Steep Price for Noncompliance With Mediation Condition Precedent.
The object lesson of this next case is that attention really must be paid to those mediation clauses that serve as a condition precedent before a party can initiate litigation or arbitration.
In a 2004 case, the Fourth District, Division Three, put teeth into a mediation provision contained in a California Association of Realtor (CAR) sale/purchase form contract that required parties to mediate before resorting to arbitration or litigation. Frei v. Davey, 124 Cal.App.4th 1506 (2004). Frei barred the prevailing parties from recovering attorney’s fees because they refused to mediate. We have posted earlier on the Frei case.
Here, the “bite” of the mediation provision came up outside the context of a CAR Form, and in the context of enforcement of a settlement agreement. Adams v. Newport Crest Homeowners Assn., Case No. G044230 (4th Dist., Div. 3 Mar. 13, 2012) (unpublished). Homeowner Adams was involved in litigation with her HOA resulting in a settlement agreement that she wanted to enforce – sort of. The settlement agreement included a mediation agreement, but she did not wish to mediate. She filed further court proceedings without availing herself of mediation first, and the HOA successfully moved to enforce the mediation provision requiring her to mediate (apparently mediation did not take place). That was a costly exercise, resulting in a trial court ruling that she owed the HOA $58,212 in attorney’s fees.
In the appeal, Adams argued she had not violated the settlement agreement, such that the HOA would be a prevailing party; she had simply not mediated. The Court viewed the matter otherwise. A provision in the settlement agreement “dictates the result in this case. . . [I]t provides that the prevailing party ‘in any dispute’ concerning an obligation under the settlement agreement shall be entitled to attorney fees. The dispute resolved in Case No. 05CC05516 was whether the settlement agreement obligated Adams to mediate. It did. She lost that one dispute.”
Justice Moore wrote the decision for a 3-0 panel of our local Santa Ana appellate court resulting in the affirmance. For more about the fee aspect of the case, see the post on California Attorney’s Fees, along with a vintage photograph of the game of “leapfrog.”
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