Defense Award of Fees Is Reversed, Because Alternative Phrasing of CAR Form Clause Means Defense Must Attempt to Mediate Or Be Disqualified From Fee Recovery After Plaintiff’s Request for Mediation.
Okay, folks, in Frei v. Davey, 124 Cal.App.4th 1506 (2004), our local appellate court (authored by Justice Fybel) considered the CAR form contractual provision requiring mediation as a condition precedent to fee recovery in disputes involving sellers and buyers. Prior to Frei and based on the wording of the CAR form provision, a plaintiff ultimately prevailing is disqualified from fee recovery if initiating a suit that is not exempt from exceptions to the mediation requirement. The plaintiffs is Frei were exempt from requesting mediation before filing suit, because their suit for specific performance with a lis pendens in play was within an express exemption. So, the plaintiffs in Frei requested mediation even after suit commencement, but defendant refused. Frei concluded that the defense refusal to mediate was dispositive under the alternative wording of the mediation disqualification penalty--which penalizes a party “refus[ing] to mediate after [the making of] a request [by the opponent].” After all, plaintiffs, albeit exempt from having to make the request before commencing suit, did make a mediation request later, and the defense refused and could not be awarded fees as a prevailing party under the contractual clause. (Keep in mind, had plaintiffs prevailed in Frei, they could gave garnered fees, but their loss ended this dream.)
Cullen v. Corwin, Case No. C067861 (3d Dist. June 7, 2012) (certified for partial publication; fee discussion published) confronted a different defensive situation not addressed by Frei--does the defense have any obligations to cooperate in mediation even where a plaintiff is disqualified from fee recovery because it went straight to litigation in a real estate nondisclosure case not falling within any contractual mediation exemption?
You betcha, said the appellate court.
Simply because plaintiff commenced litigation does not mean that the defense has no obligation to respond to plaintiff’s attempts to mediate during the litigation. The defense won on the merits, and then also was the victor in recovering $16,500 in legal fees as costs, even though it refused to mediate based on two principal theories: (1) plaintiffs’ commencement of litigation without requesting mediation eviscerated any requirement by the defense to respond to a mediation request; and (2) plaintiff’s stonewalling in discovery made it futile to mediate without access to the withheld discovery. (Interesting arguments, but did either ground prevail? Nope.)
On the first ground, the alternative wording of the CAR form contract makes it clear that the defense must still respond to a mediation request even by a disqualified plaintiff, not within an exemption, that asks for mediation later on down the line.
With respect to ground #2, the CAR form contractual language does not recognize the lack of discovery as an excuse to fail to mediate, especially given that many mediations are held (some successful, some not) without the full panoply of discovery revelations. This is actually very consistent with Frei, which held that defense declarations indicating mediation would not be productive due to plaintiffs’ staunch positions did not negate the responsibility to respond to mediation requests.
Fee award reversed based on the defense failure to mediate after a request from plaintiff otherwise, with the Third District adding another jurisdictional block to the case law on CAR mediation-precedent contractual fee clauses.