The Rule of O'Leary v. Jones is that a party who obtains dismissal of a petition to confirm arbitration award on personal jurisdiction grounds is not a prevailing party under Civil Code section 1717 where the dismissal does not finally resolve the enforceability of the arbitration award and leaves the underlying contract dispute unresolved, under circumstances where the court expressly declines to rule on vacation of the award and the substantive claims may be pursued in another forum.
Appeal from order denying attorney's fees and costs in Superior Court, Riverside County.
Cross-defendant Appellant was Walter Jones III — the guarantor of a commercial lease who sought attorney's fees after a petition to confirm arbitration award against him was dismissed for lack of personal jurisdiction.
Cross-complainant Respondent was Jennifer O'Leary — successor in interest to Michael Scheinker, the commercial landlord who petitioned to confirm an arbitration award.
The suit sounded in petition to confirm arbitration award arising from a commercial lease guarantee dispute.
The key substantive facts leading to the suit were Scheinker leased commercial property to Green America Inc., Jones signed the lease on Green America's behalf and personally guaranteed the lease obligations including attorney's fees, Green America filed claims against Scheinker, Scheinker successfully compelled arbitration and obtained an arbitration award finding Jones liable as guarantor, then Scheinker petitioned to confirm the arbitration award against Green America and Jones.
The procedural result leading to the Appeal: The trial court dismissed the petition to confirm arbitration award as to Jones for lack of personal jurisdiction (finding Jones was not properly joined as a party before arbitration was ordered), confirmed the award against Green America, expressly declined to rule on Jones's request to vacate the award, and denied Jones's motion for attorney's fees under Civil Code section 1717, ruling that there was no party prevailing on the contract because Jones obtained only an interim victory that did not finally resolve the contract dispute.
The key question(s) on Appeal: 1. Whether Jones was a prevailing party under Civil Code section 1717 entitled to attorney's fees where the petition to confirm arbitration award was dismissed as to him but the underlying arbitration award was neither confirmed nor vacated; 2. Whether Jones was entitled to costs under Code of Civil Procedure section 1032 as a defendant in whose favor dismissal was entered.
The Appellate Court held that the trial court did not abuse its discretion in finding no party prevailed on the contract under Civil Code section 1717 where the dismissal did not finally resolve the enforceability of the arbitration award and the court expressly declined to rule on vacation of the award, but Jones was entitled to costs under Code of Civil Procedure section 1032 as a defendant in whose favor dismissal was entered.
The case is inapplicable when the dismissal of a petition to confirm arbitration award finally resolves the enforceability of the award, when the court rules on vacation of the award, when there is no personal guarantee connecting the dismissed party to a party against whom the award was confirmed, or when the underlying contract dispute cannot be pursued in another forum.
The case leaves open whether Jones would ultimately be liable under his guarantee provision given that the arbitration award was confirmed against Green America, and what the outcome would be in any subsequent properly filed petition to confirm the arbitration award against Jones.
Counsel
For Appellant: Rod Pacheco and Irasema Rocha
For Respondent: Reeves & Weiss, Jeffrey H. Reeves, Daniel L. Weiss and Lindley G. Round