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Kandy Kiss of California, Inc v. Tex-Ellent

September 21, 2012

KANDY KISS OF CALIFORNIA, INC., PLAINTIFF AND APPELLANT,
v.
TEX-ELLENT, INC., DEFENDANT AND RESPONDENT.



APPEAL from an order of the Superior Court of Los Angeles County, Soussan G. Bruguera, Judge. (Los Angeles County Super. Ct. No. BC422116)

The opinion of the court was delivered by: Sortino, J.*fn4

CERTIFIED FOR PUBLICATION

Affirmed and remanded with directions.

Appellant Kandy Kiss of California, Inc. (Kandy Kiss) appeals from the trial court's award of attorney's fees to respondent Tex-Ellent, Inc., dba Paramount Textiles (Paramount), after Paramount successfully moved to dismiss Kandy Kiss's complaint against it for lack of subject matter jurisdiction. We affirm the trial court's award of attorney's fees and remand for a determination of reasonable attorney's fees incurred by Paramount in the litigation of this appeal.

BACKGROUND

Paramount, a fabric wholesaler, provided Kandy Kiss, a clothing manufacturer and wholesaler, with a small fabric sample bearing a paisley print design. The purchase order issued by Kandy Kiss to Paramount for the sample contained various statements regarding attorney's fees in the event of litigation:

"Seller [Paramount] shall indemnify and hold Buyer [Kandy Kiss] harmless from and against any and all claims, demands, lawsuits proceedings, liabilities, losses, damages, costs, and expenses (including attorneys' fees) arising out of any harm, injury, death, damage or loss suffered by any individual or entity or the property or business if any individual or entity in any manner caused or alleged to have been caused in whole or in part by any of the goods and/or services. . . . Seller will defend and save us harmless from any loss or damage, including our attorneys' fees and expenses, arising out any actual or alleged violation thereof. Seller will also defend and save us harmless from loss or damage, including our attorneys' fees and expenses, by reason of actual or alleged infringement of letters patent or copyright. Additionally, Seller will defend and save Buyer harmless from any loss or damage or claims by third parties, including Buyer's attorneys' fees and expenses arising out of any actual or alleged negligence, [or] breach of express or implied warranties[.]"

Similarly, the invoice submitted to Kandy Kiss from Paramount when it shipped the fabric sample also contained a reference to attorney's fees:

"In the event of any dispute regarding this or any related transaction, the prevailing party shall be entitled to reasonable attorney's fees and costs or [sic] arbitrating whether or not litigation or arbitration ensues or is conducted. Prevailing party shall include one who substantially obtains or defeats the relief sought whether by settlement, judgment of the claim or defense by the other party."

Kandy Kiss eventually developed a garment line utilizing the print design which it sold to retailers Target Corporation and Target Brands, Inc. (collectively Target), and Mervyn's. Initially, Kandy Kiss intended to purchase the fabric for the garment line from Paramount, and issued "fabric commits" to Paramount which stated that Kandy Kiss's overseas garment manufacturers would be issuing purchase orders to Paramount for the necessary fabric. Ultimately, however, Kandy Kiss instead purchased the fabric directly from a Chinese textile manufacturer, Pallas Textile Co., Ltd. According to Kandy Kiss, this switch in suppliers was at Paramount's request. Also according to Kandy Kiss, Paramount facilitated the transaction with Pallas and received compensation from Pallas for its participation in the sale.

Unfortunately, neither Paramount nor Pallas owned the paisley design. Another entity, L.A. Printex Industries, Inc., owned the copyright to the paisley print design. After discovering that Kandy Kiss paisley garments were being sold by Target, L.A. Printex sued Kandy Kiss, Paramount, Target, and Hongdou, Inc. (one of Kandy Kiss's overseas garment manufacturers) in federal court for copyright infringement. At trial, the federal jury determined that all four did in fact infringe L.A. Printex's copyright in the design, and awarded damages in the following amounts: $20,000 against Kandy Kiss, $175,000 against Target, $5,000 against Hongdou, and $36,624 against all defendants jointly and severally.

Shortly thereafter, Kandy Kiss filed the immediate action against Paramount for breach of warranty. In its prayer for damages, Kandy Kiss sought actual and consequential damages in the amount of $570,000. It also requested recovery of attorney's fees, pursuant to contract, incurred during the pursuit of this litigation.

Eventually, Paramount moved to dismiss Kandy Kiss's lawsuit for lack of subject matter jurisdiction. Paramount contended that the case arose under the Federal Copyright Act (17 U.S.C. § 101 et seq.) and that jurisdiction vested exclusively in the federal court. Ultimately, the trial court agreed and dismissed the action. In its order of dismissal, the court awarded Paramount $3,462.65 in costs.

Thereafter, Paramount moved for attorney's fees pursuant to contract, claiming that it was the prevailing party in the case. The trial court ultimately agreed, and eventually awarded Paramount $129,492.49 in attorney's fees. It is from this order that Kandy Kiss appeals.

Kandy Kiss did not appeal from the trial court's dismissal for lack of subject matter jurisdiction. Instead, it filed an action against Paramount in the United States District Court for the Central District of California (Los Angeles), again alleging breach of warranty, as well as fraud and negligent misrepresentation. Recently, on June 26, 2012, the district court granted Paramount's motion for summary judgment, and dismissed all of Kandy Kiss's claims against Paramount. More recently, on August 8, 2012, the district court denied Paramount's ...


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