Mediation: Plaintiff Improperly Awarded Fees When Not Seeking Mediation First

 

However, Plaintiff Was Entitled to “Defensive Fees” for Prevailing on Defendants’ Cross-Complaint.

     You might say that this was a “split” decision in the area of CAR form contracts containing a mediation condition precedent to any fee recovery.

     In Darton v. Park Vasona Gas, Inc., Case No. H037499 (6th Dist. Feb. 14, 2013) (unpublished), plaintiff gas station seller sued defendant buyers under a business purchase agreement, which was part of an integrated transaction also involving a note, guaranty, and separate covenant not to compete and written lease. Plaintiff won on his complaint for defendants’ failure to pay and defeated defendants’ cross-complaint based on the covenant not to compete and breach of a sublease of automobile repair shop bays. The trial court later awarded winning plaintiff $128,924 in attorney’s fees under the CAR contract (and related documents) over defendants’ objection.

      Defendants won a “split decision” on appeal.

     A reversal was required on the complaint fee recovery because plaintiff filed suit without first pursuing mediation. Plaintiff argued that the mediation requirement could not be exported into the fees clauses in the note and guaranty, but that contention was rejected because those documents were part and parcel of an integrated, indivisible transaction involving the CAR-form purchase agreement.

     Nonetheless, not all was lost for plaintiff. Because the cross-complaint was its own independent action, plaintiff was entitled to recoup “defensive fees” as the prevailing party without satisfying the mediation condition precedent applicable to the complaint. (See Johnson v. Siegel, 84 Cal.App.4th 1087, 1101 (2000).) Defendants tried to argue that there was no fees clause in the covenant not to compete or sublease, but that failed based on the integrated transaction analysis--these documents were incorporated into the CAR purchase agreement having a fees clause. So, the matter went back down for an allocation by the lower court, which will have to decide what amount of “defensive fees” should be awarded to plaintiff seller.