New Decision on Attorney Fees on Petition to Compel Arbitration

A July 3, 2013 decision from the California Court of Appeal holds that parties who prevail in petitioning for contractual arbitration will have to wait for the outcome of the arbitration to determine the “prevailing party” for purposes of awarding attorney fees and costs under Civil Code § 1717.

In Roberts v. Packard, Packard & Johnson, the Second Appellate District concluded that the trial court erred in awarding attorney fees and costs to defendants following a successful petition to compel arbitration under a contingency fee agreement that had a broad arbitration clause.

The Court held: “Because only one side — plaintiffs or their former attorneys — can prevail in enforcing the contingency fee agreement, we conclude the determination of the prevailing parties must await the resolution of plaintiffs’ causes of action by an arbitrator. Then, the trial court can determine which parties, if any, prevailed in the ‘action’ and award attorney fees as permitted by the fee provision in the parties’ contingency fee agreement.” (p. 6)