One of the key considerations in any real estate purchase dispute is the attorney fees provision. Given the expense of litigation, many times, the attorney’s fee quickly exceeds the damages in the case. However, a recent California case has placed limitations on the recovery of attorney fees. In Cullen v. Corwin, the court found that if the parties do not mediate, then attorney fees may not be available.
In Cullen, the parties had entered into a purchase contract using the standard California Association of Realtors® (“CAR”) purchase contract. The contract provides that if the plaintiff does not request mediation prior to filing an action, or if any party refuses to cooperate with mediation, then that party is not entitled to attorney fees. There, the plaintiff failed to request mediation prior to filing litigation but also the defendants rejected two requests for mediation thereafter.
Eventually, the defendants prevailed on a motion for summary judgment and thereby won the lawsuit. The defendants requested their attorney fees and the fees were granted to them by the trial court. The Appellate Court overturned the lower court and found that the defendants were barred from recovering their attorney fees because of their rejection of the two mediation requests. The Court explicitly rejected the defendants’ argument that they were waiting for discovery responses prior to mediation. The Court held that, even if there was a strategic benefit to waiting for discovery responses, the contractual language required mediation and public policy promotes mediation at the earliest possible time.
Take Away – California courts are strongly in favor of mediation and other forms of alternative dispute resolution. If your contract, like many standard contracts, requires mediation prior to litigation, make sure that you follow that requirement. Otherwise, you may end up in a worse situation than when you began, even if you win.
If you or someone you know is interested in seeking legal counsel regarding such matters, don’t hesitate to contact Brewer Offord & Pedersen LLP at (650) 327 – 2900 or visit us on the web at www.BrewerFirm.com.
