Thursday, December 14th, 2017

Mediation as a Precondition to Attorney Fees

May 2, 2013 by  
Filed under Newsletters

California Courts Uphold Standard Real Estate Clause

The standard California Residential Purchase Agreement contains a common contract clause stating mediation is a precondition for an award of attorney fees.  The courts have upheld these clauses, even if one side believes it has a good excuse to refuse participation in mediation.

The contract in Cullen v. Corwin, 206 Cal.App.4th 1074 (2012) contained a standard clause stating that participation in mediation was a precondition for an award of attorney fees.  The clause applied to both sides, stating a party was not entitled to attorneys fees if it commenced an action without first attempting to resolve the matter through mediation, or refused to mediate after a request was made.

After the closing, the plaintiffs alleged the defendants failed to disclose a defect in the home.  Plaintiffs filed a lawsuit and requested mediation.  The defendants refused to mediate, and ultimately prevailed on a Motion for Summary Judgment.  The trial court granted the defendants’ motion for attorney fees, but the appeals court reversed due to their refusal to participate in mediation.

The defendants argued on appeal that plaintiffs’ failure to respond to their discovery requests was reason for refusing mediation.  While the defendants were agreeable to mediation, they first wanted to conduct discovery to file a Motion for Summary Judgment to avoid mediation, settlement conference and trial. Arguing that mediation would only be meaningful if they lost their motion for summary judgment, the defendants also pointed to one of their letters to plaintiff that without discovery, mediation would be a “waste of time.”  Defendant also pointed out that plaintiff did not request mediation prior to filing litigation.

In reversing the attorney fee award, the appeals court rejected defendants’ arguments. The court noted that the plain language of the contract was clear.  The court stated “[m]oreover, there is a strong public policy in the promotion of mediation ‘as a preferable alternative to judicial proceedings’ in a less expensive and more expeditious forum.”  The purpose of the requirement for mediation is that it be conducted at the earliest possible time.  Discovery is not necessary to be conducted before a party can demand mediation participation.

Obviously, you can’t let your clients make the same mistake—for any contract dispute with mediation as a precondition to an award of attorney fees, request mediation before commencing an action and if requested to mediate, accept the offer.

But as important, at the mediation and before, make a good faith effort at resolving the dispute.  Parties and counsel are often gratefully surprised at the positive outcome of a pre-litigation mediation. Try to get to the gravamen of plaintiff’s complaint and use the flexibility of mediation to find non-litigated solutions.  It can make sense to exchange crucial documents ahead of time and to have a chat with opposing counsel to keep the lines of communication open.  When parties come to mediation with open minds, they find that it is not just about fulfilling a contract requirement.

Mediation is a way of examining all options to come to a mutually-beneficial and cost-effective resolution as an alternative to prolonged litigation. It gives us as lawyers an opportunity to be true counselors-at-law to our clients.  In the case discussed above, the defendant’s resulting legal fees may have negated their “win,” which might have been avoided by a good faith attempt at mediation.

Kevin C. Coleman is a professional mediator and attorney who performs mediation services throughout the San Francisco Bay Area, including San Francisco, Marin County, Alameda, Contra Costa, Sonoma and outlying counties and throughout the state.

Contact San Francisco Bay Area mediator Kevin C. Coleman online or by calling 415-488-7609.

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!