St. Paul Reinsurance Company Limited London v. The Fort Miller Group, Inc. et al

Filing 385

ORDER by Magistrate Judge Bernard Zimmerman denying 370 Motion for Attorney Fees (bzsec, COURT STAFF) (Filed on 4/27/2009)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 UNIONAMERICA INSURANCE CO., ) LIMITED, Successor-in) interest to ST. PAUL ) REINSURANCE, ) ) Plaintiff(s), ) ) v. ) ) THE FORT MILLER GROUP, INC.,) THE FORT MILLER CO. and ) ) BEECHE SYSTEMS CORP., ) Defendant(s). ) ) UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

No. C05-1912 BZ ORDER DENYING PLAINTIFF'S MOTION FOR ATTORNEY'S FEES

Before the Court is plaintiff Unionamerica Insurance Company's ("Unionamerica") motion for attorneys' fees. Plaintiff seeks $249,945.00 in attorneys' fees it spent prosecuting its rescission claim against The Fort Miller Group, Inc., The Fort Miller Co., and Beeche Systems Corp. (collectively "Fort Miller"), in which judgment was entered in favor of plaintiff on March 16, 2009. Unionamerica contends that California Civil Code § 1692 permits courts to award attorneys' fees as consequential damages in order to afford a prevailing party complete 1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

relief, citing Kass v. Weber, 261 Cal.App.2d 417 (1968). This case is not instructive, as it not only involved a cause of action for rescission of an agreement which had been fraudulently induced - a claim that Unionamerica did not allege­ but it also upheld an award of consequential damages to the plaintiff for its attorney fees in a "prior action" that the plaintiff was forced to litigate because of the defendant's fraudulent acts. The court stated that

"[r]ecovery in an action for deceit for fraudulently inducing a contract includes the expense of other litigation incident to the contract as part of consequential damages." 423 (emphasis in original). Id. at

Here, Unionamerica did not

claim, and the court did not find, fraud by Fort Miller and Unionamerica is not seeking fees for a "prior action" it had to litigate because of defendant's fraud. Other than Kass,

Unionamerica provides no authority for its contention that attorneys' fees may be awarded as consequential damages pursuant to § 1692.1 Unionamerica also asserts that it is entitled to an award of attorneys' fees based on Fort Miller's litigation conduct, which it contends was "vexatious, wanton, and unreasonable." "Under the `American rule,' attorney's fees

may not be awarded absent statutory or contractual

Unionamerica also cites to Audre Recognition System v. Casey, 210 B.R. 360 (Bankr. S.D. Cal. 1997) and Gibson v. Rotunno, an unpublished case in which a fraudulently induced contract with an attorney's fee provision was rescinded, No. 96-4076, 1996 U.S. App. LEXIS 33324 (10th Cir. Dec. 20, 1996). Neither case stands for the proposition that Unionamerica asserts. 2

1

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

authorization, or a finding of bad faith."

Gotro v. R & B

Realty Group, 69 F.3d 1485, 1487 (9th Cir. 1995) (citing Alyeska Pipeline Serv. Co. v. Wilderness Soc., 421 U.S. 240, 257 (1975)). Fees may be awarded " . . . when the losing

party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." Dollar Systems, Inc. v. Avcar Leasing

Systems, Inc., 890 F.2d 165, 175 (9t Cir. 1989) (citations and quotations omitted); see also Allmerica Fin. Life Ins. & Annuity Co. v. Dalessio, No. 96-0385, 2006 U.S. Dist. LEXIS 8994 at *24 (N.D. Cal. Feb. 20, 2006); United States v. Standard Oil Co., 603 F.2d 100, 103 (9th Cir. 1979) ("An award of attorneys' fees for bad faith "is punitive, and the penalty can be imposed `only in exceptional cases and for dominating reasons of justice.'") (quoting 6 J. Moore, Moore's Federal Practice para. 54.77[2] (2d ed. 1972)). This litigation was bitterly contested and I regularly cautioned both parties regarding their litigation tactics. But neither Unionamerica nor Fort Miller acted vexatiously or in bad faith to the degree that would support an award of fees. I find no need for argument and VACATE the hearing scheduled for May 20, 2009. IT IS ORDERED that

Unionamerica's motion for attorneys' fees is DENIED. Dated: April 24, 2009 Bernard Zimmerman United States Magistrate Judge
G:\BZALL\-BZCASES\UNIONAMERICA V. FORT MILLER\TRIAL\ORDER ON P'S MOT FOR ATTORNEY'S FEES.wpd

3