The Fourth District Court of Appeal's decision in Burkhalter Kessler Clement & George LLP v. Hamilton (Cal. Ct. of Appeal Case No. G054337 (Jan. 8, 2018)) reminded me of the opening lines of Carole King's 1971 hit song Sweet Seasons:
"Sometimes you win sometimes you lose
And sometimes the blues just get a hold of you
Just when you thought you had made it . . ."
The lawsuit arose from an office space sublease. When the sublessor sued the sublessee, it also named the sublessee's managing partner as an alter ego defendant. The sublessor prevailed on its breach of contract claim but the managing partner was dismissed from the case with prejudice. The sublessor then moved for its attorney's fees based on a provision in the contract providing that "In the event that either party shall bring any action or proceeding for damages or for an alleged breach of any provision of this Sublease . . . the prevailing party shall be entitled to recover reasonable attorneys' fees and court costs as part of such action or proceeding". The managing partner also moved for her attorney's fees. The trial court granted the sublessor's motion but denied the managing partner's motion.
Writing for the court, Justice Eileen C. Moore found that the sublessor's success on its breach of contract claim and recovery of attorney's fees did not prevent the managing partner from recovering her attorney fees:
When viewed from the perspective of Burkhalter's alter ego claim against Hamilton, it is apparent that Hamilton is the prevailing party on the contract. Hamilton secured an unqualified victory against Burkhalter by obtaining a judgment of dismissal with prejudice. Indeed, even though Hamilton was not a party to the contract, she is entitled to recover her attorney fees under [California Civil Code] section 1717, because Burkhalter would have been entitled to recover its attorney fees against Hamilton had it prevailed on its alleged alter ego theory of liability.
Justice Moore then propounds an interesting question of tactics. Should a plaintiff plead its alter ego claim in its initial complaint (and risk dismissal with prejudice and possible liability for attorney's fees) or should it hold off and later seek to amend a prevailing judgment? See Got Judgment? It May Not Be Too Late To Add A Judgment Debtor.