Trial Court Improperly Grants an Award of Fees to Tenant Under Fair Housing Act

Posted on April 27, 2011 by David J. McMahon

In Morrison v. Vineyard Creek, 2011 DJDAR 4611 (2011), the California Court of Appeal for the First Appellate District overturned an award of attorney fees granted to a tenant under California’s Fair Employment and Housing Act ( FEHA).

The plaintiff signed a lease for an apartment. The lease stated that the apartment would only be used as a private residence and specifically prohibited all uses for commercial or non‑residential purposes.

After taking possession of the premises, the plaintiff notified the landlord that she intended to operate a family child day care facility on the premises pursuant to the California Child Day Care Facilities Act (Act). The landlord responded to the notice, stating that operation of a day care business in the apartment would constitute a breach of the lease.

Plaintiff then sued the landlord. The plaintiff alleged violations of the Act, California’s anti‑retaliation statute, and FEHA. Thereafter, the parties signed a settlement agreement. The landlord agreed to recognize the plaintiff’s right to operate a family child care home and to pay $6,501.

In 2009, the plaintiff moved for attorney fees under the retaliatory eviction statute and FEHA. The trial court denied the motion for fees and the plaintiff pursued an appeal of the decision.

The court of appeal cited Civil Code Section 1942.5, the anti‑retaliation statute. The court noted that the statute provides for an award of attorney fees for the prevailing party in an action brought for damages for retaliatory eviction. 

The court of appeal noted that in this case, the landlord did not threaten to take any retaliatory action against the tenant and only wanted to enjoin the plaintiff from operating a day care facility. In addition, FEHA provides prevailing parties with attorney fees, and prohibits an owner of housing from discriminating against a person because of her source of income.

Because the landlord only sought to enforce the lease provision against the plaintiff, the landlord did not discriminate against the plaintiff. Thus, the plaintiff was not entitled to attorney fees.

 

Lower Court Properly Reinstates Arbitration Award Granting Fees

Posted on April 26, 2011 by David J. McMahon

In Lee v. Kwong, 2011 DJDAR 4599 (2011), a panel from the California Fifth District Court of Appeal affirmed the lower court’s decision to reinstate an arbitrator’s decision, granting a fee award.

Audrie Lee (“Lee”) entered into an agreement for the purchase of a restaurant business with David and Alice Kwong (“Kwong”). The agreement included an arbitration clause as well as an attorney fee provision. That provision provided for an award of fees in favor of a prevailing party in any dispute arising from the agreement.

The parties agreed to judicial arbitration when the dispute arose. The sale of the business failed to close in a timely manner. The arbitrator denied Lee’s claims and awarded attorney fees to the Kwongs. Lee requested a trial de novo, but later filed a request for dismissal, which the clerk promptly entered as requested.

The trial court granted the Kwongs’ motion to vacate the dismissal filed by Lee. The court entered judgment to the Kwongs and awarded attorney fees pursuant to the parties’ agreement. Lee argued that the action of the lower court went too far, and exceeded its jurisdiction by vacating the dismissal and reinstating the award.

The court of appeal affirmed, noting that a plaintiff is allowed to voluntarily dismiss an action before the commencement of trial. After entry of a voluntary dismissal, the trial court would not have any power to issue further orders in the case.

However, the court of appeal noted that the phrase “commencement of trial” is not restricted to only jury or court trials on the merits. The court noted that the term also includes pretrial process and procedures that dispose of litigation. The court of appeal noted that Lee’s reliance on the statute was misplaced. The arbitration was effectively a trial on the merits. 

For these reasons, the court of appeal ruled that the trial court did not err in vacating the dismissal and affirming the fee award.

2860 Fee Arbitration is Denied Where Insurer is Not Currently Defending

Posted on April 7, 2011 by David J. McMahon

In The Housing Group v. PMA Capital Insurance Co., 2011 DJDAR 4441 (2011), the California First District, Court of Appeal decided a case arising under California Civil Code § 2860. 

This section of the civil code provides for arbitration of disputes under California’s so called Cumis doctrine. That statute sets forth the rules for selection of “independent counsel” when the carrier reserves its rights creating a potential conflict between the carrier, its selected counsel and the insured.

The Housing Group (Plaintiffs) filed suit against their insurer, PMA Capital Insurance Co. (the “insurer”). The Plaintiffs sued the insurer for breach of contract and alleged “bad faith” arising out of liability in third‑party actions relating to construction projects.

The insurer petitioned to compel arbitration of an alleged fee dispute pursuant to Civil Code Section 2860(c), contending the action involved disputes regarding the applicable fee to be paid to the Plaintiffs’ independent counsel by the insurer incurred in the underlying litigation.

The Plaintiffs opposed the petition. Plaintiffs argued that the insurer had no standing to invoke the provisions of Section 2860(c) because it failed to prove that it had agreed to defend the case or make any payments to the defense costs incurred. The trial court denied the petition to compel arbitration.

The insurer appealed and the court of appeal affirmed the decision of the trial court. The court noted that where an insurer defends a case under a reservation of rights and has agreed to utilize independent counsel, an insurer may compel arbitration to resolve a dispute regarding the payment of defense fees pursuant to Section  2860(c).

The court noted that there was no evidence in the record that the insurer defended the case. The insurer did send two reservation of rights letters.  However, the letters only expressed a future intent to defend, rather than an actual agreement to provide a defense or to pay defense costs.

The court of appeal concluded that an agreement to the payment of defense fees at the end of the litigation was not sufficient to trigger the provisions of Section 2860.