Filed 9/8/26 Sugarman v. Banc of California CA2/8 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
STEVEN A. SUGARMAN, B343047 Individually and as Trustee, etc., Los Angeles County
Plaintiffs and Respondents, Super. Ct. No. 19STCV36697 v.
BANC OF CALIFORNIA, INC.
Defendant and Appellant.
APPEAL from a post-judgment order of the Superior Court of Los Angeles County, Wendy Chang, Judge. Affirmed.
Simpson Thacher & Bartlett, Chet A. Kronenberg and Jonathan C. Sanders for Defendant and Appellant.
Cozen O’Connor, Thomas W. Casparian and Christopher Paolino for Plaintiffs and Respondents.
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INTRODUCTION
Plaintiffs Steven A. Sugarman and his trust sued Banc of California and several of its board directors and executives in the wake of a scandal that led to Sugarman’s resignation from his positions at Banc of California in January 2017.
After years of litigation, plaintiffs voluntarily dismissed their four remaining causes of action against Banc. Banc filed a motion for attorney fees and claimed it qualifies as the prevailing party, notwithstanding the application of Civil Code section 1717, subdivision (b)(2). Banc argued that California law did not apply, and for the first time in this litigation since its initiation in 2019, referred to a New York choice of law provision in an agreement entered into by the parties in 2010. The trial court found Banc waived application of the New York choice of law provision because Banc relied solely on California law throughout all of its motions and pleadings to date.
Banc appealed the trial court’s ruling. We find no error. We find Banc waived the application of New York law. We further find Banc does not qualify as a “prevailing party” entitled to attorney fees under California law (Civ. Code, § 1717, subd. (b)(2)), as plaintiffs voluntarily dismissed their contract claims against Banc.
We affirm the order denying the attorney fee motion. FACTUAL AND PROCEDURAL BACKGROUND A. The Parties Plaintiff Sugarman is the former chair of the board, president, and chief executive officer of Banc of California, Inc. and its national bank subsidiary Banc of California, N.A. (Banc). Plaintiff The Steven and Ainslie Sugarman Living Trust (Trust),
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Sugarman’s revocable living trust, held various stock warrants and common stock in Banc. The Trust is the successor-in-interest to Banc’s contracts with two of Sugarman’s business enterprises, COR Capital LLC and COR Advisors LLC. We refer to Sugarman and the Trust collectively as plaintiffs.
Plaintiffs sued Banc and some of its executives and members of the board of directors over circumstances surrounding Sugarman’s resignation. While Banc’s board directors/executives were defendants in the underlying suit and respondents in appeal case No. B338610, they are not parties to this appeal. B. The First Amended Complaint On February 19, 2020, plaintiffs filed the 167-page operative first amended complaint (FAC) with 636 pages of exhibits attached. The FAC alleged 12 causes of action, some against Banc, some against its executives/directors, and some against both: 1) breach of contract; 2) fraudulent inducement to hold securities; 3) negligent misrepresentation to induce holder to hold securities; 4) tortious interference with contract; 5) unfair competition; 6) conspiracy to engage in unfair competition; 7) preventing subsequent employment by misrepresentation; 8) tortious interference with prospective economic advantage; 9) defamation; 10) breach of indemnification agreements; 11) account stated with respect to the separation indemnification agreement; and 12) breach of covenant of good faith and fair dealing. All causes of action except the fourth named Banc as a defendant.
On August 3, 2026, in appeal No. B307753, we directed the trial court to grant Banc’s April 6, 2020 anti-SLAPP motion to strike plaintiffs’ second, third, fifth, sixth, seventh, eighth, and
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ninth causes of action. (Sugarman v. Benett (2021) 73 Cal.App.5th 165, 178.) In this appeal, we concentrate only on the allegations relevant to the first, tenth, eleventh, and twelfth causes of action remaining against Banc.
In 2010, Sugarman’s investment firm COR Capital led a recapitalization of Banc for $60 million with other investors. Concurrent with the recapitalization, “Sugarman and the entities he wholly owned with his wife, including the Trust, COR Capital, LLC and COR Advisors LLC, entered into a series of contracts with Banc.” At least seven contracts are identified throughout the FAC: 1) Subscription Agreement with Registration Rights and Indemnification Rights dated July 16, 2010 (Subscription Agreement); 2) Consulting and Expense Agreement with Warrant Agreement, Registration Rights and Indemnification Rights dated July 16, 2010 (Consulting Agreement); 3) Warrant to Purchase Common Stock dated November 1, 2010 (Warrant Agreement); 4) Stock Appreciation Rights Agreement granted August 21, 2012 inclusive of all subsequent amendments dated August 21, 2012, December 13, 2013, May 23, 2014, March 2 and 24, 2016 (collectively, SAR Agreement); 5) 2016 employment agreement; 6) director and officer indemnification right agreement; and 7) separation agreement with indemnification rights entered January 23, 2017. These contracts “were each entered into by Banc as inducements for Mr. Sugarman and the entities he wholly owned with his wife . . . to provide services and capital to Banc.”
The Subscription Agreement includes the attorney fee provision and choice-of-law provision at issue.
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1. The Subscription Agreement The Subscription Agreement (attached as an exhibit to the FAC) provides terms for the purchase and sale of securities and common stock. The Subscription Agreement identifies the subscriber as COR Capital LLC with Sugarman’s signature as the “managing member.” Article X of the Subscription Agreement, entitled “Miscellaneous,” includes relevant provisions 10.6 and 10.7.
Section 10.6 provides: “In the event of a dispute regarding this Agreement that results in litigation or arbitration, the prevailing party, as determined by the finder of facts, shall be entitled to an award of reasonable attorneys’ fees.”
Section 10.7 provides, in relevant part: “Except to the extent governed by federal law applicable to national savings associations, all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.” (Italics added.)
2. The FAC’s First, Tenth, Eleventh, and Twelfth Causes of Action against Banc On January 23, 2017, Sugarman resigned and entered into a separation agreement including a full release and a new indemnification agreement with Banc and its affiliates. He “provided a full release to the Banc for its actions which occurred prior to the execution of the Separation Agreement.”
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Sugarman had a right to stock based on the appreciation of 1,559,012 shares of Banc common stock upon his departure from Banc. The SAR Agreement enabled Sugarman to convert his stock appreciation rights into voting common stock upon his election to exercise those rights. Misrepresentations by defendants caused Sugarman to be restricted from exercising his stock appreciation rights.
The FAC’s first cause of action for breach of the Warrant Agreement and the Registration Rights Agreement alleges:
Sugarman entered into the Warrant Agreement and the Registration Rights Agreement with Banc. Sugarman “did all of the things required of him” under those two agreements. Banc however “did not perform its obligations” and “breached” those agreements “by unilaterally altering the terms of the agreements as to the nature and class of the shares which Mr. Sugarman was entitled to receive such that [he] could not convert his Warrants into voting commons stock” and by “failing to allow Mr. Sugarman to convert his Warrants into Class A voting stock.” Plaintiffs requested damages “in the amount of not less than $17 million.” The Warrant Agreement was attached as an exhibit to the FAC. Section 10 of the Warrant Agreement provides: “This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of New York.”
The FAC’s tenth and eleventh causes of action for breach of various indemnification agreements contend that Banc’s failure to indemnify plaintiffs for litigation-related expenses incurred under various indemnification agreements (i.e., the Separation Indemnification Agreement, the Consulting Agreement, and the Subscription Agreement) amounts to breach of contractual
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obligation by Banc. Plaintiffs requested “damages in the amount of not less than $150,000.00 plus the attorneys’ fees and expenses . . . incurred in vindicating his rights under this indemnification agreements.”
The FAC’s twelfth cause of action for breach of good faith and fair dealing alleges that Banc and Sugarman were parties to the SAR Agreement. Banc breached its duty of good faith and fair dealing with respect to the SAR Agreement by “taking actions to deprive Mr. Sugarman of the fruits of the agreement, including but not limited to failing to make appropriate disclosures . . . and other related actions which unfairly interfered with Mr. Sugarman’s ability to receive the benefits” of the SAR Agreement. Plaintiffs requested that “Banc be adjudged to have breached its obligations of good faith and fair dealing and be found to owe Mr. Sugarman the full value of the fruits and benefits of the contracts as if [Banc] had never interfered in an amount to be proven at trial.” The SAR Agreement, also attached as an exhibit to the FAC, does not include a New York choice-oflaw clause. C. Banc’s Anti-SLAPP Motion On April 6, 2020, Banc filed an anti-SLAPP motion pursuant to Code of Civil Procedure1 section 425.16 and sought to strike the FAC’s second, third, fifth, sixth, seventh, eighth, and ninth causes of action as arising from Banc’s protected speech and petitioning activity. The motion did not cite to or rely upon New York law.
1 Undesignated statutory references are to the Code of Civil Procedure.
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On September 1, 2020, the trial court granted in part and denied in part the anti-SLAPP motion. On December 27, 2021, in case No. B307753 we reversed the denial of the anti-SLAPP motion. Thus, the second, third, fifth, sixth, seventh, eighth, and ninth causes of action against Banc were struck in their entirety. (Sugarman v. Benett, supra, 73 CalApp.5th at p. 178.)
As a result of its victorious anti-SLAPP motion, Banc filed a renewed motion for attorney fees and costs. On January 24, 2023, the trial court awarded Banc $1,490,057.94 in attorney fees and $48,207.09 in costs. D. Banc’s Demurrer On May 27, 2022, Banc demurred to the first and twelfth causes of action for failure to state facts sufficient to state a cause of action per section 430.10, subdivision (e). Banc argued plaintiffs are collaterally estopped from pursuing the first cause of action, based on the Court of Appeal’s ruling in favor of Banc on a similar claim in the appeal, Sugarman Family Partners v. Banc of California (July 14, 2021, G059219) [nonpub. opn.] (the SFP litigation).2
2 We also grant plaintiffs’ July 3, 2025 request that we take judicial notice of Banc’s respondent’s brief dated December 30, 2020 and filed in appeal No. G059219. (Evid. Code, §§ 452, subd. (d), 459; Cal. Rules of Court, rule 8.252.) In that brief, Banc states: “This is a breach-of-contract case, not a federal securities-fraud case, and the relevant contractual language is clear.” “SFP has advanced only contract claims, governed by California contract law, alleging that Banc breached its obligations under the terms of the warrant.” (Boldface and italics omitted.) In the decision issued in appeal No. G059219 on July 14, 2021, the Court of Appeal ruled: “This is a contract action to
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On September 9, 2022, the trial court overruled the demurrer as to both the first and twelfth causes of action. Sugarman Family Partners is an entity whose principal was Sugarman’s father, and “there is no dispute that [p]laintiffs, who [Banc] seeks to assert collateral estoppel against, were not parties in the SFP Litigation; in that action, the [p]laintiff was Sugarman Family Partners and the [d]efendant is Banc.” E. Banc Executives/Board Directors’ Attorney Fee Motion On October 2, 2023, Banc’s board directors and executives moved for an award of $1,067,598.50 in attorney fees and $2,925.67 in costs. On January 4, 2024, plaintiffs filed their opposition to the attorney fee motion and argued their dispute does not “regard” the Subscription Agreement and thus does not trigger the broadly worded attorney fee provision.
Banc’s attorney (Chet A. Kronenberg, Esq.) was present at the April 18, 2024 hearing on Banc’s executives’ attorney fee motion. While arguing that Banc’s executives/board directors “were not agents at the time the contract was made” and “could not have been within the contemplation of the parties who were entering into th[e] [transaction],” plaintiffs’ counsel mentioned the Subscription Agreement’s “language [regarding agency] is not clear at all from the agreement. This is an agreement, by the way, which if you look at closely is actually governed not by California law but New York law, and New York law says fee shifting provisions like this are strictly construed.”
The trial court awarded $1,062,813.20 in attorney fees and $2,925.67 in costs to Banc’s board directors and executives jointly
enforce the warrant; it is therefore governed by California contract law.”
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and severally, and found they are “prevailing parties as defined in Code of Civil Procedure section 1032.” The trial court found “[a]t least one of Plaintiffs’ claims is based directly on interference with the Subscription Agreement” and that regardless of “[w]hether or not Plaintiffs’ cause of action was brought directly on the Registration Rights Agreement, the fourth cause of action ‘regards’ the Subscription Agreement” due to the “broad wording” of the attorney fees clause. “The clause permits recovery for any dispute ‘regarding’ the Subscription Agreement. The constant cross-referencing of all these documents to each other, all as part of the same transaction during Banc’s 2010 recapitalization, demonstrates that each document ‘regards’ the others.” The trial court further found the Banc executives “may enforce the attorneys’ fees provision in the Subscription Agreement” because they “acted as Banc’s agents at all relevant times.” (Italics and underscoring omitted.)
In appeal No. B338610, plaintiffs asked us to reverse the attorney fee order, arguing that the trial court misinterpreted the relevant contracts and misapplied the law governing fee applications. We disagreed with plaintiffs and issued our decision on August 3, 2026, affirming the trial court’s attorney fee award. In doing so, we concluded a dispute “regarding” the Subscription Agreement resulted in litigation between plaintiffs and Banc’s board directors/executives, such that the attorney fee provision of the Subscription Agreement applied. We also concluded Banc’s executives were empowered to enforce the attorney fee provision as they are agents of Banc, as previously decided by this court in the writ proceedings in appeal No. B324186.
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F. Banc’s Motion for Summary Judgment On June 5, 2024, Banc filed a motion for summary judgment.
As to the first cause of action, Banc claimed it is barred by collateral estoppel based on the SFP Litigation. As to the tenth and eleventh causes of action, Banc argued the “plain terms of the indemnification agreements” demonstrate that the indemnification terms did not apply to Sugarman. Sugarman “demands that Banc indemnify Sugarman for legal fees he incurred relating to two lawsuits against Banc that Sugarman instigated. . . . . [T]he [Separation Indemnification] Agreement only provides for indemnification when Sugarman is made a nonparty witness ‘by reason of the fact that [Sugarman] is or was a director, officer or key employee of the Company.’ None of the legal fees Sugarman purportedly incurred in either case had anything to do with his former role at Banc.” (Boldface omitted.) As to the twelfth cause of action, Banc argued the implied covenant of good faith and fair dealing “must be tethered to express provisions of the contract” and that plaintiffs have “not identified any express provision in the SAR Agreement that required Banc to make the disclosures [plaintiffs] claimed should have been made.” (Boldface omitted.)
Banc’s motion for summary judgment cited to and relied on California case law alone. In support, Banc filed a compendium of evidence totaling 1600 pages.
The summary judgment motion was scheduled for hearing on August 20, 2024.
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G. Dismissal of the FAC On July 12, 2024, plaintiffs filed a request for dismissal of the four remaining causes of action against Banc, without prejudice, which the trial court entered. H. Banc’s Motion for Attorney Fees On August 20, 2024, Banc moved for an award of $3,215,474.50 in attorney fees “pursuant to New York law or, in the alternative, under California Code of Civil Procedure § 1033.5(a)(10) as the prevailing party in this action.”
Banc argued: “Five years into this case and shortly before the deadline for Plaintiffs to oppose Banc’s summary judgment motion, Plaintiffs dismissed all four of their remaining claims ‘without prejudice’ in an attempt to avoid an imminent summary judgment defeat and the obligation to reimburse Banc’s attorney fees pursuant to a contractual ‘prevailing party’ attorneys’ fees provision.” Banc contends the “problem” with plaintiffs’ strategy is that New York law “governs the contract at issue” and that “New York law is clear that, where a defendant has incurred substantial expenses to litigate a case and then the plaintiff voluntarily dismisses the complaint to avoid an adverse judgment, the defendant is the ‘prevailing party.’ ” Banc preemptively argues plaintiffs’ anticipated reliance on Civil Code section 1717, subdivision (b)(2), which bars contractual attorney fees following a voluntary dismissal of a case, is misplaced because the Subscription Agreement “contains a New York choice of law clause.” Banc contends the New York choice of law provision governs here and that New York “does not have a parallel statute to [Civil Code] § 1712(b)(2) limiting the recovery of attorneys’ fees under a contractual prevailing party . . .
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provision following a voluntary dismissal.” Banc cited to New York case law as support.
Banc filed the declarations of its counsel—Brian B. Farrell, Chet A. Kronenberg, and Mark R. McDonald—in support. Farell’s declaration provides: Since April 2016, he served as the “Senior Vice President, Deputy General Counsel” at Banc—“a California state chartered bank.” “Banc’s Class A shares are traded on the New York Stock Exchange.” I. Plaintiffs’ Opposition to Attorney Fee Motion On September 24, 2024, plaintiffs filed their opposition to the motion for attorney fees. They argued Banc waived the application of New York law, as it “cited to not one single New York case on its demurrers or on its summary judgment motion, urging the Court to dismiss the complaint solely on the basis of California law. . . . Additionally, in prior attorney’s fees motions[,] [Banc] cited only to California law.” Plaintiffs argued Banc does not qualify as a prevailing party (given plaintiffs’ voluntary dismissal) so that an award of contractual fee shifting is not available to Banc. Plaintiffs contend “fundamental public policy . . . requires the application of California law.”
In Sugarman’s declaration filed in support, he states: “It was my understanding that for the totality of the case[,] Banc and the court applied California law to all causes of action and rulings including prior rulings related to motions for legal fees. It was also my understanding that [Banc’s board directors and executives] were awarded legal fees under CA law that they clearly would not have been entitled to under New York law.” Sugarman’s “dismissal . . . meant that Banc was not a ‘prevailing party’ and therefore could not claim any Attorney’s Fees under the terms of any contractual fee shifting provision. I reviewed
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the Court’s decision relating to prior fee motions and the Court’s citation to CA law and case precedents to help inform my decision [to dismiss].” Sugarman has been “a California resident [his] entire life with no connection to New York.” The Trust was formed pursuant to California law and the trustees are California residents. Neither COR Capital LLC or COR Advisors LLC were registered to do business in New York, nor did they have “any business, offices, or employees in New York.” Banc’s shares were not trading on the New York Stock Exchange (NYSE) in 2010. “Banc did no business in New York at the time of the contracts and was not even registered to do business in New York until 2014.” “Banc had no employees, branches, loans or operations in New York in 2010.” Banc’s headquarters were located at Chula Vista in California. “As to the transactions at issue, the contracts were performed in California” and “were negotiated in and between California residents in California.” When Banc issued the Class B shares, it “did so from California to [Sugarman] in California.”
Also on September 24, 2024, plaintiffs filed a request for judicial notice be taken of various documents, including a press release issued by Banc on May 14, 2014, announcing the move of its common stock listing from NASDAQ to the NYSE.
On October 1, 2024, Banc filed its reply.
J. Hearing and Ruling On October 10, 2024, the trial court heard argument and took the matter under submission.
On November 18, 2024, the trial court issued its ruling denying Banc’s attorney fee motion: “Consistent with this court’s April 18, 2024 order, the Court finds that the attorney’s fees
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clause in the Subscription Agreement governs this motion.”3 The trial court found Banc “has waived the right to assert [that] New York law governs this dispute” and did “not adequately justify why it has not raised the choice of law clause until the postdismissal phase of the litigation. If New York law governed this litigation, it would have been relevant to at least Banc’s summary judgment motion, if, as Banc now claims, the Subscription Agreement reaches all of the substantive claims that remain in this case against it.” The court found “the parties proceeded through the litigation in this case under California law; thus Banc impliedly waived the right to invoke New York law notwithstanding the language of the choice of law provision.” Additionally, the court found that even if Banc did not waive application of New York law, that “a choice of law analysis favors California.” California “ha[s] a materially greater interest than New York in the determination of this issue”: “the parties are located in California, Banc is the ‘Banc of California, Inc.’ . . . and the [trial c]ourt t[ook] judicial notice of the fact that the majority of banc’s locations are located in California” while “there remain no locations (branches or operations) in New York state.” (Boldface omitted.) The trial court also concluded that Banc does not qualify as a “prevailing party” given plaintiffs’ “valid” voluntary dismissal of the remaining claims; thus, the terms of the attorney fee clause in the Subscription Agreement do not apply to Banc.
Banc filed a timely notice of appeal.
3 On August 3, 2026, this court affirmed the trial court’s April 18, 2024 order in appeal No. B338610.
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DISCUSSION
On appeal, Banc argues the trial court’s holdings “are simply wrong.” Banc contends it “never waived the New York choice of law provision in the Subscription Agreement.” Banc contends its previously filed demurrer and summary judgment motion’s reliance on California law did not amount to a waiver as those motions cited to California procedural rules and not substantively on the merits. Banc also argues the trial court “erred in holding that, even if there was no waiver, Civil Code § 1717(b)(2) trumps the New York choice of law provision in the Subscription Agreement.”
We disagree with Banc. We conclude the trial court did not err in denying the attorney fee motion. A. Applicable Law Under the American rule, each party to a lawsuit ordinarily pays its own attorney fees; section 1021 codifies this rule: “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties.” In other words, section 1021 permits parties to “contract out” of the American rule by executing an agreement that allocates attorney fees. Thus, parties “ ‘may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.’ ” (Santisas v. Goodin (1998) 17 Cal.4th 599, 608; Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751; see Miske v. Coxeter (2012) 204 Cal.App.4th 1249, 1259; see Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341.)
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Section 1032, subdivision (b) provides: “Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” (Italics added.) Section 1033.5 allows for the recovery of attorney fees as costs under section 1032 when they are expressly authorized by contract, statute, or law. (§ 1033.5, subd. (a)(10), italics added.)
Civil Code section 1717, subdivision (a) provides: “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, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Italics added.)
Civil Code section 1717, subdivision (b) provides: “(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.” (Civ. Code, § 1717, subd. (b)(1)–(2), italics added.) B. Standard of Review “ ‘Generally, a trial court’s determination that a litigant is a prevailing party, along with its award of fees and costs, is
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reviewed for abuse of discretion.’ ” (Lampkin v. County of Los Angeles (2025) 112 Cal.App.5th 920, 926; Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332.) However, when the question presented requires interpretation of a statute or contract, our review is de novo. (Lampkin, at p. 926; Goodman, at p. 1332; Saeta v. Superior Court (2004) 117 Cal.App.4th 261, 267.) In other words, it is a discretionary trial court decision on the propriety or amount of statutory attorney fees to be awarded, but a determination of the legal basis for an attorney fee award is a question of law to be reviewed de novo. (Mountain Air, supra, 3 Cal.5th at p. 751; Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 966; see Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175 [“Under some circumstances, this may be a mixed question of law and fact and, if factual questions predominate, may warrant a deferential standard of review.”].)
In reviewing a trial court’s attorney fee award, we “ ‘accept the trial court’s resolution of credibility and conflicting substantial evidence, and its choice of reasonable inferences from the evidence.’ ” (Sukumar v. City of San Diego (2017) 14 Cal.App.5th 451, 464; City of San Clemente v. Department of Transportation (2023) 92 Cal.App.5th 1131, 1149.) “[A] trial court abuses its discretion when factual findings critical to its decision are not supported by substantial evidence.” (Sukumar, at p. 464.) C. The Subscription Agreement’s Attorney Fee Provision Applies to this Litigation When the parties briefed this appeal, this court’s decision in appeal No. B338610 had not yet been issued and thus there remained a question as to whether or not the Subscription Agreement’s attorney fee provision applied to this litigation. The
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provision, found in section 10.6 of the Subscription Agreement, provides: “In the event of a dispute regarding this Agreement that results in litigation or arbitration, the prevailing party, as determined by the finder of facts, shall be entitled to an award of reasonable attorneys’ fees.” (Italics added.)
On August 3, 2026, this court issued its opinion affirming the trial court’s April 18, 2024 order granting Banc’s board directors/executives’ motion for attorney fees. In so doing, this court found: “So, as long as the litigation between the parties regards a dispute regarding the Subscription Agreement, then the attorney fee provision applies and permits recovery of fees by the prevailing party. We also conclude the fee provision’s reference to ‘litigation’ resulting from ‘a dispute regarding th[e] [Subscription Agreement]’ encompasses the entire controversy and is not limited to specific claims or causes of action arising from the contract. If such a limitation exists, it must come from other words in the attorney fees provision, and no such limitation exists here.” This court further found the FAC cites many provisions directly from the Subscription Agreement, which was attached as an exhibit to the FAC, and “is indicative that the dispute, to some extent, regards the Subscription Agreement.”
More specifically, the FAC’s first cause of action alleges a breach of the Warrant Agreement and the Registration Rights Agreement—the latter which this court found in appeal No. B338610 formed part of Schedule III of the Subscription Agreement (actually entitled Subscription Agreement with Registration Rights and Indemnification Rights dated July 16, 2010). The FAC’s reference to the Registration Rights Agreement that forms part of the Subscription Agreement, means this claim
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alleges a dispute “regarding” the Subscription Agreement, triggering the application of the attorney fee provision.
Similarly, the FAC’s tenth and eleventh causes of action for Banc’s failure to indemnify plaintiffs for litigation expenses and breach of various indemnification agreements, expressly specify a breach of the indemnification provisions found in the Subscription Agreement in addition to the Separation Indemnification Agreement and the Consulting Agreement. Allegations of Banc’s breach of the Subscription Agreement necessarily qualify this claim as a dispute “regarding” the Subscription Agreement, imposing the application of its attorney fee provision in section 10.6.
The FAC’s twelfth cause of action alleged Banc’s breach of good faith and fair dealing in connection with the SAR Agreement. While this cause of action does not allege a breach of the Subscription Agreement, consistent with this court’s August 3, 2026 decision in appeal No. B338610, we find the Subscription Agreement’s attorney fee provision still applies—“Given the extremely broad and unambiguous language of the attorney fee provision in the Subscription Agreement, coupled with the wording of and exhibits to plaintiffs’ FAC. . . , we find the litigation between the parties is a dispute ‘regarding’ the Subscription Agreement”—triggering the application of section 10.6’s attorney fee provision. The provision allows for the prevailing party in “a dispute regarding this Agreement that results in litigation” to be entitled to a fee award. As apparent, the litigation is to an extent a dispute concerning the Subscription Agreement.
Thus, the attorney fees provision applies.
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D. Banc Does Not Qualify as a “Prevailing Party”
Next, a question arises as to whether Banc may rely on the Subscription Agreement’s attorney fee provision in support of its motion for attorney fees. “In the event of a dispute regarding this Agreement that results in litigation or arbitration, the prevailing party, as determined by the finder of facts, shall be entitled to an award of reasonable attorneys’ fees.” (Italics added.) Whether or not Banc qualifies as a “prevailing party” depends on whether we apply California law or New York law to the Subscription Agreement’s attorney fee provision.
Under California law, application of Civil Code section 1717, subdivision (b) precludes Banc from qualifying as a “party prevailing on the contract” following plaintiffs’ voluntary dismissal of the action against Banc. (See § 1717, subd. (b)(1)-(2).)
In contrast, New York law does not have any parallel statute limiting the recovery of attorney fees; rather, the “issue of who is a prevailing party is largely a factual determination” left to the trial court. (Tullett Prebon Financial Services v. BGC Financial, L.P. (N.Y. App. Div. 2013) 111 A.D.3d 480, 482; see McAllister v. Dowling (N.Y. App. Div. 1995) 221 A.D.2d 443, 444.) “ ‘Only a prevailing party is entitled to recover an attorney’s fee, and, to be considered a prevailing party, a party must be successful with respect to the central relief sought.’ ” (Kefalas v. Valiotis (N.Y. App. Div. 2021) 197 A.D.3d 698, 703.) Such a determination requires an initial consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope. (Ibid.)
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Banc contends New York law applies, relying on the fact that “the contract with the prevailing party attorneys’ fee provision contains a New York choice of law provision.” Section 10.7 of the Subscription Agreement provides, in relevant part, that “all questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdictions other than the State of New York.” (Italics added.) Banc contends: “It is well established that for [Civil Code] § 1717(b)(2) to apply, California law needs to govern the contract, and in this case, California law does not govern due to the New York choice of law provision.” (Italics added.)
Plaintiffs, on the other hand, argue California law applies:
“Seeking to avoid [Civil Code] § 1717(b)(2), Banc argued . . . that the [Subscription Agreement’s] New York choice-of-law provision should govern this case and be applicable to contractual claims regarding the [Subscription Agreement]. The [trial] court correctly rejected this argument, reasoning that Banc waived the right to invoke the provision.” (Italics added.)
To resolve whether we apply California law versus New York law in defining what a “prevailing party” is, we must determine whether Banc waived application of the New York choice-of-law provision.
1. Banc Waived the Application of New York Law Banc contends it “could not have waived the New York choice of law provision in the Subscription Agreement because no prior motion practice by Banc in the case had turned on or even
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involved any choice of law issue concerning the Subscription Agreement.” Banc argues the trial court “committed legal error” by finding waiver and urges this court to review the trial court’s waiver determination de novo.
Plaintiffs retort that the waiver ruling “is supported by substantial evidence because, inter alia: (1) Banc relied exclusively on California law on all relevant issues and motions; (2) Banc did not object to applying California law to the [Subscription Agreement’s] fee provision . . . on a motion brought by Banc’s co-defendants . . . even though Banc had every opportunity to object and Banc was the real party in interest on that motion; (3) . . . the court made its choice-of-law ruling on [April 18, 2024] on [Banc’s co-defendants’] motion” by applying California law.
We begin with a discussion of the applicable standard of review, a standard on which the parties disagree. Banc seeks to obtain de novo review, claiming the facts are not disputed and thus we are free to substitute our view for that of the trial court. Plaintiffs disagree and contend we are required to apply the substantial evidence standard of review given the record before us. We agree with plaintiffs.
“ ‘Generally, the determination of waiver is a question of fact, and the trial court’s finding, if supported by sufficient evidence, is binding on the appellate court. [Citations.] “When, however, the facts are undisputed and only one inference may reasonably be drawn, the issue is one of law and the reviewing court is not bound by the trial court’s ruling.” ’ ” (Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 962 (Davis).)
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Here, “the essential facts may not be in dispute, in the sense that no one doubts that party X did or did not do act Y on date Z. Nevertheless, even if there is no difference in opinion on such events or non[-]occurrences, the inferences to be drawn from the essential facts are conflicting. And where conflicting inferences may be drawn, the issue is reduced to whether the trial court’s finding of waiver is supported by substantial evidence.” (Davis, supra, 84 Cal.App.5th at pp. 962–963; see Davis v. Continental Airlines, Inc. (1997) 59 Cal.App.4th 205, 211; see also 9 Witkin, Cal. Procedure. (6th ed. 2022) Appeal, § 396.) Here, the critical facts permit conflicting inferences. The undisputed fact that Banc has never invoked New York law since the conception of the case in 2019; conflicting inferences include whether Banc misled plaintiffs about its intent to rely on New York law in applying the Subscription Agreement’s attorney fee provision and thus waived its application (as alleged by plaintiffs) versus whether Banc remained silent about the choice-of-law provision until the attorney provision was directly invoked in this case by Banc (as alleged by Banc). We agree that the appropriate test is substantial evidence. In applying that standard of review, we infer all necessary findings supported by substantial evidence and construe any reasonable inference in the manner most favorable to the ruling, resolving any and all ambiguities to support an affirmance. (Davis, at p. 963.)
The trial court’s ruling that Banc “impliedly waived the right to invoke New York law notwithstanding the language of the choice of law provision” is indeed amply supported by substantial evidence.
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First and foremost, Banc litigated the entire case pursuant to California law, which, in and of itself, lends support to the finding that Banc waived application of New York law.
Banc disagrees and contends its previously filed pleadings and motions “never waived the New York choice of law provision in the Subscription Agreement.” Banc argues its demurrer “moved to dismiss [plaintiffs’] first cause of action based on collateral estoppel—a California procedural rule governed by California law—and cited California law in support of dismissal of [plaintiffs’] twelfth cause of action because the [SAR] agreement does not contain a New York choice of law provision.” This seems disingenuous at best, as Banc is arguing on the one hand that the entire litigation, including the twelfth cause of action, falls under the purview of the Subscription Agreement (and its attorney fee provision) because plaintiffs’ claims against Banc amount to a “dispute regarding this [Subscription] Agreement that results in litigation” ; yet, on the other hand, Banc argues it need not have cited to New York law in connection with the twelfth cause of action as there was no New York choice of law provision in the SAR Agreement (i.e., not subject to the Subscription Agreement’s choice-of-law provision).
If, as Banc argues, New York law governs the substantive claims in this case pursuant to the Subscription Agreement’s choice-of-law provision, then Banc should have raised New York law in connection with the arguments made in its May 27, 2022 demurrer or June 5, 2024 summary judgment motion, none of which raised solely procedural arguments. Banc’s contention amounts to this—it wishes for the FAC’s four remaining causes of action to be subject to the Subscription Agreement’s attorney fee provision, such that Banc may apply for an attorney fee award,
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but does not wish for the claims to be subject to the Subscription Agreement’s choice-of-law provision, unless it benefits Banc’s position on a claim by claim basis. Significantly, Banc has failed to demonstrate or explain how its summary judgment motion and demurrer as to the FAC’s causes of action involving the Subscription Agreement do not amount to a “question[] concerning the construction, validity, enforcement and interpretation of th[e Subscription] Agreement” such that it “shall be governed by the internal laws of the State of New York” as expressed in section 10.7 of the Subscription Agreement. Banc’s failure to raise New York law in its demurrer and summary judgment motion qualifies as substantial evidence in support of the trial court’s waiver finding.
Moreover, Banc remained silent when this exact issue was raised by plaintiffs’ counsel in opposing the attorney fee motion filed by Banc’s executives and board directors. Banc’s executives argued California law applied in their fee motion, both in underlying proceedings and on appeal in B338610. At the April 18, 2024 hearing, plaintiffs’ counsel raised the choice-of-law provision and said: The Subscription Agreement “is an agreement, by the way, which if you look at closely is actually governed not by California law but New York law, and New York law says fee shifting provisions like this are strictly construed.” Neither Banc, whose counsel Chet A. Kronenberg personally appeared at the hearing, nor Banc’s executives stated anything in response or raised any issue with the choice-of-law provision then. “[C]ontractual waiver generally requires ‘an existing right, a knowledge of its existence, and an actual intention to relinquish it, or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished,’ with
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no required showing of prejudice.” (Armstrong v. Michaels Stores, Inc. (9th Cir. 2023) 59 F.4th 1011, 1014, italics added.)
If Banc, which appeared through counsel as a real party in interest (with a duty to indemnify its executives/board directors), disagreed with its agents’ position that California law governed the fee motion, it had an opportunity to say so when plaintiffs’ counsel expressly raised the contractual choice-of-law provision at the hearing. (See Killian v. Millard (1991) 228 Cal.App.3d 1601, 1605 [“A real party in interest ordinarily is defined as the person possessing the right sued upon by reason of the substantive law.”].) Banc’s failure to do so supports the inference that it knowingly acquiesced in that position and thereby waived any right to assert otherwise. (See In re Domestic Partnership of Torres Campos & Munoz (2026) 118 Cal.App.5th 1112, 1125 [The party “failed to . . . call the court’s attention to the issue. The forfeiture rule applies to a party’s failure to object . . . when it had an opportunity to do so.”].) A “ ‘[r]eal party in interest’ ” has been generally defined as “ ‘any person or entity whose interest will be directly affected by the proceeding.’ ” (Sonoma County Nuclear Free Zone v. Superior Court (1987) 189 Cal.App.3d 167, 173.) So, Banc’s contention that proceedings in the same action, arising from the same operative complaint and underlying agreement, and involving Banc’s co-defendants who are also Banc’s agents (its executives and board directors) have no bearing on Banc itself, is untenable. Having remained silent while its executives and board directors advocated application of California law, Banc should not now be permitted to take a contrary position that it failed to assert when the issue was squarely presented to the court.
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All of the foregoing qualifies as substantial evidence in support of the trial court’s waiver finding. Banc’s consistent reliance on California law throughout the entire case is substantial evidence of ponderable legal significance that Banc waived application of the New York choice-of-law provision.
Banc contends the “lone case relied upon by the Superior Court to find waiver involved wildly different circumstances.” Not so different, we find. In Nagrampa v. MailCoups, Inc. (9th Cir. 2006) 469 F.3d 1257, defendant MailCoups initiated arbitration against plaintiff Nagrampa after she allegedly breached a franchise agreement. (Id. at p. 1265.) The district court ruled: “Although the choice of law clause in article 36.17 of the franchise agreement provides that the governing law is that of the State of Massachusetts, both parties have proceeded throughout the district court and on appeal on the assumption that the franchise agreement is governed by California law. As a result, the district court applied California law in determining whether the arbitration provision is unconscionable. We will follow suit because the parties through their course of conduct have waived the provision of the agreement that specifies the application of Massachusetts law. See 13 Williston on Contracts § 39:27 (4th ed. 2005) (stating that parties to a contract impliedly waive a term through a course of conduct clearly manifesting an intention to waive the term). This principle is recognized both in California, Daugherty Co. v. Kimberly-Clark Corp., 14 Cal.App.3d 151, 158, 92 Cal.Rptr. 120 (1971), and in Massachusetts, see Porter v. Harrington, 262 Mass. 203, 159 N.E. 530, 531 (Mass. 1928).” (Nagrampa, at p. 1267.) Similarly, the reviewing court in Brandwein v. Butler (2013) 218 Cal.App.4th 1485 addressed an analogous scenario and ruled: “The parties cite only California
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law in addressing the propriety of the trial court’s dismissal of the Brandwein's bad faith claim, even though they acknowledge that the nature of the Underwriters’ duty to act in good faith toward Brandwein is defined by the insurance agreement, and that agreement expressly provides that it is governed by New York law. Nevertheless, because neither the parties nor the trial court focused on New York law, we will proceed with our analysis, as they did, under California law.” (Id. at p. 1515, fn. 17; see 13 Williston on Contracts (4th ed. 2000) § 39:27, pp. 620–621 [parties to a contract impliedly waive a term through a course of conduct clearly manifesting an intention to waive the term].)
Having found that substantial evidence supports the trial court’s finding that Banc waived application of the New York choice-of-law provision in section 10.7 of the Subscription Agreement, we conclude California law governs. Thus, Civil Code section 1717, subdivision (b)(2) operates to preclude Banc from qualifying as a “prevailing party” entitled to an attorney fee award, given the fact that “there is no party prevailing on the contract . . . [w]here an action has been voluntarily dismissed” (Civ. Code, § 1717, subd. (b)(1)–(2)), as it was here via plaintiffs’ July 12, 2024 request for voluntary dismissal.
Because of our ruling finding that there was in fact a waiver or forfeiture by Banc as to New York choice of law, we need not address Banc’s additional argument whether Civil Code section 1717, subdivision (b)(2) trumps New York choice of law provision absent a waiver. That argument is moot.
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DISPOSITION
The trial court’s order denying Banc’s motion for attorney fees is affirmed. Costs awarded to plaintiffs.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
STRATTON, P. J.
We concur:
WILEY, J.
VIRAMONTES, J.