Alter Egos on the Contract

347 Grp., Inc. v. Philip Hawkins Architect, Inc., No. C091273 (D3 Dec. 7, 2020)

Plaintiff sued Company and its Principal for breach of contract. Company defaulted. Plaintiff dropped its contact claim against Principal, but proceeded against him on an alter ego theory. But Principal won a defense ruling on that at trial. He then moved for attorneys fees under Civil Code § 1717, because the Plaintiff/Company contract had an attorney fee clause. The trial court denied the motion, finding that the dismissal of the contract clause meant that the case was no longer “on the contract” and thus took the issue out of § 1717.

But that’s not right. Plaintiff was trying to enforce the contract against the principal, using the alter ego doctrine to bind it to Company’s liability. That’s on the contract. And basic estoppel principles say that if a party’s claim is based on binding a non-signatory to a contract under a theory like like alter ego, a prevailing non-signatory gets to raise the contract’s attorney fee provision against the party. 

Reversed.