Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-56097/USCOURTS-ca9-13-56097-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

FIRST INTERCONTINENTAL BANK, a

Georgia State Chartered Federally

Insured Bank,

Plaintiff-Appellant,

v.

CHRISTINA AHN,

Defendant-Appellee.

No. 13-56097

D.C. No. CV11-

08764-RGK

OPINION

Appeal from the United States District Court

for the Central District of California

R. Gary Klausner, District Judge

Argued and Submitted

June 5, 2015—Pasadena, California

Filed August 18, 2015

Before: Milan D. Smith, Jr. and N. Randy Smith, Circuit

Judges, and Joan H. Lefkow,* Senior District Judge.

Opinion by Judge Milan D. Smith, Jr.

* The Honorable Joan Humphrey Lefkow, Senior District Judge for the

United States District Court for the Northern District of Illinois, sitting by

designation.

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2 FIRST INTERCONTINENTAL BANK V. AHN

SUMMARY**

Choice-of-Law

The panel affirmed the district court’s decision awarding

attorney’s fees to defendant-appellee in a diversity breach of

contract action between a bank and defendant-appellee.

The parties’ agreement specified that Georgia law applied

to any dispute. The defendant-appellee filed a motion for

attorney’s fees and costs pursuant to California Civil Code

§ 1717(a), which makes reciprocal otherwise unilateral

attorney’s fees clauses in contract.

The panel held that California’s choice-of-law rules

governed the question of whether Georgia or California law

applied to the attorney’s fees issue, where the diversity action

for breach of contract was brought in California. The panel

held that California applies the approach set out in the

Restatement (Second) of Conflict of Laws § 187 to determine

the law that applies to a contract with a choice-of-law clause. 

Applying California choice-of-law principles, the panel

held that the district court correctly concluded that California

law, including California Civil Code § 1717(a), governed the

outcome of the case, and awarded attorney’s fees to

defendant-appellee.

** This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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FIRST INTERCONTINENTAL BANK V. AHN 3

COUNSEL

S. Young Lim (argued), Park & Lim, Los Angeles,

California, for Plaintiff-Appellant.

Natalie Ikhlassi (argued) and Helen B. Kim, Thompson

Coburn LLP, Los Angeles, California, for DefendantsAppellees.

OPINION

M. SMITH, Circuit Judge:

In this appeal, we apply California choice-of-law rules to

determine whether California law or Georgia law governs an

attorney’s fees dispute between Plaintiff-Appellant First

Intercontinental Bank (Bank) and Defendant-Appellee

Christina Ahn (Christina). We conclude that California law,

specifically California Civil Code § 1717(a), governs the

attorney’s fees dispute, and we affirm the district court’s

decision awarding attorney’s fees to Christina.

FACTUAL AND PROCEDURAL BACKGROUND

I. Factual Background

In March of 2009, First Intercontinental Bank, a bank

chartered in Georgia, with its principal place of business in

Doraville, Georgia, made a purchase money loan of

$1,939,907.72 to AEHCC and Christina in connection with

their purchase of a hotel. Christina’s parents, Edward Ahn

and Helen Ahn, guaranteed the loan. Christina, Edward Ahn,

and Helen Ahn are residents of California. AEHCC is a

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4 FIRST INTERCONTINENTAL BANK V. AHN

Colorado limited liability company with its principal place of

business in California.

The promissory note included in the loan agreement

documentation specified: “This Note is intended as a contract

under and shall be construed and enforceable in accordance

with the laws of the State of Georgia.” The note also

contained a non-reciprocal attorney’s fees clause, providing: 

“In the event this Note, or any part hereof, is collected by or

through an attorney at law, Borrower agrees to pay all costs

of collection, including but not limited to reasonable

attorney’s fees actually incurred.”

In December of 2009, the Bank released Christina from

her obligations under the loan, and Christina executed a

quitclaim deed that transferred her interest in the hotel to

AEHCC. On March 9, 2010, the Bank’s Board of Directors

voted to remove Christina as a borrower on the loan.

Christina’s parents, Edward Ahn and Helen Ahn, remained as

guarantors of the loan.

In June of 2011, AEHCC ceased making payments on the

loan, and in September of 2011, the Bank sent a letter to

Christina’s parents demanding that they honor their

guarantees.

II. Prior Proceedings

When Edward Ahn and Helen Ahn failed to respond to

the Bank’s demands for payment on their guarantees, the

Bank filed an action in the Central District of California

against Edward Ahn, Helen Ahn, Christina, and AEHCC for

breach of contract and breach of guaranty. The district court

granted summary judgment to the Bank on all claims against

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FIRST INTERCONTINENTAL BANK V. AHN 5

AEHCC, Edward Ahn, and Helen Ahn. However, the district

court also granted summary judgment to Christina, holding

that the Bank had released her in December of 2009 from any

obligations under the loan. None of the parties appealed

these decisions.

On February 22, 2013, Christina filed a Motion for

Attorney’s Fees and Costs pursuant to California Civil Code

§ 1717(a), which makes reciprocal otherwise unilateral

attorney’s fees clauses in contracts. The Bank contended that

California Civil Code § 1717(a) was inapposite, and that

Georgia law should govern the attorney’s fees dispute. The

district court held that California law applied to the attorney’s

fees dispute, and awarded attorney’s fees to Christina

pursuant to California Civil Code § 1717(a).

This timely appeal followed.

JURISDICTION AND STANDARD OF REVIEW

The district court had subject matter jurisdiction over the

attorney’s fees dispute pursuant to 28 U.S.C. § 1332. We

have appellate jurisdiction pursuant to 28 U.S.C. § 1291.

We review de novo the district court’s legal conclusions,

including its decision that California law applies to the

attorney’s fees dispute. See Pokorny v. Quixtar, Inc.,

601 F.3d 987, 994 (9th Cir. 2010).

DISCUSSION

The central issue in this case is whether Georgia law or

California law applies to the parties’ attorney’s fees dispute.

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6 FIRST INTERCONTINENTAL BANK V. AHN

I. Legal Standard

We begin by determining whether Georgia’s or

California’s choice-of-law rules apply in this case. In

diversity jurisdiction cases, such as this one, we “apply the

substantive law of the forum in which the court is located,

including the forum’s choice of law rules.” Ins. Co. of North

Am. v. Fed. Express Corp., 189 F.3d 914, 919 (9th Cir. 1999). 

The Bank brought its action for breach of contract in the

Central District of California. The district court thus

correctly determined that California’s choice-of-law rules

govern the question of whether Georgia or California law

applies to the attorney’s fees issue.

California follows the approach set out in the Restatement

(Second) of Conflict of Laws § 187 to determine the law that

applies to a contract with a choice-of-law clause. See

Nedlloyd Lines B.V. v. Superior Court, 834 P.2d 1148, 1153

(Cal. 1992). Under § 187, a California court begins its

analysis by determining “whether the chosen state has a

substantial relationship to the parties or their transaction, or

. . . whether there is any other reasonable basis for the parties’

choice of law.” Washington Mut. Bank, FA v. Superior

Court, 15 P.3d 1071, 1078 (Cal. 2001) (quoting Nedloyd

Lines B.V., 834 P.2d at 1152). If this is the case, the court

then determines whether California would “be the state of the

applicable law in the absence of an effective choice of law by

the parties.” Restatement (Second) of Conflict of Laws,

§ 187(2). If the chosen forum has a substantial relationship

to the parties or their transaction but California law would

apply in the absence of a choice-of-law provision, the court

then determines whether the relevant portion of the chosen

state’s law is contrary to a fundamental policy in California

law. If there is such a conflict, the court finally determines

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FIRST INTERCONTINENTAL BANK V. AHN 7

whether California has a “‘materially greater interest than the

chosen state in the determination of the particular issue . . . .’”

Washington Mut. Bank, FA, 15 P.3d at 1078 (quotingNedloyd

Lines B.V., 15 P.3d at 1078). If all of these criteria are met,

the court applies California law. Otherwise, the court applies

the law of the forum selected in the contract.

II. Application of California Choice-of-Law Principles

A. Georgia Has a Substantial Relationship to the

Parties in the Transaction

The loan agreement between Christina and the Bank

specifies that Georgia law applies to any dispute. 

Additionally, the Bank is chartered in Georgia, its principal

place of business is in Georgia, and it drafted the contract and

related documents in Georgia. Accordingly, there is a

reasonable basis for the choice-of-law provision contained in

the loan agreement documents.

B. The Application of California Law in the Absence

of the Choice-of-Law Provision

We next assess whether California would apply its own

law to the dispute in the absence of the choice-of-law

provision selecting Georgia law. In addressing this issue,

Restatement (Second) of Conflict of Laws § 188 directs us to

consider: “(a) the place of contracting, (b) the place of

negotiation of the contract, (c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation

and place of business of the parties.”

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1. Place of Contracting

When adjudicating the underlying breach of contract

claim in this case, the district court concluded that the Bank

and Christina negotiated and executed the contract in both

California and Georgia, and that Christina signed the contract

in California. These facts do not favor the application of

either California or Georgia law.

On appeal, the Bank contends that it is unclear where the

parties executed the loan agreement because Christina may

not have even signed the loan documents, or been present

when she signed the agreements by proxy. According to the

Bank, because the place of execution is unclear, the balance

tips in favor of applying Georgia law. The Bank’s argument

is unavailing for two reasons.

First, its contentions, at best, only establish that it is

unclear where the parties executed the agreements, which

brings us no closer to resolving the question of which state’s

law would apply to the present dispute. Second, the doctrine

of judicial estoppel prevents the Bank from asserting that

Christina did not sign the loan agreements in California. 

“[J]udicial estoppel, ‘generally prevents a party from

prevailing in one phase of a case on an argument and then

relying on a contradictory argument to prevail in another

phase.’” New Hampshire v. Maine, 532 U.S. 742, 749 (2001)

(quoting Pegram v. Herdrich, 530 U.S. 211, 227 n.8 (2000)). 

In her motion for summary judgment in the breach of contract

action, Christina argued that she did not sign and execute the

contract at issue. In response, the Bank acknowledged that

“Christina Ahn made, executed and delivered [the contract]

to Plaintiff.” The Bank also submitted documents into

evidence that indicated Christina had executed the

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FIRST INTERCONTINENTAL BANK V. AHN 9

agreements in California, and that bore Christina’s signature. 

After reviewing the evidence, the district court concluded that

Christina had signed the agreements in California. Judicial

estoppel prevents the Bank from contradicting this finding,

and asserting that Christina did not sign the loan documents

in California. We see no reason to disturb the district court’s

factual findings that the contract was executed in both

Georgia and California.

2. Place of Negotiation of the Contract

Based on the record, it is undisputed that the contract was

negotiated in both California and Georgia, which again does

not favor the selection of the law of either forum.

3. Place of Performance

The record is unclear as to the place of performance of the

contract. The note states that payments from Christina to the

Bank were due in Georgia, but it is unclear where Christina

made payments on the note.

4. Location of the Subject Matter of the Contract

The contract was for the purpose of refurbishing a hotel

in Louisiana, a forum unrelated to either California or

Georgia.

5. Citizenship of the Parties

Finally, the domicile or citizenship of the parties does not

compel the application of Georgia or California law. As

noted supra, Christina is a citizen of California, while the

Bank is a citizen of Georgia.

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Applying the factors in Restatement § 188 does not lead

us to a clear conclusion as to whether California or Georgia

law would apply in the absence of the choice-of-law clause. 

Accordingly, we adopt the approach of the California District

Court of Appeals, which has determined that California law

would apply in circumstances analogous to those we analyze

here.

6. Grove Properties

In ABF Capital Corporation v. Grove Properties

Company, a case involving a conflict between New York and

California law concerning attorney’s fees, the California

District Court of Appeals confronted a situation similar to the

one we consider here. 23 Cal. Rptr. 3d 803 (Ct. App. 2005). 

In that case, which involved a California defendant

contracting with a New York plaintiff to purchase oil and gas

interests in Oklahoma and Texas, the parties had selected

New York law to govern the contract. As in this case, the

analysis of which state’s law would have applied in the

absence of the forum-selection clause was unclear based on

§ 188 of the Restatement. The California District Court of

Appeals ultimately decided that California law would have

applied primarily because California has a fundamental

policy interest in protecting its citizens “from unfair litigation

tactics or procedures,” including non-reciprocal attorney’s

fees clauses. Id. at 815. See also Section II.C, infra.

We are persuaded by the reasoning in Grove Properties

because the same policy interest is at issue here. Christina, a

California citizen, would be on the losing end of a nonreciprocal attorney’s fees clause when litigating in a

California court. We therefore conclude that, in the absence

of the choice-of-law provision in the contract, a California

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FIRST INTERCONTINENTAL BANK V. AHN 11

court would apply California law to the attorney’s fees

dispute between Christina and the Bank.

The Bank urges us to reject the Grove Properties

approach and instead adopt the holding of the California

District Court of Appeals in ABF Capital Corp. v. Berglass,

30 Cal. Rptr. 3d 588 (Ct. App. 2005). Although the facts in

Grove Properties and Berglass are substantially similar, the

Berglass court applied New York law, rather than California

law, in part because it concluded that New York’s law would

have applied in the absence of a New York choice-of-law

clause. Id. at 596–97. We believe that Berglassis inapposite

here for two reasons.

First, the Berglass court distinguished that case from

Grove Properties on the ground that it did “not know where

[the] defendant executed the contract or the parties negotiated

the contract.” Id. at 597. By contrast, there was evidence in

Grove Properties “that the contract was negotiated in both

California and New York and was made in California.” Id. 

The case before us is more like Grove Properties because the

district court clearly found that the contract was negotiated

and executed in both California and Georgia.

Second, Berglass did not give sufficient weight to one of

the primary purposes of California Civil Code § 1717(a),

which seeks to ensure that California citizens do not fall

victim to non-reciprocal attorney’s fees clauses when

litigating in California courts. See Section II.C, infra. The

Berglass court only recognized that the policy underlying

§ 1717 was to enhance “free and equal access to the courts

. . . by preventing the oppressive use of one-sided fee

provisions,” 30 Cal. Rptr. 3d at 597, and held that New York

effectuated the same policy “by enforcing strictly the parties’

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intentions.” Id. In Grove Properties, on the other hand, the

Court of Appeals concluded that California had a stronger

interest in “enforcing the equitable rules governing access to

its courts—including the reciprocal attorney fees rule—than

New York has in assuring the enforcement of New York law

concerning attorney fees.” Grove Props. Co., 23 Cal. Rptr.

3d at 813 (emphasis added). Grove Properties thus

recognizes that one of the fundamental purposes of § 1717 is

to ensure that California citizens in a disadvantageous

bargaining position are protected against non-reciprocal

attorney’s fees clauses when litigating in California courts. 

We apply the law from Grove Properties, and conclude that

California law would have applied to the contract at issue

here in the absence of the choice-of-law provision selecting

Georgia.

C. California’s Fundamental Policy Against NonReciprocal Attorney’s Fees Clauses

We next consider whether Georgia law permitting nonreciprocal attorney’s fees clauses is contrary to a fundamental

public policy in California law. To determine the public

policy of a state, “the Constitution, laws, and judicial

decisions of that state, and as well the applicable principles of

the common law, are to be considered.” Twin City Pipe Line

Co. v. Harding Glass Co., 283 U.S. 353, 357 (1931). Based

on our review of existing legal authorities, we conclude that

California has a fundamental policy disfavoring nonreciprocal attorney’s fees clauses in litigation in its state

courts.

California generally enforces parties’ freely-negotiated

choice-of-law clauses. See Washington Mut. Bank, FA,

15 P.3d at 1078–79. As the California Supreme Court held:

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FIRST INTERCONTINENTAL BANK V. AHN 13

It is to the interest of the public generally

that the right to make contracts should not be

unduly restricted, and no agreement will be

pronounced void, as being against public

policy unless it clearly contravenes that which

has been declared by statutory enactment or

by judicial decisions to be public policy, or

unless the agreement manifestly tends in some

way to injure the public.

Jensen v. Traders & Gen. Ins. 345 P.2d 1, 6 (Cal. 1959)

(quoting Spangenberg v. Spangenberg, 126 P. 379, 382 (Cal.

Ct. App. 1912)).

However, the California legislature has prohibited the use

of non-reciprocal attorney’s fees through California Civil

Code § 1717(a), which provides:

In any action on a contract, where the contract

specifically provides that attorney’s fees and

costs, which are incurred to enforce that

contract, shall be awarded either to one of the

parties or to the prevailing party, then the

party who is determined to be the party

prevailing on the contract, whether he or she

is the party specified in the contract or not,

shall be entitled to reasonable attorney’s fees

in addition to other costs.

Section 1717’s “effect is to make an otherwise unilateral right

to attorney fees reciprocally binding upon all parties to

actions to enforce the contract.” Xuereb v. Marcus &

Millichap, Inc., 5 Cal. Rptr. 2d 154, 157 (Ct. App. 1992).

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The California Supreme Court has yet to rule on whether

§ 1717 embodies a fundamental policy of the state, although

it has recognized that one of the primary purposes of § 1717

is “to prevent oppressive use of one-sided attorney’s fees

provisions.” Reynolds Metals Co. v. Alperson, 599 P.2d 83,

85 (Cal. 1979). “When the state’s highest court has not

squarelyaddressed an issue, we must ‘predict how the highest

state court would decide the issue using intermediate

appellate court decisions, decisions from other jurisdictions,

statutes, treaties and restatements for guidance.’” Glendale

Assocs., Ltd. v. Nat’l Labor Relations Bd., 347 F.3d 1145,

1154 (9th Cir. 2003) (quoting Nat’l Labor Relations Bd. v.

Calkins, 187 F.3d 1080, 1089 (9th Cir. 1999)).

The California District Court of Appeals has held that

“California does have a fundamental policy concerning the

reciprocity of attorney fee provisions in contracts.” Grove

Props. Co., 23 Cal. Rptr. 3d at 810. Soon after the legislature

passed § 1717, the Court of Appeals also concluded that the

statute “is part of an overall legislative policy designed to

enable consumers and others who may be in a

disadvantageous contractual bargaining position to protect

their rights through the judicial process by permitting

recovery of attorney’s fees incurred in litigation in the event

they prevail.” Coast Bank v. Holmes, 97 Cal. Rptr. 30, 39 n.3

(Ct. App. 1971). See also Milman v. Shukhat, 27 Cal. Rptr.

2d 526, 529 (Ct. App. 1994) (“Section 1717 was enacted in

1968. It is one of several similarly worded statutes which are

recognized as being part of an overall legislative policy

designed to enable consumers and others who may be in a

disadvantageous contractual bargaining position to protect

their rights through the judicial process by permitting

recovery of attorney’s fees in the litigation in the event they

prevail.” (citations omitted)).

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FIRST INTERCONTINENTAL BANK V. AHN 15

Federal courts have also concluded that California has a

fundamental policy against non-reciprocal attorney’s fees

clauses. Our circuit has yet to address this issue in a

published decision, but in an unpublished decision, we

concluded that “California law requiring mutuality of

attorneys’ fees provisions reflects a strong public policy,

overriding another strong public policy of freedom of

contract.” See Daniel Indus., Inc. v. Barber-Colman Co.,

8 F.3d 26 (9th Cir. 1993) (table) (citing Harbor View Hills

Community Ass’n. v. Torley, 7 Cal. Rptr. 2d 96, 99-100 (Ct.

App. 1992)). Additionally, in Ribbens International, S.A. de

C.V. v. Transportation International Pool, Inc., a district

court in the Central District of California held that § 1717 is

“mandatory, unavoidable and emphatic. Section 1717(a) is

no default provision or gapfiller, subject to override by the

parties. Rather, it represents a basic and fundamental policy

choice by the state of California that nonreciprocal attorney’s

fees contractual provisions create reciprocal rights to such

fees.” 47 F. Supp. 2d 1117, 1122 (C.D. Cal. 1999).

Having considered these authorities, we are persuaded

that if the issue were presented to the California Supreme

Court, it would conclude that Civil Code § 1717 reflects a

fundamental policy of the state of California, and we hold

that it is.

D. California Has a Materially-Greater Interest than

Georgia in this Dispute

In addressing whether California had a materially-greater

interest than New York in an attorney’s fees dispute

analogous to the one we face here, the California District

Court of Appeals focused on: (1) whether the parties chose

to bring litigation in a California state court, and (2) the

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citizenship of the parties. Grove Props. Co., 23 Cal. Rptr. at

812–13. Applying these two factors here, we conclude that

California has a materially-greater interest in the attorney’s

fees dispute than does Georgia.

1. Choice To Bring Litigation in California Court

We first examine whether “the party choosing the

litigation availed itself of California courts. Fair access to

California courts is a significant part of the policy underlying

Civil Code section 1717.” Id. at 812. In this case, the Bank

filed a federal diversity suit in the Central District of

California, even though we have no reason to believe it could

not have filed the same action in a federal district court in

Georgia. Although this case differs from Grove Propertiesin

that the Bank brought suit in a California federal court, rather

than a state court, “a federal court adjudicating a state-created

right solely because of the diversity of citizenship of the

parties is for that purpose, in effect, only another court of the

State.” Guar. Trust Co. of N.Y. v. York, 326 U.S. 99, 108

(1945). Accordingly, the Bank’s choice to bring its lawsuit

in a federal district court in California, rather than another

federal district court, satisfies the first prong of the Grove

Properties court’s analysis.

2. Residency of Litigants

The Grove Properties court also considered whether

either of the litigating parties was a California resident: “The

interest of California in seeing its residents receive fair play

with respect to attorney fees, when resort is made to the

California courts, is a fundamental equitable policy of this

state.” Grove Props. Co., 23 Cal. Rptr. at 813.

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FIRST INTERCONTINENTAL BANK V. AHN 17

Christina is a resident of California. The Bank is

incorporated in Georgia, with its principal place of business

in Georgia. Because Christina is a California citizen and

would be on the losing end of a non-reciprocal attorney’s fees

provision, the state of California has a substantial interest in

applying its law to the attorney’s fees dispute in this case. 

See Milman, 27 Cal. Rptr. 2d. at 529–31.

Given that both prongs of the Grove Properties analysis

have been satisfied, we conclude that California has a

materially-greater interest in seeing its fundamental policy

applied in this case than Georgia has in applying its own law. 

The district court did not err in applying California law and

awarding attorney’s fees to Christina.

E. Telco Leasing

Finally, the Bank calls our attention to Telco Leasing, Inc.

v. Transwestern Title Co., in support of the proposition that

Georgia law must be applied in this dispute. 630 F.2d 691

(9th Cir. 1980). In Telco Leasing, whose facts bear some

resemblance to those in the present case, we concluded that

Illinois law, not California law, applied to an attorney’s fees

dispute. We noted therein that the contract in Telco Leasing

had selected Illinois law to govern any disputes concerning

the agreements in that case. Id. at 693.

However, Telco Leasing is easily distinguishable from

this case because the litigants in that case originally filed suit

in Illinois before transferring the case to California. As a

result, we concluded that Illinois law applied, emphasizing

that “the applicable state law is that which would have been

applied by the transferor court.” Id. at 694. Moreover, we

engaged in no choice-of-law analysis in Telco Leasing, which

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18 FIRST INTERCONTINENTAL BANK V. AHN

predated the California Supreme Court’s adoption of § 187 of

the Restatement (Second) of Conflict of Laws. Here, by

contrast, no venue transfer occurred, and California choiceof-law rules clearly apply.

III. Conclusion

Applying the relevant authorities to the facts in this case,

we hold that the district court correctly concluded that

California law, including California Civil Code § 1717(a),

governs the outcome of this case, and awarded attorney’s fees

to Christina. We affirm the district court.

AFFIRMED.

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