fee request accordingly.
Attacking from another
angle, plaintiffs argue the court need not wait until resolution of the entire
action based on the language in the agreements, i.e., that the prevailing party
may recover attorney fees in connection with, not just an action, but a
petitions to compel arbitration are located within that portion of the Civil
Code that deals with “special proceedings.”
(Otay, supra, 158 Cal.App.4th
at p. 802.) But Otay discussed this in the context of whether an order denying
arbitration was appealable. (
holding actually is consistent with our decision in this case. As noted above, it decided only that a party
was entitled attorney fees when a separate action to compel had been filed, not
the case here. (Id. at p. 799.)
Further,
this argument and we agree with its reasoning.
In Acosta v. Kerrigan, supra, 150
Cal.App.4th 1124, another case on which plaintiffs rely, the contract at issue
contained two attorney fees provisions.
One stated attorney fees could be awarded to a prevailing party in an
arbitration. The other was within the
arbitration provision itself, and provided if a party “institute[d] any legal
action or administrative proceedings . . . other
than . . . arbitration,” the other party could recover
attorney fees, in addition to damages and costs “incurred as a result of such
action.” (Id. at p. 1126.) After the
plaintiff filed a complaint, the court granted the defendant’s motion to compel
arbitration and awarded fees.
On appeal the court
affirmed, relying on what it labeled “an independent provision of the
contract . . . entitl[ing him to fees] even if he loses
the case on the merits in the arbitration.”
(Acosta v. Kerrigan, supra,
150 Cal.App.4th at p. 1132, fn. omitted.)
As noted above, section 1717 was not the basis for the award.
Frog Creek specifically disagreed with Acosta’s reasoning that a so-called “independent” contractual
provision could support an award of attorney fees as being contrary to section
1717. (Frog Creek, supra, 206 Cal.App.4th at p. 543.) It cited Santisas
v. Goodin, supra, 17 Cal.4th 599, which “reject[ed a] construction of
section 1717” that would “never . . . bar recovery of
attorney fees that would otherwise be recoverable as a matter of contract law”
as “inconsistent with the legislative history of section 1717.” (Id.
at p. 616, italics omitted.) That intent
was “to establish uniform treatment of fee recoveries in actions on contracts
containing attorney fees provisions . . . . A
holding that in contract actions there is still a separate contractual right to
recover fees that is not governed by section 1717 would be contrary to this
legislative intent.” (
372-373 [“[W]hile the availability of an award of contractual attorney fees is
created by the contract [citation], the specific language of the contract does
not necessarily govern the award. . . . Parties to a
contract cannot . . . enforce a definition of ‘prevailing
party’ different from that provided in . . . section
1717”].)
Thus, the “proceeding”
language on which plaintiffs rely does not justify attorney fees. Nor is there any other basis to affirm the
award.
Timeliness of Request for Attorney Fees and Amount of Award
Because we reverse the
fee award we have no need to decide whether plaintiffs timely filed the
motion. If they are entitled to fees
after the case is resolved they will need to file another motion. For the same reason, the objection to the
amount of fees is moot at this juncture in the case.
DISPOSITION
The order is
reversed. Appellants are entitled to
costs, but not attorney fees, on appeal.
RYLAARSDAM,
ACTING P. J.
WE CONCUR:
ARONSON, J.
IKOLA, J.
