United States: California Supreme Court Rules Concerning Recovery Of Attorneys' Fees Under Civil Code Section 1717

The California Supreme Court recently issued an opinion analyzing whether a defendant is entitled to attorney fees under Civil Code section 1717 ("section 1717") by obtaining a dismissal of a contract action under the agreement's forum selection clause. In DisputeSuite.com, LLC v. Scoreinc.com  (Apr. 6, 2017, S226652) __ Cal.5th __, the court held that the trial court did not abuse its discretion in finding that the defendants were not prevailing parties for purposes of section 1717. (Slip opn., pp. 1, 5.)

The court determined that "[a] party does not become the prevailing party under [section 1717] merely by obtaining a forum for resolution of the contractual dispute or by moving it from one forum to another." (Slip opn., p. 8.) Under section 1717, "a party who obtains an unqualified victory on a contract dispute, including a defendant who defeats recovery by the plaintiff on the plaintiff's entire contract claim, is entitled as a matter of law to be considered the prevailing party." (Id. at pp. 4-5.) However, "'when the results of the [contract] litigation are mixed,' the trial court has discretion under the statute to determined that no party has prevailed." (Id. at p. 5, additional citations omitted.) 

The court concluded that "the trial court acted within its discretion in determining that the defendant had not prevailed on the contract within the meaning of section 1717 by moving the litigation to Florida." (Slip opn., p. 5.) While the defendant succeeded in enforcing the forum selection clause in two of its agreements with the plaintiff, it had not defeated the plaintiff's breach of contract and related claims. "Because none of those claims had yet been resolved and the litigation was still ongoing in Florida, the California court was in no position to 'compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objections." (Id. at p. 8.) Thus, the defendant's "victory in moving the litigation to Florida did not make it the prevailing party as a matter of law under section 1717. . . ." (Id. at p. 17.)

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