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By Jeffrey L. Marcus*
June 2005


If you fail to request or refuse mediation when required by a contract to which you are a party, you may lose the right to recover your attorney fees even if you win in litigation. 


Many contracts include a provision requiring parties to mediate before filing a lawsuit and conditioning recovery of attorney fees on an attempt to mediate.  For example, the standard form California residential purchase and sale agreement contains a clause providing that a prevailing party in litigation refusing a request to mediate or failing to request mediation before the commencement of such proceeding is barred from recovering attorney fees.  Recently, the California Court of Appeal concluded such a clause is enforceable.  [Michael J. Frei v. Walter T. Davey, Jr. (2004) 124 Cal.App.4th 1506, 22 Cal.Rptr.3d 429]. 


The Frei Case, A $500,000 Disaster.

The Freis sued the Daveys for breach of a residential real estate purchase and sale agreement. The agreement required mediation in order to recover attorney fees.  After the Daveys cancelled the purchase agreement the Freis demanded mediation in connection with an $18,000 dispute.  The Daveys refused mediation.  Through cross-actions, trials and appeals, the attorneys’ fees tallied over $500,000.  By defeating the Freis’ breach of contract claim, the Daveys won and sought attorney fees.  The Appellate Court rejected the Daveys’ claim for attorney fees because of their refusal to mediate. 



Mediation is a confidential process through which a neutral third-party intermediary, usually selected by the parties, attempts to facilitate a settlement.  The parties control the mediation process.  Unlike trial or arbitration, the mediator cannot impose a particular result on a party.  If all parties cannot agree, the dispute remains unresolved and litigation commences or moves forward.


The Frei case is an example of how attorney fees can spiral out of control.  A mediator’s explanation of the likely litigation expenses and the pros and cons of the parties’ respective positions may have avoided the Frei disaster. 



The purpose of early mediation is to minimize the cost and risk of litigation and to attempt to buy peace with a negotiated settlement.


When drafting your contract, a provision requiring mediation prior to litigating is an effective tool to facilitate an early resolution without incurring significant litigation costs.  Generally, there is little resistance to inclusion of a mediation clause as part of your contract negotiations. 


After a contractual dispute arises and if you are unsure whether the contract provides a mediation requirement prior to litigation, consult your attorney.  As in the Frei case, the refusal to mediate can have drastic consequences on your ability to recover attorney’s fees.


This quarterly newsletter is published for the interest of friends, clients and prospective clients of the Law Offices of Jeffrey L. Marcus and should not be relied upon or considered as legal advice.  

*Jeffrey L. Marcus, Esq. provides litigation services and transactional advice to the firm’s clients.  He has more than 14 years’ experience in private and corporate practices involving business transactions and real estate.  Mr. Marcus can be contacted at jeff@marcuslawgroup.com or at the above address/telephone number.

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