Court Opinion

ID: 2793646
Source: CourtListenerOpinion
Date Created: 2015-04-14 19:09:01.500443+00
Date Added: 2024-06-11T11:29:06.275820
License: Public Domain

Filed 4/14/15
                           CERTIFIED FOR PUBLICATION

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                            SECOND APPELLATE DISTRICT

                                      DIVISION TWO

DISPUTESUITE.COM, LLC,                              B248694

        Plaintiff and Respondent,                   (Los Angeles County
                                                    Super. Ct. No. BC489083)
        v.

SCOREINC.COM et al,

        Defendants and Appellants.

        APPEAL from an order of the Superior Court of Los Angeles County. James C.
Chalfant, Judge. Affirmed.

        Weintraub Tobin Chediak Coleman Grodin, Marvin Gelfand and Brendan J.
Begley for Defendants and Appellants.

        J.J. Little & Associates and James J. Little for Plaintiff and Respondent.

                               _________________________
       The question presented is whether defendants who obtained dismissal of a case in
California pursuant to a Florida forum-selection clause are entitled to contractual attorney
fees? We conclude the answer is no, because there has been no final resolution of the
contract claims.
                     FACTUAL AND PROCEDURAL BACKGROUND
       Plaintiff and respondent DisputeSuite.com, LLC (plaintiff) filed a lawsuit in the
Los Angeles Superior Court against defendants and appellants Scoreinc.com and its
principals Joel S. Pate and Joshua Carmona (collectively defendants) on July 26, 2012.
The complaint contained 21 causes of action, including causes of action for breach of
contract, fraud, misappropriation of trade secrets, and interference with contract. Plaintiff
sought compensatory and punitive damages as well as preliminary and permanent
injunctive relief.
       The complaint alleges that plaintiff is a leading provider of credit repair software
and services that it markets to credit repair organizations (CROs) to help them service
their customers in need of credit repair. Defendants, on the other hand, work directly for
CROs handling daily administrative tasks. According to the complaint, plaintiff agreed
to provide defendants with its confidential list of CROs and other proprietary
information, including its “secret method by which it sells its software and other products
to its customers.”
       While the parties dispute the existence and enforcement of certain contracts,
including end-user agreements, it is undisputed that in September 2010, they entered into
a master reseller agreement that enabled defendants to act as a licensed reseller of
plaintiff‟s software. At defendants‟ insistence, the master reseller agreement contains a
forum-selection clause by which “any disputes, actions, claims or causes of action arising
out of or in connection with this Agreement or the Service shall be subject to the
exclusive jurisdiction of the state and federal courts located in Hillsb[o]rough, Florida.”
       It is also undisputed that in March 2012, the parties entered into a cross-marketing
agreement, which also contains a Florida forum-selection clause. The cross-marketing
agreement further provides that “The prevailing party in any legal action brought by one

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party against the other and arising out of this Agreement shall be entitled . . . to
reimbursement of legal expenses incurred in such action, including court costs and
reasonable attorneys‟ fees.”
       The same day plaintiff filed the complaint, plaintiff applied ex parte for an order to
show cause regarding a preliminary injunction and temporary restraining order. The trial
court denied the application without prejudice. Plaintiff later renewed its ex parte
application. This time the trial court granted a temporary restraining order as to two of
the five requested actions: barring defendants from transferring any customers referred to
them by plaintiff to any entity that did not use plaintiff‟s software and barring defendants
from making commercial use of plaintiff‟s software. The trial court subsequently granted
preliminary injunctive relief on the same two bases.
       Meanwhile, defendants filed a motion to quash service of summons and complaint
(which the trial court and parties subsequently referred to as the “motion to dismiss”)
based on the Florida forum-selection clauses in the master reseller agreement and cross-
marking agreement. Plaintiff opposed the motion, arguing that a California forum-
selection clause in the end-user agreements applied. The trial court granted the motion to
dismiss, stayed the case for 60 days, and extended the effective date of the preliminary
injunction so that plaintiff could file suit in Florida and seek injunctive relief in that
forum. After plaintiff refiled the case in Florida, the trial court dismissed the case in
California and dissolved the preliminary injunction.
       Defendants then filed a motion in the trial court for an award of attorney fees in
the amount of $84,640, on the ground that they were the prevailing parties in connection
with the motion to dismiss. The trial court denied the motion. Defendants filed this
appeal from the trial court‟s order denying attorney fees.

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                                       DISCUSSION
I. Statutory and Case Law
       Civil Code section 1717, subdivision (a) 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.” The statute goes on to provide that “The court,
upon notice and motion by a party, shall determine who is the party prevailing on the
contract for purposes of this section, whether or not the suit proceeds to final
judgment. . . . [T]he party prevailing on the contract shall be the party who recovered a
greater relief in the action on the contract. The court may also determine that there is no
party prevailing on the contract for purposes of this section.” (Civ. Code, § 1717,
subd. (b)(1).)
       In Hsu v. Abbara (1995) 9 Cal.4th 863 (Hsu), our supreme court held that “in
deciding whether there is a „party prevailing on the contract,‟ the trial court is to compare
the relief awarded on the contract claim or claims with the parties‟ demands on those
same claims and their litigation objectives as disclosed by the pleadings, trial briefs,
opening statements, and similar sources. The prevailing party determination is to be
made only upon final resolution of the contract claims and only by „a comparison of the
extent to which each party ha[s] succeeded and failed to succeed in its contentions.‟
[Citation.].” (Id. at p. 876, italics added.) The Hsu court concluded that when a
defendant “obtains a simple, unqualified victory by defeating the only contract claim in
the action” (id. at p. 877), “the defendant is the party prevailing on the contract under
section 1717 as a matter of law” (id. at p. 876), and the trial court has no discretion not to

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award fees.1 In Hsu, the defendants obtained a simple, unqualified victory by proving
that no contract was ever formed. (Id. at p. 868.)
       In addition to Hsu, the trial court and the parties focused primarily on three other
cases in connection with the motion to dismiss. In Estate of Drummond (2007) 149
Cal.App.4th 46 (Drummond), an opinion by the Sixth District, a lawyer filed a petition in
probate court for contractual attorney fees against his former clients, who had filed a
separate civil action against him. His petition was granted, but the appellate court
reversed on the ground urged by the clients that the petition violated the compulsory
cross-complaint rule. (Id. at p. 49.) On remand, the lawyer filed a cross-action seeking
his fees and the clients also sought their fees for having litigated the petition. The trial
court denied the clients‟ motion for attorney fees. The clients appealed, and the
Drummond court affirmed.
       Relying on Hsu, the Drummond court found there had been no “„final resolution of
the contract claims.‟” (Drummond, supra, 149 Cal.App.4th at p. 51.) The court stated:
“Appellants‟ argument could be reconciled with Hsu only by qualifying „final‟ to mean,
„final for purposes of a particular lawsuit.‟ But this view is inconsistent with the thrust of
the decision, which is that status as the „party prevailing on the contract‟ is ascertained
not by technicalities of pleading and procedure but by a pragmatic assessment of the
parties‟ ultimate positions vis-à-vis their litigation objectives as reflected in pleadings,
prayers, and arguments. . . . Appellants‟ reading is also inconsistent with the phrase
„prevailing on the contract,‟ which implies a strategic victory at the end of the day, not a
tactical victory in a preliminary engagement.” (Drummond, supra, at p. 51.)
       The Drummond court concluded that the clients had obtained only an “interim
victory” based on the lawyer‟s having attempted to pursue his claims in the wrong forum.
(Drummond, supra, 149 Cal.App.4th at p. 51.) The court stated that the clients had “at no

1
       While we review the determination of the legal basis for an award of attorney fees
de novo, (Pueblo Radiology Medical Group, Inc. v. Gerlach (2008) 163 Cal.App.4th 826,
828), the trial court‟s actual determination of prevailing party status is often reviewed for
an abuse of discretion (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109).

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time won a victory „on the contract.‟ They have only succeeded at moving a
determination on the merits from one forum to another.” (Id. at p. 53.) While the
Drummond court could “conceive of cases where a party obtaining a dismissal of contract
claims on purely procedural grounds might be found to have prevailed on the contract,
even though the dismissal was without prejudice, because the plaintiff had no other
means to obtain relief under the contract,” it found that in the case before it “[t]he
dismissal of [the lawyer‟s] petition in the probate matter did not defeat his contract
claims; it merely deflected or forestalled them.” (Ibid.) The Drummond court stated:
“We think the interim nature of appellants‟ success provided a sound basis for a
discretionary finding that neither party prevailed on the contract.” (Id. at p. 54.)
       More recently, two cases out of the Fourth District reached the opposite result. In
Profit Concepts Management, Inc. v. Griffith (2008) 162 Cal.App.4th 950 (Profit
Concepts), a California company sued a former employee for breach of contract. The
employee, a resident of Oklahoma, brought a motion to quash service of summons for
lack of personal jurisdiction. The company filed a notice of nonopposition, and the trial
court granted the motion. The employee then filed a motion for attorney fees as the
prevailing party, which the trial court granted, and the appellate court affirmed. (Id. at
p. 952.) The Profit Concepts court stated: “The only claims before the trial court were
contained in Profit Concepts‟s complaint, which sought compensatory and punitive
damages in an amount to be determined, as well as preliminary and permanent injunctive
relief. The case in California has been finally resolved. What was awarded on Profit
Concepts‟s complaint? Zero. Thus, the contract claim was finally resolved within the
meaning of Hsu v. Abbara, and that case does not use the term „merits.‟ [¶] The
determination of which party is the prevailing party must be made without consideration
of whether the plaintiff may refile the action after a motion to quash service is granted.
The issue of final resolution should not depend on the plaintiff's possible future conduct.
Prevailing party attorney fees should be awarded based on the contract language, the
statutory language, and the fact of dismissal of the case, not on speculation.” (Profit
Concepts, supra, at p. 956.) The Profit Concepts court noted that the employer had

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refiled its suit in Oklahoma, but found “nothing in the language of the statute or of Hsu v.
Abbara, or any other case, that requires resolution in another state on the merits of a
contract claim first asserted in California before a prevailing party can be determined
here, when the matter has been completely resolved vis-à-vis the California courts.”
(Profit Concepts, supra, at p. 956.)
       In PNEC Corp. v. Meyer (2010) 190 Cal.App.4th 66 (PNEC), the trial court
dismissed a contract action against a defendant based upon forum non conveniens, and
entered a judgment of dismissal without prejudice. (Id. at p. 68.) The defendant then
sought and obtained an award of attorney fees pursuant to the contract, which the PNEC
court affirmed. The court essentially rejected Drummond and followed Profit Concepts
in finding that the trial court “did not abuse its discretion in making an award for the
work done while the case was under its jurisdiction.” (PNEC, supra, at p. 73.)
II. The Motion for Attorney Fees Was Correctly Denied
       Not surprisingly, defendants here rely on Profit Concepts and PNEC in arguing
that the trial court erred in denying their motion for an award of attorney fees. They go
one step further and argue that their position is even stronger than that of the defendants
in those cases because, unlike those defendants who obtained dismissal of the contract
actions on procedural grounds, defendants here obtained dismissal by successfully
enforcing the contractual forum-selection clause. Thus, they claim they prevailed on the
only contract claim at issue here. According to defendants, they “conclusively ended the
litigation in California and thereby achieved a final resolution of the dispute so far as the
Golden State is concerned.”
       In denying the motion to dismiss, the trial court found that Drummond more
closely followed the Hsu court‟s dictate that “[t]he prevailing party determination is to be
made only upon final resolution of the contract claims.” (Hsu, supra, 9 Cal.4th at p. 876,
italics added.) The trial court agreed that defendants had prevailed in the sense that they
obtained dismissal of the case in California, but because the contract claims were still in
dispute and being litigated in Florida, there had been no final resolution of those claims,
and therefore no prevailing party on the contract.

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       We agree with the trial court‟s reasoning. As stated in Drummond, defendants‟
argument “could be reconciled with Hsu only by qualifying „final‟ to mean, „final for
purposes of a particular lawsuit.‟ But this view is inconsistent with the thrust of the
[Hsu] decision, . . .” that courts look at the overall objectives of the parties. (Drummond,
supra, 149 Cal.App.4th at p. 51.) Defendants did not obtain a simple, unqualified victory
on the only contract claim against them, thus ending all litigation on the contract. Rather,
plaintiff put its entire complaint before the trial court, including all of its contract claims
against defendants. Defendants succeeded only in enforcing one contractual clause, not
in disposing of all of plaintiff‟s contract claims. Thus, defendants obtained merely an
interim victory by succeeding in getting the case moved from one forum to another,
thereby delaying final resolution of the contract claims.
       Defendants‟ position is also inconsistent with the plain language of Civil Code
section 1717, subdivision (b)(1) that “the party prevailing on the contract shall be the
party who recovered a greater relief in the action on the contract.” (Italics added.) As
Drummond and other cases explain, the language action on the contract “refers to the
contract claims in the lawsuit as a whole,” since a single action can involve multiple
contract claims, like here. (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206
Cal.App.4th 515, 539 (Frog Creek).) Based on its analysis of the statutory language,
legislative history, and case law, the Frog Creek court concluded that “under Civil Code
section 1717 there can only be one prevailing party on a given contract in a given
lawsuit.” (Frog Creek, supra, at p. 543.) While one could argue that the Florida case is a
separate lawsuit from the California case, the fact remains that the contract claims against
defendants are still the same and still viable.
       If it were not the case that there can only be one prevailing party on a contract,
then a party could be considered a prevailing party by succeeding on one contract issue or
claim while later losing on others. Surely, the Legislature did not intend this result. Nor
do we believe the Legislature intended for courts to make piecemeal attorney fee awards
for each resolution of a contract clause. Like here, resolution of one contract clause does
not always equate to a resolution of all contract claims.

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       Defendants complain that our result is unfair because “there is no evidence that
[Civil Code] section 1717 is applicable in Florida.” But defendants cannot be heard to
complain about a forum they chose.
       We conclude that where, as here, a defendant obtains an interim procedural victory
that results only in a relocation of an active contract dispute from one forum to another,
there has been no final resolution of the contract claims and therefore it would be
premature to make a prevailing party determination at such juncture. Accordingly, the
trial court did not err in denying defendants their attorney fees for obtaining a dismissal
of the case in California based on a Florida forum-selection clause.
                                       DISPOSITION
       The order denying defendants‟ motion for attorney fees is affirmed. Plaintiff is
entitled to recover its costs on appeal.
       CERTIFIED FOR PUBLICATION.

                                           __________________________, J.
                                                 ASHMANN-GERST

We concur:

_____________________________, P. J.
           BOREN

____________________________, J.
           CHAVEZ

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