Case Name: A. Kalbali vs A. Kalbali
Case No.: 20141CV271602

After an action to compel arbitration was concluded in his favor, Respondent Ali Asghar Kalabi (“Respondent” or “Asghar”) has filed a motion for attorney fees claiming that the contract between the parties provides for prevailing party attorney fees. Petitioner Ali Akbar Kalbali (“Plaintiff” of “Akbar”) filed opposition after the Court (Judge Kirwan) granted an application to continue the hearing to allow opposition to be filed.

The motion for attorney fees is DENIED. The Court finds that the contract language in question provides for an award of attorney fees only to a prevailing party in an arbitration, and does not apply to litigation before any arbitration was commenced. As no arbitration ever happened, Respondent is not entitled to attorney fees.

This action commenced with a petition to compel arbitration filed in 2014, initially denied in 2015, went up on appeal, and was ultimately dismissed after the Court (Judge Kirwan) concluded that Petitioner had waived his right to arbitration.

The language in question in section 10.2 of the Operating Agreement provides that:

“Any action to enforce or interpret this Agreement, or to resolve disputes with respect to this Agreement as between the Company and a Member, or between or among the Members, shall be settled by arbitration in accordance with the rules of the American Arbitration Association. Arbitration shall be the exclusive dispute resolution process in California, but arbitration shall be a nonexclusive process elsewhere. Any party may commence arbitration by sending a written demand for arbitration to the other parties. Such demand shall set forth the nature of the matter to be resolved by arbitration. The Managers shall select the place of arbitration. The substantive law of the Stale of California shall be applied by the arbitrator to the resolution of the dispute. The parties shall share equally all initial costs of arbitration. The prevailing puny shall be entitled to reimbursement of attorney fees, costs, and expenses incurred in connection with the arbitration.” (Emphasis added.)

The entire paragraph in question refers to arbitration, not to litigation. No general attorney fee clause that provides for attorney fees is found anywhere in the Operating Agreement. The right to attorney fees under CCP 1033.5 and Civil Code 1717 depend on a contract that provides for attorney fees.

Respondent relies on the case of Otay River Constructors v. San Diego Expressway (2008) 158 Cal.App.4th 796, to argue that Civil Code section 1717 provides for attorney fees in any action to enforce a contract, where the contract provides for an award of attorney fees. However, the distinguishing factor in Otay is that the contract in that case included a standard provision for attorney fees for any party prevailing on the contract. The primary issue discussed in Otay was whether following an appeal on denial of arbitration any party was prevailing where further litigation was contemplated.

Context is important here. The attorney fee clause in question is found solely in a section of the contract providing for arbitration, and limited attorney fees to those incurred “in connection with the arbitration.” As Petitioner correctly notes, attorney fees are awarded only “where the contract allows.” Here, the contract in question does not allow for attorney fees incurred in litigation before any arbitration commences.

Respondent also argues that the mutuality provision of Civil Code section 1717, that a provision for attorney fees to one party applies to all parties, requires that he be paid attorney fees because Petitioner sought attorney fees for his Petition to compel arbitration. However, fees are not awardable simply because one party requests them if the contract language does not support them.

A party claiming fees under section 1717 must “establish that the opposing party actually would have been entitled to receive them if he or she had been the prevailing party.” (Blickman Turkis LP v. MF Downtown Sunnyvale (2008) 162 Cal.App.4th 858, 899 [italics in original], (“Blickman Turkis”). In the Blickman Turkis case, noting that “[n]one of the cases cited by it authorizes a court to disregard an express limitation on the character of litigation to which an attorney fee provision will apply,” the Sixth District concluded that an attorney fee provision that by its terms limited recovery of fees to “any litigation between the parties hereto to enforce any provision of this Agreement…,” meant exactly what it said. Fees were available only to the parties to the Agreement.

Here, fees are only available “in connection with the arbitration,” which never occurred.

Accordingly, the motion seeking an award of attorney fees is DENIED.