The Lack Of An Enforceable Contract Does Not Require Denial Of Attorney Fees Claim

by Hinshaw & Culbertson LLP
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In Douglas E. Barnhart Inc. v. CMC Fabricators Inc., 2012 DJDAR 15717 (2012), the California Court of Appeal for the Fourth Appellate District decided a unique and interesting claim for attorney fees arising from the alleged breach of a construction contract.

A general contractor solicited bids from subcontractors for metalwork at a public building. CMC Fabricators Inc. (“CMC”) submitted a proposal to do the work. The general contractor used CMC’s price in preparing its own comprehensive bid for the public works project.

Subsequently, the general contractor and CMC failed to agree on the essential terms of the subcontract. The general contractor then retained a different subcontractor for the library work. The general contractor sued CMC based on the legal theories of breach of contract and promissory estoppel. The trial court rejected the general contractor’s breach of contract claim, but found liability against CMC on the promissory estoppel theories.

CMC then moved for attorney fees at the trial court level. The fee claim was based on language in its bid that stated the “prevailing party” would recover attorney fees in any litigation related to the bid. CMC asserted that it was the “prevailing party” because it had defeated the general contractor’s breach of contract claim. The trial court disagreed.

The Fourth District reversed the lower court’s decision denying the fee claims. The court noted that in California, absent a contract or statute to the contrary, each party to a lawsuit must pay its own attorney fees. The court noted that under the facts presented, if the general contractor had proven its breach of contract claim, it would have been entitled to an award of attorney fees. Although the general contractor did not prevail, the court nonetheless engaged in an extensive analysis whether an action for promissory estoppel is an action “on a contract.” The court concluded that a claim on such a theory is not “on the contract” and denied the general contractor’s fee claim on that basis too.

The court continued its analysis and concluded that CMC had a legal right to recover the attorney fees incurred because it proved that the contract was nonexistent. As the prevailing party in that dispute, CMC was entitled to recovery of attorney fees as it defeated the general contractor’s breach of contract claim.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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