Page 1
Ninth Circuit Affirms Plaintiff’s Fee Award of Over $4 Million
Opinion Says Fact That Defendants Successfully Litigated Mitigation Defense, Reducing Damages, Did Not Deprive Other Party of Prevailing Status Where Plaintiff Defeated Counterclaims, Achieved $6 Million Judgment
By Kimber Cooley, associate editor
The Ninth U.S. Circuit Court of Appeals yesterday affirmed an order granting attorney fees of more than $4 million to a plaintiff, as the “prevailing party” in a breach of contract action, rejecting the defendant’s contention that no party had prevailed as the results were “mixed” due to certain litigation losses and a successful affirmative mitigation defense causing the jury’s award of $12 million in damages to be cut in half.
An appeal following the judgment, in which the plaintiff unsuccessfully challenged certain of the court’s pretrial rulings, was also found to be insufficient evidence that the plaintiff, which originally sought over $55 million in damages, did not achieve its litigation objectives.
At issue is California’s Civil Code §1717, which provides that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded…to the prevailing party, then the party who is determined to be the party prevailing on the contract…shall be entitled to reasonable attorney’s fees in addition to other costs.”
Appealing the award were Guardian Protection Product Inc (“Guardian”) and RPM Wood Finishes Group Inc. (“RPM”), which argued that the years-long litigation, involving multiple trials and appeals, failed to yield a clear enough winner to justify an award of fees under the contract between the parties.
Complaint Filed
Plaintiff G.P.P Inc., which does business as Guardian Innovation Solutions (“GIS”), filed a complaint in 2015 against Guardian, alleging that the defendant, which sells furniture protection products, breached warehousing distributor agreements (WDAs) authorizing GIS to serve as a distributor of Guardian’s products. GIS asserted breach of contract and other claims.
An amended pleading also named RPM as a defendant as to some claims based on an alter ego theory of liability.
After a first trial resulted in the jury rejecting all claims and counterclaims, GIS successfully appealed summary judgment orders dismissing certain causes of action and the Ninth Circuit remanded for retrial.
A new trial was held in December 2021, and this time the jury found for GIS in the amount of $12 million, but reduced the award to $6 million after finding that GIS could have avoided half of the damages with reasonable efforts or expenditures.
In September 2023, the parties filed cross-motions for attorney fees, citing provisions in the WDAs that provide “should any action be initiated upon this contract, the party prevailing in the…court of law shall be awarded its actual attorney fees, in addition to any other court costs or awards by the court.” GIS sought fees only against Guardian.
Attorney Fee Award
Magistrate Judge Sheila K. Oberto of the Eastern District of California conducted a claim-by-claim evaluation based on the second trial and said:
“In this case, the result suggested by the claim tally actually correlates to litigation success. The gravamen of this lawsuit…is the allegation that Guardian, either directly or through its alter ego RPM, diminished and/or deprived GIS of its rights under the various WDAs. As to this pervading issue, GIS clearly prevailed, its litigation objectives met not only by obtaining $6 million in damages on its affirmative claims, but also by successfully defending against liability on all of Guardian’s counterclaims….
“Applying equitable considerations to this case,…the Court finds that GIS, having achieved ‘greater relief’ than Defendants ‘in the action on the contracts,’ is the prevailing party and therefore entitled to attorney’s fees under Section 1717. The Court shall therefore grant GIS’s motion for attorney’s fees and, as a result, shall deny Defendants’ motion for attorney’s fees.”
She found GIS’ request for $4,353,283 was reasonable, relying on declarations provided by Dylan J. Liddiard and Dylan J. Savage, partners at the Palo Alto offices of Wilson Sonsini Goodrich & Rosati P.C., indicating hourly rates between $350 and $400 for partners and $175 to $350 for associates. The firm claimed a total of 12,967.6 hours of work on the matter.
In an opinion authored by Circuit Judge Milan D. Smith Jr, and joined in by Circuit Judge Patrick J. Bumatay and Tenth Circuit Judge Timothy M. Tymkovich, sitting by designation, the court affirmed the award as against Guardian, and the denial of fees to that defendant. The court found that Oberto had erred in the analysis of whether RPM was entitled to fees as to claims GIS abandoned before trial, remanding for reconsideration of the issue.
Sec. 1717
Smith noted that §1717(b) defines “prevailing party” as “the party who recovered a greater relief in the action on the contract” but also specifies that a court may determine that no party has prevailed. He cited the 1995 California Supreme Court case of Hsu v. Abbara as providing guidance on how to determine if a party qualifies as “prevailing” under the section.
In an opinion authored by then-Justice Joyce L. Kennard (now retired), the court concluded that “[i]f neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.”
Pointing to language in the Hsu decision indicating that courts should compare the relief actually awarded to the party’s demands on the claims and the litigation objectives disclosed by the pleadings, the defendants argue that Oberto erred by failing to give weight to certain GIS litigation losses and to Guardian’s success on the affirmative mitigation defense.
Unpersuaded, Smith wrote:
“Although Hsu mandates ‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions,’ it encourages courts to ‘respect substance rather than form,’ and emphasizes that § 1717 ‘vests the trial court with discretion’ in evaluating applicable equitable considerations….
“The district court satisfied that mandate here. Although it conducted the…‘tally’ of the parties’ claim by-claim victories, it described this ‘rudimentary calculation’ as ‘only part of the analysis.’ The court then proceeded to consider appropriate equitable considerations, including GIS’s successful defense of ‘all of Guardian’s counterclaims,’…GIS’s ‘unqualified victory on appeal’ before this court, and the jury’s ‘ultimate[] award[] [of] millions of dollars.’….In finding that GIS achieved a litigation victory as to [the] ‘pervading issue,’ the district court developed and focused its analysis appropriately.”
Affirmative Defense
Turning to the Guardian’s successful litigation of its affirmative mitigation defense, Smith remarked:
“[T]he district court….recognized…that ‘Guardian’s lack-of-mitigation affirmative defense…result[ed] in a net award of $6 million to GIS.’ But the district court also acknowledged that the jury did not ‘value[] Guardian’s affirmative defense as equal to the value of GIS’s claims.’ The district court thus found that, because GIS overcame the affirmative defense to receive a sizable award of damages, the ‘net judgment in its favor’ was a ‘significant’ marker of litigation success. Contrary to Defendants’ contentions, we discern no fault in this logic, or in the court’s overall assessment of equitable considerations.”
As to asserted litigation “failures” suffered by GIS, he added:
“Specifically, Defendants criticize the district court for ‘refus[ing] to consider’ GIS’s ‘failed…appeal’ arising out of the second trial. But the district court did address GIS’s…appeal. It found that, though the appeal was not successful, GIS’s ‘failure…to achieve all of its litigation objectives d[id] not preclude a finding that [it] prevailed.’ The court premised its analysis, in part, on its view that critical review of failed appeals for purposes of fee awards ‘could have a chilling effect on a party’s right to pursue an appeal.’ Defendants provide no authority to suggest that this view was erroneous.”
Prevailing Party
The defendants contend that the litigation outcome was “so equivocal” as to require a finding that neither party prevailed.
Noting that the question was within the discretion of the trial court as the defendants “do not contend that Guardian achieved a complete victory,” Smith declared:
“We conclude that the district court did not abuse its discretion in identifying GIS as the prevailing party…. Although GIS prevailed on all of its contract claims in the 2021 trial, it secured only a portion of the damages and other forms of relief it sought, and it ultimately failed to prevail on its appeal stemming from that trial. This ‘mixed’ result deprives GIS—and Guardian—of an automatic entitlement to fees….However, ‘even though [GIS] did not successfully obtain all the relief which [it] sought in the action,’ it is a ‘general rule’ that ‘where claims and counterclaims arise in connection with a contract containing an attorney’s fees provision, the party who obtains a favorable judgment is deemed to be the prevailing party.’…GIS falls within the constraints of this rule.”
The case is G.P.P. Inc. v. Guardian Protection Products Inc., 23-4167.
Copyright 2025, Metropolitan News Company