California Businesses Cannot Recover Every Legal Fee in Cascading Litigation
Horst Legal Counsel | April 2026
Someone torpedoes your deal. You spend north of a million dollars in court forcing the sale through. You win. Then you sue the people who caused the mess in the first place, and you win again. But the second lawsuit cost you another $841,000 in legal fees. Can you recover those fees too?
The First District Court of Appeal just said no. In Guinnane Construction Co., Inc. v. Chess, the court confirmed that California’s “tort of another” doctrine covers the attorney fees a business is forced to spend litigating against an innocent third party because of someone else’s wrongful conduct. It does not cover the fees spent going after the wrongdoer directly. That distinction sounds technical, but for any business that has been dragged into layered litigation by a bad actor, it is the difference between full recovery and absorbing six figures in legal costs.
What Happened in Guinnane
The dispute started with an 80-acre parcel of land in Livermore. Guinnane Construction held the right to purchase a 50 percent interest in the property through an assigned right of first refusal. Edmund Jin, a prospective buyer, and his real estate agent Stephen Chess knew about that right. They pursued the deal anyway, ultimately convincing the sellers to breach their agreement and sell to Jin for $1.5 million.
Guinnane sued the sellers for specific performance. That case was fully litigated for over a year, culminating in a bench trial. Guinnane prevailed, obtaining a court order directing conveyance of the property interest in exchange for $1.2 million.
Guinnane then turned to the people who had caused the problem. It filed a separate action against Jin and Chess for inducing breach of contract and intentional interference with contractual relations. After years of litigation, including a meritless anti-SLAPP motion by the defendants that this same appellate court had already rejected, the trial court entered judgment in Guinnane’s favor. The compensatory damages totaled $1,798,994, consisting of the attorney fees Guinnane had incurred prosecuting the specific performance action plus prejudgment interest.
So far, the tort of another doctrine was working exactly as designed. The fees Guinnane spent suing the sellers were recoverable as damages against the people whose interference made that lawsuit necessary. The question was what came next.
The Fee Request the Court Denied
After judgment, Guinnane moved for an additional $841,133 in attorney fees: the cost of prosecuting the tort of another action against Jin and Chess. Guinnane argued that without recovering those fees, its judgment would be significantly diluted. It had spent over $800,000 just to collect the damages the defendants’ own conduct caused. If the doctrine existed to make Guinnane whole, shouldn’t it cover the full cost of getting there?
The trial court denied the motion, and the Court of Appeal affirmed. Presiding Justice Stewart, writing for a unanimous panel, traced the doctrine from its 19th-century English common law origins through the California Supreme Court’s foundational decisions in Prentice v. North American Title Guaranty Corp. and Gray v. Don Miller & Associates. The through line was consistent: the tort of another doctrine allows a plaintiff to recover fees spent in litigation with a third party that the defendant’s tortious conduct made necessary. It does not extend to the fees incurred in the action against the tortfeasor.
Why the Court Drew the Line
The court’s reasoning rested on the structural relationship between the tort of another doctrine and the American Rule, codified in Code of Civil Procedure section 1021, which requires each party to bear its own attorney fees absent a statute or contract providing otherwise. The tort of another doctrine is not a general fee-shifting rule. It is a narrow equitable exception that treats certain attorney fees as consequential damages, specifically, the fees a plaintiff was forced to spend because of the defendant’s wrong. Those fees are recoverable as damages “like any other damages,” but the key phrase is “in the action against the third party.”
Gray itself made this distinction. The Supreme Court there remanded for an apportionment of attorney fees, directing the trial court to award only the portion “attributable to [the plaintiff’s] action against the sellers,” not the fees incurred in the fraud action against the broker. Subsequent decisions reinforced the boundary. In Lewis v. Edmonds, this same court rejected a tort of another claim for fees incurred suing the tortfeasor, noting the doctrine “arguably would support a recovery from [the defendant] for the attorney fees incurred in [plaintiffs’] defense of the foreclosure proceeding” but not fees from “the ordinary two-party action” against the wrongdoer. Third Eye Blind, Inc. v. Near North Entertainment drew the same line, distinguishing fees recoverable under the doctrine from “attorney’s fees qua attorney’s fees” incurred in suing the tortfeasor defendant.
Guinnane tried an alternative argument: that “fees on fees” are recoverable under the private attorney general doctrine (Code of Civil Procedure section 1021.5), and the same logic should apply here. The court rejected the analogy. The private attorney general doctrine exists to incentivize enforcement of important public policies. Without fee recovery, such litigation would often be impracticable, and statutory rights would go unenforced. The tort of another doctrine serves a different function. It compensates a plaintiff for a specific economic injury. It does not aim to encourage litigation or deter bad conduct. Those are fundamentally different engines, and extending “fees on fees” from one to the other would require the kind of policy decision that belongs to the Legislature.
The court acknowledged the practical unfairness. Guinnane spent over $841,000 to collect damages that the defendants’ own tortious interference had caused, and the defendants’ aggressive litigation tactics, including a meritless anti-SLAPP motion, made the case more expensive than it needed to be. The opinion closes by noting that sanctions for frivolous litigation tactics exist as a potential remedy, but the bar is high. As for changing the underlying rule, the court said plainly: “this court is not at liberty to depart from current law.”
What This Means for California Businesses
For companies involved in real estate transactions, commercial contracts, or any business relationship where a third party’s interference might trigger cascading litigation, Guinnane offers three practical lessons.
First, budget for the full cost of enforcement. If you are the victim of tortious interference and need to sue both the breaching party and the interfering party, the tort of another doctrine will help you recover the fees from the first lawsuit. It will not help you recover the fees from the second. That reality should inform how you structure your litigation strategy, how you allocate resources, and how you evaluate settlement offers.
Second, look for contractual and statutory fee provisions early. The American Rule applies by default, but contracts can change the calculus. If your agreements include attorney fee provisions that cover disputes arising from interference or breach, you may have an independent basis for fee recovery that the tort of another doctrine does not provide. Review your contracts with this gap in mind.
Third, consider injunctive relief and other early intervention strategies. The cheapest way to deal with cascading litigation is to prevent it. When a third party is actively interfering with a deal, tools like lis pendens, temporary restraining orders, and preliminary injunctions can stop the interference before it metastasizes into years of multi-front litigation. The earlier you involve litigation counsel, the more options you have.
Guinnane Construction v. Chess is a well-reasoned opinion that confirms what practitioners have long suspected about the boundaries of the tort of another doctrine. It is also a reminder that winning on the merits does not always mean recovering every dollar you spent getting there.