Whether attorney's fees may be awarded to a party prevailing on an action to enforce a consent degree must be determined pursuant to Civil Code §1717, which governs attorney's fees in contract actions, said the Fourth District Court of Appeal in In re Tobacco Cases I (Apr. 5, 2011, D056589), __ Cal.App.4th __ [2011 DJDAR 4896].
The People filed an action to enforce a consent decree entered into in 1998 between numerous States, including California, and numerous tobacco companies, including R.J. Reynolds Tobacco Company, which enjoined the companies from using any cartoon in their advertising. In 2006 Reynolds launched an advertising campaign called "Camel Farm' or "Camel Rocks" to promote Camel cigarettes to adult smokers who enjoy rock music on independent labels. In November 2007 Reynolds placed a four-page advertisement in Rolling Stone magazine, which contained photo collages of fanciful objects such as jet-powered flying tractors, radio helicopters and televisions on plant stems. The advertisement appeared adjacent to five pages of the magazine's editorial content, which included cartoons "under any definition of the term."
The trial court found that "a relatively small portion" of the advertisement violated the cartoon prohibition and that Reynolds was not responsible for the placement of the ad near the magazine's cartoons. The People sought attorney's fees pursuant to a provision in the decree that a State may recover attorney's fees if the manufacturer is found to be in violation. The court awarded fees, rejecting Reynold's argument that the consent decree was a contract and that §1717 applied. The court added that even if §1717 applied, the People were the prevailing party since they prevailed on the "significant issue" of whether Reynolds' advertising violated the cartoon ban.
This was error, said the appellate court, because a consent decree is a contract. In a stipulated judgment or a consent decree the parties voluntarily terminate a lawsuit by assenting to specific terms, and this is close enough to a contract to trigger §1717. The trial court also applied the incorrect legal standard in determining the prevailing party under §1717. Under this section, the issue is not whether the party prevailed on a significant issue, but whether the party recovered the greater relief in the action. Since the results in the case were mixed, the trial court needed to compare the relief awarded with the parties' demands and their litigation objectives, and the matter was remanded for reconsideration under the correct legal standard.