In Kaufman v. Diskeeper Corp., 2014 DJDAR 11468, the California Court of Appeal for the Second Appellate District decided an interesting case involving the interplay of a filed Memorandum of Costs and a related Petition to Recover Attorney Fees.

An employee sued his employer for wrongful termination. After the lawsuit settled, a comprehensive settlement agreement was drafted, which contained an attorney fee provision. The agreement also contained an arbitration provision for resolving disputes that might arise concerning the agreement.

The employer subsequently filed for arbitration against the former employee and his attorney. The Petition to Compel Arbitration alleged that the employee failed to comply with important provisions of the resolution agreement. The arbitrator found in favor of the employer. Both parties then filed motions with the trial court. The employee sought to vacate the arbitrator’s decision. The employer sought a ruling confirming the award. The trial court ultimately confirmed the arbitration award and entered judgment for the employer.

The employer then filed a motion for an award of attorney fees, claiming that it was the prevailing party in the arbitration. However, the trial court denied the motion on the ground that a timely Memorandum of Costs was not submitted in conjunction with the fee petition.

The employer appealed and the trial court’s decision was reversed. The court noted that a contractual request for attorney fees must be based on Civil Code Section 1717. That statute states that reasonable attorney fees are “an element of the costs of suit.” The California Rules of Court (Rule 3.1700) requires a party claiming costs to file a Memorandum of Costs.

The court of appeal noted, however, that there is built in ambiguity in the process. Although Rule 3.1702(b) governs attorney fees which are incurred prior to a trial court judgment, it fails to even mention a Memorandum of Costs. The court of appeal also pointed out that Rule 3.1702(e) requires attorney fees to be claimed in a Memorandum of Costs only when an attorney fees motion is not required. On this basis, the court of appeal concluded that Rule 3.1700 did not apply as Section 1717 fee claims are solely governed by Rule 3.1702.