Civil Code section 1717, which authorizes an award of attorney fees to the prevailing party in a contract action, was intended to establish uniform treatment of fee recovery in actions on contracts containing attorney fee provisions and to eliminate distinctions between fee awards based on contract or statute. Thus, restrictive language in a contractual attorney fee provision will not always be given effect as equitable and public policy considerations under section 1717 prevail over technical rules of statutory construction. Continue reading
Contracts frequently contain a prevailing party attorney fee provision and a provision requiring that any controversy arising under the contract be decided by binding arbitration. Where both parties agree to arbitration there is no tension between these two provisions. The prevailing party and the award of reasonable attorneys fees will be determined by arbitration.
There can be tension, however, where the parties do not agree that the controversy between them is governed by the contract provision requiring arbitration. In that case a party may file a petition to enforce the arbitration agreement or the party may file a lawsuit. If a party files a lawsuit the defendant may respond with a petition to compel arbitration. If there is a pending action, a petition to compel arbitration must be filed in that action. Continue reading
The rules which govern how a party petitions the court to vacate an arbitration award contain a potential jurisdictional trap. Specifically, Code of Civil Procedure section 1288 requires that a petition to vacate an arbitration award shall be both served and filed not later than 100 days after the date of service of a signed copy of the award on petitioner. Failure to serve within the statutory period is jurisdictional and fatal. Continue reading
The California Supreme Court in Pinnacle Museum Tower Assn. v. Pinnacle Market Development reverses the Court of Appeal and holds that a clause in the recorded CC&Rs of a common interest development providing that the HOA and the individual owners agree to resolve any construction dispute with the developer through binding arbitration in accordance with the Federal Arbitration Act is binding on the HOA and is not unconscionable.
Arbitration is frequently touted as a less expensive and faster procedure to resolve disputes, preferable to resolution in court. Many contracts require it, and those that do frequently specify the American Arbitration Association as the forum. Parties, who are not bound by a prior agreement to arbitrate, may nonetheless agree to arbitration once a dispute arises.
Under California law, an attorney fee award to the prevailing party is available only when authorized by statute or pursuant to written agreement. While many contracts have an attorney fee provision, many do not. Whether or not a contract contains such a provision, or whether attorneys’ fees are authorized by statute, should always be considered before a party resorts to the court for resolution — likewise, it should always be considered before any arbitration filing.
The commercial rules of the AAA, for example, modify this result in one important respect. Rule R-43 provides for “an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.” The important change is, of course, that if all parties request such an award, the award may include an award of attorneys’ fees to the prevailing party, whether or not it is otherwise authorized.
If not authorized by law or prior agreement, it is wise to think twice before requesting attorneys’ fees in arbitration. There is, perhaps, no right choice except in hindsight. But if the issue is never considered and attorneys’ fees are blindly requested, I see a potential malpractice claim on the horizon.
Michael Daymude consults with clients and accepts cases involving contractual disputes subject to arbitration, including disputes before the American Arbitration Association. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael at 818.971.9409.