A somewhat obscure but effective means of shifting attorney’s fees is the Tort of Another doctrine. The Tort of Another doctrine is an exception to the general rule each party bear’s its own fees and costs absent a contractual provision or statute authorizing prevailing party attorney’s fees. Code of Civil Procedure (“CCP”) Section 1021 prohibits the recovery of attorney’s fees in an ordinary two party case. The Tort of Another doctrine, however, is found in the Restatement of Torts and allows for the recovery of reasonable compensation for attorney’s fees incurred as damages proximately caused by another party’s improper actions. (Rest. 2d Torts §914(2)). California courts generally recognize the Tort of Another doctrine in applicable circumstances. (Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618,620-21).
The Tort of Another exception has been defined by the California Supreme Court as: “A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred.”
(Prentice v. North Amer. Title Guar. Corp., 59 Cal.2d 620). Typically, Tort of Another is used in real estate transaction cases. For example in the Prentice case, an escrow holder’s negligence in closing a real property sale forced the plaintiffs to bring a quiet title action against third parties. The Supreme Court held it was proper for plaintiffs to recover attorney’s fees incurred in a quiet title action brought by the escrow holder. Although the Court allowed attorney’s fees because there was no prejudice, it noted attorney’s fees under the Tort of Another doctrine should be properly pleaded. (Id. at 621).
In another real estate transaction case, attorney’s fees were awarded to a plaintiff who sued the seller of property for specific performance and also sued a real estate agent for fraud for not disclosing the seller changed its mind. (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505). The Tort of Another doctrine, however, is not limited to real estate transactions. In (Vanguard Recording Society, Inc. v. Fantasy Records, Inc. (1972) 24 Cal.App.3d 410) a record company recovered attorney’s fees from a defendant who was marketing unlicensed and unauthorized recordings of one of its artists. While the Tort of Another doctrine has been successful in limited cases, courts have denied its application to an innocent defendant seeking attorney’s fees against a co-defendant in a garden variety product liability action. (Davis v. Air Technical Industries, Inc. (1978) 22 Cal.3d 1, 6). To justify its holding, the Davis Court read an “exceptional circumstances” requirement into the Tort of Another doctrine which otherwise does not exist in the Restatement of Torts. The Court’s concern was absent exceptional circumstances, Tort of Another doctrine, if expanded could swallow up CCP § 1021. (Ibid.)
The Prentice articulation of the Tot of Another exception is not limited to plaintiffs. Indeed, it applies to any person who is forced to bring or defend an action against a third party to protect its interest. For example, a defendant might use the Tort of Another doctrine as a weapon to facilitate early resolution or dismissal of the underlying case, as follow:
An entity plaintiff sues an absentee owner of undeveloped land for a prescriptive easement to an access road on the property. Plaintiff’s agents, who had been using the access road for the prescriptive period, misleads the land owner as to the nature of their use. To protect his interests, defendant landowner sues Plaintiff’s agents for fraud and seeks attorney’s fees for having to prosecute the fraud action to defend against the prescriptive easement claim.
While the Tort of Another doctrine has limited application, there are any number of analogous scenarios beyond real estate where the Tort of Another doctrine could be used. Accordingly, creative adjusters and defense counsel should consider the Tort of Another doctrine as part of its strategic evaluation. When the Tort of Another doctrine does apply, it can a powerful negotiating chip.