SwiftAir, LLC v. Row 44, Inc.
| Decision Date | 12 May 2022 |
| Docket Number | B306166 |
| Parties | SWIFTAIR, LLC, Plaintiff and Appellant, v. ROW 44, INC. et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
APPEAL from orders of the Superior Court of Los Angeles County No SC122964. Elaine W. Mandel, Judge. Affirmed.
Holmgren Johnson: Mitchell Madden and Dennis M. Holmgren Shamoun & Norman and Stephen R. Tittle, Jr., for Plaintiff and Appellant.
Sheppard, Mullin, Richter & Hampton, Martin D. Katz, and Dylan J. Price for Defendant and Respondent Row 44, Inc.
Hawxhurst Harris, Gerald E. Hawxhurst, David S. Harris and Patrick B. Nichols; Hawxhurst, Gerald E. Hawxhurst and Patrick B. Nichols; Davis S. Harris and David S. Harris for Defendant and Respondent Southwest Airlines Co.
SwiftAir, LLC appeals from the trial court's orders granting motions by Southwest Airlines Co. and Row 44, Inc. for attorneys' fees and costs. SwiftAir argues the court erred in ruling Southwest and Row 44 were entitled to attorneys' fees as prevailing parties under the relevant contracts. SwiftAir also argues that, because Southwest's offer to compromise under Code of Civil Procedure section 998 was unreasonable, [1] the trial court erred in awarding Southwest $209, 886.89 in fees for experts not ordered by the court. We affirm.
As we described in SwiftAir, LLC v. Southwest Airlines Co. (2022) 77 Cal.App.5th 46 (SwiftAir I), in 2010 SwiftAir was developing a software platform that would allow passengers to make inflight purchases of coupons and vouchers the passengers could use at restaurants and other businesses in their destination cities. Later that year Southwest expressed an interest in evaluating the software platform for use on its flights.
In August 2011 SwiftAir and Southwest entered into a contract titled "Beta Test Agreement," with Southwest agreeing to evaluate SwiftAir's software platform by testing it for eight weeks on some of Southwest's WiFi-enabled aircraft, to report to SwiftAir during the testing period on the software's performance, and to notify SwiftAir within 30 days after the testing period ended whether Southwest intended to use the software "on an extended basis." The agreement also stated that, in the event Southwest decided to continue using the software platform, Southwest and SwiftAir would "enter into good faith discussions prior to the termination of the Initial Term [of testing] to negotiate a full license agreement." The parties subsequently amended the Beta Test Agreement to extend the testing period to 24 weeks. Installing the software platform on Southwest's planes also required SwiftAir to enter into agreements with Row 44, the company that operated Southwest's inflight WiFi service. (SwiftAir I, supra, 77 Cal.App.5th at p. 50.)
At the end of the testing period, Southwest had not decided whether to license SwiftAir's software platform, but Southwest continued "'to work toward some arrangement whereby the SwiftAir product would be refined and deployed ultimately to Southwest planes.'" Ultimately, Southwest decided not to license SwiftAir's software platform. (SwiftAir I, supra, 77 Cal.App.5th at p. 50.)
In August 2014 SwiftAir filed this action against Southwest and Row 44.[2] In the operative first amended complaint SwiftAir asserted 12 causes of action against both defendants, including for breach of contract and the covenant of good faith and fair dealing, quantum meruit, and interference with contractual relations and prospective economic advantage. (SwiftAir I, supra, 77 Cal.App.5th at p. 51.) The trial court sustained a demurrer by Row 44 to four of the causes of action against it without leave to amend. Southwest and Row 44 then each filed a motion for summary judgment or, in the alternative, summary adjudication, arguing, among other things, the federal Airline Deregulation Act (49 U.S.C. § 41713(b)(1)) (ADA) preempted most of SwiftAir's remaining causes of action. Row 44 also moved for summary adjudication on SwiftAir's claims that Row 44 committed various distinct breaches of agreements between Row 44 and SwiftAir, as alleged in SwiftAir's first cause of action.
The trial court ruled the ADA preempted all of SwiftAir's remaining causes of action except for the first (against both defendants) for breach of contract (which included a claim for breach of the covenant of good faith and fair dealing). The court therefore granted motions by Southwest and Row 44 for summary adjudication on all other remaining causes of action. In addition, on the breach of contract cause of action against Row 44, the court summarily adjudicated in favor of Row 44 some, but not all, of the alleged "separate and distinct breaches." Finally, on a motion by Southwest for reconsideration, the court also granted summary adjudication on that portion of the first cause of action against Southwest that alleged breach of the covenant of good faith and fair dealing.
At this point, what remained of SwiftAir's lone breach of contract cause of action against Southwest were claims based on two alleged breaches. First, SwiftAir alleged Southwest breached the Beta Test Agreement by not entering into good-faith discussions to negotiate a full licensing agreement and by not timely removing SwiftAir's software platform from Southwest's planes after the testing period. Second, SwiftAir alleged Southwest breached an implied-in-fact agreement requiring it to install SwiftAir's software platform on "WiFi-enabled aircraft flying into 11 of Southwest's top destinations, with more cities added throughout the term" of the Beta Test Agreement.
Southwest now served SwiftAir with an offer to compromise under section 998. In exchange for SwiftAir's voluntary dismissal with prejudice of all claims against Southwest, Southwest offered to pay SwiftAir $50, 000 and to agree that SwiftAir and Southwest would each bear its attorneys' and expert fees, costs, and expenses. In an accompanying letter, Southwest wrote that it believed agreements between Southwest and SwiftAir. SwiftAir did not respond to the offer to compromise.
The parties tried SwiftAir's remaining causes of action to a jury. Finding that Southwest breached the Beta Test Agreement, but that the breach did not harm SwiftAir, the jury awarded SwiftAir no damages for the breach. Finding SwiftAir did not substantially perform its obligations under the implied-in-fact agreement with Southwest and was not excused from doing so, the jury found Southwest was not liable for any breach of that agreement. The jury found Row 44 was not liable on the cause of action against it.
SwiftAir filed motions for judgment notwithstanding the verdict and for a new trial, contending that, because the jury found Southwest breached the Beta Test Agreement, the jury should have awarded SwiftAir $878, 000 in damages "for the monies SwiftAir [spent] developing" its software platform. The trial court denied these motions, and SwiftAir appealed from the judgment.
Meanwhile, citing attorneys' fees provisions in their agreements with SwiftAir, Southwest and Row 44 each filed a postjudgment motion for attorneys' fees and costs as a prevailing party in the action. Southwest also contended it was entitled to attorneys' fees and costs because SwiftAir failed to achieve a more favorable result than the one Southwest proposed in its section 998 offer to compromise.
Concluding Southwest and Row 44 were prevailing parties, the trial court granted their motions. The court awarded Southwest $1, 501, 988.80 in attorneys' fees and $309, 362.40 in costs. The court denied a motion by SwiftAir to strike from Southwest's memorandum of costs $209, 886.89 in expert fees, ruling Southwest was entitled to recover those fees under section 998. The court awarded Row 44 $2, 216, 117.50 in attorneys' fees and $57, 830.44 in costs. SwiftAir timely appealed the orders granting the motions. That's this appeal.
And again meanwhile, with SwiftAir's two appeals pending, Row 44 and various affiliates filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code, which resulted in stays of both appeals. After the bankruptcy court confirmed a plan, Row 44 asked this court to dismiss it from SwiftAir's appeal from the judgment (but not from this appeal). Pointing out that SwiftAir had not filed a proof of claim in the bankruptcy proceeding, Row 44 argued the bankruptcy plan and confirmation order barred SwiftAir from pursuing any claims against Row 44, including the claims asserted in this action. After receiving opposition from SwiftAir, we granted Row 44's request and dismissed Row 44 from the appeal from the judgment. The Supreme Court denied SwiftAir's petition for review.
SwiftAir's appeal from the judgment in favor of Southwest, however proceeded. SwiftAir contended the trial court erred in granting Southwest's motion for summary adjudication because the ADA did not preempt any of SwiftAir's causes of action and in denying SwiftAir's motions for judgment notwithstanding the verdict and for a new trial because the...
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