Filed 9/22/14 American Master Lease v. Idanta Partners CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

AMERICAN MASTER LEASE LLC,

Plaintiff and Appellant,

v.

IDANTA PARTNERS, LTD. et al.,

Defendants and Respondents.

 B247478

 (Los Angeles County

 Super. Ct. No. BC367987)

APPEAL from an order of the Superior Court of Los Angeles County, Ramona G. 

See, Judge. Affirmed.

Mayer Brown, Donald Falk; Mayer Brown, Neil M. Soltman and Germain D. 

Labat for Plaintiff and Appellant.

Lathrop & Gage, John Shaeffer, Jeffrey Grant and Emily Birdwhistell for 

Defendants and Respondents.

____________________
2

INTRODUCTION

Plaintiff American Master Lease LLC (AML) appeals from a postjudgment order 

denying its motion to recover attorneys’ fees from defendants Idanta Partners, Ltd., 

David J. Dunn, Steven B. Dunn, and the Dunn Family Trust. In defendants’ prior appeal 

we affirmed the judgment as to liability but reversed as to the amount of recoverable 

unjust enrichment and ordered a new trial on that issue. (American Master Lease LLC v. 

Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451 (AML I).) We now affirm the order 

denying AML’s motion for attorneys’ fees.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Underlying Litigation

Neal Roberts formed AML in 1998 for the purpose of investing in real estate using 

an investment vehicle known as a 1031 FORT.

1 Roberts was AML’s managing member.

The other members of AML were Jim Andrews, Charles “Duke” Runnels (Runnels), and 

Michael Franklin. AML was governed by an operating agreement (Operating 

Agreement), paragraph 3.9 of which provided: “‘The Members agree that the business of 

the LLC, either to sell AML Products . . . directly to purchasers or to sell AML Products 

indirectly through an accommodator as part of a tax-exempt transaction, is unique. . . . 

No Member, Principal of a Member or holder of an Economic Interest of a Member, may 

have any interest, directly or indirectly, in any business that offers to sell or exchange 

AML Products or is otherwise competitive with [AML], nor may any such Member, 

Principal or Economic Interest holder be employed by, or act as a consultant to, any such 

competitive business without the approval of a Majority In Interest of the Class A and 

 

1 FORT stands for Fractionalized Ownership in Real estate Tax deferred, and 1031 

is the section of the Internal Revenue Code applicable to real estate exchanges.
3

Class B Members, voting as a Class. . . .’” (AML I, supra, 225 Cal.App.4th at p. 1459, 

fn. omitted.)

In January 2000 Roberts, Andrews, Runnels, and Franklin entered into a 

management agreement with AML. Under this agreement, Roberts remained the 

managing member and chairman of the board, and Andrews, Runnels, and Franklin 

agreed to serve as the operational managers of AML (collectively the Operating Group). 

(See AML I, supra, 225 Cal.App.4th at p. 1460.)

David J. Dunn was the founder and managing general partner of Idanta, a venture 

capital firm, and trustee of the Dunn Family Trust. David Dunn’s son, Steven, worked 

for Idanta for a period of time and was a partner in Idanta for some of that time. (AML I, 

supra, 225 Cal.App.4th at p. 1460.)

The Operating Group was looking for funding for AML and eventually met with 

David Dunn. In January 2004 David Dunn proposed that Idanta form and finance a new 

company in which Idanta would own 80 percent, Runnels and Franklin would own 15 

percent and manage the company, and AML would own 5 percent. Roberts rejected this 

and a subsequent proposal. (AML I, supra, 225 Cal.App.4th at p. 1461.)

In approximately mid-March 2004 Runnels incorporated FORT Properties, Inc. 

(FPI). David Dunn had already arranged with Runnels and Franklin for an ownership 

interest in FPI for himself, the Dunn Family Trust, and Idanta. Pursuant to this

arrangement, in April 2004 defendants purchased preferred shares in FPI. The Operating 

Group, on behalf of AML, then granted FPI a nonexclusive license to use AML’s 

business method. (AML I, supra, 225 Cal.App.4th at pp. 1462-1463.)

Runnels and Franklin notified Roberts of the Operating Group’s action. Roberts 

told them he believed their actions violated paragraph 3.9 of the Operating Agreement 

and that they had no authority to license AML’s business method without his permission. 

Roberts also had his attorney convey his position to the Dunns and Idanta. FPI later 

cancelled the license agreement with AML and engaged in several FORT transactions 

without AML. (AML I, supra, 225 Cal.App.4th at pp. 1463-1465.)
4

In March 2007 AML filed this action against Idanta, the Dunn Family Trust, 

David Dunn, and Steven Dunn. AML’s fourth amended complaint alleged causes of 

action for aiding and abetting breach of fiduciary duty, interference with contractual 

relations, unfair competition, and unjust enrichment. (AML I, supra, 225 Cal.App.4th at 

p. 1467.)

In June 2007 FPI agreed to repurchase the preferred stock it had sold to Idanta and 

the Dunn Family Trust. From March 2004 through December 2009 FPI experienced a 

net loss and never paid the full amount it had agreed to pay Idanta and the Dunn Family 

Trust for this repurchase of stock. (AML I, supra, 225 Cal.App.4th at p. 1466.)

In the litigation the trial court ruled on demurrer that AML had stated a cause of 

action for aiding and abetting a breach of fiduciary duty, rejecting defendants’ argument 

that a defendant must owe an independent duty to the plaintiff in order to be liable for 

aiding and abetting a breach of that duty. The trial court sustained defendants’ demurrer 

to AML’s causes of action for unfair competition and unjust enrichment without leave to 

amend. At trial, there were disputes over the applicable statute of limitations and what 

the jury could consider in making an award based on unjust enrichment. The trial court

ruled that AML’s action was not barred by the statute of limitations and instructed the 

jury in a manner that was basically favorable to AML. (AML I, supra, 225 Cal.App.4th 

at pp. 1467-1469.)

On AML’s cause of action for interference with contract, the jury found that 

Idanta, David Dunn, Steven Dunn, and the Dunn Family Trust knew about paragraph 3.9 

of the AML Operating Agreement; they acted with the intent to disrupt the performance 

of paragraph 3.9; their conduct prevented the performance of paragraph 3.9 or made its 

performance more expensive or difficult; and their conduct was a substantial factor in

causing harm to AML. The jury found, however, that AML’s interference claim was 

barred by the statute of limitations, because AML had actual or constructive knowledge 

of the facts giving rise to the interference claim more than two years before AML filed its 

complaint. On AML’s cause of action for aiding and abetting a breach of fiduciary duty, 

the jury found that Andrews, Runnels, and Franklin knowingly acted against AML’s 
5

interests, and without AML’s informed consent, in forming FPI, and, as to Runnels and 

Franklin, working for and owning shares in FPI. The jury also found that defendants 

knew that Andrews, Runnels, and Franklin were going to breach their fiduciary duties to 

AML; defendants gave substantial assistance to Andrews, Runnels, and Franklin; and 

defendants’ conduct was a substantial factor in causing harm to AML. The jury awarded 

AML restitution in the amount of $7,075,891. Defendants appealed from the judgment. 

(AML I, supra, 225 Cal.App.4th at pp. 1470-1471.)

B. Motion for Attorneys’ Fees

AML then filed a motion for attorneys’ fees. AML argued that, even though 

defendants were not signatories to the Operating Agreement, AML was entitled to an 

award of attorneys’ fees based on the attorneys’ fees provision in the Operating 

Agreement.

Paragraph 14.19 of the Operating Agreement provided: “In the event of any 

litigation, arbitration or other dispute arising as a result of or by reason of this 

Agreement, the prevailing party in any such litigation, arbitration or other dispute shall be 

entitled to, in addition to any other damages asserted, its reasonable attorney’s fees, and 

all other costs and expenses incurred in connection with settling or resolving such 

dispute. . . .” AML relied on Civil Code section 1717, subdivision (a) (section 1717(a)), 

which provides in pertinent part that “[i]n 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.” AML reasoned that it was the prevailing party in the litigation; 

the action was “on the contract” because the fiduciary duties that defendants aided and 

abetted the breach of arose out of the Operating Agreement; and the Operating 

Agreement mandated an award of attorneys’ fees.
6

The trial court denied AML’s motion for attorneys’ fees. The court found that,

although AML was the prevailing party, its claims were “not grounded in contract.” The 

court read the authorities cited by the parties and noted that “in each of those cases where 

attorney’s fees were awarded to a non-signatory, the claim was for some form of breach 

of contract where the prevailing party was standing in the shoes of one of the contracting 

parties.” AML appealed from this order.

C. Decision on Appeal in the Underlying Litigation

On May 5, 2014 we filed our opinion following rehearing in the underlying 

litigation. On the issue whether defendants could be held liable for aiding and abetting a 

breach of fiduciary duty by Andrews, Runnels, and Franklin, we explained that “there are 

two different theories pursuant to which a person may be liable for aiding and abetting a 

breach of fiduciary duty. One theory, like conspiracy to breach a fiduciary duty, requires 

that the aider and abettor owe a fiduciary duty to the victim and requires only that the 

aider and abettor provide substantial assistance to the person breaching his or her 

fiduciary duty. [Citations.] . . . Courts impose liability for concerted action that violates 

the aider and abettor’s fiduciary duty. [Citations.] The second theory for imposing 

liability for aiding and abetting a breach of fiduciary duty arises when the aider and 

abettor commits an independent tort. [Citations.] This occurs when the aider and abettor 

makes ‘“a conscious decision to participate in tortious activity for the purpose of 

assisting another in performing a wrongful act.”’ [Citations.]

“AML proceeded on the second theory of aiding and abetting liability. AML 

pleaded and proved that defendants had actual knowledge of the fiduciary duties 

Andrews, Runnels, and Franklin owed to AML, that defendants provided the three 

fiduciaries with substantial assistance in breaching their duties, and that defendants’

conduct resulted in unjust enrichment. Thus, the trial court did not err in ruling, on 

demurrer and in connection with the jury instructions, that defendants could be liable for 

aiding and abetting a breach of fiduciary duty even though they did not owe a fiduciary 

duty to AML.” (AML I, supra, 225 Cal.App.4th at pp. 1477-1478, fn. omitted.)
7

On the issue whether the statute of limitations barred AML’s breach of fiduciary 

duty cause of action, we stated that “[t]he fiduciary duties of Andrews, Runnels, and 

Franklin . . . were not created exclusively or even primarily by the Operating Agreement

but were imposed by law on them as members and managers of AML. [Citations.] 

[¶] Moreover, AML did not allege that defendants aided and abetted by interfering with a 

contract. AML’s fourth amended complaint mentioned a contractual provision, 

paragraph 3.9 of the Operating Agreement, and alleged that it formed the basis for 

AML’s (ultimately unsuccessful) cause of action for interference with contract, but AML 

did not allege that the Operating Agreement was the basis of the aiding and abetting 

claim. Instead, the gravamen of AML’s cause of action for aiding and abetting breach of 

fiduciary duty was that defendants provided substantial assistance for Andrews, Runnels, 

and Franklin in breaching their duties of loyalty as members and managers of AML. 

AML alleged that defendants acted with Andrews, Runnels, and Franklin ‘to: a). 

wrongfully acquire rights to the AML patent for less than full value; b). hire Runnels and 

Franklin to execute the AML Business Method; and c). otherwise cause Runnels and 

Franklin to breach their fiduciary duties to AML without seeking or obtaining the 

requested permission of AML and Roberts, its majority owner and manager.’ AML 

alleged that in February 2004 Andrews, Runnels, and Franklin ‘were secretly aligned

with the Defendants and had already commenced negotiating with Defendants,’

‘surreptitiously forwarded [AML’s] strategic negotiating points’ to defendants, received 

financial incentives from defendants ‘to breach their duties of loyalty to AML and its 

other member,’ and ‘incorporate[d] [FPI] for the unlawful purpose of using [FPI] as an 

operating company to exploit the patented AML Business Method without receiving 

valid authorization from AML and without adequately compensating AML.’ AML also 

alleged that Runnels engaged in a classic example of a breach of the duty of loyalty by 

signing an unauthorized and undervalued licensing agreement on behalf of both 

contracting parties, AML and FPI. The fact that one of the breaches of fiduciary duty 

may also have been a breach of a provision of the Operating Agreement does not mean 
8

the three defalcating fiduciaries only breached a provision of the Operating Agreement.” 

(AML I, supra, 225 Cal.App.4th at pp. 1480-1481, fns. omitted.)

We noted that the limitations period for aiding and abetting breach of fiduciary 

duty is either three years, where the breach of fiduciary duty is based on fraud or deceit, 

or four years, under the “catchall provision” in Code of Civil Procedure section 343. 

(AML I, supra, 225 Cal.App.4th at pp. 1478-1479.) We concluded that we did not need 

to decide which limitations period applied because “the gravamen of AML’s aiding and 

abetting breach of fiduciary duty claim was not interference with a provision of the 

Operating Agreement,” and therefore the “two-year statute of limitations for interference 

with contract did not apply.” (Id. at p. 1481.)

With respect to remedies, “[w]e agree[d] with AML that the restitutionary 

remedies of unjust enrichment and disgorgement are available for aiding and abetting 

breach of fiduciary duty.” (AML I, supra, 225 Cal.App.4th at p. 1481.) We concluded, 

however, that the trial court gave erroneous instructions on the amount of restitution the 

jury could award. (Id. at p. 1486.) We reversed the judgment as to the amount of 

defendants’ unjust enrichment and directed the trial court to grant a new trial on the issue 

of the amount of defendants’ unjust enrichment only. (Id. at p. 1494.)

DISCUSSION

AML argues that it is entitled to attorneys’ fees under section 1717(a) because its 

aiding and abetting fiduciary duty claims arise out of the non-competition provisions of 

paragraph 3.9 of the Operating Agreement and therefore are “on the contract.”

2 AML 

 

2 This issue is ripe for adjudication. Because we reversed the judgment as to the 

amount of defendants’ unjust enrichment only, AML is still the prevailing party in the 

litigation and its entitlement to attorneys’ fees is still at issue. “‘Ripeness’ refers to the 

requirements of a current controversy. . . . A controversy becomes ‘ripe’ once it reaches, 

‘but has not passed, the point that the facts have sufficiently congealed to permit an 

intelligent and useful decision to be made.’ [Citation.]” (City of Santa Monica v. Stewart

(2005) 126 Cal.App.4th 43, 59; accord, Lockaway Storage v. County of Alameda (2013) 
9

argues that “[t]he claims on which [it] prevailed involve, arise from, and have their 

genesis in the AML Operating Agreement,” that “the fiduciary duties underlying the 

aiding and abetting fiduciary breach claims arose as a result of the Operating 

Agreement,” and that “[e]xecution of the Operating Agreement was necessary to create 

AML as a valid limited liability company.” AML also contends that it is entitled to 

attorneys’ fees because defendants requested attorneys’ fees in their answer to the 

complaint and would have been entitled to attorneys’ fees under section 1717(a) had they 

prevailed, even though they were not parties to the Operating Agreement. We conclude 

that, even if its claims were on or arose as a result of or by reason of the Operating 

Agreement, AML is not entitled to recover its attorneys’ fees under section 1717(a) from 

defendants as nonsignatories to the Operating Agreement.

A. Standard of Review

“‘“On review of an award of attorney fees after trial, the normal standard of 

review is abuse of discretion. However, de novo review of such a trial court order is 

warranted where the determination of whether the criteria for an award of attorney fees 

and costs in this context have been satisfied amounts to statutory construction and a 

question of law.”’ [Citation.]” (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 

1213; accord, Serrano v. Stefan Merli Plastering Co., Inc. (2011) 52 Cal.4th 1018, 1025-

1026; see Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 

Cal.App.4th 858, 894 [“the ‘determination of the legal basis for an award of attorney 

fees’ is a ‘question of law’ which the reviewing court will examine de novo”].) 

“‘Whether section 1717 applies is a legal question . . . rather than a factual question’

 

216 Cal.App.4th 161, 174.) That the issue of the amount of restitution must be retried 

does not preclude us from issuing “a meaningful and realistically enforceable decision”

(Vandermost v. Bowen (2012) 53 Cal.4th 421, 456) on the attorneys’ fees issue. (See 

Otay Land Co. v. Royal Indemnity Co. (2008) 169 Cal.App.4th 556, 562 [controversy 

ripe for adjudication where court can provide “‘“‘specific relief through a decree of 

conclusive character’”’”].)
10

[citation], which ‘“we review de novo. [Citation.]” [Citations.]’ [Citation.]” (Plotnik v. 

Meihaus (2012) 208 Cal.App.4th 1590, 1615.)

B. AML Is Not Entitled to Attorneys’ Fees

As a general rule, only parties to a contract containing an attorneys’ fees provision 

are entitled to fees. “However, under some circumstances, the Civil Code section 1717

reciprocity principles will be applied in actions involving signatory and nonsignatory 

parties. [Citation.]” (Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 966; accord, 

Mepco Services, Inc. v. Saddleback Valley Unified School Dist. (2010) 189 Cal.App.4th 

1027, 1046.) “‘“[I]n cases involving nonsignatories to a contract with an attorney fee 

provision, the following rule may be distilled from the applicable cases: A party is 

entitled to recover its attorney fees pursuant to a contractual provision only when the 

party would have been liable for the fees of the opposing party if the opposing party had 

prevailed.” [Citation.]’ [Citation.]” (Loduca v. Polyzos (2007) 153 Cal.App.4th 334, 

341; see Hsu v. Abbara (1995) 9 Cal.4th 863, 870; Reynolds Metals Co. v. Alperson

(1979) 25 Cal.3d 124, 128.) This is because section 1717 “is meant to prevent 

‘oppressive use of one-sided attorney’s fees provisions’ [citation], not to abolish the 

general rule that each party pay its own attorney fees.” (Diamond Heights Village Assn., 

Inc. v. Financial Freedom Senior Funding Corp. (2011) 196 Cal.App.4th 290, 308.) 

Therefore, under section 1717 AML can recover attorneys’ fees from defendants, as 

nonsignatories to the Operating Agreement, only if defendants could have recovered 

attorneys fees from AML. (See Reynolds Metals Co., supra, at pp. 128-129; Sessions 

Payroll Management, Inc. v. Noble Construction Co. (2000) 84 Cal.App.4th 671, 679

[signatory cannot recover fees from nonsignatory unless nonsignatory could recover fees 

from signatory].)

“Two situations may entitle a nonsignatory party to attorney fees. First is where 

the nonsignatory party ‘stands in the shoes of a party to the contract.’ [Citation.] Second 

is where the nonsignatory party is a third party beneficiary of the contract.” (Cargill, Inc. 

v. Souza, supra, 201 Cal.App.4th at p. 966; see Apex LLC v. Korusfood.com (2013) 222 
11

Cal.App.4th 1010, 1017-1018 [“[a] nonsignatory will be bound by an attorney fees 

provision in a contract when the nonsignatory party ‘“stands in the shoes of a party to the 

contract”’”]; Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, supra, 162 

Cal.App.4th at p. 897 [“where a nonsignatory is sued on the ground that he stands in the 

shoes of a party to the contract, and where he would be liable for fees if that claim 

succeeded, he may recover fees under section 1717 if he defeats the claim”].) Defendants 

were not third party beneficiaries of the Operating Agreement. (See Blickman Turkus, 

LP, supra, at p. 897 [“a nonsignatory seeking relief as a third party beneficiary may 

recover fees under a fee provision only if it appears that the contracting parties intended

to extend such a right to one in his position”]; Souza v. Westlands Water Dist. (2006) 135 

Cal.App.4th 879, 891 [third party beneficiary must show the contracting parties intended 

to benefit the third party, and “it is not enough that the third party would incidentally 

have benefited from performance” of the contract].) Thus, defendants could have 

recovered attorneys’ fees from AML (and therefore AML can recover attorneys’ fees 

from defendants under section 1717(a)) only if defendants “stand in the shoes” of other 

parties to the Operating Agreement, Andrews, Runnels, and Franklin.

A nonsignatory may stand in the shoes of a party to an agreement “either by virtue 

of a preexisting relationship, or as an assignee or successor in interest.” (JSM Tuscany, 

LLC v. Superior Court (2011) 193 Cal.App.4th 1222, 1240, fn. 20; cf. Diamond Heights 

Village Assn. v. Financial Freedom Senior Funding Corp., supra, 196 Cal.App.4th at 

p. 308 [third party not entitled to recover attorneys’ fees under section 1717 where third 

party and contracting party were “complete strangers to each other”].) Examples of 

preexisting relationships justifying the enforcement of contractual provisions against a 

nonsignatory defendant include employer and employee, principal and agent (DMS 

Services, LLC v. Superior Court (2012) 205 Cal.App.4th 1346, 1357 [enforcing 

arbitration agreement]), general partner and limited partnership (Crowley Maritime Corp. 

v. Boston Old Colony Ins. Co. (2008) 158 Cal.App.4th 1061, 1070 [enforcing arbitration 

agreement]), successor in interest (Exarhos v. Exarhos (2008) 159 Cal.App.4th 898, 906-

907 [successor in interest to decedent who had signed a contract containing an attorneys’ 
12

fees provision], and surety (National Technical Systems v. Superior Court (2002) 97 

Cal.App.4th 415, 425). A nonsignatory may also be liable for attorneys’ fees on an alter 

ego theory or where the nonsignatory has assumed the obligations of a party to the 

contract. (See Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at pp. 128-129 

[plaintiff would have been entitled to attorneys’ fees from nonsignatory defendants had 

the plaintiff been able to prove the defendants were alter egos of defendant corporation];

Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 823 [“[i]t is well settled a 

breach of contract claim based on alter ego theory is still a claim on the contract and a 

nonsignatory that successfully defends against the claim may recover its attorney fees 

under section 1717”]; see also Apex LLC v. Korusfood.com, supra, 222 Cal.App.4th at 

pp. 1017-1018 [nonsignatory defendant liable for attorneys’ fees under a credit 

application submitted under its former name].

Here, there was no preexisting relationship between defendants and the Operating 

Group that would have allowed defendants to recover attorneys’ fees under the Operating 

Agreement. It was not until six years after Roberts and the Operating Group had 

executed the Operating Agreement that defendants entered into a business relationship 

with the Operating Group. Nor were defendants alter egos or successors in interest of the 

Operating Group. Defendants did not assume the Operating Group’s obligations under 

the Operating Agreement. Rather, defendants entered into an arm’s length business 

transaction with the Operating Group by purchasing shares in FPI. The relationship 

between defendants and the Operating Group was not the type of relationship that courts 

have found justifies imposing contractual liability for attorneys’ fees on a nonsignatory. 

Because defendants did not stand in the Operating Group’s shoes with respect to the 

Operating Agreement, they would not have been entitled to an award of attorneys’ fees 

had they prevailed.

Lewis v. Alpha Beta Co. (1983) 141 Cal.App.3d 29, cited by AML, is 

distinguishable. In that case, both the Lewises and Alpha Beta entered into written leases 

with the owner of a shopping center, and both of the leases contained attorneys’ fees 

provisions. The Lewises’ lease granted them the exclusive right to sell alcoholic 
13

beverages in the shopping center. When Alpha Beta posted a notice of intention to sell 

alcoholic beverages, the Lewises sued Alpha Beta and the landlord. The trial court issued 

an injunction in favor of the Lewises and allowed them to recover attorneys’ fees from 

Alpha Beta. (Id. at pp. 31-32.) The Court of Appeal stated, “We believe [section 1717’s] 

provisions should also provide a remedy to individuals, such as the Lewises, who on the 

basis of their own lease, sue their landlord and a cotenant to enforce a restrictive covenant 

assumed by the cotenant for their benefit in its lease, when each such lease specifically 

provides for attorney’s fees.” (Id. at p. 33.) While the Lewis court did not specify the 

basis on which it upheld the award of attorneys’ fees, it appears that the Court of Appeal 

relied on the existence of a preexisting relationship between the parties or the Lewises’

status as third party beneficiaries of Alpha Beta’s contract with the landlord. (See ibid.) 

Unlike the Lewises, defendants here were not third party beneficiaries of the Operating 

Agreement and they had no preexisting relationship with either AML or the Operating 

Group.

Walsh v. New West Federal Savings & Loan Assn. (1991) 234 Cal.App.3d 1539 is 

also distinguishable. In that case the Walshes entered into a real estate contract 

containing an attorneys’ fees provision with Gallegos, who was supposed to arrange a 

transaction in which State Savings was going to transfer property to the Walshes. The 

transaction fell through, and the Walshes sued Gallegos and State Savings, which became 

insolvent and had its assets and liabilities acquired by New West. (Id. at pp. 1541-1542.) 

After New West prevailed, the trial court denied New West’s request for attorneys’ fees. 

(Id. at p. 1546.) In reversing, the Court of Appeal held that “the predicate of New West’s 

liability as alleged in the Walshes’ complaint is that State Savings acted as a 

coconspirator or in a principal/agency relationship with Gallegos. Assuming these 

allegations are true, the lack of a direct relationship is irrelevant. A coconspirator is 

liable as a joint tortfeasor ‘irrespective of whether or not he was a direct actor and 

regardless of the degree of his activity.’ [Citation.] Likewise a principal is liable to all 

persons who have relied upon an agent’s ostensible authority, regardless of the lack of 

contact between the third party and the principal. [Citation.] The Walshes’ attempts to 
14

recover for Gallegos’s failure to fulfill his promise to transfer certain of the bank’s 

properties to them, . . . and for fraudulent representations allegedly made by Gallegos are 

unquestionably derived from the property exchange agreement between the Walshes and 

Gallegos, for which New West is alleged to be liable as a principal or coconspirator.” 

(Id. at pp. 1545-1546, fn. omitted.) The court concluded that the “Walshes’ breach of 

contract cause of action against New West falls within the purview of section 1717.” (Id. 

at p. 1547.) Here, as explained in AML I, defendants were not liable as joint tortfeasors 

with or conspirators of the Operating Group but were independently liable for their 

tortious conduct. (AML I, supra, 225 Cal.App.4th at pp. 1477-1478.) Nor was there any 

liability based on a principal/agent relationship. Walsh does not support AML’s assertion 

that defendants could have been liable for attorneys’ fees and thus had a reciprocal right 

to attorneys’ fees from AML under section 1717.

Finally, contrary to AML’s assertion, the mere fact that defendants sought 

attorneys’ fees in their answer to AML’s fourth amended complaint does not compel 

application of the reciprocal remedy provision of section 1717(a). The “‘bare 

allegation’” that a party is entitled to attorneys’ fees under a contract provision is not 

sufficient to prove an entitlement to attorneys’ fees; proof is required. (Bear Creek 

Planning Committee v. Ferwerda (2011) 193 Cal.App.4th 1178, 1188; accord, Mepco 

Services, Inc. v. Saddleback Valley Unified School Dist., supra, 189 Cal.App.4th at 

p. 1047; see Hyduke’s Valley Motors v. Lobel Financial Corp (2010) 189 Cal.App.4th 

430, 436 [“mere fact [a party] pleaded a breach of contract cause of action is not 

dispositive” of the attorneys’ fees issue]; Myers Building Industries, Ltd v. Interface 

Technology, Inc. (1993) 13 Cal.App.4th 949, 962, fn. 12 [“[w]hile it is true that [the 

appellant] requested attorney fees under the contract in its cross-complaint against [the 

respondent], mere allegation of a contractual right to attorney fees is not sufficient to 

create an estoppel where [the appellant] would not actually have been entitled to attorney 

fees under the contract if [the appellant] had prevailed”].) Defendants’ request for 

attorneys’ fees in their answer does not establish AML’s right to attorneys’ fees.
15

DISPOSITION

The order is affirmed. Defendants are to recover their costs on appeal.

SEGAL, J.*

We concur:

PERLUSS, P. J.

ZELON, J.

 

*

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to 

article VI, section 6 of the California Constitution.