Attorney’s Fees as Damages In California: When Are They Recoverable?
California follows the “American Rule,” which provides each party involved in litigation is responsible for paying his or her own attorney’s fees and costs unless provided otherwise by statute or contract. However, a party can circumvent this rule through the “tort of another” doctrine. This doctrine applies if the party is required to file or defend a suit because of a third party’s tort, which typically occurs in professional malpractice suits. A tort is a wrongful act or an infringement of a right (other than under contract) leading to civil legal liability.
II. THIRD PARTY LIABILITY
Specifically, when a plaintiff must bring an action against a third party as “the natural and probable consequence” of the defendant’s negligence, the plaintiff is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred. (Prentice v. North Am. Title Guaranty Corp., Alameda Division (1963) 59 Cal.2d 618, 620.) Unless the parties have stipulated otherwise, a claim for attorney’s fees and costs under the “tort of another” doctrine cannot be asserted by a post-trial motion or memorandum of costs, but must be pleaded and proved to the trier of fact. (Gorman v Tassajara Dev. Corp. (2009) 178 Cal.App.4th 44, 79.)
The “tort of another” doctrine, rather than being an exception to the rule that parties must bear their own attorneys’ fees, is an application of the usual measure of tort damages. The exception is predicated on damages wrongfully caused by the defendant’s improper actions. The theory of recovery is the attorney’s fees are recoverable as damages resulting from a tort in the same way medical fees would be part of the damages in a personal injury action. (Sooy v. Peter (1990) 220 Cal.App.3d 1305, 1310.) “Nearly all cases which have applied the “tort of another” doctrine involve a clear violation of a traditional tort duty between the tortfeasor who is required to pay the attorney’s fees and the person seeking compensation for those fees.” Id.
III. THERE MUST BE MERITORIOUS CLAIMS AND THUS DAMAGES TO MOVE FOR AND OBTAIN ATTORNEY’S FEES AND COSTS
The court’s holding in Mega RV Corporation v. HWH Corporation (2014) 225 Cal.App.4th 1318 is a reminder that the existence of an underlying tort by a defendant is a basic requirement for applying the tort of another. In this case, plaintiffs sued Mega RV (the retailer of an allegedly defective motor home), Country Coach (the manufacturer of the motor home) and Bank of America (who financed the transaction) for defective hydraulic systems in the motor home. Mega RV filed a cross-complaint for partial indemnification against HWH Corporation (“HWH”), the entity who manufactured components for the motor home. The trial court concluded HWH was not required to indemnify Mega RV and awarded $166,000 to HWH in attorneys’ fees based on the tort of another. HWH had argued it was entitled to these fees because Mega RV was negligent in servicing plaintiffs’ motor home.
However, the appellate court held the tort of another did not apply and struck the award of damages. The court found the defendants had not committed a tort against plaintiffs, and the plaintiffs had not sued for negligence or any other tort. (Id. at 1338.) The court also rejected HWH’s contention that Mega RV negligently serviced plaintiffs’ motor home. (Id. at 1338-1339.) The court reasoned:
“The connection between HWH’s harm and Mega RV’s servicing of the motor home is extremely attenuated. There is no moral blame attached to Mega RV’s servicing repair failures, even assuming failures occurred; there was certainly no evidence of reckless or purposeful behavior, or of anything other than economic damages suffered by anyone involved in this case…” (Id. at 1342.)
IV. THE DUTIES OF ENTITIES CAN BE COMPLEX AND REQUIRE CAREFUL ANALYSIS
In sum, there was no tort because Mega RV had no duty to HWH with regard to the servicing of plaintiffs’ motor home. If there is no tort, the tort of another doctrine cannot apply. (Id.) The court in Mega RV Corp. clarified that attorney’s fees cannot be awarded against one of several joint tortfeasor defendants on the theory one induced the other co-defendants to participate in the injury-producing event. Joint tortfeasors are treated as a single unit (i.e. one party), and the third party tort doctrine does not apply. (Id. at 1340.) The court noted the tort of another doctrine is not particularly relevant in cases involving physical injury or property damage.
Due to the American Rule, attorneys and clients often do not consider their opponents’ attorneys’ fees in evaluating cases. Given the “tort of another” doctrine, counsel and their clients should consider their opponents’ attorneys’ fees in applicable situations when evaluating their clients’ potential exposure. Furthermore, parties who plan to sue for attorneys’ fees, pursuant to the tort of another, must be careful to identify an existing tort committed by a defendant or face losing this claim.
Please contact us or seek the advice of competent counsel to advise you of your rights. PLEASE BE ADVISED: Views expressed are not intended to be legal advice and does not create an attorney-client relationship.