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Disputesuite.Com, LLC v. Scoreinc.Com.

Supreme Court of California

April 6, 2017, LLC, Plaintiff and Respondent,
v. et al., Defendants and Appellants.

         Superior Court Los Angeles County, No. BC489083, Ct.App. 2/2 B248694 James C. Chalfant Judge

          Weintraub Tobin Chediak Coleman Grodin, Marvin Gelfand, Brendan J. Begley; Wilson, Elser, Moskowitz, Edelman & Dicker and Robert Cooper for Defendants and Appellants.

          J.J. Little & Associates and James J. Little for Plaintiff and Respondent.

          WERDEGAR, J.

         Is the defendant in an action arising out of contract entitled to an award of attorney fees under Civil Code section 1717 (section 1717) by virtue of having obtained a dismissal from a California court on the ground that the agreement at issue contained a forum selection clause specifying the courts of another jurisdiction? In the circumstances of this case, we conclude the trial court did not abuse its discretion in finding that defendants were not prevailing parties for purposes of section 1717. Considering that the action had already been refiled in the chosen jurisdiction and the parties' substantive disputes remained unresolved, the court could reasonably conclude neither party had yet achieved its litigation objectives to an extent warranting an award of fees. (See § 1717, subd. (b)(1) [court may determine that there is no party prevailing on the contract]; Hsu v. Abbara (1995) 9 Cal.4th 863, 876 [prevailing party determination is to be made by comparing the parties' relative degrees of success “upon final resolution of the contract claims”].)

         Factual and Procedural Background

         Plaintiff, LLC (DisputeSuite) owns copyrighted software it markets to credit repair organizations (CROs) for their use in serving their customers. Defendant performs services for CROs, including supporting credit repair software such as DisputeSuite's. The individual defendants are principals of; we refer to defendants collectively as Score.

         The parties entered into a business relationship embodied in a series of oral and written agreements. Under these agreements, DisputeSuite referred CROs buying its software to Score for outsourcing services, licensed the software to Score and allowed Score to relicense it to end users, and provided Score with proprietary marketing methods. In return, Score agreed to pay DisputeSuite a commission on referred CROs, to provide services only to CROs that used DisputeSuite's software, to market that software exclusively, and to maintain the confidentiality of marketing information and software DisputeSuite provided.

         Two of the parties' written agreements, referred to as the “Master Re Seller Agreement” and the “Cross Marketing Agreement, ” contain clauses subjecting disputes arising out of the agreements to the sole jurisdiction of courts in Florida. According to DisputeSuite, a third contract, the “End User Agreement, ” had been modified to specify courts in Los Angeles as the exclusive forum for dispute resolution, but Score denied receiving notice of that modification.

         In July of 2012, DisputeSuite brought this action for breach of contract, fraud, and related causes of action, alleging Score had breached its obligations to pay commissions and to use only DisputeSuite's software in its services to CROs. In September, the court issued a preliminary injunction barring Score from transferring CROs referred by DisputeSuite to other software platforms or transferring DisputeSuite software to anyone other than the parties' joint customers.

         Citing the two Florida forum selection clauses, Score moved to dismiss the action on grounds of forum non conveniens. On October 11, 2012, the trial court granted the motion, concluding the action arose out of the Master Re Seller and Cross Marketing Agreements, which specified courts in Florida as the proper forum, rather than the End-User Agreement, which DisputeSuite maintained specified Los Angeles as the forum. The court, however, stayed the action rather than immediately dismissing it, giving DisputeSuite 60 days to refile in Florida. After granting DisputeSuite a one-week extension of that period, on December 18, 2012, the court dismissed the case and vacated its preliminary injunction.

         Score then moved to recover $84, 640 in attorney fees incurred in connection with the motion to dismiss, relying on an attorney fee clause in the Cross Marketing Agreement and on section 1717. The trial court denied the motion, finding that because the merits of the contract issues were still disputed and under litigation, Score was not the prevailing party for purposes of section 1717. In the trial court's view, a defendant would be entitled to fees for obtaining a nonmerits victory only if that victory finally ended the parties' litigation, which was not the case here. “DisputeSuite has filed suit in Florida, the more convenient forum. As Defendants have not prevailed on the parties' contract, they are not entitled to an award of reasonable attorneys' fees.”

         The Court of Appeal affirmed, agreeing with the trial court that Score was not entitled to fees because “there has been no final resolution of the contract claims.” Score had not achieved an unqualified victory on the contract claim against it. Rather, “[d]efendants succeeded only in enforcing one contractual clause, not in disposing of all of plaintiff's contract claims. Thus, defendants obtained merely an interim victory by succeeding in getting the case moved from one forum to another, thereby delaying final resolution of the contract claims.”

         We granted Score's ...

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