Daily Blast May 24, 2012

Recently, Division Five of the First Appellate District Court of Appeal (SF) filed an opinion in Frog Creek Partners, LLC v. Vance Brown, Inc. (May 24, 2012, A129651) ____ Cal.App.4th ____, holding that the party who obtains “greater relief on the contract action” is the prevailing party entitled to attorney fees under section 1717, regardless of whether another party prevailed on a petition to compel arbitration under the contract. (Slip opn., pp. 15-16.)

The parties entered into a contract in which Brown agreed to build a multi-million dollar home for Jeffrey Dazan. (Slip opn., p. 2.) Dazan formed a company, Frog Creek Partners, LLC to manage the construction project. (Ibid.) The contract included a dispute resolution provision and an attorney fee provision. (Id. at p. 3.) Therefore, when Frog Creek filed suit against Brown, Brown filed a petition to compel arbitration. (Ibid.) The trial court denied the petition since Brown’s version of the contract did not contain Frog Creek’s signature and the appellate court affirmed. (Id. at p. 4.) Brown later filed a renewed petition to compel arbitration based on Frog Creek’s version of the contract. (Id. at p. 5.) The trial court again denied the petition, but the appellate court reversed. (Ibid.) Following 50 days of arbitration hearings, Brown was awarded almost $2 million in damages. (Ibid.) On the parties’ separate motions for attorney fees, the trial court found that Brown was the prevailing party in the arbitration and awarded Brown prearbitration attorney fees and postarbitration fees.  (Id. at pp. 5-6.) The court also found that Frog Creek was the prevailing party on the initial petition to compel arbitration and awarded Frog Creek attorney fees. (Id. at p. 6.)

The Court of Appeal analyzed whether Frog Creek was entitled to fees as “the party who recovered a greater relief in the action on the contract” because it prevailed on the first petition to compel arbitration, even though it ultimately lost on the substantive contract claims. (Slip opn., p. 26.) The court reviewed the statutory language, legislative history, and cases in the arbitration context to support its holding that “within a given lawsuit, there can be only one prevailing party entitled to attorney fees as the party prevailing on the contract.’” (Ibid.) According to the court, “the contractual relief obtained by the parties must be compared, and the party obtaining the greater relief is the party who prevailed in the contract action.” (Slip opn., p. 13.) The court explained that the denial of Brown’s first petition to compel arbitration did not resolve the parties’ contract dispute. (Id. at p. 34.) Rather, the merits of that dispute remained before the court in Frog Creek’s complaint and Brown’s cross-complaint, both of which alleged claims for breach of contract. (Id. at pp. 34-35.) The merits of the parties’ claims under the contract were then resolved in Brown’s favor by the arbitration panel. (Id. at p. 35.) As a result, Brown, rather than Frog Creek was entitled to fees under section 1717 for the proceedings on the first petition. (Id. at p. 8.) Accordingly, the court reversed the fee award to Frog Creek and remanded for the trial court to award reasonable fees to Brown for those proceedings and the present appeal. (Ibid.)

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