Lisa Laser USA. INC. v. HealthTronics INC.
| Decision Date | 31 March 2011 |
| Docket Number | NO. 03-10-00464-CV,03-10-00464-CV |
| Parties | Lisa Laser USA, Inc. and Lisa Laser Products, oHG, Appellants v. HealthTronics, Inc., Appellee |
| Court | Texas Court of Appeals |
OPINION TEXT STARTS HERE
NO. D-1-GN-08-004469, HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING
HealthTronics, Inc. ("HealthTronics") filed suit against Lisa Laser USA, Inc. and Lisa Laser Products, oHG (collectively, "Lisa Laser") for breach of contract and tortious interference with contract.1 The trial court issued an order dismissing the suit based on a mandatory forum-selection clause in the contract between the parties, but denied Lisa Laser's request for an award of attorneys' fees. Lisa Laser now appeals the portion of the trial court's order denying its request for attorneys' fees. We reverse the portion of the trial court's order denying attorneys' fees and remand for a determination of the amount of reasonable attorneys' fees incurred.
BACKGROUND
In December 2008, HealthTronics sued Lisa Laser in Travis County district court for breach of a distribution agreement in which HealthTronics was to serve as the exclusive U.S. distributor of certain surgical laser devices manufactured by Lisa Laser. HealthTronics alleged that Lisa Laser violated the contractual provision giving HealthTronics the right of first refusal for the sale and distribution of newly developed products. HealthTronics also brought a cause of action for tortious interference with contract, alleging that Lisa Laser had interfered with confidentiality and non-solicitation agreements between HealthTronics and its former employees.
Lisa Laser filed a motion to dismiss the suit, asserting that pursuant to the distribution agreement's forum-selection clause, the exclusive venue for disputes arising from the agreement was Alameda County, California. In response, HealthTronics argued that the forum-selection clause was inapplicable to the dispute at hand, as it was located in an addendum to the agreement that pertained only to certain sales transactions occurring between Lisa Laser USA, Inc. and HealthTronics. The trial court denied Lisa Laser's motion to dismiss.
Lisa Laser then filed a petition for writ of mandamus in this Court, seeking to compel the trial court to vacate its order and dismiss the suit pursuant to the mandatory forum-selection clause in the distribution agreement. This Court denied the petition, and Lisa Laser filed a petition for writ of mandamus in the Texas Supreme Court. See In re Lisa Laser USA, Inc., 310 S.W.3d 880 (Tex. 2010). While the mandamus proceeding was pending in the supreme court, Lisa Laser filed an amended answer in the underlying suit, raising counterclaims against HealthTronics for fraud, breach of contract, negligent misrepresentation,"intentional interference with prospective economic relationships," and deceptive business practices. According to Lisa Laser, HealthTronics had relied on its exclusivity agreement to purchase surgical laser devices from Lisa Laser at wholesale prices, but then had leased the devices to physicians and hospitals, rather than marketing and selling them as required by the contract.
In April 2010, the supreme court ruled in Lisa Laser's favor on the forum-selection clause and conditionally granted the petition for writ of mandamus. See id. at 887. Lisa Laser then filed a motion in the trial court, requesting that the case be dismissed pursuant to the order of the supreme court. Lisa Laser further requested an award of the attorneys' fees incurred in defending the suit in Texas and successfully obtaining mandamus relief, citing a contractual provision stating that the prevailing party in any legal action arising out of the distribution agreement would be entitled to recover attorneys' fees. Lisa Laser claimed that it had incurred approximately $117,000 in reasonable and necessary attorneys' fees. HealthTronics filed a response in opposition to the request, arguing that Lisa Laser was not entitled to attorneys' fees based on the dismissal of the Texas suit because the merits of the parties' dispute had not yet been resolved. HealthTronics further asserted that during the pendency of the Texas suit, Lisa Laser had filed suit in Alameda County, California, and that the same claims and causes of action at issue in the Texas suit were currently pending in the California suit.
The trial court issued an order dismissing the suit pursuant to the mandate of the Texas Supreme Court, "without prejudice to the parties' ability to file and pursue such claims and causes of action in the presiding courts of Alameda County, California." The trial court's order further denied Lisa Laser's request for attorneys' fees, "without prejudice to either party's ability to recover such fees in the California proceeding." This appeal followed.
STANDARD OF REVIEW
Because the distribution agreement at issue here contains a choice-of-law provision, the parties agree that California law applies to the question of whether Lisa Laser is entitled to recover attorneys' fees under the contract. See Fairmont Supply Co. v. Hooks Indus., Inc., 177 S.W.3d 529, 536 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) ().
Lisa Laser seeks attorneys' fees pursuant to a California statutory provision permitting the prevailing party in an action on a contract to recover attorneys' fees if the contract provides for such an award. See Cal. Civ. Code § 1717. The availability of attorneys' fees under a particular statute is a question of law that we review de novo. See Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999); Colonial Am. Cas. & Sur. Co. v. Scherer, 214 S.W.3d 725, 729 (Tex. App.—Austin 2007, no pet.).
DISCUSSION
In a single issue on appeal, Lisa Laser argues that the trial court erred in determining that it was not entitled to an award of attorneys' fees because the merits of the parties' dispute had not yet been resolved. Lisa Laser requested attorneys' fees pursuant to the following provision in the distribution agreement between the parties: The prevailing party in any legal action brought by one party against another party and arising out of this Agreement shall be entitled, in addition to any other rights and remedies it may have, to reimbursement for its expenses, including court costs and reasonable attorneys' fees.
Under California law, parties may contractually provide for awards of attorneys' fees to the prevailing party in litigation arising out of the contract. See Cal. Civ. Code § 1717. Specifically, California Civil Code section 1717 provides, in relevant part:
(a) In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract . . . shall be entitled to reasonable attorney's fees in addition to other costs.
. . . .
(b)(1) The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section.
(2) Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.
Lisa Laser takes the position that because it prevailed on its mandamus action in the Texas Supreme Court and obtained a dismissal of the Texas suit, it is entitled to recover attorneys' fees as a prevailing party in a dispute arising out of the contract. HealthTronics, on the other hand, argues that because the same claims and causes of action remain pending in California, Lisa Laser has not yet prevailed on any ultimate issue or claim in this dispute.
Under the plain language of section 1717, a suit need not proceed to final judgment in order for the court to determine a prevailing party for purposes of a contractual attorneys' fee award. Id. § 1717(b)(1). The statute further provides that in the event of a voluntary dismissal or dismissal pursuant to settlement, no party can be considered a "prevailing party" on the contract. Id. § 1717(b)(2). The statute does not, however, specifically address the situation presented here, where a party has successfully obtained a dismissal based on an improper forum, but the same substantive issues remain pending in another suit, filed in the proper forum.
The California Supreme Court has described the "prevailing party" determination for purposes of section 1717 as follows:
[I]n deciding whether there is a "party prevailing on the contract," the trial court is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.
Hsu v. Abbara, 891 P.2d 804, 813 (Cal. 1995) (internal quotation marks and citation omitted). HealthTronics emphasizes the statement that a prevailing party determination is to be made "only upon final resolution of the contract claims," arguing that this language bars Lisa Laser from recovering attorneys' fees incurred in the Texas proceeding until the merits of the contract dispute have been...
To continue reading
Request your trial