Brief Summary: Plaintiff sought a temporary restraining order against mandatory arbitration. Defendant argued that arbitration should be permitted pursuant to the contract entered into between plaintiff and defendant. The trial court denied plaintiff’s request and awarded attorney fees to defendant as prevailing party under the terms of the contract. Plaintiff appealed saying that attorney fees should not be awarded because the dispute was not “on the contract” and defendant failed to prevail on the final issues. The appellate court rejected plaintiff’s contention saying that the court’s liberally construe what constitutes “on the contract” and that the determination to require arbitration was a final resolution.

Case Summary: Plaintiff was a shareholder in a company along with two other shareholders. In 2004, the company laid off plaintiff as an employee. As part of their contract, if the company laid off an employee, the company could then buy back the shares held by the employee. Plaintiff argued he did not receive fair evaluation of his shares at time of the buy out.

Pursuant to the agreement, any dispute must go to arbitration. Plaintiff challenged the entire agreement saying he signed it under the pretense of fraud. Defendants continued to move forward with arbitration. Plaintiff then filed a motion with the superior court for a temporary restraining order and a request to select new arbitrators. Defendants prevailed and plaintiff appealed. The appeals court dismissed the action and remanded it back to the trial court. Defendants moved for judgment on the pleadings. The trial court granted the motion and awarded attorney fees. Plaintiff appealed again.

On appeal, plaintiff contends that the lower court did not make a ruling on the contract, and the court did not issue a final resolution; thus an award of attorney fees was not appropriate.

When a contract awards attorney fees to a prevailing party, the party recovers for any action “on the contract.” Shadoan v. World Savings & Loan Assn. (1982) 135 Cal.App.3d 97, 107. Courts liberally construe the term “on a contract,” for purposes of California Civil Code Section 1717. So long as the dispute involves a contract, it satisfies Section 1717. Blickmana Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 894.

A determination of final resolution of a matter is considered on a case by case basis. In a case where the court granted a motion to compel arbitration, the court determined that the contract contemplated litigation over the arbitration clause. Acosta v. Kerrigan (2007) 150 Cal.App.4th 1124, 1129-1130. In Ascosta, the court reasoned that even though this ruling was interim to the resolution of the overall issue, the prevailing party had a right to attorney’s fees under a separate clause in the contract. Id. at 1131-1132.

The California Supreme Court also determined where a party successfully opposed a petition to compel arbitration, even though further litigation on the merits loomed, the lower court reached a final resolution and should award attorney’s fees. Christensen v. Dewor Developments (1983) 33 Cal.3d 778, 780-781, The Supreme court agreed that the prevailing party, for purposes of an attorney fee’s award need not always prevail on the final issue in dispute. Rather, where the prevailing party achieved a resolution separate from the issue raised upon arbitration, the court may award attorney’s fees where appropriate.

In the current case, defendant prevailed on the issue as to whether or not parties had to partake in arbitration. The court’s ruling related to the contract in determining the scope of the arbitration clause, thus triggering the attorney’s fees clause. Although the court did not resolve the contractual dispute, such requirement is not needed to determine if attorney fees should be awarded. Therefore, the lower court correctly awarded attorney fees to the defendant.