Heppler v. J.M. Peters Co

Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, involved attorney fees that were readily and fairly allocable among several defendants. The plaintiffs in Heppler sued a developer for construction defects, and the developer cross-complained against several subcontractors for indemnity. (Id. at p. 1273.) After the developer assigned its indemnity rights to the plaintiffs as part of a settlement, the plaintiffs proceeded to a seven-week trial against four of the subcontractors. (Id. at pp. 1273-1274, 1297.) The jury found in favor of all but one of the subcontractors, Martin, and the trial court ordered Martin to pay the plaintiffs' attorney fees for the entire seven-week trial, pursuant to Civil Code section 1717. (Heppler v. J.M. Peters Co., supra, at pp. 1274, 1293, 1296.) On appeal, the court reversed the fee award and remanded the matter to determine the amount of fees that "should have been properly allocated against Martin." (Id. at pp. 1297-1298.) The Heppler court explained that it reversed the fee award because Martin bore limited responsibility for the plaintiffs' damages and trial time: "Martin's part of the case could have been tried in considerably less time than seven weeks had the trial not taken up issues that involved the other nonsettlling subcontractors. It strikes us as eminently unfair to tag Martin with all of plaintiffs' attorney fees for the entire seven-week trial. . . . Not all the issues involving Martin's case were integrally associated with the other issues in the case; at the very least, some of them could have been severed and isolated for purposes of the attorney fees award. Certainly, there were multiple days of trial that were devoted exclusively to soil issues." (Heppler v. J.M. Peters Co., supra, 73 Cal.App.4th at p. 1297.) The appellate court found the trial court abused its discretion in failing to allocate fees. The plaintiffs in Heppler sued a contractor, who cross-complained against four subcontractors, for construction defects. The trial court awarded plaintiffs all their requested attorney fees against one subcontractor, Martin, pursuant to a contract provision. The Court of Appeal found error, noting: "Martin's part of the case could have been tried in considerably less time than seven weeks had the trial not taken up issues that involved the other nonsettling subcontractors. It strikes us as eminently unfair to tag Martin with all of plaintiffs' attorney fees for the entire seven-week trialNot all the issues involving Martin's case were integrally associated with the other issues in the case; at the very least, some of them could have been severed and isolated for purposes of the attorney fees award." (Heppler, supra, 73 Cal.App.4th at p. 1297.) In sum, in Heppler v. J.M. Peters Co., a developer, J.M. Peters Company, Inc., settled with a class of homeowners by, among other things, assigning its indemnification rights against nonsettling subcontractors. The agreement between the developer and certain of the subcontractors contained language providing that "the subcontractor 'agrees to indemnify and save Peters harmless against all claims for damages to persons or to property growing out of the execution of the work, and at his own expense to defend any suit or action brought against Peters founded upon the claim of such damage . . . .' " (Id. at p. 1278.) In a pretrial ruling, the trial court "obtained stipulations from the parties that Peters had tendered its defense in the underlying complaints to the subcontractors and received rejections." (Id. at p. 1274 .) The plaintiffs in Heppler sought a jury instruction that "plaintiffs were entitled to a rebuttable evidentiary presumption that Peters the developer was liable for the amount it paid to settle the claims against it and the allocations of the good faith settlement were reasonable . . . ." (Id. at p. 1275.) The trial court refused that instruction, and instead ruled "that the indemnity provisions at issue did not apply unless plaintiffs proved the subcontractors were at fault." (Ibid.) On appeal, the plaintiffs attacked the trial court's refusal to give the requested instruction and its "legal determination that subcontractor fault (negligence plus causation) was a prerequisite to trigger the contractual obligation to indemnify under the subcontracts . . . ." (Heppler v. J.M. Peters Co., supra, 73 Cal.App.4th at p. 1275.) The appellate court found no error, noting: "It appears what plaintiffs in fact wanted was an instruction that they were entitled to a rebuttable presumption that nonsettling subcontractors--not Peters--were liable for the amounts Peters paid to settle the claims. But the law does not so provide." (Heppler, at p. 1282.) In Heppler v. J.M. Peters Co. (1999) homeowners suing for construction defects, settled with Peters, the developer, and acquired its contractual indemnification rights against subcontractors who worked on the development. Two subcontracts indemnified Peters for liability "'arising out of or in connection with Subcontractor's . . . performance of the Work and for any breach or default of the Subcontractor in the performance of its obligations under the subcontract. . . .'" (Id. at p. 1272.) Two other subcontracts provided indemnification for claims "'growing out of the execution of the work . . . .'" (Id. at p. 1273.) Recognizing the general rule construing indemnity agreements against an indemnitee, Heppler declared, "had the parties intended to include an indemnity provision that would apply regardless of the subcontractor's negligence, they would have had to use specific, unequivocal contractual language to that effect. . . . As this court has pointed out . . ., the specificity of the language used is a key factor in construction of an indemnity agreement. 'To obtain greater indemnity, more specific language must be used.' " (Id. at p. 1278.) In short, a construction defect class action, the plaintiffs lost at trial against three of four subcontractors, each of which had performed a different type of work on the development in question. (Id. at pp. 1271-1272, 1273-1274.) The appellate court held the trial court properly awarded costs (including contractual attorney fees) to plaintiffs against the losing subcontractor, but abused its discretion by failing to apportion the attorney fees and certain costs to determine which portion of those fees and costs should be allocated against the losing defendant. (Id. at pp. 1296, 1298.) The appellate court reached this conclusion because the issues involving the losing subcontractor's case were distinct from the issues relating to the prevailing subcontractors, which consumed multiple days of trial time. (Heppler, at p. 1297.)