In complex litigation, as jurisdictional and factual circumstances become increasingly complicated, it is regularly difficult to ascertain the identity of prevailing parties. In Profit Concepts Management, Inc. v. Griffith, the Court of Appeal (Fourth Appellate District, Division Three) offers some additional guidance on the concept. Specifically, the Court considered whether a defendant that successfully quashed service for lack of personal jurisdiction was a "prevailing party" entitled to recover attorney's fees pursuant to a fee recovery clause in a contract underlying the dispute.
The Court first established the framework for its analysis: "Attorney fees are allowable as costs under Code of Civil Procedure section 1032 when they are authorized by contract. (Code Civ. Proc., § 1033.5, subd. (a)(10)(A).)" (Slip op., at p. 3.) Next, the Court noted that authority cited in the trial court by appellant (Berard Construction Co. v. Municipal Court (1975) 49 Cal.App.3d 710) relied upon a prior version of Civil Code section 1717 that had been amended subsequently. The Court than analyzed the outcome of the matter before it to determine if Griffith prevailed:
The only claims before the trial court were contained in Profit Concepts’s complaint, which sought compensatory and punitive damages in an amount to be determined, as well as preliminary and permanent injunctive relief. The case in California has been finally resolved. What was awarded on Profit Concepts’s complaint? Zero. Thus, the contract claim was finally resolved within the meaning of Hsu v. Abbara, and that case does not use the term “merits.”
(Slip op., at 7.) Here's the real catch to all of this: "Griffith moved to quash service of summons for lack of personal jurisdiction. Profit Concepts filed a notice of nonopposition to the motion to quash, and the trial court granted the motion." (Slip op., at 3.) You'd have to imagine that Profit Concepts would have opposed the Motion to Quash if it knew that the granting of the Motion would have resulted in Griffith obtaining attorney's fees as the "prevailing party." While this action isn't complex, you can certainly imagine situations like this arising in complex actions with dozens of defendants and cross-defendants. Moral: Be careful who you name as a party in a contract-based action. You might be writing them a check for their attorney's fees.