by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
LANDLORD/TENANT; LANDLORD'S REMEDIES; ATTORNEY FEES: Contract provision permitting recovery of attorney's fees to "the successful party . . . whether or not such action is prosecuted to judgment" requires landlord to pay tenant's attorney's fees when landlord dismisses unlawful detainer action. Honey Baked Hams, Inc. v. Dickens, 43 Cal. Rptr. 2d 596 (Cal. App. 1995) The result seems obvious, but the case was necessary because another California case had held that contractual provisions for award of attorney's fees may not be enforced when the action is dismissed, as the dismissal may not necessarily reflect that the action is without merit and to penalize a party for dismissing when appropriate could result in clogged courts and interfer with the efficient administration of justice.
The court here rules that the rationale prohibiting the award of fees upon dismissal should apply only to cases in which the party seeking fees is relying upon California's "automatic reciprocity" statute, Cal. Civ. Code Sec. 1717(b)(2). This section authorizes a party to recover fees when the contract does not provide for fees to that party but does provide for fees to the other side if that side should prevail. Recognizing that such provisions often reflect a fundamentally unfair imbalance in bargaining power, the California legislature had set the rule that if one side has a contractual right to attorney's fees, both do.
The court here rules that Section 1717 is a reflection of equitable values, and thus should not be the basis for an award of attorney's fees in the event of a dismissal, but that this rationale should not apply when the contract provision for fees is already balanced and the fee claim is not based upon an imbalance of bargaining power but rather upon a clear contract right.
Comment: The court's analysis makes some sense, but the argument that permitting fee agreements to apply to dismissals is detrimental to efficient justice is still there. So is the other appellate court decision holding that the rules are the same, whether Section 1717 is involved or not. Looks like we have a "split in the circuits," and we'll have an appeal if Honey Baked decides the issue should be cooked a bit more.
DIRT readers: The editor is unaware whether there are counterparts to California Section 1717 elsewhere. It strikes the editor as a good idea, as many commercial contracts and most residential leases in the editor's neighborhood have one way attorney's fee provisions precisely because of imbalance in barganing power or sophistication. What about a DIRT survey? Are you aware of other provisions imposing automatic reciprocal fees? (At the risk of broaching a "political" subject) Do you think they're a good idea?
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