ADR Case Updates
Mediation and Recovery of Attorney Fees, 01/09/05
In case you have not seen it, attached is the recent decision in Frei v. Davey (Fourth Appellate District, Division Three, No. G033682), filed December 17, 2004, dealing with the standard California Association of RealtorsR purchase contract that required the parties to mediate before commencing litigation in order to recover attorney fees. The recalcitrant seller refused a request to mediate. The buyer then sued for specific performance. After the seller prevailed in the action, the trial court awarded the seller $119,935 in attorney fees as the prevailing party under the attorney fee provision in the contract. In reversing the award of fees, the Appellate Court held that the seller refused to mediate and therefore waived the right to recover fees. Interestingly, the Court observed that the parties incurred over a half million dollars in fees in two trials and three appeals when they were only $18,540 (plus expenses) apart before litigation was commenced. The Court noted: "A mediator's explanation of the process and estimate of likely expenses, which would have taken place before or shortly after the litigation began, could have permitted the parties, in their own self-interest, to reach a compromise agreement." Although a real estate contract case, the public policy principles cited in support of mediation have broad application to any contract between litigants requiring them to mediate a dispute that ripens into litigation.
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