700 Valencia Street LLC v. Farina Focaccia & Cucina Italiana, LLC

          ORDER GRANTING MOTION FOR ATTORNEYS FEES Re: Dkt. No. 47

          JOSEPH C. SPERO CHIEF MAGISTRATE JUDGE

         I. INTRODUCTION

         The dispute in these related cases revolves around a commercial lease for a restaurant property located at 702-706 Valencia Street, in San Francisco, California. In the lower-numbered case (“the Breach of Contract Action”), filed on May 21, 2015, Farina Focaccia & Cucina Italiana, LLC (“Farina Focaccia”) asserts, inter alia, that landlord 700 Valencia Street LLC (“700 Valencia”) breached the parties’ lease agreement (“Lease”) by refusing to extend the lease pursuant to an option that Farina Focaccia contends it validly exercised. The higher-numbered case (“the Unlawful Detainer Action”) is an unlawful detainer case that was brought against Farina Focaccia and Luca Minna, among others. On April 19, 2016, the Court granted a motion to dismiss (“Motion to Dismiss”) by Defendant Luca Minna in the Unlawful Detainer Action, finding that the allegations in the Unlawful Detainer complaint were not sufficient to state a claim as to Minna.

         Presently before the Court is Minna’s Motion for Attorneys’ Fees (“Motion”), in which he asks the Court to award attorneys’ fees incurred in connection with the Motion to Dismiss under California Civil Code § 1717, ^[1] pointing to the attorneys’ fees provision found at Paragraph 58 of the Lease. 700 Valencia contends Minna may not recover under Paragraph 58 because he was not a party to that the Lease. It further contends that while there are circumstances under which California law permits a non-signatory to an agreement to recover attorneys’ fees under a contractual attorneys’ fees provision, that exception to the general rule does not apply.

         The Court finds that the Motion is suitable for determination without oral argument pursuant to Civil Local Rule 7-1(b) and therefore vacates the hearing scheduled for July 29, 2016. For the reasons stated below, the Motion is GRANTED.^[2]

         II. ANALYSIS

         A. Whether Minna is Entitled to an Award of Attorneys’ Fees Under California Civil Code Section 1717

         California Civil Code section 1717 provides, in relevant part, as follows:

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.

Cal. Civ. Code § 1717. The California Supreme Court has explained that this provision “was enacted to establish mutuality of remedy where contractual provision makes recovery of attorney’s fees available for only one party.” Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 128 (1979). Consistent with this purpose, the court in Reynolds found that section 1717 should be construed “to further provide a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff would clearly be entitled to attorney’s fees should he prevail in enforcing the contractual obligation against the defendant.” Id.

         The term “on a contract” under section 1717 is construed liberally by California courts. Eden Twp. Healthcare Dist. v. Eden Med. Ctr., 220 Cal.App.4th 418, 426 (2013) (citing Turner v. Schultz, 175 Cal.App.4th 974, 979 (2009)). The court in Eden Township explains:

The phrase “action on a contract” includes not only a traditional action for damages for breach of a contract containing an attorney fees clause (e.g., Jones v. Drain (1983) 149 Cal.App.3d 484, 487- 488, 196 Cal.Rptr. 827), but also any other action that “involves” a contract under which one of the parties would be entitled to recover attorney fees if it prevails in the action (e.g., Mitchell Land & Improvement Co. v. Ristorante Ferrantelli, Inc. (2007) 158 Cal.App.4th 479, 486, 70 Cal.Rptr.3d 9). “In determining whether an action is ‘on the contract’ under section 1717, the proper focus is not on the nature of the remedy, but on the basis of the cause of action.” (Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 347, 85 Cal.Rptr.3d 532.)

Id.

         Thus, the question of whether a defendant who prevails in an unlawful detainer case may receive an award of attorneys’ fees on the basis of an attorneys’ fees provision in a lease does not focus on the abstract question of whether an unlawful detainer action sounds in tort or contract but instead, on the specific basis for the plaintiff’s claim. Consequently, California courts have found that an unlawful detainer action may or may not be an “action on a contract, ” depending on the rights the plaintiff in the action is seeking to enforce. For example, California courts have found that “an unlawful detainer action based on a lessee’s alleged breach of covenants in a lease” sounds in contract for the purposes of Section 1717. Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 211 Cal.App.4th 230, 241 (2012) (citing Mitchell Land & Imp. Co. v. Ristorante Ferrantelli, Inc., 158 Cal.App.4th 479, 490 (2007) (finding that because unlawful detainer action was premised upon an alleged breach of covenants of the lease, the action was one “on a contract” for the purposes ...