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Attorneys Fees Awarded on Tort Claims due to an overbroad attorney fee clause even on a dismissed case

On Behalf of | Feb 16, 2017 | Civil Procedure, Contracts |

Attorney Fees gavel

While Code of Civil Procedure § 1717a bars attorneys fees if the cause of action is on a contract, look to Santisas v. Goodin (1998) 17 Cal.4th 599.In Santisas, attorney fees were awarded on a tort claim because the home purchase agreement attorney fee provision stated it covered claims “ ‘arising out of the execution of this agreement or the sale’ ” which was interpreted as being broad enough to cover tort claims and contract claims.These attorneys fees, would then be claimed as an element of costs. (Code Civ. Proc., §§1032(a)(4) and §1033.5, subd. (a)(10)(A).)

A summary of how some prior courts have interpreted other provisions click here:

Torts were covered in Santisas because the fee provision stated “ ‘arising out of the execution of this agreement or the sale’.Torts were also covered in: ‘any action or proceeding arising out of this agreement’ ” (Lerner v. Ward (1993) 13 Cal.App.4th 155), torts were covered “ ‘[i]f this Agreement gives rise to a lawsuit or other legal proceeding between any of the parties hereto.’ ” (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338) A lease providing for fees to the prevailing party “ ‘[i]f [a] civil action is instituted in connection with this Agreement …’ ” was also interpreted to cover tort claims (Cruz v. Ayromloo (2007) 155 Cal.App.4th 1270 as was a lease allowing fees for “ ‘any legal action brought by either party to enforce the terms hereof or relating to the demised premises.’ ” (Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794)

Compare to Khan v. Shim (2016) 7 Cal.App.5th 49, 60  finding NO tort claim coverage due to the word “its”…

A recent case of Khan v. Shim (2016) 7 Cal.App.5th 49 held that an attorney fee clause stating:  “If at any time after the Close of Sale, any litigation or arbitration is commenced between the parties to this Contract of Sale … concerning its terms, interpretation or enforcement or the rights and duties of any party in relation thereto, the party or parties prevailing in such litigation or arbitration shall be entitled, in addition to such other relief as may be granted to them, to a reasonable sum as and for their attorney fees incurred in such litigation or arbitration….”

In Khan v. Shim, at p. 59-60, the Court analyzed this attorney fee clause as follows:

“First, a bit of grammar: the pronoun “its” as used in the fee provision clearly refers to the “Contract of Sale,” as the contract is the only logical antecedent in the sentence. In addition, the word “thereto” in the phrase “rights and duties of any party in relation thereto,” is most naturally read to refer to rights and duties of parties in relation to the “Contract of Sale,” rather than to the other antecedent candidates, such as the contract’s terms, interpretation or enforcement. We therefore believe that the fee provision is most 60 sensibly interpreted as providing for the award of fees in any litigation “concerning [the contract’s] terms,” “concerning … [the contract’s] interpretation,” “concerning … [the contract’s] enforcement,” or “concerning … the rights and duties of any party in relation [to the contract].”