Litigation Update For April 2017

California Supreme Court Rules on Fee Awards in Forum Selection Clause Dismissals

This past week, the California Supreme Court weighed in on whether trial judges should award attorneys' fees against the losing side where the California litigation is dismissed because the parties' contractual forum selection calls for litigation elsewhere. In DisputeSuite.com, LLC v. Scoreinc.com, No. S226652 (Cal. Apr. 6, 2017), the trial court had found that a clause in one of the parties' agreements specified that the parties would litigate any disputes in Florida, in spite of the fact that the plaintiff had filed suit in Los Angeles County, California. The California Supreme Court affirmed the trial judge's decision not to award fees, even though the parties' called for the prevailing party to be awarded its attorneys' fees. The Supreme Court found that the merits of the dispute were not yet decided, and since the same dispute was being litigated in the proper forum, the trial court had not abused its discretion to find no party had yet prevailed for purposes of obtaining a fee award. The Supreme Court cautioned that it was not ruling against fee awards in all such forum selection disputes, but did state that any fee award "should be supported by a record showing that the contract claims have been finally resolved."

The California Supreme Court's decision in DisputeSuite.com makes clear that defendants in California courts are unlikely to recover their attorneys' fees simply by obtaining a favorable ruling enforcing a forum selection clause. The DisputeSuite.com court's reasoning is consistent with an earlier decision in the New York County Commercial Court, in which the judge parsed through New York appellate opinions on fee awards to conclude that claims that were dismissed and could not be refiled would entitle a defendant to an award of attorneys' fees under a contract clause requiring such an award. However, the judge determined that dismissals on procedural grounds, which did not preclude later litigation over those claims, did not render the defendant a prevailing party entitled to a fee award. See Am. Guard Servs., Inc. v. Griffin Security Servs., Inc., 2015 N.Y. Slip Op. 31709(U) (N.Y. County Sept. 4, 2015). A few months prior to the decision in American Guard Services , a federal judge in New York rejected claims for fees in another forum selection case where the claimed entitlement to fees was based only upon the law of the chosen forum...