Indemnity Clause Gave No Basis For Fee Recovery, Because It Was Unilateral In Favor Of Unsuccessful Party, Not Allowing For Fee Entitlement--$628,587.50 In Fees Went Away!
In Club Acacia Community Assn. v. Professional Community Management of California, Inc., Case No. G056313 (4th Dist., Div. 3 July 11, 2019) (unpublished), a long-time dispute between an HOA, property manager, and contractor over the problematic installation of a fire alarm system at a condominium building resulted in property manager being found liable to HOA for $88,500 after allocation of comparative negligence against HOA and contractor in litigation, but no one pursuing claims in arbitration. There were two potential fee entitlement provisions: (1) an arbitration clause, but fees to the prevailing party only applied to an arbitration; and (2) an indemnification clause between HOA and property manager, in favor of property manager, for claims arising out of performance of the HOA-property manager contract. Eventually, the lower court awarded HOA fees in the amount of $628,587.50 against property manager based on the arbitration clause. Property manager appealed the fee award, to its credit.
First of all, the indemnity clause did not allow for fee entitlement. An indemnity clause is not made mutual by operation of Civil Code section 1717, such that HOA could not get fees, because it only favored property manager. (Building Maintenance Service Co. v. AIL Systems, Inc., 55 Cal.App.4th 1014, 1029 (1997).)
Most importantly, the arbitration clause only applied to arbitration activities, such that the litigation attorney’s fees award went POOF! Respondent HOA offered numerous theories—conduct of the parties and drafting party adverse ambiguities (contra proferentem) arguments—but they were to no avail, based on the unambiguous language that only arbitration fees were to be awarded. So, in the end, $628,587.50 in adverse fees went away on appeal, in a 3-0 unpublished decision authored by Justice Moore.
Comments