Khavarian Enterprises, Inc. v. Commline, Inc.
216 Cal. App. 4th 310
Cal. Ct. App.2013Background
- Vision sued for trade secret misappropriation in Aug 2010; mediation settled in Apr 2012 with a Settlement Sum excluding fees/costs and a provision that Vision could move for fees/costs under 3426.4 and 1033.5, with Defendants reserving opposition.
- Parties filed a joint notice of complete settlement and dismissed the action, reserving only Vision’s costs and attorney’s fees for court determination.
- Settlement provided that Vision would apply to the court for its attorney’s fees and costs; Defendants reserved the right to oppose and tax the costs.
- Vision filed a memorandum of costs and a motion for attorney’s fees under 1033.5 and 3426.4; Commline opposed and moved to strike the costs.
- At a July 11, 2012 hearing, the court questioned whether settlement foreclosed the motions and denied the fees and struck the costs; Vision appealed.
- Court of Appeal reversed, held the settlement allowed postsettlement court determination of prevailing party status and, if Vision could be prevailing party, whether willful/malicious misappropriation supported fees and costs; remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the settlement permits postsettlement fee/cost determination. | Vision could seek fees/costs under 3426.4 and 1033.5; settlement reserved that issue for the court. | Chinn controls; settlement forecloses fee recovery or prevails only under statutory definitions. | The settlement permits postsettlement determination of prevailing party and related fee claims. |
| Whether Vision could be the prevailing party after voluntary dismissal and settlement. | The agreement designated Vision as potential prevailing party and allowed motion for fees/costs. | Prevailing party status follows CCP 1032(a)(4) unless contract dictates otherwise; settlement here precludes automatic prevailings. | Yes; Vision could be the prevailing party, subject to court discretion after factfinding. |
| Whether the court was bound by Chinn and Vacco in denying fees postsettlement. | Chinn is distinguishable; contractual allocation allowed fee motion notwithstanding settlement. | Chinn controls where settlement is silent; postsettlement fee awards improper without finding willful/malicious misappropriation. | Chinn distinguishes but is not controlling; settlement permits postsettlement adjudication of willfulness and fees. |
| Whether the trial court could act as fact finder postsettlement on willful/malicious misappropriation. | Court could review documentary evidence to determine willfulness after settlement as part of fee award. | Without trial context, due process concerns; no finding of willfulness possible after dismissal. | Trial court may act as fact finder postsettlement to determine willfulness and fee entitlement. |
Key Cases Cited
- Chinn v. KMR Property Management, 166 Cal.App.4th 175 (Cal. Ct. App. 2008) (allocation of costs/fees in settlement; can define proceedings outside CCP 1032)
- Vacco Industries, Inc. v. van Den Berg, 5 Cal.App.4th 34 (Cal. Ct. App. 1992) (postsettlement fee awards; costs defined under 1033.5/1032)
- Santisas v. Goodin, 17 Cal.4th 599 (Cal. 1998) (limits of contract-based attorney fee awards after dismissal)
- Olen v. Vickers International?, 21 Cal.3d 218 (Cal. 1968) (pre-1717; policy on contractual fees after voluntary dismissal)
- Kim v. Euromotors West/The Auto Gallery, 149 Cal.App.4th 170 (Cal. Ct. App. 2007) (prevailing party for contractual fee under CLRA context post-settlement)
- Folsom v. Butte County Assn. of Governments, 32 Cal.3d 668 (Cal. 1982) (fees as costs; fees may be considered as incident to judgment)