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CA Appeals Court: Legal Expenses Connotes Attorney Fees in Contract

November 19, 2012 | Posted in : Fee Award, Fee Jurisprudence, Unpaid Fees

A recent Metropolitan News story, “Appeals Court Finds That ‘Legal Expense’ Connotes Attorney Fees,” reports that a contract providing that in the event of a dispute, the prevailing party would receive recompense for its “legal…expenses” is sufficiently certain as to require an award of attorney fees to the victor, the Court of Appeals for Division Two held.  Justice Judith Ashmann-Gerst wrote the opinion.

In Dickerson Associates v. ShinYoung 3670, the appellate, Donald F. Dickerson Associates, Inc, successfully sued ShinYoung 3670, LLC, for unpaid fees incurred in connection with a construction project, but Los Angeles Superior Court Judge John A. Kronstadt declined to award attorney fees.  He ruled that the fee-shifting provision in the parties’ contract would not support such an order.

Wording of Contract

The contract read: “In the event of legal of collection expenses in connection with this agreement, [defendant] agrees to pay such expenses.”  Kronstadt relied on the wording of California Civil Code 1717(a) which provides:

“(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 prevailing party on the contract, whether he or she is the party specified on the contract or not, shall be entitled to reasonable attorneys’ fees in addition to other costs.”

The jurist noted that the contract does not “specifically” provide for an award of attorney fees.

Ashmann-Gerst’s Rationale

Explaining the reversal, Ashmann-Gerst wrote: “We cannot imagine what the phrase ‘legal…expense[s]’ would include if not attorney fees.  At the hearing on plaintiff’s motion, defendant’s counsel suggested that ‘[l]egal expense’ could be limited to litigation costs, but we are not convinced.  Litigation costs are recoverable by a prevailing party as a matter of right…Thus, a contractual provision allowing solely for the recovery of costs would be unnecessary, rendering this paragraph ineffectual and superfluous…