Attorney’s Fee Provisions: The Big Hammer

In the American legal system, ordinarily each side pays their own attorney’s fees. This concept is intended to level the playing field and ensure equal access for all to the court system. If an individual felt he would be on the hook for a large corporation’s legal costs, he might be intimidated from bringing an otherwise meritorious claim. Yet in some circumstances–dictated by statute or contract–the opposite occurs. Through an attorney’s fee provision, the winning party may be awarded their attorney’s fees.

This fee shifting dynamic recently occurred in a case involving two homeowners who sued their condominium association in Los Angeles County Superior Court. The owners filed suit against the association and several board members alleging wrongful conduct related to management of the condominium association, including claims for negligence, emotional distress, negligent interference with economic relations and breach of fiduciary duty.

At a mandatory settlement conference a year into the case, the plaintiffs settled with the association and all defendants except for one. The remaining parties prepared for trial and shortly before commencement of trial, the homeowners filed a request for voluntary dismissal. The remaining defendant filed a motion for determination that she was a prevailing party with request for an award of over $35,000 in attorneys’ fees. The trial court ruled she was not a prevailing party and denied the motion.

Statutory Attorney’s Fee Provisions

In Durack v. Wang, WL 4230435 (Sep. 25, 2017), the Court of Appeals reversed the trial court and ruled that the defendant should be awarded her attorneys’ fees under § 5975(c) of the Davis-Stirling Act. The Davis-Stirling Act constitutes the statutory law governing condominiums and other common interest communities in California. Section 5975 of the Act provides: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.”

There are three interesting takeaways from the Durack opinion:

1. The appellate court awarded the defendant attorney’s fees and costs even though the condominium declaration upon which plaintiffs’ claims were brought did not include a prevailing party attorney’s fee provision [many condominium and homeowner association declarations include such provisions]. The court found that the defendant was entitled to recover her reasonable attorney’s fees if the claims brought against her “were actions to enforce the CC&Rs.” In reaching this conclusion, the court looked to “the gravamen of the complaint.” [“gravamen” is a $100 legal word that means “the substantial part of a charge or complaint”] In short, the court found that all of the claims alleged against the defendant arose from the CC&Rs—there was no common law or independent basis for their claims other than the CC&Rs.

2. The Davis-Stirling Act does not define “prevailing party” or provide a rubric for that determination. In the absence of statutory guidance, the Durack court relied upon other California court opinions that have concluded that the test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives. Here, the court held that the defendant was the prevailing party because she asked the court to dismiss the complaint and enter judgment in her favor regarding 5 of 7 claims, and the remaining two claims were voluntarily dismissed; thus, her litigation objectives were fully satisfied.

3. The legislature used the word “shall” and not “may” when drafting § 5975(c) of the Act. When litigants spar over common interest community CC&Rs, it is an all or nothing proposition. If one party satisfies his or her litigation objectives and is deemed the “prevailing party,” they not only win on the merits, but will be awarded their attorney’s fees and costs.

In addition to the three takeaways described above, there is a major lesson to be learned here. Beware when suing to enforce common interest community CC&Rs in California. Whether you are the association or individual homeowner, it is probable that if you lose, you will pay your adversary’s reasonable attorney’s fees and costs, even if your particular association’s CC&Rs do not include a prevailing party fee clause.

If you have a question regarding prevailing party attorney’s fee provisions, or any other legal matter involving your condominium or homeowner association in San Diego, Orange or Riverside County, do not hesitate to give me a call or complete the contact submission form on this page.