Court Opinion

ID: 3049499
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:27:37.512797+00
Date Added: 2024-06-11T11:49:20.625825
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

GOLDEN PISCES, INC., an Oregon            
business corporation; ONEBEACON
AMERICA INSURANCE COMPANY, a
                                                 No. 05-35477
Massachusetts insurance company,
              Plaintiffs-Appellants,
                                                  D.C. No.
                                               CV-04-06064-TMC
                v.
                                                   OPINION
FRED WAHL MARINE CONSTRUCTION,
INC.,
               Defendant-Appellee.
                                          
        Appeal from the United States District Court
                 for the District of Oregon
       Thomas M. Coffin, Magistrate Judge, Presiding

                   Submitted* March 6, 2007
                       Portland, Oregon

                        Filed July 24, 2007

       Before: Ronald M. Gould, Richard A. Paez, and
           Johnnie B. Rawlinson, Circuit Judges.

                     Opinion by Judge Paez

  *This panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).

                                8967
      GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION 8969

                       COUNSEL

Dennis M. Moran, Seattle, Washington, for the appellants.

Daniel F. Knox and Mario J. Madden, Portland, Oregon, for
the appellee.
8970 GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION
                           OPINION

PAEZ, Circuit Judge:

   Golden Pisces, Inc. (“Golden Pisces”) and OneBeacon
America Insurance Group (“OneBeacon”) appeal the district
court order denying their motion for attorneys’ fees following
their successful suit for breach of contract against Fred Wahl
Marine Construction, Inc. (“Fred Wahl”). Under the Ameri-
can Rule, which applies in federal litigation, including mari-
time litigation, Golden Pisces and OneBeacon are not entitled
to attorneys’ fees absent statutory authorization, an enforce-
able contractual provision, or an equitable exception to the
rule. F.D. Rich Co. v. Indus. Lumber Co., 417 U.S. 116, 126,
129-30 (1974). Because no statute authorizes attorneys’ fees
for this maritime cause of action, because the parties’ contract
was void, and because no recognized equitable exception
applies, we affirm the district court’s order denying attorneys’
fees.

                                I.

   Golden Pisces owns the F/V Golden Pisces, which at the
time this action arose was based in Newport, Oregon. In the
fall of 2001, Golden Pisces and Fred Wahl, a shipyard in
Reedsport, Oregon, entered into an oral agreement whereby
Fred Wahl would make repairs on the F/V Golden Pisces,
with Golden Pisces paying standard shipyard rates and costs
for work performed. After the parties entered into the oral
agreement, Fred Wahl presented the F/V Golden Pisces’ cap-
tain with a form contract that purported to limit Fred Wahl’s
liability through a warranty disclaimer. The form contract also
contained a clause providing for attorneys’ fees in favor of the
prevailing party “[i]n any litigation to enforce or interpret this
agreement.” Although the captain signed the form contract, it
was never signed by the ship’s manager; nor was it signed by
a representative of Fred Wahl.
      GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION 8971
   Fred Wahl completed the repairs in December 2001. The
F/V Golden Pisces departed for Alaska for the “A” cod fish-
ing season at the beginning of January, 2002. In February, in
the midst of fishing operations, the F/V Golden Pisces suf-
fered problems due to misalignment of the propeller shaft that
Fred Wahl had installed. It returned to the fishing grounds
after undergoing repairs in Dutch Harbor, Alaska, only to
break down again at the beginning of March. It was towed
back to Dutch Harbor and missed the remainder of the fishing
season. Golden Pisces’ insurer, OneBeacon, paid $114,583 in
repairs.

   Golden Pisces and OneBeacon brought suit against Fred
Wahl in district court, alleging negligence, breach of contract,
breach of warranty, and breach of the implied warranty of
workmanlike performance, and claiming consequential losses
and lost profits. Fred Wahl raised the affirmative defenses that
Golden Pisces was comparatively negligent; that Golden
Pisces “impliedly warranted [the] suitability” of a propeller it
provided to Fred Wahl for installation; that the owner
accepted the repairs following sea trials; and that the work
order and attached form contract created an enforceable
agreement so as to disclaim Fred Wahl of any liability for “all
consequential, indirect or special damages,” pursuant to the
terms of the contractual warranty disclaimer. Fred Wahl also
counterclaimed for unpaid repair bills. The parties stipulated
to several facts but disputed whether Golden Pisces was com-
paratively negligent and whether the terms of the form con-
tract controlled.

   After a trial, the district court found for Golden Pisces and
OneBeacon on the issue of liability. It further found “that
there was no written contract between the parties which
would operate to limit plaintiffs’ remedies against defendant.”
The court concluded that the work order and form contract did
not create an enforceable contract:

    The document fails to set forth essential terms of the
    agreement, such as a complete description of the
8972 GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION
    work to be performed, the amount to be charged for
    the repair work and the payment terms. The docu-
    ment further contains an integration clause which
    precluded referencing prior or subsequent oral agree-
    ments to supply the missing terms . . . . [T]here are
    no written modifications. The document is not even
    signed by a representative of Wahl.

The court thus held that the terms of the parties’ oral
agreement—which did not include an implied warranty dis-
claimer or an attorneys’ fees provision—controlled. The court
awarded Golden Pisces $25,000 for damage to the vessel and
$315,000 in lost profits and awarded OneBeacon $114,583. It
awarded Fred Wahl $36,412.24 on its counterclaim against
Golden Pisces for outstanding bills.

   Golden Pisces and OneBeacon then moved for attorneys’
fees and costs. Because no federal statute provides for attor-
neys’ fees in suits arising in admiralty, Golden Pisces and
OneBeacon invoked the following provision from the form
contract on which Fred Wahl had unsuccessfully relied in
defending against the complaint:

    In any litigation to enforce or interpret this agree-
    ment, the losing party agrees to pay the prevailing
    party’s reasonable attorney fees including costs of
    depositions and experts.

The district court granted Golden Pisces and OneBeacon’s
motion for costs but denied the motion for attorneys’ fees,
holding “there was no written contract between the parties”
and that consequently “the purported attorney fees clause was
null and void, and not enforceable against either party in this
action, regardless of the outcome. See, e.g., Perry v.
O’Donnell, 759 F.2d 702 (9th Cir. 1985).”

  Golden Pisces and OneBeacon timely appealed.
        GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION 8973
                                     II.

   The district court had original jurisdiction over this mari-
time action pursuant to 28 U.S.C. § 1333; our appellate juris-
diction arises under 28 U.S.C. § 1291. We review de novo
conclusions of law, including interpretations of the American
Rule, by a district court sitting in admiralty. Madeja v. Olym-
pic Packers, LLC, 310 F.3d 628, 635 (9th Cir. 2002); Perry,
759 F.2d at 704. When the district court correctly interprets
the American Rule, however, we review its decision whether
to award or deny attorneys’ fees for abuse of discretion.
Perry, 759 F.2d at 704.

                                     III.

   [1] Because Golden Pisces and OneBeacon’s breach-of-
contract claim arose in admiralty, federal law governs this
appeal. See Royal Ins. Co. of Am. v. Pier 39 Ltd., 738 F.2d
1035, 1036 (9th Cir. 1984). In federal litigation, the American
Rule generally precludes an award of attorneys’ fees absent
statutory authorization or an enforceable contractual fees pro-
vision. Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421
U.S. 240, 257 (1975); see also F.D. Rich Co., 417 U.S. at
126; Perry, 759 F.2d at 704. However, federal courts have
created a limited set of equitable exceptions to the American
Rule and will award attorneys’ fees even in the absence of an
applicable statutory or contractual provision when, for exam-
ple, the losing party acted in bad faith or willfully disobeyed
a court order. See Alyeska, 421 U.S. at 258-59. “These excep-
tions are unquestionably assertions of inherent power in the
courts to allow attorneys’ fees in particular situations.” Id. at
259.1
  1
   See also Reiser v. Del Monte Props. Co., 605 F.2d 1135, 1137 (9th Cir.
1979) (recognizing “ ‘common benefit’ ” exception); Perry, 759 F.2d at
704 (interpreting Alyeska as allowing three equitable exceptions to the
American rule: “(1) when a litigant preserves or recovers a fund for the
benefit of others; (2) when a losing party acts in bad faith; or (3) in a con-
tempt action for willful disobedience of a court order”).
8974 GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION
   Golden Pisces and OneBeacon do not argue that a statute
or enforceable contract authorizes an attorneys’ fees award
here. Nor do they argue that a previously recognized equitable
exception to the American Rule applies in this set of circum-
stances. Instead, Golden Pisces and OneBeacon ask this court
to recognize a new equitable exception to the American Rule
by announcing a “uniform maritime rule” of “true reciprocity
of contractual attorney fees provisions” so as to enforce a con-
tractual attorneys’ fees provision in favor of a party who pre-
vailed in a breach of contract action by showing that the
underlying contract was void. Golden Pisces and OneBeacon
have not pointed us to a single federal or state court decision
that so held in the absence of a governing reciprocity statute;
nor have they demonstrated the existence of a compelling pol-
icy rationale to create this new exception.2 We therefore
decline their invitation and affirm the district court’s denial of
fees.

                                   A.

   When “there is no effective manifestation of assent[, there
is] no contract at all.” Restatement (Second) of Contracts
§ 163 cmt. a (1979). Here, the district court found that the
parties had not mutually assented to the terms of the form
contract. Without mutual assent, the parties’ written contract
was therefore void. See Restatement (Second) of Contracts
§ 7 cmt. a (1981) (defining void contract as “[a] promise for
breach of which the law neither gives a remedy nor otherwise
recognizes a duty of performance by the promisor” and
explaining that “such a promise is not a contract at all.”).

   [2] Consistent with this understanding that a void contract
is “not a contract at all,” in applying the American Rule fed-
  2
    Cf. Reiser, 605 F.2d at 1137 (“[E]xceptions to the rule have developed
based upon the equitable powers of the courts to award attorneys’ fees
when overriding considerations of justice seemed to compel such a result.”
(citations and internal quotation marks omitted)).
       GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION 8975
eral courts have distinguished between contracts that are void
as opposed to divisible or voidable. In a diversity case apply-
ing Indiana law, for example, the Seventh Circuit enforced an
attorneys’ fees provision in an employment contract in favor
of the moving party, who had prevailed on her defense that
the non-competition provision in the same contract was void
as to her. See Osler Inst., Inc. v. Forde, 386 F.3d 816, 818
(7th Cir. 2004).3 Crucial to the Seventh Circuit’s holding was
the severability of the non-competition clause. See id.
Because the non-competition clause was not the “essential
purpose” of the contract, the remaining provisions, including
that providing for attorneys’ fees, survived. Id. at 819. In
Aetna Casualty and Surety Co. v. L.K. Comstock & Co., Inc.,
684 F.2d 1267 (9th Cir. 1982), we invalidated an indemnity
agreement that was prohibited under Nevada law. See id. at
1272. We enforced an attorneys’ fees provision in the parties’
contract, however, because enforcing that provision would
“not result in an indirect payment of damages to the employ-
ee,” the result that Nevada law condemned. Id. at 1272 n.9;
see also Oral Roberts Univ. v. Anderson, 11 F. Supp. 2d
1336, 1339 (N.D. Okla. 1997) (enforcing attorneys’ fees pro-
vision in favor of party who prevailed by showing that option
contract had expired). Analogously, the district court in Inter-
national Marble and Granite of Colorado, Inc. v. Congress
Financial Corporation, 465 F. Supp. 2d 993 (C.D. Cal. 2006),
held that a party who successfully repudiated a subsequent
agreement, such that the terms of the first agreement con-
trolled, could not bar the opposing party from enforcing the
attorneys’ fees provision in the earlier contract. Id. at 1002,
1004.4
  3
     Indiana adheres to the American Rule. Id.
  4
     See also Johnson Enters. of Jacksonville v. FPL Group, Inc., 162 F.3d
1290, 1313 (11th Cir. 1998) (holding that attorneys’ fees provision did not
constitute consideration when it “would impose a cost on JEJ only if JEJ
breached another provision of the contract. Because JEJ had no obliga-
tions under the contract, it would be impossible for JEJ to be in breach
. . . . [and its] commitment to pay attorneys’ fees is illusory”). The court
ultimately awarded the opposing party attorneys’ fees when the fees provi-
sion from the void contract “was incorporated into [the parties’] subse-
quent contracts.” Id. at 1329 n.87.
8976 GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION
   [3] State courts have similarly distinguished between con-
tracts that are void as opposed to divisible or voidable in
deciding whether to enforce an attorneys’ fees provision. In
Grease Monkey International, Inc. v. Godat, 916 S.W.2d 257
(Mo. Ct. App. 1995), for example, the Missouri Court of
Appeals affirmed an attorneys’ fees award pursuant to a pro-
vision from a divisible contract in favor of the party who pre-
vailed by showing that a sales provision in the same contract
was unenforceable. See id. at 261-62. First explaining that
“[s]everable or divisible contracts are, in legal effect, indepen-
dent agreements about different subjects though made at the
same time,” id. at 261, the court enforced the attorneys’ fees
agreement because the “sales agreement in no way depended
upon the litigation clause . . . . [which] stated the prevailing
party would be reimbursed in the event of ‘any litigation’
between the parties,” id. at 262. In Williams v. Coe, 417 So.
2d 426 (La. Ct. App. 1982), in contrast, the Louisiana Court
of Appeal refused to enforce a contractual attorneys’ fees pro-
vision in a sales contract when the entire contract was null
and void. See id. at 433 (“[S]ince we have determined the
contract became null and void, the contractual basis for the
award of attorney fees ceased to exist.” (citations omitted)).

   The Nevada Supreme Court similarly distinguished
between a void contract and a rescinded contract in Mackin-
tosh v. California Federal Savings and Loan Association, 935
P.2d 1154 (Nev. 1997), and enforced an attorneys’ fees provi-
sion in favor of the party who prevailed by showing that the
contract at issue was rescinded. Id. at 1162 (citing Katz v. Van
Der Noord, 546 So. 2d 1047, 1049 (Fla. 1989)). In Katz, the
Florida Supreme Court likewise enforced an attorney fees’
provision in a rescinded contract, holding that:

    the distinction between no contract at all and one
    that is unenforceable makes all the difference . . . .
    [because t]he legal fictions which accompany a judg-
    ment of rescission do not change the fact that a con-
    tract did exist. It would be unjust to preclude the
      GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION 8977
    prevailing party to the dispute over the contract
    which led to its rescission from recovering the very
    attorney’s fees which were contemplated by the con-
    tract.
546 So. 2d at 1049 (alteration omitted) (emphasis added); see
also Norwood v. Serv. Dist., Inc., 994 P.2d 25, 36 (Mont.
2000) (citing Mackintosh, 936 P.2d at 1162)).

   [4] The principle that emerges from our survey of federal
and state case law is that, consistent with the American Rule,
a party who prevails by demonstrating that a contract is
entirely void, as opposed to divisible, voidable, or rescind-
able, cannot then seek the benefit of an attorneys’ fees provi-
sion from that contract. Applying this principle here, we find
no reason to create a new equitable exception to the American
Rule so as to enforce the attorneys’ fees clause from the writ-
ten form contract that Golden Pisces and OneBeacon success-
fully argued was void for lack of mutual assent.

                               B.

   [5] Golden Pisces and OneBeacon unavailingly rely on a
series of state cases that apply state reciprocity statutes so as
to enforce attorneys’ fees provisions, regardless of the under-
lying contract’s validity. In Hsu v. Abbara, 891 P.2d 804 (Cal.
1995), for example, the California Supreme Court held that
California Civil Code section 1717 “appl[ies] in favor of the
party prevailing on a contract claim whenever that party
would have been liable under the contract for attorney fees
had the other party prevailed.” Id. at 809. The state court
rejected Hsu’s argument that Abbara, who had successfully
defended by showing that no contract was formed, could not
then claim the benefit of a fee provision from the void con-
tract. The court noted that the legislative intent behind section
1717 was to:

    establish mutuality of remedy where a contractual
    provision makes recovery of attorney’s fees avail-
8978 GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION
    able for only one party, and to prevent oppressive
    use of one-sided attorney’s fees provisions. The stat-
    ute would fall short of this [legislative] goal of full
    mutuality of remedy if its benefits were denied to
    parties who defeat contract claims by proving that
    they were not parties to the alleged contract or that
    it was never formed.

Id. (citations and alterations omitted). In Bartmess v.
Bourassa, 639 P.2d 1147 (Mont. 1982), the Montana Supreme
Court similarly interpreted the applicable Montana statute as
providing a reciprocal right to attorney fees in any action on
a contract. Id. at 1148; see also Herzog Aluminum, Inc. v.
Gen. Am. Window Corp., 692 P.2d 867, 872 (Wash. Ct. App.
1984) (applying state reciprocity statute in favor of prevailing
party who showed absence of enforceable contract).

   [6] We disagree with Golden Pisces and OneBeacon’s
assertion that this set of state court cases indicates a “common
law rule of true reciprocity.” The state courts were simply
construing the legislative intent behind the state reciprocity
statutes at issue. See Hsu, 891 P.2d 804 at 809. No similar
maritime reciprocity statute exists; moreover, other state
courts have declined to interpret their reciprocity statutes as
requiring enforcement of a fees provision from an unenforce-
able contract. See, e.g., Care Med. Equip., Inc. v. Baldwin, 15
P.3d 561, 563 (Or. 2000) (en banc) (denying attorneys’ fees
based on conclusion that state reciprocity statute required
existence of valid contract); Kunz v. Lobo Lodge, Inc., 990
P.2d 1219, 1223 (Id. Ct. App. 1999) (holding that state reci-
procity statute did not apply in favor of prevailing party who
showed that contract was illegal); Baxley Veneer & Clete Co.
v. Maddox, 404 S.E.2d 554, 556 (Ga. 1991) (“It would be
inconsistent to allow an award of attorney fees under OCGA
§ 13-6-11 in an action based on a contract that is unenforce-
able as a matter of law.”); Buckmaster v. Dent, 707 P.2d 319,
321 (Ariz. 1985) (holding that “there is no successful party
      GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION 8979
within the meaning of A.R.S. § 12-341.01 when a contract has
been held to be void”).

                              C.

    [7] We are also unpersuaded by Golden Pisces and One-
Beacon’s policy-based rationales in favor of their proffered
rule. They argue first that one-sided fees provisions are inher-
ently unfair to the party with weaker bargaining power. The
attorneys’ fees provision in the void contract at issue here,
however, was not one-sided, providing instead that “[i]n any
litigation to enforce or interpret this agreement, the losing
party agrees to pay the prevailing party’s reasonable attorney
fees.”

   [8] Golden Pisces and OneBeacon next assert that the doc-
trine of judicial estoppel, which “precludes a party from gain-
ing an advantage” by taking contradictory positions at
different stages of a judicial proceeding, see Risetto v. Plumb-
ers & Steamfitters Local 343, 94 F.3d 597, 600 (9th Cir.
1996), requires the adoption of its reciprocity rule. To the
contrary, this doctrine actually supports the opposite conclu-
sion here: Golden Pisces and OneBeacon first argued to their
advantage that the written contract was void for lack of
mutual assent and now seek, again to their advantage, to
enforce a term from that same contract.

                              IV.

   [9] We therefore conclude that the district court correctly
interpreted the American Rule and that it did not abuse its dis-
cretion in denying Golden Pisces and OneBeacon’s motion
for attorneys’ fees. Because Golden Pisces and OneBeacon
cannot rely on the attorneys’ fees provision from the same
form contract that they successfully proved was void, the Rule
does not authorize an attorneys’ fees award in their favor. We
also decline to announce a new equitable maritime exception
to the Rule on the basis of “reciprocity.” No maritime statute
8980 GOLDEN PISCES v. FRED WAHL MARINE CONSTRUCTION
otherwise requires an attorneys’ fees award in Golden Pisces
and OneBeacon’s favor; we therefore affirm the district
court’s order.

  AFFIRMED.