Opinion ID: 1195277
Heading Depth: 1
Heading Rank: 4

Heading: PLCM May Recover Attorney Fees

Text: The first question in this casewhether PLCM may recover attorney fees for the services of in-house counselhas a simple answer. Under section 1717, subdivision (a), [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. The insurance contract in this case provides: If the Insured fails, after demand, to reimburse the [insurance companies] for any amounts within the deductible which the [insurance companies have] advanced, the [insurance companies] may bring suit to recover such amounts and shall also be entitled to recover interest from the date of demand, and attorneys' fees and costs incurred in bringing the action. Drexler breached the insurance contract by refusing to reimburse his insurers for amounts within the deductible that they advanced on his behalf. PLCM prevailed at trial on both the breach of contract claim and on Drexler's cross-complaint. Thus, PLCM was entitled to recover attorney fees under the contract and section 1717. I reject Drexler's contention, based on Trope v. Katz (1995) 11 Cal.4th 274, 45 Cal.Rptr.2d 241, 902 P.2d 259 ( Trope ), that PLCM may not recover attorney fees because it used in-house counsel. There, in holding that an attorney litigating in propria persona may not recover fees under section 1717, we relied principally on the ordinary meaning of (1) the word incur, which is to `become liable' for or to become obligated to pay  and (2) the term attorney fees, which is the consideration that a litigant actually pays or becomes liable to pay in exchange for legal representation. ( Trope, supra, 11 Cal.4th at p. 280, 45 Cal.Rptr.2d 241, 902 P.2d 259.) Drexler argues that corporations do not incur attorney fees for in-house counsel as Trope defines those terms. He is incorrect. As we suggested in Trope, but did not hold because the issue was not before us, the salary of in-house counsel is the functional equivalent of the fee. ( Id. at p. 291, 45 Cal.Rptr.2d 241, 902 P.2d 259.) A corporation should not forfeit its right to recover attorney fees simply because it anticipates its future need for litigation counsel and hires attorneys as employees to handle litigation that may subsequently arise. Thus, I conclude that under the contract and section 1717, PLCM may recover attorney fees for the services of in-house counsel. [2]