Sunday, January 28, 2007

Mediation Required in Real Estate Action for Prevailing Party to Recover Attorney's Fees

In real estate disputes, "Seeking mediation is a condition precedent to the recovery of attorney fees by the party who initiates the action." (Johnson v. Siegel (2000) 84 Cal.App.4th 1087)

In California, litigants are expected to pay for their own attorney's fees unless there is a special law or contract provision stating otherwise. And there are special provisions in most real estate purchase agreements which provide that in the event of a lawsuit between the buyer and seller, the "prevailing party" of the lawsuit is entitled to recover attorney's fees but only if the party who filed the action first attempted to resolve the dispute through mediation. That means the losing party has to pay his own attorney's fees as well as the winning party's fees - but only if mediation was attempted first.

Several days ago, the California appellate court confirmed in its ruling in Van Slyke v. Gibson that it is the party filing the lawsuit who is required to request mediation of the real estate dispute first and not the party who was sued. If mediation is not successful, then a lawsuit or arbitration can be pursued and attorneys' fees will be paid by the losing party to the prevailing party - regardless of whether the prevailing party is the plaintiff or the defendant.

In the Van Slyke case, $94,974 was at stake as the defendant seller prevailed in the lawsuit brought by a prospective buyer and then sought to have that prospective buyer pay almost $100,000 for the attorneys' fees the seller incurred from the litigation. The trial court ordered the prospective buyer to pay that amount to the seller. The award was confirmed on appeal and the appellate court also ordered the prospective buyer to pay the defendant seller's attorneys' fees incurred on appeal.

That's a lot of money. It all could have been avoided had the prospective buyer/plaintiff (Van Slyke) requested or attempted mediation of the dispute in the first place. Not to mention that Van Slyke has to pay his own attorney's fees as well, which could have been greatly minimized through early mediation.

And, did I mention how much wasted time was involved to get a final resolution of the case? The events leading to the lawsuit occured in May 2004 and Van Slyke filed the lawsuit in June 2004. Sometime later came the trial court ruling and finally, on January 18, 2007 - almost three years later - the appellate court ruling. But it's not done yet. The appellate court ordered the case back to the trial court to determine the amount of fees Van Slyke owes the defendant seller for the attorney's fees incurred on appeal. All signs point toward one easy and early decision that should be made in real estate disputes: Mediation!

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