Harris v. West Bay Builders: Award of Attorney’s Fees Not Mandatory Under California Prompt Payment Statutes

By Timothy L. Pierce and Hector H. Espinosa, K&L Gates, Los Angeles

California’s prompt payment statutes, found at Business and Professions Code section 7108.5 and Public Contract Code sections 7107 and 10262.5, each contain a fee-shifting provision, stating that the prevailing party “shall” be entitled to his or her attorney’s fees and costs. In James L. Harris Painting & Decorating, Inc. v. West Bay Builders, Inc. (No. C072169), the California Court of Appeals confirmed that a trial court can, in its discretion, choose not to award either party attorney’s fees under the prompt payment statutes if the trial court determines that neither party “prevailed.”

In Harris, the prime contractor (West Bay) on a public school renovation project hired a painting subcontractor (Harris) to apply certain paint and water repellant materials on the project. Shortly after performance began, West Bay and Harris disagreed as to Harris’s scope of work under the terms of the subcontract.  Harris alleged that West Bay was requiring it to perform extra work not contemplated in the original subcontract; conversely, West Bay accused Harris of failing to perform its contractual obligations and, ultimately, walking off of the job without justification.  Harris filed a complaint against West Bay for breach of contract and failure to comply with applicable prompt payment statutes.  West Bay cross-claimed, alleging that Harris failed to complete the work in accordance with the subcontract.  At trial, a jury decided that Harris and West Bay both breached the terms of the subcontract and, as a result, did not award damages to either party. In light of the jury’s verdict, the trial court then declined to award attorney’s fees.[1]

West Bay and Safeco (West Bay’s surety) appealed the trial court’s decision not to award attorney’s fees, arguing that an award of attorney’s fees to the prevailing party is mandatory under the prompt payments statutes (“shall” award attorney’s fees) and that the trial judge, therefore, abused his discretion in refusing to award any attorney’s fees whatsoever.  According to West Bay, neither party prevailed on their breach of contract claims but West Bay did prevail as it pertained to Harris’s allegations of prompt payment violations.

The Court of Appeals disagreed with West Bay, holding that a trial court retains discretion to determine what constitutes a “prevailing party” under  the prompt payment statutes (“…when a defendant cannot in any realistic sense be said to have been successful, fees need not be awarded.  For this reason, the trial court had discretion under the prompt payment statutes in this case to determine there was no prevailing party for purpose of attorney fee shifting.”).  This determination must be based on “a practical level, after considering what each party accomplished via the litigation.” Id. (internal citations omitted).  In this case, the trial court determined that, as a practical matter, neither party “prevailed.”  To the extent that West Bay succeeded in defending against Harris’s claim that West Bay violated the prompt payment statutes, this success was inextricably intertwined with the parties’ dueling breach of contract actions which, according to the judge, entitled neither party to an award of attorney’s fees.

The Harris opinion firmly establishes that in spite of the fee-shifting provisions, a trial court can decline to award attorney’s fees to either party under the prompt payment statutes if the court determines that, as a practical matter, neither party “prevailed.”

[1] The Judge’s Order stated:  “The Jury denied all relief. Fairness dictates that each side should pay its own attorney’s fees.”

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