Mountain Air Enterprises, LLC v. Sundowner Towers, LLC

An affirmative defense based on a contract is not “an action or proceeding brought” to enforce that contract for purposes of the contract’s attorney fee clause.  This decision holds that an attorney fee clause which provides for a fee award in “any action or proceeding brought” to enforce the contract does not apply if the contract containing the attorney fee clause is raised only as an affirmative defense to a suit brought on some other basis.  Here, defendant successfully raised a later contract containing an integration clause superseding all prior contracts between the parties as a novation defense to the plaintiff’s suit on a prior contract.  The affirmative defense was not a proceeding or an action but only a step in the overall action or proceeding that the plaintiff brought on other grounds.  However, fees were properly awarded anyway since the attorney fee clause also allowed fees if an action or proceeding was brought “because of an alleged dispute . . . in connection with any provision of this Agreement.”  The plaintiff’s suit on an earlier contract on the same subject as the later agreement containing the attorney fee clause was an alleged dispute that necessarily had some connection to the later agreement since the court would have to determine which of the two governed the parties rights.

California Supreme Court (Chin, J.; Kruger, J., dissenting); July 31, 2017; 2017 WL 3222520

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