In California, the ability to recover attorney fees in a breach of contract action is not automatic. Unlike damages for breach, which are governed by Cal. Civ. Code § 3300, attorney fees are recoverable only when authorized by statute, contract, or, in rare instances, as part of equitable relief. In most contract disputes, the key to recovering fees lies in the language of the contract itself—specifically, whether it includes a valid attorney fee provision.
Understanding the statutory framework, enforceability requirements, and strategic considerations surrounding attorney fee recovery is critical to maximizing your position in breach of contract litigation.
The Statutory Basis: Civil Code § 1717
The principal statute governing contractual attorney fee recovery in California is Cal. Civ. Code § 1717. This provision ensures mutuality of remedy: if a contract gives one party the right to recover attorney fees in an action “on the contract,” the other party is entitled to fees if they prevail, regardless of whether the contract explicitly grants that right to them.
The California Supreme Court in Santisas v. Goodin, 17 Cal. 4th 599 (1998), confirmed that § 1717 applies only to actions “on a contract” and does not extend to tort claims unless they are inextricably intertwined with the contract claims.
Defining the “Prevailing Party”
Determining the prevailing party is not always straightforward. Under Cal. Civ. Code § 1717(b)(1), the court must decide who achieved the greater relief in the action, considering all claims and counterclaims. This determination is discretionary and can result in no party being deemed the prevailing party if the results are mixed.
In Hsu v. Abbara, 9 Cal. 4th 863 (1995), the court held that a party who achieves a “simple, unqualified win” on the contract is entitled to attorney fees as a matter of law.
Contractual Requirements and Drafting Considerations
A valid attorney fee clause should:
- Clearly state that the prevailing party is entitled to reasonable attorney fees and costs in any action “arising out of” or “relating to” the contract.
- Avoid overly narrow language that limits recovery to specific types of disputes.
- Consider including coverage for appellate attorney fees.
Ambiguities in fee provisions are typically construed against the drafter, which can limit recovery if the clause is poorly written.
Reasonableness of Fees
Even when a contractual or statutory basis exists, the amount recoverable must be “reasonable” under Cal. Civ. Proc. Code § 1033.5(c)(2). Courts consider factors such as:
- The time and labor required.
- The novelty and difficulty of the questions involved.
- The skill necessary to perform the legal service properly.
- The results obtained.
Excessive, duplicative, or inadequately documented fees may be reduced or denied.
Fees in Mixed Contract and Tort Actions
When a case involves both contract and tort claims, recovery of attorney fees may still be possible if the claims are factually and legally intertwined. In Abdallah v. United Savings Bank, 43 Cal. App. 4th 1101 (1996), the court awarded fees for work on related tort claims because they arose from the same set of facts as the contract claims.
Offers to Compromise and Fee-Shifting Leverage
Fee recovery can be affected by statutory settlement offers. Under Cal. Code Civ. Proc. § 998, a party who rejects a valid settlement offer and fails to obtain a more favorable result at trial may lose the right to recover post-offer attorney fees, and in some cases may have to pay the other side’s fees and costs.
Enforcement of Fee Awards
Once awarded, attorney fees become part of the judgment and are enforceable under the same provisions governing judgment collection, including Cal. Code Civ. Proc. §§ 680.010–724.260. Post-judgment interest applies, increasing the cost to the losing party over time.
Strategic Insights from a Litigator
From a lawyer’s standpoint, attorney fee provisions are powerful litigation tools. They can:
- Deter frivolous claims or defenses.
- Shift negotiation leverage.
- Significantly increase the stakes in litigation.
However, the same provision that protects you can expose you to substantial liability if you lose. A thorough risk assessment is essential before filing suit or defending a contract claim with a fee provision.
Conclusion and Call to Action
Recovering attorney fees in a breach of contract case can dramatically affect the financial outcome of litigation. Success depends on having a valid contractual provision, meeting statutory requirements, proving prevailing party status, and substantiating the reasonableness of the fees sought. At Guiding Legal Counsel, APC, we evaluate fee recovery strategies from the outset of a case, ensuring that clients are positioned to maximize recovery—or minimize exposure—when attorney fees are at stake. Contact us today to schedule a confidential consultation and discuss how we can protect your interests in contract litigation.