The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge
ORDER DENYING DEFENDANTS' MOTION FOR ATTORNEY'S FEES*fn1
On June 1, 2010, Defendants Robert Lowe and Robert Draizen (collectively, "Defendants") filed a motion for attorney's fees under Federal Rule of Civil Procedure 54 and California Civil Code section 1717. (Docket No. 152.) A jury trial was held in this action on April 27 and 28, 2010, on Plaintiff's conversion claim. The jury found that Plaintiff prevailed on his conversion claim against Defendant Lowe and awarded Plaintiff $243,516.66, but found in favor of Defendant Draizen. Defendants argue they are entitled to attorney's fees under a contract since they are prevailing parties on Plaintiff's breach of contract, "disregard of the corporate entity" and breach of fiduciary duty claims. Defendant Draizen also argues he is entitled to an award of attorney's fees since he is a prevailing party on Plaintiff's conversion claim. Plaintiff opposes Defendants' motion, arguing that there is no contractual or statutory basis for awarding attorney's fees to either Defendant. For the reasons stated below, Defendants' motion is DENIED.
Plaintiff filed his complaint in Washington state court, alleging claims of breach of contract, conversion, unjust enrichment, wrongful withholding of wages, tortious interference with contractual relations, breach of fiduciary duty, and negligence against MortgageTree Lending, Inc. ("MortgageTree"), Diana Grossmann, Robert Draizen, Patrick Mize and Rodney Lowe. (Compl. ¶ 21.) Plaintiff's complaint also sought to "[d]isregard... MortgageTree's corporate entity." (Prayer for Relief ¶ 2.)
The state court case was removed to federal court and then was transferred to this court. Later, on November 11, 2009, the parties filed a Joint Pretrial Statement ("JPS") in which the parties stated that Plaintiff's following three claims against Defendants Lowe and Draizen would proceed to trial: conversion, breach of fiduciary duty, and disregard of the corporate entity. However, at a pre-trial hearing held on April 27, 2010, Plaintiff voluntarily dismissed his breach of fiduciary duty and disregard of the corporate entity claims.
"Under the American Rule, the prevailing party [in litigation] is ordinarily not entitled to collect a reasonable attorneys' fee from the loser. This default rule can, [however,]... be over come by statute [or]... by an enforceable contract allocating attorney's fees." Travelers Cas. & Sur. Co. of Am. v. Pacific Gas & Elec. Co., 549 U.S. 443, 448 (2007) (quotations and citations omitted). Defendants contend they are entitled to recover attorneys' fees under a fee shifting provision in the "Agreement, Waiver and General Release," (the "Agreement") entered into by Plaintiff and MortgageTree on October 27, 2003. (Lapcevic Decl. Ex. C.)
State law governs the interpretation and application of contractual attorney fee provisions. See Resolution Trust Corp. v. Midwest Fed. Sav. Bank, 36 F.3d 785, 800 (9th Cir. 1993) (applying California law to interpret contract that included fee shifting provision). California Civil Code section 1717 ("section 1717") governs the recovery of attorneys' fees recoverable under a contract. See Farmers Ins. Exchange v. Law Offices of Conrado Joe Sayas, Jr., 250 F.3d 1234, 1237 (9th Cir. 2001) (stating that under California law, "where the parties have contractually obligated themselves to pay attorneys' fees" section 1717 governs.) Section 1717 provides in pertinent part:
(a) In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs....
(b)(1) The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract....
(2) Where an action has been voluntarily dismissed..., there shall be no prevailing party for purposes of this section.
Cal. Civ. Code § 1717. "Therefore, in order for [Defendants] to recover the attorney fees [they] seek, (1) [a] contract must authorize such fees, (2) [Defendants] must be the prevailing party, and (3) the fees incurred must be reasonable." First Nat. Ins. Co. v. MBA Const., No. 2:04-CV-836-GEB-JFM, 2005 WL 3406336, at *2 (E.D. Cal. Dec. 12, 2005).
Defendants argue they are entitled to recover attorneys' fees under a fee shifting provision in the Agreement. Plaintiff responds that since neither Defendant Draizen nor Defendant Lowe are a party to the Agreement, there is no contractual basis for awarding attorneys' fees, and further, ...