Mediation: Defendants Beware—Cooperate In Mediation Efforts Or Be Refused Attorney’s Fees Even if You Prevail Under Real Estate CAR Form Fee Clauses

 

Second District, Division 5 Reiterates Bitter Lesson for Defendants Losing Opportunity to Recoup Fees as the Prevailing Parties.

     Under our category “Mediation,” we have surveyed both published and unpublished decisions that hold contracting parties must strictly comply with the terms of CAR-form real estate purchase agreement fees clauses, which require a suing party to commence pre-litigation mediation and a sued party to cooperate in mediation efforts as condition precedents to obtaining recovery of attorney’s fees should either side prevail in an action or arbitration. Two of the leading cases on the mediation requirements are Frei v. Davey, 124 Cal.App.4^th 1506 (2004) and Lange v. Schilling, 163 Cal.App.4^th 1412 (2008). Below, we examine a recent unpublished decision on the subject, which buttresses our advice that you strictly comply with the mediation requirement when confronted with these types of fees clauses.

    In Byoun v. Padilla, Case No. B204850 (2d Dist., Div. 5 July 15, 2009) (unpublished), defendants eventually prevailed as a matter of law in a real estate dispute with plaintiffs where there was a purchase agreement with a mediation requirement in the attorney’s fees clause. Acting Presiding Justice Armstrong, on behalf of a 3-0 panel of the Second District, Division 5, affirmed a trial court’s refusal to award fees to defendants. The reason? The record showed that defendants did not cooperate in plaintiffs’ efforts to mediate the case—“although defendants agreed [to mediate], they did not take the steps necessary to ensure that the mediation actually took place. That is a refusal to mediate.” (Slip Opn., at p. 12.)

     Again, strictly comply with this provision or suffer the consequences!