Labor & Employment Law

Court Denies Employee's Attorney Fees For Tort Claims

Apart from being an informative warning about some tactics used by car dealerships to increase the price paid by consumers by using “legs” or “payment packing” techniques, the court’s opinion in Casella v. Southwest Dealer Services, Inc. also analyzed when parties may recover their attorney fees in litigation.

As a general rule, in the United States each party bears the costs their own attorney’s fees. However, this general rule can be modified if a statute allows for prevailing parties to recover attorney’s fees or by a contractual agreement by the parties.

In Casella v. Southwest Dealer Services, the following attorney fee provision was at issue:

If any legal action arises under this Agreement or by reason of any asserted breach of it, the prevailing party shall be entitled to recover all costs and expenses, including reasonable attorney’s fees, incurred in enforcing or attempting to enforce any of the terms, covenants or conditions, including costs incurred prior to commencement of legal action, and all costs and expenses, including reasonable attorney’s fees, incurred in any appeal from an action brought to enforce any of the terms, covenants or conditions.

Casella’s lawsuit was based on tort claims for wrongful termination in violation of public policy, fraud, and violation of Labor Code section 970. He did not allege a breach of the employment contract. The court interpreted the attorney’s fee provision as being very narrow:

In this case, the attorney fees provision starts out broadly, using the phrase “[i]f any legal action arises under this Agreement”…. [And then] the provision then narrows in scope, limiting the recovery of reasonable attorney fees to those “incurred in enforcing or attempting to enforce any of the terms, covenants or conditions,” including reasonable attorney fees “incurred in any appeal from an action brought to enforce any of the terms, covenants or conditions.”

Therefore, the court held that “[s]uch tort claims do not seek to enforce the employment agreement. Section 1717, subdivision (a) of the Civil Code “makes clear that a tort claim does not ‘enforce’ a contract. That statute expressly refers to, and therefore governs, ‘attorney’s fees . . . which are incurred to enforce th[e] contract.’ Because section 1717 does not encompass tort claims [citations], it follows that tort claims do not ‘enforce’ a contract.” (citing Exxess Electronixx, 64 Cal.App.4th at p. 709.) Because the employment contact did not provide for recovery of attorney’s fees for tort claims, plaintiff’s claim for attorney’s fees failed.

However, the plaintiff was awarded $12,500, a small portion of his attorney’s fee claim. This was due to the fact that after plaintiff filed the lawsuit, the defendant brought a Cross-Complaint against the plaintiff for breach of contract under the employment agreement. The defendant eventually withdrew this claim prior to trial, which made plaintiff the prevailing party on the claim.  Therefore, the court awarded plaintiff the pro-rata costs he incurred in defending this the breach of contract claim.

Full post as published by California Labor & Employment Defense Blog on December 19, 2007 (boomark / email).