Golden Pisces, Inc., et al. v. Fred Wahl Marine Construction, Inc.

Golden Pisces, Inc. ("Golden Pisces") and OneBeacon
America Insurance Group ("OneBeacon") appeal the district
court order denying their motion for attorneys' fees following
their successful suit for breach of contract against Fred Wahl
Marine Construction, Inc. ("Fred Wahl"). Under the American
Rule, which applies in federal litigation, including maritime
litigation, Golden Pisces and OneBeacon are not entitled
to attorneys' fees absent statutory authorization, an enforceable
contractual provision, or an equitable exception to the
rule. F.D. Rich Co. v. Indus. Lumber Co., 417 U.S. 116, 126,
129-30 (1974). Because no statute authorizes attorneys' fees
for this maritime cause of action, because the parties' contract
was void, and because no recognized equitable exception
applies, we affirm the district court's order denying attorneys'
fees.

I.

Golden Pisces owns the F/V Golden Pisces, which at the
time this action arose was based in Newport, Oregon. In the
fall of 2001, Golden Pisces and Fred Wahl, a shipyard in
Reedsport, Oregon, entered into an oral agreement whereby
Fred Wahl would make repairs on the F/V Golden Pisces,
with Golden Pisces paying standard shipyard rates and costs
for work performed. After the parties entered into the oral
agreement, Fred Wahl presented the F/V Golden Pisces' captain
with a form contract that purported to limit Fred Wahl's
liability through a warranty disclaimer. The form contract also
contained a clause providing for attorneys' fees in favor of the
prevailing party "[i]n any litigation to enforce or interpret this
agreement." Although the captain signed the form contract, it
was never signed by the ship's manager; nor was it signed by
a representative of Fred Wahl.

Fred Wahl completed the repairs in December 2001. The
F/V Golden Pisces departed for Alaska for the "A" cod fishing
season at the beginning of January, 2002. In February, in
the midst of fishing operations, the F/V Golden Pisces suffered
problems due to misalignment of the propeller shaft that
Fred Wahl had installed. It returned to the fishing grounds
after undergoing repairs in Dutch Harbor, Alaska, only to
break down again at the beginning of March. It was towed
back to Dutch Harbor and missed the remainder of the fishing
season. Golden Pisces' insurer, OneBeacon, paid $114,583 in
repairs.

Golden Pisces and OneBeacon brought suit against Fred
Wahl in district court, alleging negligence, breach of contract,
breach of warranty, and breach of the implied warranty of
workmanlike performance, and claiming consequential losses
and lost profits. Fred Wahl raised the affirmative defenses that
Golden Pisces was comparatively negligent; that Golden
Pisces "impliedly warranted [the] suitability" of a propeller it
provided to Fred Wahl for installation; that the owner
accepted the repairs following sea trials; and that the work
order and attached form contract created an enforceable
agreement so as to disclaim Fred Wahl of any liability for "all
consequential, indirect or special damages," pursuant to the
terms of the contractual warranty disclaimer. Fred Wahl also
counterclaimed for unpaid repair bills. The parties stipulated
to several facts but disputed whether Golden Pisces was comparatively
negligent and whether the terms of the form contract
controlled.

After a trial, the district court found for Golden Pisces and
OneBeacon on the issue of liability. It further found "that
there was no written contract between the parties which
would operate to limit plaintiffs' remedies against defendant."
The court concluded that the work order and form contract did
not create an enforceable contract:

The document fails to set forth essential terms of the
agreement, such as a complete description of the work to be performed, the amount to be charged for
the repair work and the payment terms. The document
further contains an integration clause which
precluded referencing prior or subsequent oral agreements
to supply the missing terms . . . . [T]here are
no written modifications. The document is not even
signed by a representative of Wahl.

The court thus held that the terms of the parties' oral
agreement - which did not include an implied warranty disclaimer
or an attorneys' fees provision - controlled. The court
awarded Golden Pisces $25,000 for damage to the vessel and
$315,000 in lost profits and awarded OneBeacon $114,583. It
awarded Fred Wahl $36,412.24 on its counterclaim against
Golden Pisces for outstanding bills.

Golden Pisces and OneBeacon then moved for attorneys'
fees and costs. Because no federal statute provides for attorneys'
fees in suits arising in admiralty, Golden Pisces and
OneBeacon invoked the following provision from the form
contract on which Fred Wahl had unsuccessfully relied in
defending against the complaint:

In any litigation to enforce or interpret this agreement,
the losing party agrees to pay the prevailing
party's reasonable attorney fees including costs of
depositions and experts.

The district court granted Golden Pisces and OneBeacon's
motion for costs but denied the motion for attorneys' fees,
holding "there was no written contract between the parties"
and that consequently "the purported attorney fees clause was
null and void, and not enforceable against either party in this
action, regardless of the outcome. See, e.g., Perry v.
O'Donnell, 759 F.2d 702 (9th Cir. 1985)."
The district court granted Golden Pisces and OneBeacon's
motion for costs but denied the motion for attorneys' fees,
holding "there was no written contract between the parties"
and that consequently "the purported attorney fees clause was
null and void, and not enforceable against either party in this
action, regardless of the outcome. See, e.g., Perry v.
O'Donnell, 759 F.2d 702 (9th Cir. 1985)."
Golden Pisces and OneBeacon timely appealed.

Because Golden Pisces and OneBeacon's breach-ofcontract
claim arose in admiralty, federal law governs this
appeal. See Royal Ins. Co. of Am. v. Pier 39 Ltd., 738 F.2d
1035, 1036 (9th Cir. 1984). In federal litigation, the American
Rule generally precludes an award of attorneys' fees absent
statutory authorization or an enforceable contractual fees provision.
Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421
U.S. 240, 257 (1975); see also F.D. Rich Co., 417 U.S. at
126; Perry, 759 F.2d at 704. However, federal courts have
created a limited set of equitable exceptions to the American
Rule and will award attorneys' fees even in the absence of an
applicable statutory or contractual provision when, for example,
the losing party acted in bad faith or willfully disobeyed
a court order. See Alyeska, 421 U.S. at 258-59. "These exceptions
are unquestionably assertions of inherent power in the
courts to allow attorneys' fees in particular situations." Id. at
259.1

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