This long-running breach of contract dispute involved G.P.P., Inc., doing business as Guardian Innovative Solutions (GIS), and two defendants: Guardian Protection Products, Inc. (Guardian) and RPM Wood Finishes Group, Inc. (RPM). The parties had entered into warehousing distributor agreements containing a fee-shifting provision designating California law. After years of litigation, including two trials, the district court awarded GIS over $4 million in attorney's fees, finding GIS the prevailing party against both defendants. The defendants appealed, arguing the court used an improper methodology and failed to recognize RPM as a prevailing party regarding specific claims GIS had effectively abandoned by not presenting them at trial.
The Ninth Circuit applied the standards of California Civil Code section 1717, which governs attorney's fees in contract actions. The court first addressed whether the district court properly identified GIS as the prevailing party against Guardian. The panel affirmed, noting that the district court correctly employed a holistic analysis that evaluated the parties' litigation objectives and the relief awarded. The court rejected the defendants' argument that the district court failed to analyze Guardian and RPM independently, finding that the lower court had indeed bifurcated its analysis for each defendant. The court also found no error in the district court's consideration of equitable factors, such as GIS's successful defense of counterclaims and the net monetary recovery, which outweighed GIS's partial failures on appeal or specific damages mitigation issues. However, the court reversed the ruling regarding RPM. The district court had treated five equitable claims abandoned by GIS as voluntarily dismissed, thereby finding no prevailing party for those issues and denying RPM fees. The Ninth Circuit held that voluntary abandonment of a claim operates as a voluntary dismissal under section 1717 only if there is a clear, unequivocal, and express intent to abandon. The court found that GIS's failure to include the claims in jury instructions or verdict forms did not constitute such notice, especially given GIS's pretrial statement that it did not anticipate abandoning any claims. Consequently, the abandonment was not a voluntary dismissal, and the district court erred in denying RPM fees based on that characterization.
The decision affirms the $4.3 million fee award to GIS against Guardian but requires the district court to recalculate fees owed to RPM for the claims that were not litigated. This ruling clarifies that under California law, a plaintiff's silence or omission regarding a claim does not automatically trigger the 'no prevailing party' rule; there must be an affirmative, clear expression of intent to abandon the claim on the record. The case is remanded to determine if RPM is entitled to fees for the abandoned equitable claims.
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