Failure To Comply With A Contractual Requirement To Mediate May Bar Claim For Attorney’s Fees

On June 7, 2012, the Third District Court of Appeals in California ruled that a failure to participate in mediation prevented a prevailing party from recovering attorney’s fees and costs.  Cullen v. Corwin, 2012 DJDAR 7533 (2012).

The case addressed a real estate dispute involving the alleged failure to disclose a defective roof.  The parties utilized a standard form purchase agreement, which included the language that a party who: “commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after the making of a request shall not be entitled to recover attorney fees.”

Despite this term and the plaintiffs’ requests, the defendants refused to engage in mediation.   The defendants filed a motion for summary judgment (a motion to dismiss the plaintiff’s action without a trial) and won.  The trial Court awarded the defendants $16,500.00 in attorney’s fees and costs.  The plaintiffs appealed this decision, and the Court of Appeals reversed the award of fees.  The Court determined that the failure to mediate barred the prevailing party’s attorney’s fee claim.

The defendants argued that they did want to mediate, but that they wanted to complete discovery first.  The Court rejected this argument and cited an earlier case for the proposition that the contractual mediation requirement “is designed to encourage mediation at the earliest possible time.” (internal citation omitted).  The Court found that parties are not allowed to delay mediation “until they feel that they have marshaled the strongest possible support for their positions in litigation and mediation.”

The Court also noted the “strong public policy” to promote mediation as the preferred alternative to litigation, “in a less expensive and more expeditious forum.”  Expensive and time-consuming discovery is not necessary for mediation.

What does this case mean for Arizonans?  While the case is not binding in Arizona, it demonstrates that Courts will also enforce mediation provisions in valid contracts.  The case also demonstrates that Courts: respect mediation; recognize its benefits as less expensive and time consuming; and acknowledge that mediation can take place at any time – even before discovery is completed.

Alona M. Gottfried is a mediator and attorney in Arizona.  If you have questions about mediation, she can be reached at: 480-998-1500 or alona@sglawaz.com.  This is a general interest article only and is not intended to be legal advice.  See a legal professional before making legal decisions. 

Simmons & Gottfried, PLLC
8160 E. Butherus Dr., Suite #7
Scottsdale, AZ 85260

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Simmons & Gottfried, PLLC
8160 E Butherus Dr, Suite #7 Scottsdale, AZ 85260
Phone: (480) 998-1500