Attorney Fees Provision May Not Be As Powerful As You Think

Defendants who are sued for breach of contract often take comfort in the fact that the contract contains a provision that will award them attorney fees if they prevail in the action. The more frivolous the action, the more confident a defendant may feel, as an attorney fees award will seemingly accompany a final judgment. But if a plaintiff voluntarily dismisses his case before trial, a defendant may "feel" like a prevailing party, but has absolutely no right to recover any fees. It may be only after attorney fees have piled up that a plaintiff is persuaded of the futility of the case and the necessity of dismissal, yet that is exactly when attorney fees are not recoverable. In this way, a defendant is often at the mercy of a plaintiff's last-minute decision to dismiss a case, and has little assurance of being able to recoup attorney fees for defending against even the most frivolous cases. In fact, the more frivolous the case, the more likely a voluntary dismissal before trial, and the more frustrating an inability to recover fees will seem. Under California law, a defendant may not recover attorney fees pursuant to a contract claim where a plaintiff voluntarily dismisses the complaint, regardless of the proximity to trial and the amount of work that defendant's counsel has completed. Whether a case is dismissed with or without prejudice, Civil Code Section 1717 precludes an award of attorney fees in a breach-of-contract action where the plaintiff voluntarily dismisses the action and the request for attorney fees is based on contract claims. Santisas v. Goodin (1998) 17 Cal.4th 599, 608. This is because Section 1717 states that there is no prevailing party for contract claims where a matter has been voluntarily dismissed. It is not even possible to avoid this rule by creatively drafting the attorney fees provision to define "prevailing party" differently than provided in the statute. Mitchell Land and Imp. Co. v. Ristorante Ferrantelli, Inc. (2007) 158 Cal.App.4th 479, 486. Nonetheless, defendants are not entirely helpless in this situation. It is rare that a breach-of-contract case is filed without a few, if not several, of the typical accompanying tort claims, such as fraud. In Santisas, the state Supreme Court held that, although Section 1717 precludes the recovery of attorney fees under a contract claim pursuant to the attorney fees provision, it will not preclude an award of attorney fees in connection with a complaint that contains...