A „subtle” question about the right to lawyers` fees raised by this appeal was one of the Court of Appeal`s first impressions. In a separate action before the Superior Court, the plaintiffs obtained a judgment for breach of contract, including the award of attorneys` fees, against certain companies that are not parties to this action. The plaintiffs brought the present enforcement action against the defendants and sought to hold them liable for the judgment as the alter ego of the judgement debtors. The plaintiffs lost to one of the defendants, Steve Saleen (Steve). Steve moved for legal fees under the contract; The court granted the plaintiffs` application and appeals. The plaintiffs argued that this was not a contractual action and that, therefore, no fees were available under Article 1717 of the Civil Code. Rather, it was a coercive measure. They cited case law to assert that a contract judgment encompasses contractual rights and expires. On the other hand, if the plaintiffs had included Steve as a defendant in the Superior Court`s application and made exactly the same alter-ego claims they would have made before the Court of Appeal, Steve would undoubtedly have been entitled to contractual attorneys` fees under the doctrine of reciprocity set forth in Article 1717 of the Civil Code and Reynolds Metals Co. v.
Alperson, 25 Cal.3d 124 (1979), although he did not sign the contract. The Court of Appeal concluded that the timing of an alter-ego lawsuit (before or after the verdict) was too arbitrary a consideration to establish entitlement to attorneys` fees. `Where a judgement creditor seeks to add a party to an infringement judgment involving the contractual award of fees, the action relates essentially to the contract, within the meaning of Article 1717 of the Civil Code.` The court ruled in Steve`s favour and upheld the verdict. Disclaimer: Justia Annotations is a forum for lawyers to summarize, comment on and analyze case law published on our website. Justia makes no warranty that the comments are accurate or reflect current legal status, and no comment is intended and should not be construed as legal advice. Contacting Justia or an attorney via this website, via a web form, by email or otherwise does not constitute an attorney-client relationship. The ACCC took action against MSY in December of last year, saying MSY made a statement to consumers between January 2013 and February 2016 that it had the discretion to determine whether customers were entitled to a remedy for defective products and what recourse it would offer customers. In a previous dispute, the plaintiff obtained a judgment for breach of contract against certain companies („judgement debtor”) of MSY Trading.
Since the contract contained a clause on attorneys` fees, MSY Trading`s judgment also included an award of attorneys` fees. MSY Trading then filed a lawsuit against Steve Saleen (among others) on the grounds that Mr. Saleen, the CEO of one of the insolvency debtors, should be held liable as an alter ego. M. Saleen successfully had the alter-ego`s lawsuit quashed and then recovered his partners` attorney fees based on the contract in the underlying claim. The trial court awarded Mr. Saleen legal fees and MSY Trading appealed. The Court of Appeal also rejected MSY Trading`s argument that attorneys` fees were not available to the defendant because the judgment extinguished all other contractual rights, including the attorney`s fees provision in the underlying contract. Although the Court of Appeal concluded that this rule — a judgment in a contract case, any other contractual right, including a provision on lawyers` fees — is generally true, it does not apply to alter-ego claims.
If an alter ego is added to a judgment, it is because the alter ego is considered a party to the original trial. Therefore, an alter-ego claim seeking to establish liability for a judgment on a contract – regardless of the method used to bring the claim – is a „contractual action” within the meaning of Article 1717 of the Civil Code. Under California Civil Code Section 1717, if a contract provides for the award of attorneys` fees in litigation to enforce the contract, the right to reasonable mutual attorneys` fees applies and is attributed to the prevailing party. On appeal, MSY Trading argued that the alter ego action was not a „contract” claim, so Mr. Saleen, as a prevailing party, would have no legal fees available. In addition to the fine, the Federal Court ordered MSY to complete an Australian consumer law compliance training program. pay ACCC`s legal fees in the amount of A$50,000; and injunctions that prevent the prosecution of false statements of consumer rights. In MSY Trading Inc. v. Saleen Automotive, Inc., 51 Cal.App.5th 395 (2020), the California Court of Appeals held that a defendant is entitled to attorneys` fees after successfully defending a claim to be held liable as an alter ego of a judicial debtor if the underlying dispute involved a contract with an attorney`s fee clause even if the defendant was not a party to the underlying contract.