Sun. Nov 28th, 2021

In plaintiff borrowers’ largely unsuccessful action against defendant escrow holder and others that alleged a conspiracy to fraudulently induce plaintiffs to take out real estate refinancing loans, the Superior Court of Alameda County (California) awarded contractual attorney fees to defendant. In setting its fees award, the trial court considered plaintiffs’ financial circumstances and allocated the award among plaintiffs. Defendant appealed.

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Overview

While the court recognized that an award of contractual attorney fees might be subject to equitable considerations, it nonetheless concluded that a losing party’s financial condition should not be considered in the setting the amount of such an award. A reduction in an award of attorney fees otherwise determined to be reasonable on the basis of the losing party’s financial condition was not a change in the determination of the fair market value of the legal services rendered. Rather, it was an equitable reduction in the losing party’s liability for an otherwise reasonable fee. The court found nothing in Civ. Code, § 1717, or the cases construing it that suggested contractual and statutory awards had to be consistent in permitting such reductions. Accordingly, the trial court erred in reducing defendant’s attorney fees on the basis of plaintiffs’ limited financial resources. The court found adequate justification for the trial court’s exercise of discretion in allocating attorney fees among plaintiffs, rather than imposing joint and several liability. Although plaintiffs elected to bring suit together, they were not joint obligors on a single contract.

Outcome

The court vacated the trial court’s ruling on the award of contractual attorney fees and remanded the matter to the trial court for further proceedings.