Last month, the state Supreme Court granted review of the question, “Is the party who obtains the dismissal of a contract action entirely on procedural grounds entitled to an award of attorney fees under Civil Code section 1717 as the prevailing party in actions on a contract?” The case in question is “Kandy-Kiss of California v. Tex-Ellent.”
After obtaining dismissal of Kandy-Kiss’s breach of warranty claims, $129,000 in attorney fees were awarded to the defendant. Kandy-Kiss had argued that since the dispute would proceed in federal court, there was no winner of the contract action yet. But the Second District’s Division 8, concluded that “[defendant] should not be deprived of compensation for the fees it expended in defeating a separate action brought in an independent and separate forum.”
The California Supreme Court has previously interpreted section 1717 (b) which states “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract,” and concluded that “the prevailing party determination 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.’”
Although seemingly straightforward, the appellate courts have disagreed as to when fees should be awarded for early procedural victories—particularly if the contract battles will continue in a different forum. Thus, until Kandy-Kiss is resolved by the Supreme Court, it is difficult to say whether early procedural wins in contract wars will be decisive for attorney fee purposes or perhaps, just another variation on Dunkirk.
This article was originally published in the Daily Journal and subscription-based Daily Journal website at www.dailyjournal.com.