Cussler v. Crusader Entertainment, LLC
150 Cal. Rptr. 3d 895, 212 Cal. App. 4th 356 (2012)
Rule of Law:
A trial court does not abuse its discretion in determining there is no prevailing party for attorney fees under Civil Code section 1717 when both parties on a contract claim sought monetary relief but neither ultimately recovered affirmative relief; however, a defendant is a prevailing party entitled to recover routine costs as a matter of right under Code of Civil Procedure section 1032 when neither plaintiff nor defendant obtains any relief, and a 7% interest rate on restitution is permissible in the absence of evidence of actual returns on collected funds.
Facts:
- Clive Cussler, an author, and Crusader Entertainment, LLC, a film producer, entered into a contract on May 9, 2001, for Crusader to purchase film rights to the novel Sahara and a second novel from Cussler.
- The contract stipulated that if certain conditions were met, Crusader would pay Cussler $20 million in seven annual installments for the film rights.
- The agreement also required Cussler's written approval, in his sole and absolute discretion, for any changes to an Approved Screenplay for the Sahara film, and prohibited Cussler from disseminating publicity without Crusader’s approval.
- In November 2001, Crusader exercised its initial option, but the relationship between the parties subsequently deteriorated.
- Cussler claimed Crusader made unacceptable changes to the screenplay, while Crusader claimed Cussler unreasonably withheld approval and breached the contract by making derogatory public statements about the film.
- The film Sahara was released in April 2005 but was not a commercial success, and Crusader did not produce a second Dirk Pitt film.
- Crusader paid Cussler four of the seven annual installments, totaling $11,428,571, but disputed its obligation to pay the remaining $8,571,429.
- During the litigation, Crusader collected $20,907,200.14 from Cussler pursuant to an erroneous judgment that was later reversed on appeal.
Procedural Posture:
- In January 2004, Clive Cussler commenced a lawsuit against Crusader Entertainment, LLC, by filing a complaint in Los Angeles County Superior Court.
- In November 2005 and October 2006, Crusader deposited two disputed installments totaling $5,714,286 with the superior court.
- In the spring of 2007, the superior court conducted a 14-week trial.
- On May 15, 2007, the jury returned a special verdict, finding that both Crusader and Cussler breached the contract but sustained no damages, rejecting both parties' fraud claims, but found Cussler breached the implied covenant of good faith and fair dealing, resulting in $5 million in damages for Crusader.
- In July 2007, Crusader dismissed its cause of action for declaratory relief with prejudice.
- In January 2008, the trial court denied Cussler's post-trial motions for judgment of $8,571,429 and for leave to amend his complaint.
- In February 2008, the trial court dismissed Cussler's first cause of action for declaratory relief as moot.
- On May 15, 2008, the trial court entered a judgment that Cussler "shall take nothing" from Crusader and that Crusader shall recover $5 million in damages, prejudgment interest, and costs as "the prevailing party."
- Cussler appealed this May 15, 2008, judgment (Cussler as appellant, Crusader as appellee).
- On March 3, 2010, the Court of Appeal (in Cussler I) reversed the $5 million award to Crusader and the trial court’s finding that Crusader was the prevailing party, but otherwise affirmed the judgment and remanded the case to determine the prevailing party.
- On June 9, 2010, the California Supreme Court denied both Cussler’s and Crusader’s petitions for review of Cussler I.
- On April 21, 2009, the trial court entered an order awarding Crusader $13,949,131 in attorney fees (Fee Order), which Cussler timely appealed (Cussler as appellant, Crusader as appellee).
- In July 2009, Crusader collected $20,907,200.14 from Cussler.
- On October 22, 2009, the trial court issued a Second Fee Order awarding Crusader $150,000 in attorney fees for postjudgment enforcement efforts, which Cussler also appealed (Cussler as appellant, Crusader as appellee).
- On September 8, 2010, the Court of Appeal (in Cussler II and Cussler III) granted Cussler’s motion for summary reversal of the Fee Order and Second Fee Order, declaring them void in light of Cussler I.
- On December 8, 2010, after remand from Cussler I, the trial court issued an order denying both Cussler’s and Crusader’s motions for attorney fees, finding no prevailing party, and released the $5,714,286 in funds deposited with the court to Crusader.
- On December 20, 2010, Crusader filed a motion for clarification, arguing it was the mandatory prevailing party for costs under Code of Civil Procedure section 1032.
- On January 14, 2011, Cussler filed a motion for restitution of $20,907,200.14 collected by Crusader, plus 10% interest.
- On February 8, 2011, the trial court granted Crusader’s clarification motion, awarding Crusader $514,237.47 in costs, and also granted Cussler’s motion for restitution, awarding him the collected amount (less costs) plus 7% interest, totaling $22,547,857.86.
- Cussler and Crusader filed separate timely notices of appeal of the February 8, 2011 order, which were consolidated on June 7, 2011.
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Issue:
1. Did the trial court abuse its discretion by finding no prevailing party for purposes of awarding attorney fees under Civil Code section 1717 when both parties sought monetary relief but neither ultimately recovered any affirmative relief on their contract claims? 2. Did the trial court abuse its discretion by awarding 7% interest on restitution recovered under Code of Civil Procedure section 908, despite a lack of evidence regarding the actual return on the funds? 3. Was a defendant, against whom a plaintiff obtained no relief and who obtained no relief on its cross-complaint, a prevailing party entitled to recover costs as a matter of right under Code of Civil Procedure section 1032, subdivision (a)(4)?
Opinions:
Majority - Kitching, J.
No, the trial court did not abuse its discretion by finding that there was no prevailing party for purposes of attorney fees. Civil Code section 1717 grants the 'party prevailing on the contract' a right to recover attorney fees, but it also explicitly allows a trial court to determine there is no prevailing party. In making this determination, the trial court compares the relief awarded on contract claims with the parties' demands and litigation objectives. Here, both Cussler and Crusader sought millions of dollars from each other on their contract claims but ultimately recovered nothing, with neither side obtaining any affirmative relief. The trial court's wide discretion in determining the prevailing party for attorney fees means such a ruling is reviewed for abuse of discretion, which occurs only if the court acts in an arbitrary, capricious, or patently absurd manner. Given that both parties lost on their main objectives of seeking affirmative relief on the contract, the trial court acted well within its discretion. No, the trial court did not abuse its discretion by awarding Cussler 7% interest on the restitution he recovered. Where one party collects money based on an erroneous judgment later overturned, the other party may seek restitution, and the court has discretion to award interest on that amount. Interest is generally awarded unless it would be inequitable. Crusader conceded the court's discretion to award interest but argued for a lower rate (1.4%). However, Crusader provided no factual or legal basis for this rate, and it failed to provide evidence of what it actually did with the collected funds or the rate of return it earned. In the absence of such evidence, the trial court appropriately used 7%, which is the constitutional prejudgment interest rate, a decision that was not arbitrary or absurd. This rate serves to compensate the party for the time value of money, akin to interest on damages. Yes, Crusader was a prevailing party under Code of Civil Procedure section 1032, subdivision (a)(4), and was entitled to recover costs as a matter of right. Code of Civil Procedure section 1032, subdivision (b), states that a prevailing party is entitled to costs as a matter of right, unless otherwise expressly provided by statute. Section 1032, subdivision (a)(4), defines 'prevailing party' to include 'a defendant where neither plaintiff nor defendant obtains any relief.' In this case, Cussler recovered nothing on his complaint, and Crusader recovered nothing on its cross-complaint. This situation squarely fits the statutory definition, as confirmed by precedents like McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. The trial court's discretion under this section is limited to situations involving nonmonetary relief or those 'other than as specified,' neither of which applied here. Cussler's claim for nonmonetary declaratory relief became moot for reasons independent of his litigation efforts.
Analysis:
This case clarifies the nuanced distinction in California law between 'prevailing party' determinations for attorney fees under Civil Code section 1717 and for routine costs under Code of Civil Procedure section 1032. It reaffirms the broad discretion afforded to trial courts when neither party achieves a clear victory on their contract claims for affirmative relief, permitting a finding of 'no prevailing party' for attorney fees. Simultaneously, it emphasizes the mandatory nature of cost awards to a defendant when a plaintiff obtains no relief and the defendant also obtains no affirmative relief on a cross-complaint, providing greater certainty for cost recovery in 'tie' litigation scenarios. Furthermore, the decision provides guidance on the appropriate interest rate for restitution in the absence of specific evidence regarding the use of collected funds, defaulting to the constitutional rate to compensate for the time value of money.
