Case Number: EC063626 Hearing Date: May 09, 2016 Dept: A

Dancsecs v Simpson

MOTION FOR ATTORNEY’S FEES

Calendar: 5
Case No: EC063626
Date: 5/9/16

MP: Defendants, John Simpson and Portera, LLC
RP: Plaintiff, Soraya Dancsecs

RELIEF REQUESTED:
Order awarding attorney’s fees of $23,619.50

DISCUSSION:
This case arises from the Plaintiff’s claim that her employment was terminated improperly. The case was dismissed on December 18, 2015 after the Court sustained the Defendants’ demurrer to each cause of action without leave to amend.

This hearing concerns the Defendants’ request that the Court award attorney’s fees of $23,619.50 because they prevailed on the claims arising from a contract that awards attorney’s fees to the prevailing party. Civil Code section 1717 states that a party may recover attorney’s fees when the party prevails in an action based on a contract that provides for the prevailing party to recover attorney’s fees. The phrase “action on a contract” includes not only a traditional action for damages for breach of a contract containing an attorney fees clause, but also any other action that “involves” a contract under which one of the parties would be entitled to recover attorney fees if it prevails in the action. Eden Township Healthcare Dist. v. Eden Medical Center (2013) 220 Cal. App. 4th 418, 426-427. In determining whether an action is ‘on the contract’ under section 1717, the proper focus is not on the nature of the remedy, but on the basis of the cause of action. Id.

Accordingly, an action or cause of action is “on a contract” for purposes of section 1717 if

1) the action or cause of action ‘involves’ an agreement, in the sense that the action or cause of action arises out of, is based upon, or relates to an agreement by seeking to define or interpret its terms or to determine or enforce a party’s rights or duties under the agreement; and

2) the agreement contains an attorney fees clause.
Eden Township, 220 Cal.App.4th at 427.

The Plaintiff pleaded the following claims in her Complaint:

1) Breach of Fiduciary Duty
2) Negligence
3) Fraud
4) Negligent Misrepresentation
5) Breach of Contract
6) Accounting
7) Breach of Implied Covenant of Good Faith and Fair Dealing
8) Intentional Infliction of Emotional Distress
9) Negligent Infliction of Emotional Distress
10) Wrongful Termination
11) Civil Extortion
12) Violation of Business and Profession Code section 17200
13) Petition for Peremptory or Alternative Writ of Mandate

The Defendants argue that they are entitled to obtain attorney’s fees under the Operating Agreement for Portera LLC. A copy of the operating agreement is attached as exhibit 2 to the declaration of Paul Chan. Under section 15.14, which is on page 40 of the agreement, the parties agree that in the event that any legal action is instituted between the parties that arises out of the agreement, the prevailing party is entitled to recover attorney’s fees.

The Defendants cite to paragraphs that mention the operating agreement, e.g., paragraph 8. However, the Defendants do not demonstrate that one, some, or any of the causes of action in the Complaint arise from the operating agreement because the causes of action are not seeking to define or interpret its terms or to determine or enforce a party’s rights or duties under the agreement.

Eight of the causes of action in the Complaint are based on torts, e.g., negligence, fraud, intentional infliction of emotional distress, wrongful termination. The fifth cause of action for breach of contract and the seventh cause of action for breach of the implied covenant of good faith and fair dealing are not based on the operating agreement and they do not seek to define or interpret its terms or to enforce any rights under the operating agreement. The eleventh cause of action for civil extortion is based on the claim that the Defendant extorted money with threats. The twelfth cause of action for Violation of Business and Professions Code section 17200 claims that the Defendant’s conduct was unlawful, unfair, fraudulent, or deceptive. The thirteenth cause of action seeks to enforce the right to review the company’s books under Corporations Code sections 1770.01 et seq. The fifth cause of action for an accounting seeks an accounting of the records based on the failure to provide the information in the company’s books.

The causes of action do not seek to define or interpret the terms of the operating agreement and they do not seek to enforce any rights under the operating agreement. The Defendants do not proceed through each of these causes of action and offer grounds to find that any of them are actions on the contract, i.e., the operating agreement, for the purposes of seeking attorney’s fees under Civil Code section 1717.

In addition, the third cause of action for fraud and the fourth cause of action for negligent misrepresentation are tort claims of deceit. California law finds that the phrase ‘action on a contract’ as used in section 1717 does not include a tort action for fraud arising out of a contract. Eden Township Healthcare Dist. v. Eden Medical Center (2013) 220 Cal. App. 4th 418, 426-427.; see also Stout v. Turney (1978) 22 Cal. 3d 718, 730 (holding that a tort action for fraud arising out of a contract is not action “on a contract” within the meaning of section 1717). The Defendants do not address these causes of action to offer any grounds to find that prevailing on these claims is a basis to award attorney’s fees.

A review of the pleadings reveal that the gravamen of the Plaintiff’s Complaint was that she suffered damages because the Defendant terminated her employment because the Defendant had a dispute with her husband. The Plaintiff alleges the following:

1) she was a partner with the Defendant, John Simpson, in the Defendant, Portera LLC;
2) the Defendant, John Simpson, had another business, Cyntron Payroll Solutions;
3) the Plaintiff’s husband, Mark Dancsecs, was an employee of this other business, Cyntron Payroll Solutions;
4) the Defendant terminated the employment of her husband at Cyntron Payroll Solutions and accused him of embezzlement;
5) the Defendant then informed the Plaintiff that her earnings on commissions would be reduced 50% until her husband’s issues at Cyntron were resolved; and
6) the Defendant then terminated the Plaintiff’s employment because of this dispute with her husband.

In her Complaint, the Plaintiff seeks damages on theories that this termination of her employment was wrongful, that the Defendant’s conduct was negligent, fraudulent, an intentional and negligent infliction of emotional distress, and a violation of Business and Professions Code section 17200. There are no grounds to find that each of the causes of action arise from the operating agreement.
In the moving papers, the Defendants argue, in a footnote on page 5, that even if some causes of action are not based on the operating agreement, they are “inexplicably intertwined” with other causes of action. Under California law, attorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed. Abdallah v. United Savings Bank (1996) 43 Cal. App. 4th 1101, 1111. Further, when claims are inextricably intertwined and it is “impracticable, if not impossible, to separate the multitude of conjoined activities into compensable or noncompensable time units”, there is no requirement to apportion the attorney’s fees. Id.

The Defendant offers no analysis, in the footnote, to demonstrate that 1) any of the claims arise from the operating agreement and 2) that the rest of the claims are “inexplicably intertwined” with the claims that purportedly arise from the operating agreement. Further, the premise of this argument is that one or some of the claims in the Complaint arise from the operating agreement. As discussed above, it cannot be determined that any of the claims in the Complaint arise from the operating agreement because they do not seek to define or interpret its terms and they do not seek to enforce any rights under the operating agreement. Since the Defendants do not establish the premise, i.e., that one or some of the claims arise from the operating agreement, they do not establish the validity of the argument. Accordingly, the Defendants do not demonstrate, in their footnote, that the claims in the Complaint are inexplicably intertwined with claims arising from the operating agreement.

Therefore, the Court deny the Defendants’ motion.

RULING:
Deny motion.