A tenant prevailed in a lawsuit against his landlords and obtained a judgment exceeding $61,000. He then sought approximately $137,000 in attorney fees and $24,773 in litigation costs. The landlords relied on a provision in their residential lease limiting the prevailing party’s combined recovery of attorney fees and costs to $1,000.
The trial court enforced that provision, limiting costs to $1,000 and denying attorney fees entirely.
On November 2, 2026, the California Court of Appeal issued its partially published decision in Aviles v. Shenon (B342634, B344966). The court concluded that the contractual limitation was enforceable as to attorney fees, but invalid as applied to the tenant’s statutory right to recover litigation costs.
The distinction turned on the source of each entitlement. The tenant had a statutory right to recover allowable costs as the prevailing party. His right to recover attorney fees, however, arose solely from the lease provision that also limited their amount.
A $19,500 Security Deposit Led to a Dispute Over More Than $160,000 in Litigation Expenses
Lee Aviles leased a Los Angeles residence from Yury and Natela Shenon. The monthly rent was $9,750, and the security deposit was $19,500.
The tenancy lasted approximately two years. When Aviles moved out, the landlords retained the entire security deposit without providing the required accounting.
Aviles sued under Civil Code section 1950.5, which regulates residential security deposits.
Following a jury trial, the court entered judgment for approximately $61,801, including a $39,000 statutory penalty based on the landlords’ bad-faith conduct.
Aviles subsequently sought $24,773.27 in litigation costs and $136,896.50 in attorney fees.
The lease contained the following provision: “In any action or proceeding arising out of this agreement, the prevailing party between landlord and tenant shall be entitled to reasonable attorney fees and costs, collectively not to exceed $1,000 (or $ _________).”
The parties had not inserted a different amount.
The landlords argued that this provision controlled the tenant’s recovery, regardless of the amounts actually incurred.
The trial court agreed. It limited the recoverable costs to $1,000 and denied the attorney-fee motion because the entire contractual allowance had already been exhausted.
Aviles appealed both orders.
Why the $1,000 Limitation Could Not Restrict Statutory Costs
Code of Civil Procedure section 1032(b) generally entitles a prevailing party to recover allowable litigation costs as a matter of right, except as otherwise expressly provided by statute.
Those costs are subject to the limitations and requirements of the applicable cost statutes, including Code of Civil Procedure section 1033.5.
The question in Aviles was whether a residential tenant could agree in advance to limit that statutory entitlement.
Civil Code section 1953(a)(4) declares void a provision in a residential lease through which a tenant agrees to waive or modify certain procedural rights in litigation concerning the tenant’s rights and obligations.
The Court of Appeal concluded that the right to recover prevailing-party costs under section 1032(b) is procedural.
The statute governs the allocation of litigation expenses after a party prevails. It does not define the substantive elements of the underlying claim.
Because section 1953 prohibits a residential tenant from waiving or modifying such procedural rights, the lease provision could not restrict Aviles’s statutory cost recovery to $1,000.
The appellate court therefore reversed the order limiting costs and directed the trial court to reconsider the landlords’ motion to tax costs.
This did not mean that Aviles was automatically entitled to every dollar of his $24,773.27 request. The trial court must still determine which claimed costs are allowable and recoverable under the applicable statutes.
The holding also depends on Civil Code section 1953, a statute specifically protecting residential tenants. The decision should not be read as establishing that every contractual limitation on litigation costs is invalid in an ordinary commercial agreement.
Why the Attorney-Fee Limitation Was Enforceable
The attorney-fee issue required a different analysis.
California generally follows the American Rule: each party bears its own attorney fees unless recovery is authorized by contract, statute, or another recognized legal basis.
Code of Civil Procedure section 1033.5(a)(10) recognizes attorney fees as recoverable costs when independently authorized, but it does not itself create a general entitlement to attorney fees.
Aviles argued that the lease’s $1,000 limitation improperly restricted his right to recover reasonable fees.
The Court of Appeal examined the source of that right.
Although Civil Code section 1950.5 permits certain remedies for a landlord’s improper handling of a residential security deposit, it does not independently authorize prevailing-party attorney fees.
Aviles identified no other statute or legal basis entitling him to attorney fees in this action.
His entitlement came from the lease itself.
The same provision that authorized attorney fees also imposed the $1,000 combined limitation.
Accordingly, the appellate court concluded that the provision created a limited contractual entitlement rather than improperly waiving an independent statutory right.
The tenant could not rely on the lease to establish his right to fees while disregarding the limitation contained in that same provision.
The court also declined to invalidate the provision on unconscionability grounds. Striking the entire provision would have eliminated the only basis for recovering attorney fees. The court rejected the suggestion that it could simply remove the dollar limitation while preserving an unrestricted contractual fee entitlement.
What Happens to the Attorney-Fee Request on Remand?
The Court of Appeal affirmed the underlying judgment but reversed the postjudgment cost order.
It also provisionally reversed the order denying attorney fees.
The instructions on remand are significant.
If the trial court determines that Aviles is entitled to at least $1,000 in allowable statutory costs, no additional attorney fees may be awarded under the contractual provision.
If allowable costs are less than $1,000, the court may consider awarding attorney fees, but only to the extent that the combined award does not exceed $1,000.
For example, if the court awards $700 in costs, it may consider up to $300 in attorney fees. If allowable costs exceed $1,000, the tenant may recover those costs notwithstanding the contractual cap, but the contract provides no additional attorney-fee recovery.
The appellate court did not authorize recovery of the requested $136,896.50 in attorney fees.
The practical result is that the tenant’s statutory cost recovery may exceed the contractual ceiling, while his contractual attorney-fee entitlement remains subject to the limitation.
The California Supreme Court Is Considering a Related Question
The legal landscape may change.
In Gogal v. Deng, S292779, the California Supreme Court granted review on November 19, 2025.
The Supreme Court directed the parties to address two questions: whether parties to a contract entered into before litigation may waive their rights to recover prevailing-party costs, and whether Civil Code section 1953 invalidates a residential tenant’s agreement to waive or modify those rights.
Those questions overlap directly with the statutory-cost analysis in Aviles.
The Supreme Court’s eventual decision may clarify the enforceability of prelitigation cost waivers more broadly and the particular protection afforded to residential tenants.
Until that decision issues, parties and counsel should distinguish the current holding in Aviles from questions that remain under review.
Implications for California Contract Litigation
Aviles illustrates why attorney fees and litigation costs require separate analysis even when a contract addresses them in a single provision.
A prevailing party may have a statutory right to ordinary litigation costs without having any independent right to attorney fees.
Conversely, a contract may create an attorney-fee entitlement subject to a negotiated limitation.
Whether the limitation is enforceable depends on the governing statutes, the language of the agreement, and the legal basis for the requested recovery.
The residential lease statute was decisive in Aviles. Civil Code section 1953 prevented the tenant from waiving procedural rights that otherwise existed under California law.
The same analysis cannot automatically be applied to commercial leases, business contracts, shareholder agreements, or settlement agreements.
For parties drafting contracts, the decision also illustrates the importance of distinguishing attorney fees from statutory costs. Combining both categories under one dollar limitation may create uncertainty when one category is governed by a statutory entitlement that the parties cannot validly restrict.
For litigants, the first question should be whether the claimed fees or costs arise independently under a statute or depend entirely on the parties’ agreement.
That distinction determined the outcome in Aviles.
Elpis Law represents businesses and individuals in California contract disputes, commercial litigation, and civil litigation involving attorney-fee provisions and the recovery of litigation expenses.
Legal Authorities
- Aviles v. Shenon (Nov. 2, 2026, B342634, B344966), Cal. Ct. App., 2d Dist., Div. 1, certified for partial publication — opinion
- Gogal v. Deng, S292779, review granted Nov. 19, 2025 (pending)
- Code of Civil Procedure § 1021 — official text
- Code of Civil Procedure § 1032 — official text
- Code of Civil Procedure § 1033.5 — official text
- Civil Code § 1950.5 — official text
- Civil Code § 1953 — official text
Related practice areas: Civil Litigation · Real Estate