Court Opinion

ID: 8245487
Source: CourtListenerOpinion
Date Created: 2022-10-16 09:31:16.480481+00
Date Added: 2024-06-11T16:42:42.047390
License: Public Domain

HUDSON, Judge
(concurring in part, dissenting in part).
I concur with the majority’s conclusion that the district court did not err by compelling the parties to arbitrate their lease dispute. I disagree, however, with the majority’s conclusion that Elsenpeter is not a prevailing party entitled to an award of fees and costs. Because Addendum 9 of the lease specifically provides that fees and costs incurred in enforcing the contract, exclusive of arbitration, will be borne by the non-prevailing party and because El-senpeter’s action to compel arbitration was discrete from the arbitration proceeding, I would affirm the district court’s exercise of its broad discretion to declare Elsenpeter a prevailing party and award him fees and costs.
Addendum 9 provides: “In the event either party hereto institutes legal action or proceedings arising out of or in any way connected with this [l]ease, the non-prevailing party shall reimburse the prevailing party for all reasonable attorney fees and costs incurred in connection therewith.” Elsenpeter brought his action to compel arbitration to enforce Article 3.05 of the lease — the arbitration clause — because the mall had rejected his attempts to arbitrate the dispute. Elsenpeter’s action plainly arose out of the lease, and the district court therefore did not abuse its discretion in awarding Elsenpeter fees and costs under Addendum 9.
The majority’s opinion rests heavily on its characterization of Elsenpeter’s action as a preliminary proceeding to determine the forum for the parties’ underlying lease dispute. But that characterization proceeds from an unspoken premise that there was only one “underlying lease dispute” when, in my view, there were two substantive lease disputes: (1) the claim to compel arbitration, and (2) the claim to abate rent. Elsenpeter commenced the district court action solely to enforce his contractual right to arbitration, and the parties understood that if Elsenpeter prevailed, there would be a separate arbitration to determine Elsenpeter’s renb-abatement claim. The district court resolved— in Elsenpeter’s favor — a finite, substantive legal dispute: whether the mall was bound under the lease to arbitrate Elsenpeter’s claim. The subsequent arbitration resolved a separate, but equally finite, substantive legal dispute: whether the mail’s alleged breach of the lease had harmed Elsenpeter. In that separate action, before a separate tribunal, the mall prevailed. But for each dispute, the allocation of fees and costs was governed by a separate provision of the lease — Addendum 9 for the action to compel arbitration and Article 3.05 for the arbitration on the merits.
*676Borrowing a military metaphor, the majority’s view is simply this: Elsenpeter won the battle but lost the war — thus, he cannot be a prevailing party. But the metaphor breaks down because here, there were two wars, each of which had a final result. The substantive legal basis for the order to arbitrate did not depend in any way upon the substance of the arbitration decision. Accordingly, because Elsenpeter obtained the relief he requested in the action to compel arbitration, he was the prevailing party in that action.
Admittedly, there is persuasive authority from other jurisdictions supporting the majority’s conclusion that a party who succeeds on or defeats a motion to compel arbitration is not necessarily a prevailing party entitled to fees and costs. Pitchford v. Oakwood Mobile Homes, Inc., 212 F.Supp.2d 613, 617-18 (W.D.Va.2002); Green v. Mt. Diablo Hosp. Dist., 207 Cal.App.3d 63, 254 Cal.Rptr. 689, 697-98 (1989); Lachkar v. Lachkar, 182 Cal.App.3d 641, 227 Cal.Rptr. 501, 504-06 (1986). But these authorities do not deal with the situation here, where the parties entered an agreement that contains separate provisions regarding fees and costs incurred in actions commenced outside of arbitration and those initiated as arbitra-tions. See Pitchford, 212 F.Supp.2d at 617-18 (concluding that party who successfully defeated motion to compel arbitration was not prevailing party under Magnuson-Moss Act because she did not “finally prevail” in the action); Green, 254 Cal.Rptr. at 697-98 (concluding that party who successfully defeated motion to compel arbitration but who had not yet received a decision on the merits was not prevailing party for purposes of awarding fees and costs under California Code of Civil Procedure); Lachkar, 227 Cal.Rptr. at 504-06 (concluding that party who successfully compelled arbitration was not prevailing party entitled to fees and costs under California Code of Civil Procedure). As such, these cases are of limited utility in determining the identity of the prevailing party on a motion to compel arbitration when the contract itself contemplates two separate actions — one to compel arbitration and one to arbitrate the dispute — that could have different prevailing parties.
Instead, I find the California Court of Appeals’ recent decision in Acosta v. Kerrigan, 150 Cal.App.4th 1124, 58 Cal.Rptr.3d 865 (2007), instructive. In Acosta, the appellant challenged an interim order awarding fees and costs incurred in bringing a successful motion to compel arbitration. 58 Cal.Rptr.3d at 868. The appellant argued that the issue of attorney fees should be arbitrated, or, in the alternative, the district court should not award attorney fees until the underlying arbitration was completed. Id. at 869. The appellate court affirmed, holding that (1) because the district court was responsible for adjudicating the motion to compel, it was in the best position to adjudicate attorney fees, and (2) because the agreement at issue contained a provision permitting the recovery of fees and costs by a party who is forced to compel arbitration, there was no reason for that party to wait to recover fees to which it was entitled regardless of the outcome of the arbitration. Id. at 870-72. While Acosta was primarily concerned with who should determine fees and costs and when that determination should occur, it also supports the proposition that when a contract contains separate provisions regarding fees and costs for actions commenced outside of arbitration and those commenced as arbitrations, there may be different prevailing parties for the purpose of awarding fees and costs. Id.
Certainly, the parties could have been clearer in drafting Addendum 9 and Article 3.05 and in indicating how the two interacted with one another. But I read *677Addendum 9 to allow Elsenpeter, who succeeded in enforcing a lease provision outside of arbitration, to recover attorney fees. Given the strong public policy favoring arbitration, it seems unwise to make the award of fees and costs associated with a motion to compel arbitration contingent upon subsequently prevailing in the arbitration itself, particularly where the parties have not only bargained for an arbitration clause, but also for a clause that requires a non-prevailing party to pay fees and costs incurred in actions outside of arbitration.