Tempted by the Tort of Another: California’s Judicial Exception to the American Rule

To paraphrase Homer J. Simpson: “Mmm… attorney’s fees….” And yet, however much we may want attorney’s fees, typically they are only available to a plaintiff if a contract or statute specifically provides that the prevailing party is entitled to an award of attorney’s fees. California generally follows the “American rule,” under which each party to a lawsuit must pay its own attorney’s fees unless a contract or statute or other law authorizes a fee award. Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 211 Cal. App. 4th 230, 237 (2012).

One “exception” to the American rule is the “tort of another” doctrine. Under this doctrine, “[a] person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred.” Prentice v. North Am. Title Guaranty Corp., Alameda Division, 59 Cal.2d 618, 620 (1963). In Prentice, the California Supreme Court addressed whether in a quiet title action attorney’s fees may be awarded to a seller of land because of the negligence of a paid escrow holder. Id. at 619. The Court summarized the holding in that case as follows: “When a paid escrow holder has, as in this case, negligently made it necessary for the vendor of land to file a quiet title action against a third person, attorney’s fees incurred by the vendor in prosecuting such action are recoverable as an item of the vendor’s damages in an action against the escrow holder.” Id. at 621.

“Exception” is in quotes at the start of the preceding paragraph because while some courts describe the “tort of another” doctrine as an exception to the American rule, see, e.g., Appel v. Bos. Nat’l Title Agency, LLC, No. 18-873, 2019 WL 3858888, at *7–8 (S.D. Cal. Aug. 15, 2019); Gorman v. Tassajara Dev. Corp., 178 Cal. App. 4th 44 (2009), other California courts describe tort of another as a measure of tort damages. See, e.g., Mega RV Corp. v. HWH Corp., 225 Cal. App. 4th 1318, 1337 (2014); Sooy v. Peter, 220 Cal. App. 3d 1305, 1310 (1990). However, this is a bit of a distinction without a difference. Characterizing the tort of another doctrine as an exception to the American rule may imply that attorney’s fees under this doctrine can be recovered via post-trial motion, but the California Supreme Court long ago clarified that attorney’s fees under the tort of another doctrine usually must be pleaded and the amount of attorney’s fees must be determined by the fact finder (i.e., a jury or, in a bench trial, a court). See Chia-Lee Hsu v. Abbara, 9 Cal.4th 863, 869 n.4 (1995) (“Unless the parties stipulate otherwise, a claim for attorney fees under the ‘tort of another’ doctrine may not be asserted by post-trial motion but rather must be pleaded and proved to the trier of fact.”) (citations omitted).

There are three important considerations in seeking attorney’s fees under the tort of another doctrine. First, the plaintiff must have sued a second defendant to recover attorney’s fees from the first defendant under the tort of another doctrine. Often this means that a plaintiff sues one defendant in one action and subsequently sues another defendant and includes a plea for tort-of-another damages in a second action. But a plaintiff can also include both defendants in the same lawsuit. “In the usual case, the attorney’s fees will have been incurred in connection with a prior action; but there is no reason why recovery of such fees should be denied simply because the two causes (the one against the third person and the one against the party whose breach of duty made it necessary for the plaintiff to sue the third person) are tried in the same court at the same time.” Prentice, 59 Cal.2d at 621 (citation omitted).

Second, as alluded to above, the tort of another doctrine ordinarily must be pleaded clearly in the complaint. That said, California courts are required to employ a liberal approach to requests for leave to amend a complaint. For example, the court in Prentice stated that failure to plead tort of another damages in the original complaint may not be fatal if it is clear to the parties and the court that the plaintiff has been seeking tort-of-another damages (e.g., through discovery requests or if counsel and the court are otherwise made aware of the plaintiff’s theory of recovery prior to trial). In Prentice, the complaint failed to plead tort-of-another damages but this omission was overlooked because “the issue was thoroughly tried and understood by counsel and the court, and no prejudice has resulted to defendant from a failure to allege the damage more specifically in the complaint.” Prentice, 59 Cal.2d at 621–622. Accordingly, if tort-of-another damages are not pleaded in the complaint, the trial court has discretion to grant or deny leave to amend to include a new theory of damages. Compare Duchrow v. Forrest, 215 Cal. App. 4th 1359 (denying leave to amend to seek tort of another attorney’s fees), with Tung v. Chi. Title Co., A151526, at *18 (Cal. Ct. App. Apr. 28, 2021) (distinguishing Duchrow and finding that the trial court abused its discretion in denying leave to amend). Needless to say, the best practice is to not have this issue arise in the first place by pleading tort-of-another damages in the original complaint.

Third, for the tort of another doctrine to apply, the defendant against whom the plaintiff seeks attorney’s fees “must owe a duty to the person seeking compensation,” Zahnleuter v. Lenhart, No. 2:20-cv-02492-KJM-KJN, at *6 (E.D. Cal. Apr. 30, 2021) (citation omitted), or the defendant must have acted wrongfully. Id. For example, in Mega RV Corp. HWH Corp., 225 Cal. App. 4th 1318 (2014), a buyer brought an action against a retailer of a motor home for alleged defects. Id. at 1322. The RV retailer then filed a cross-complaint against one of the RV parts manufacturers seeking indemnity. Id. The superior court found that the retailer was not entitled to indemnity and allowed the parts manufacturer to recoup attorney’s fees under the tort of another doctrine. Id. at 1322–23. The appellate court disagreed and reversed the award of attorney’s fees, deciding that the retailer owed no duty of care to the parts manufacturer when servicing the motor home. Id. at 1339–42. If there is no duty, there is no tort, so “the tort of another doctrine cannot apply.” Id. at 1342; but see Manning v. Sifford, 111 Cal. App. 3d 7, 11 (1980) (finding the plaintiffs could still recover from a defendant that did not owe them a duty when the defendant acted wrongfully, intentionally, and harm was natural, proximate, and foreseeable cause of defendant’s wrongful conduct).

Bottom line: when drafting a complaint, attorneys should ask themselves whether their clients reasonably can seek attorney’s fees under the tort of another doctrine. Doing so may require adding a defendant to the complaint. Provided there is probable cause to do so, however, this pleading decision could be quite lucrative for the client and—assuming the case has a contingency component—for the attorney.