Subcontractor Hit With $150,000 Fee Award Below, Gets A Reversal Of Fortune—Merits Reversal Of Retention Claim Meant Subcontractor Now Gets To Seek Fees For Being the Winner On Appeal!
Here you may see what’s very rare,
The world turn’d upside down;
A tree and castle in the air,
A man walk on his crown.
United Riggers & Erectors, Inc. v. Coast Iron & Steel Co., Case No. B258860 (2d Dist., Div. 1 Dec. 3, 2015 modification, first posted Nov. 23, 2015) (unpublished) is an appellate example of a true reversal of fortune, especially a reversal of fee exposure based on an overturning of a lower court partial merits ruling.
In this one, subcontractor sued contractor, among other things, for failure to make a retention payment in derogation of prompt payment statutes on a private construction project. Civil Code section 8818 has a fee-shifting provision which allows the prevailing party in a retention payment dispute to obtain recovery of costs and reasonable attorney’s fees. Contractor prevailed in the lower court, obtaining a fee award of $150,000 based on section 8818.
On appeal, the fee award went POOF! and much more.
The appellate court determined that contractor could not prevail on the merits of the retention payment claim because its dispute did not relate to the retention alone but to other collateral performance/damages disputes, with subcontractor showing that there was no good faith defense to the retention dispute alone—following the reasoning of East West Bank v. Rio School District, 235 Cal.App.4th 742 in the process that such a merits award was anchored to a “retention only” dispute. As a result, the section 8818 fee award against subcontractor not only had to be reversed, but subcontractor on remand got to pursue its fees against contractor (the prior winner)! Quite a reversal of events.
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