Recovering Attorney’s Fees in California Breach-of-Contract Cases

Attorney's Fees in California Contract Cases - SARI LAW FIRM

If the other side breaches our agreement, can I recover my attorney’s fees? The answer depends on the interplay between the American Rule (each party ordinarily pays its own fees), the terms of the contract, and statutory exceptions made by the Legislature. 

The American Rule is a rule in the U.S. justice system that says two opposing sides in a legal matter must pay their own attorney fees, regardless of who wins the case.

The general rule: each side pays its own lawyers

California follows the American Rule: unless a statute or contract provides otherwise, each party bears its own attorney’s fees. Code of Civil Procedure section 1021 codifies this rule, leaving the “measure and mode” of attorney compensation to agreement or statute. This baseline means that in the absence of a fee‑shifting clause or statute, the prevailing party in a contract case will typically recover only standard court costs, not its legal fees.

Contract‑based fee provisions - Civil Code § 1717

1- Attorney‑fee clauses must be written and reciprocal

The easiest path to fee recovery is through a written fee clause. Civil Code § 1717 provides that when a contract specifically allows the prevailing party to recover fees, the prevailing party is entitled to “reasonable attorney’s fees … in addition to other costs”. Section 1717 applies only to written contracts; oral agreements cannot make attorney fee rights. So, one of the most important clause in a contract is attorney fee clause. The statute also automatically makes one‑sided fee clauses reciprocal, so a clause authorizing fees to only one party becomes mutual. This reciprocity reflects a strong California policy; courts will even override contractual choice‑of‑law provisions to ensure that fee clauses are mutual.

2- Determining the “prevailing party”

Section 1717 entitles the prevailing party to reasonable fees. The California Supreme Court’s decision in Hsu v. Abbara requires courts to compare the relief awarded to each party’s litigation objectives; when one side clearly obtains greater relief, the trial court has no discretion to deny fees. When neither side achieves a complete victory, the court may determine that there is no prevailing party and decline to award fees. Prevailing party clauses should therefore explain how victory will be measured (e.g., net recovery, percent of claim, etc.).

3- Enforcing fee clauses – recent developments

• Non‑signatories and alter‑ego defendants: A fee clause can bind a non‑signatory if the non‑signatory would have been liable under the contract (e.g., alter‑ego defendants). Conversely, parties sometimes omit fee clauses if they expect to file suit and have deeper pockets.

• Prevailing on affirmative defenses: In 2024 the court in American Building Innovation v. Balfour Beatty Construction clarified that a party who prevails on a contract‑based affirmative defense may recover fees if the defense concerns the same contract. The decision affirmed a $1.55 million fee award where the defendant prevailed on an affirmative defense that the plaintiff contractor was unlicensed.

• Consumer statutes override § 1717: The 2025 Martinez v. SAI Long Beach decision illustrates that § 1717 does not trump consumer‑protection statutes. The court held that the Magnuson–Moss Warranty Act and Song‑Beverly Act allow fee recovery only for prevailing consumers; § 1717 cannot be invoked by a defendant to recover fees. Similarly, the Consumers Legal Remedies Act (CLRA) and the Unfair Competition Law award fees to prevailing plaintiffs but not defendants.

• Spouses representing spouses: The Court of Appeal held in 2025 that a prevailing party could not recover fees when represented by an attorney‑spouse because there was no true attorney–client relationship; the spouse acted as a party rather than counsel. (Gogal v. Deng (Cal. App. 4th Dist., Div. 1, July 22, 2025) 2025 WL 2046177). This case underscores that to recover fees, the client must prove a bona fide attorney‑client relationship.

• Fee caps and waivers: Parties may agree to cap or waive fee recovery in advance. Contract drafters can therefore limit potential exposure by including reasonable caps or waivers in their agreements.

• Reasonable fee calculations: Courts apply a “lodestar” method: reasonable hourly rates multiplied by reasonable hours, with possible adjustments. Plaintiff in Tidrick v. FCA US LLC, sought an award in the total amount of $82,719.33, consisting of $74,275 in attorney fees and $8,444.33 in costs. The trial court awarded plaintiff a total of $15,000 in fees and costs, a reduction of 82.9 percent. Reversing, the Court of Appeal stated: “We conclude the court erred in applying hourly attorney rates prevailing in Fresno County and abused its discretion by failing to properly apply the lodestar method and to specify the amount of costs. We therefore reverse the court’s award of attorney fees and costs and remand with directions to recalculate”. Fee claimants should document hours and rates, and opponents should challenge unreasonably high fees.

  
  

How courts calculate “reasonable” attorney’s fees

When a statute or contract authorizes fee recovery, courts must determine what amount is reasonable. The lodestar method multiplies the number of hours reasonably spent by attorneys by a reasonable hourly rate. Courts may adjust the lodestar upward or downward based on factors such as the complexity of the case, the attorney’s skill, the result achieved, and whether the fee arrangement is contingent. Fee claimants should keep detailed time records and evidence of prevailing market rates, while opposing parties should be prepared to challenge excessive hours or rates. 

Conclusion

In California, recovering attorney’s fees in breach‑of‑contract cases is neither automatic nor simple. The default American Rule generally requires each party to bear its own fees, but well‑drafted fee clauses and specific statutes can shift fees to the losing side. Civil Code § 1717 remains the cornerstone for contractual fee recovery.

At Sari Law Firm, we help clients navigate complex contract disputes, protect their rights, and pursue fair outcomes. Contact us today to schedule a free consultation. Let’s make things right.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Every case is different. If you believe your rights have been violated, consult a qualified California attorney to evaluate your specific situation.

FAQ

1. Can I recover attorney’s fees in a breach-of-contract case in California?

Yes — but only if your contract includes an attorney-fee clause or a specific statute authorizes recovery.

2. What is California Civil Code §1717?

It ensures that contractual attorney-fee clauses are mutual, even if the contract gives the right to only one party.

3. What if my contract doesn’t include a fee clause?

You generally cannot recover attorney’s fees unless a statute applies — you’ll only recover standard court costs.

4. Who qualifies as the “prevailing party”?

Courts look at which side achieved greater relief compared to their goals (see Hsu v. Abbara). If results are mixed, the court may find no prevailing party.

5. How do California courts calculate “reasonable” attorney’s fees?

They use the “lodestar” method: multiplying reasonable hours worked by reasonable hourly rates, adjusted for complexity and results.

6. What happens if my spouse is my attorney?

In Gogal v. Deng (2025), the court denied fees where an attorney-spouse represented their partner, finding no true attorney-client relationship.