### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-10-00464- CV

Lisa L aser U SA, Inc. and Lisa L aser P roducts, oHG, A ppellan ts

v. HealthTronics, Inc., App ellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 98TH JUDICI AL DISTRICT NO. D-1 -GN-0 8-0 0446 9, H ONO RAB LE SUZ ANNE COVI NGTON, J UDGE P RESIDING

M E M O R A N D U M O P I N I O N

H e a lt h T r o n ic s, I nc. (“H ealthTronic s”) filed suit ag ainst L isa L aser USA , I n c . a n d L is a L aser Products, oHG (collec tively , “L isa L aser ”) for brea ch of contra ct and tortio us interfe renc e with
contra ct. The trial court issued an order dismiss ing the suit based on a mandatory forum-se lection

1
clause in the contra ct betwee n the parties, but denied L isa L aser ’s reque st for an awa rd of attorney s’ fee s. L isa L aser now appea ls the portion of the trial court’s order deny ing its reque st for attorney s’ fee s. We reve rse the portion of the trial court’s order deny ing at t o rney s’ fee s and rema nd for a deter mination of the amount of re asonable attorney s’ fe es incurr ed.

I n a related procee ding, the Texas Supreme Court explained that the designation “oHG” 1 indicates the Ger

man equivalent of a g ener al partne rship. See In re L i s a L a s er USA, Inc. , 310 S.W .3d 880, 882 n.1 (Tex. 2010).BACK GR OUND
I n Dec ember 2008, Hea lthTronics sued L isa L aser in Travis County district court for brea ch of a distribution ag ree ment in which Hea lthTronics was to serve as the ex clusive U.S. distributor of cer

tain surg ical laser device s manufa cture d by L isa L aser . Hea lthTronics alleg ed that
L isa L aser violated the contr actua l provision giving Hea lthTronics the right of first ref usal for the sale and distribution of newly develope d products. Hea lthTronics also broug ht a cause of action for tortious interfer ence with contrac t, alleg ing that L isa L aser had interf

ere d with confidentiality

and non-solicitation ag ree ments betwee n Hea lthTronics and its former employ ees. L isa L aser filed a motion to dismiss the suit, asser ting that pursuant to the distribution
ag ree me n t’ s f

o r um-selec tion clause , the exclusive venue for disputes arising from the ag ree ment was Alameda County , California. I n response , Hea lthTronics arg ued that the forum-se lection clause was inapplicable to the dispute at hand, as it was located in an addendum to the ag ree ment that perta ined only to c erta in sa les transac tions oc curr ing betwee n L isa L aser USA, I nc. and Hea lthTronics. The trial court de nied L isa L aser ’s motion to dis miss.

L isa L aser then filed a petition for writ of mandamus in this Court, seeking to compel the trial court to vaca

te its order and dismiss the suit pursuant to the mandatory for u m -s el ec t i o n clause in the distribution ag ree ment. This Court denied the petition, and L isa L aser filed a petition for writ of mandamus in the Texas Supreme Court. See In re Lisa Laser USA, Inc. , 310 S.W .3d 880 (Tex. 2010). Whil e the manda mus procee ding w as pending in the supreme court, L isa L aser filed

an amende d answe r in the underly ing suit, raising counter claims ag ainst He al t h Tronics for fra ud, brea ch of contra ct, neg lige nt misrepre sentation,“intentional interfe renc e with prospec tive economic

2rela tionships,” and dece ptive business prac tices. Acc ording to L isa L aser , Hea lthTronics had relied

on its exclusivi ty ag ree ment to purcha se surg ical laser device s from L isa L aser at wholesale price s, but then had lease d the device s to phy sicians and hospitals, rathe r than marke ting and selling them

as re quired by

the contra ct.
I n April 2010, the supreme court ruled in L isa L aser ’s favor on the forum-se lection clause and conditionally g rante d the petition for writ of mandamus. See id. at 887. L isa L aser then filed a motion in the trial court, re q uesting that the case be dismiss ed pursuant to the order of the
supreme c ourt. L isa L aser further reque sted an award of the attorney s’ fees i ncurr ed in defe nding the suit in Texas and succe ssfully obtaining mandamus relief , citing a contra ctual provision stating that the preva ili n g party in any leg al action arising out of the distribution ag ree ment would be entitled to rec over attorney s’ fee s. L isa L aser claimed that it had incurre d approximately $117,000
in rea sonable and nece ssary attorney s’ fee s. Hea lthTronics filed a response in opposition to the
reque st, arg uing that L isa L aser was not entitled to attorney s’ fe es based on the dismiss al of the
Texas suit beca

use the merits of the parties’ dispute had not y et been resolved. Hea lthTronics further

as serted that during the pendenc y of the Texas suit, L isa L aser had filed suit in Alameda Cou n t y , California, and that the s ame claim s an d ca uses of action at issue in the Tex as sui t wer e currently pending in the California suit.

The trial court issued an order dismiss ing th e s u i t p ursuant to the mandate of the Texas Supreme Court, “without prejudice to the parties’ ability to f ile and pursue such cla ims and

cause s of act i o n i n t h e presiding courts of Alameda County , California.” The trial court’s order

3further denied L isa L aser ’s reque st for attorney s’ fee s, “without prejudice to either party ’s ability to

rec over suc h fee s in the California proc eeding .” This appe al followed.

STANDARD OF REVIEW
Be cause the distribution ag ree ment at issue here contains a choice -of- law provision, the parties ag ree that California law applies to the quest i o n o f wh ether L isa L aser is entitled to

rec over attorn ey s’ fee s under the contra ct. See Fairmont Supply Co. v. Hooks Indus., Inc. , 177 S.W .3d 529, 536 (Tex. App.—Houst o n [ 1st Dist.] 2005, pet. denied) (holding that awa rd of attorney s’ fee s under contra ct was g overne d by law of ju r is d ic tion desig nated in contra ct’s choice -oflaw provision).
L is a L a s e r s e e k s a tt o r n e y s ’ f e e s p ursuant to a California statutory provision p e r mi tt in g the preva iling party in an action on a contra ct to r ecove r attorney s’ fee s if the contra ct provides for such an awa

rd. See Cal. Civ. Code § 1717. T h e av ai l ab i l i t y of attorney s’ fee s under a particula r
statute is a question of law that we revie w de novo. See Holland v. W al-Mart Stores, Inc. , 1 S.W .3d 91, 94 (Tex. 1999); Colonial Am. Cas. & Sur. Co. v. Schere r , 214 S.W .3d 7 2 5 , 729 (Tex. App.—Austin 2007, no pet.).

DISCUSSIO N

I n a single issue on appea l, L isa L aser arg ues that the trial court err ed in deter mining that it wa s not entitled to an awa rd of attorney s’ fee s beca

use the merits of the parties’ dispute had not y et bee n resolved. L isa L aser reque sted attorney s’ fees pursuant to the foll owing provision in the distribution agr eeme nt betwee n the par ties:

4The prevailing party in any leg al act i o n b ro u g ht by one party ag ainst another party

and arising out of this Ag ree ment shall be entitled, in addition to any other rig hts and reme dies it may

have, to r eimbursement f or its expenses, including c ourt costs and rea sonable a ttorney s’ fe es.

Under California law, parties may contra ctually provide for award s o f at torney s’ fee s to the
preva iling party in litigation arising out of t he contract. S ee Cal. Civ. Code § 1717. Specifica lly , California Civil Code section 1717 provides, in re levant par t:
(a) I n any action on a contra ct, wher e the contra ct specific ally provides that attorney ’s fee s and costs, which are incurre d to enfor ce that contra ct, shall be awa rded either to one of the parties or t o the prevailing party , then t he party who i s deter mined to be the party preva iling on the contra ct

. . . shall be entitled to rea sonable attorney ’s fee s in addition to other costs.

. . . . (b)( 1) The court, upon notice and motion by a party , shall deter mine who is the party preva iling on the contra ct for purposes of this section, whether or not the suit proce eds to final judgme nt. Ex cept as provided in para g raph (2), the party preva iling on the contra ct shall be the pa rty who rec overe d a g rea ter relief in the action on the contra ct. Th e court may also deter mine that there is no party preva iling on the contra ct for pur

poses of this section. (2) Wher e an action has been voluntarily dismiss ed or dismiss ed pursuant to a settlement of the case , there shall be no preva iling party for purposes of this section.

Id.
L isa L aser takes the position that beca use it preva iled on its mandamus action in the
Texas Supreme Court and obtained a dismiss al of the Texas suit, it is entitled to rec over attorney s’ fee s as a preva iling party in a dispute arising out of the contra ct. Hea lthTronics, on the other hand,

5arg ues that beca use the same claims and cause s of action rema in pe nding in Ca lifornia, L isa L aser has not y et pre vailed on any ultimate issue or claim in this disput e. Under the plain lang uag e of section 1717, a suit need not proce ed to final judgme nt in order for the court to deter mine a preva iling party for purposes of a co n t rac tual attorney s’ fee

awa rd. Id. § 1717(b)( 1). The sta tute further provides that in the event of a voluntary dismiss al or dismiss al pursuant to settlement, no party can be c o n s i d ered a “preva iling party ” on the contract. Id. § 1717(b)( 2). The statute does not , howeve r, specifically addre ss the s ituation prese nted here, wher e a party has succe ssfully obtained a dismiss al based on an i m p ro p er forum, but the same substantive issues remain pe nding in a nother suit, filed in the prope r for um. The California Supreme Court has descr ibed the “pre vailing party ” deter mination for purposes of se ction 1717 as follows:
[I ]n deciding whether

there is a “pa

rty preva iling on the contract,” the trial court is t o compar e the relief awa rded on the contra ct claim or claims with the part i es ’ demands on those same claims and their litigation object i v es as disclosed by the pleading s, trial briefs, opening statements, and simil ar source s. The preva iling party deter mination is to be made only upon final resolution of the contra ct claims and only by a compar ison of the extent to which eac h party ha[s] succe eded and fai led to succe ed in its contentions.

Hsu v. Abbara , 891 P.2d 804, 813 (Cal. 1995) (intern al q u o t at ion marks and citation omitted).
Hea lthTronics emphasizes the s tatement that a pre vailing pa rty deter mination is to be made “only
upon final resolution of the contra ct claims,” arg uin g t h at t h is lang uag e bars L isa L aser from

rec overing attorney s’ fee s incurre d in the Texas proce eding until the merits of the contra ct dispute have be en re solved in the California pr ocee ding.

6I n Hsu , howeve r, there was no question that the contra ct claims at issue had been fully

resolved, as the defe ndant had obtained “a simple, unqualified victory by defe ating the only contra ct claim i n the acti o n . ” Id

. T hus, the i ssue of whether a party succe ssfully obtaining a di smissal on
proce dural g rounds might be entitled to attorney s’ fee s as a preva iling party under section 1717 was
not actua lly decide d in Hsu

. See Santisas v. Goodin , 951 P.2d 399, 413 (Cal. 1998) (“A n appellate decision is not authority for ever y thing said in the court’s opinion but only for the points actua lly involved and actua lly decide d.” (interna l q u otation marks and citation omitted)). Be cause the California Supreme Court has not expressly addre ssed the preva iling party deter mination i n t he

co n t ex t o f a factual situation like the one at issue here , we turn to the decisions of the California intermediate courts of a

ppeals a pply ing c ivil code sec tion 1717. 2
I n support of its contenti o n t h at L i s a L aser is not entitled to attorney s’ fee s as a
preva iling party , Hea lthTronics relies on In re Estate of Drummond , 56 Cal. Rptr. 3d 691 (Ct. App. 2007). I n that case , a g roup of family members hired an attorney to repr esent them in a will contest. Id. at 692. A di spute eventua lly arose , leading the Drumm ond family to file a civil action aga inst their now-for

mer attorney for fra

ud. Id. at 693. T h e attorney then filed a petition in the probate depar tment, seeking to rec over fee s that he alleg ed wer e owed to him by the Drummonds. Id. at 692.

California court of appea ls opinions are equally binding prec edent for t ri al co u rt s 2 throug hout the state. See Meeha n Rasch, Calif

ornia’s Dueling Harmless Error Standa r d s: Approaches to Fede ral Constit utional Error in Civil Procee dings and Establishi ng the Proper Test for Depe ndency , 35 W. St. U. L

. Rev. 433, 464 n.7 (2008) (“T h e C al i fo rn i a Courts of Appeal are divided into six appellate districts, which contain a total of nineteen differ ent divisions, eac h of whose opinions constitute equally final and binding prec edent for all courts throug hout the state, not only on those within the di strict.”). As a result, prec edent from any one appellate dis trict will not weig h more he avily

in our ana ly sis than prec edent f rom any other district. 7The probate cour t g rante d the attorne y ’s petition, consolidated it with the civil action, and e ntere d judgme nt awa

rding damag es in favor of the attorney

. Id. at 693. The Drummonds appea led, and in

an unpublished opinion, the court of appea ls deter mined that the attorney ’s claim for fee s should have been raised as a cross-c omplaint in the civil act i o n , rather than in a petition for fee s in the probate depar

tment. Id. On that basis, the court of appea ls direc ted the probate court to dismiss the petition and to take no further action on the Drummonds’ claims. Id. When the case was rema nded
to the probate court for dismiss al, the Drummonds soug ht to rec over the attorney ’s fee s they incurre d in obtaining a dismiss al of the petition for fee s, citing a provision in their leg al service s contra ct that allowed for the rec overy of fee s by the preva iling party in an action on the contra ct. Id. The attorney objected, arg

uing that the dismiss al of his petition in the probate court was mere ly a proce dural victory , and that the Drummonds wer e not pr evailing parties for purposes of section 1717 beca use the substantive issues rela ted to the underly ing leg al service s contra ct rema ined pending in the civil action. Id. The c ourt of appe als ag ree d, stating:
[L ]i tiga tion on the contra ct in the probate depar tment ended solely beca

use it should have been broug ht in another depar tment of the same court. Nothing prohibited [t he attorney ] from taking up his claims in the other depar tment; indeed he did so, and has now rec overe d a judgme nt ag ainst appel l an ts. The dismiss al of his petition in the probate matter did not defe at hi s contra ct claim s ; i t m erely defle cted or fore stalled them. By achie ving that result, appellants no more “pre vailed” than does a flee ing army that outruns a pursuing o n e. L iving to fig ht another day may be a kind of succe ss, and surely it is better than defe at. But as long as the war g oes on, neither side ca n be said to have preva iled.

8Id. at 696. The court further noted t h at t h e Dr u m m onds “have at no time won a victory ‘on the

contra ct.’ They have only succe eded at moving a deter mination on the merits from o n e fo rum to another .” Id.
Her e, too, L isa L aser has succe eded in moving a deter mi n ation on the merits from one forum to another , as the Texas proce eding has been dismiss ed and the California proce eding rema ins pending

. This case d i ff

er s fr o m Drummond , howeve r, in that the dispute here was not moved to “anothe r depar

tment of the same court,” id. , but wholly dismiss ed from this State’s jurisdiction. As far as Texas is conce rned, L isa L aser has not mere ly obtained an interim victory , but a dismiss al of the entire case . Whil e Hea lthTronics arg ues that this distinction is insignifica nt, a rec ent California
court of appea ls case co n s idere d Drummond to be distinguishable on those g rounds. See PNEC Corp. v. Mey er , 118 Cal. Rptr. 3d 730, 735 (Ct. App. 2010). I n Mey er , the court held t hat a party who obtained a dismiss al of a lawsuit on forum non convenie ns g rounds could rec over contra ctual attorney s’ fee s under section 1717, despite the opposing party ’s arg ument that fee s wer e unavailable beca use t he d i s m i s s al wa s without prejudice to ref iling in another state. Id. at 734-35. The court found the lang uag e of Drummond to be inapplicable t o t h e ca s e at hand, stating that “the party seeking an awa

rd of fee s [i n Drummond ] fac ed no obstacles i n p u rsui ng an awa rd in a differ ent depar tment of the same court.” Id. at 735. The court went on to hold that even though the suit could be re fi l ed i n t h e state of Washington, t he trial court did not err in awa rding contra ctual attorney s’ fee s pursuant to section 1717 “for the work done while t he case wa s under its jurisdiction.” Id. at 735-36. The issue of a dismiss al in one state while the same claims wer e pending in another
state was specific ally addre ssed in Profit Concepts Mgmt., Inc. v. Griffit h , 76 Cal. Rptr. 3d 396, 397
9(Ct. App. 2008), in which the court of appea ls held that wher e the trial court g rante d a motion to

quash service for lack of persona l jurisdiction, Griff ith, the party who filed the motion, could rec over
contra ctual attorney s’ fee s as a preva iling party under section 1717. The opposing party arg ued, as Hea lthTronics does here , that Griff ith could not be considere d a preva iling party beca use the merits of the underly

ing contra ct claim rema ined pending in another proce eding in a differ ent state. Id. at 400. The c ourt of appe als reje cted this arg ument, stating:

The only claims befor e the trial court wer e contained in Profit Concept’s complaint, which sou gh t co m p ensatory and punit ive damage s in an amount to be determined, as well as preliminary and pe rm an ent injunctive relief

. The case in Calif

ornia has been finally resolved. What was awa rded on Profit Concepts’s complaint? Z ero. Thus, the contra ct claim was finally resolved within the meaning of Hsu v. Abbara , and that ca se does not use the term “me rits.”

. . . . Profit Concepts initiated an action i n Ok l ahoma on April 4, 2007, seeking c o mp ensatory damag es, punitive damag es, and preliminary and p e r ma n e n t in ju n c ti v e relief

. Pro fi t Concepts s ug g ests that beca use t he case in Oklahoma is pending , the case in toto has not been finally resolved. We fi n d n o thing in the lang uag e of the statute or of Hsu v. Abbara , or any other case , that require s resolution in another state on the merits of a contra ct claim first asser ted in California befor e a preva iling party can be deter

mined here , when the matter has been completely resolved vis-à-vis the California c ourts.

Id. The fac tual circ umstances prese nted here are much closer to those of Profit Concepts than Drummond

. Whil e L isa L aser may have filed a new suit in California, the case in Texas has been completely and finally resolved. L isa L aser ’s “litiga tion objectives” in Texas wer e limit ed to obtaining a di smissal of t he entire proce eding , an objective that was a chieve d when the tr ial court
enter ed its order

of dismissal. See H

su , 891 P.2d at 813.

10Ba sed on our revie w of the rele vant California authorities, we conclude that the trial

court e rre d in deny ing L isa L aser ’s re quest for a ttorney s’ fe es on the g round that it did not qualify

as a preva iling party under section 1717. See Cal. Civ. Code § 1717. We sustain L isa L aser ’s issue
on appea l.

CONCLUSION

We reve rse the portion of the trial co u rt ’s o rd er deny ing L isa L aser ’s reque st for attorney s’ fee s and rema

nd for a deter

mination of the amount of rea sonable attorney s’ fee s to which
L isa L aser

is entitled.

___________________________________________ Diane M. H enson, Jus tice
Be fore J ustices Pemberton, He nson and Goodwin Affir med in part; Rever sed and Rema nded in par

t Filed: Mar ch 31, 2011

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