Tuesday, January 8, 2008
Attorney Fees Awarded for Defeating Arbitration Petition
By a MetNews Staff Writer
A party that defeats a petition to compel arbitration may be awarded contractual attorney fees, even though that party might not win the underlying litigation, the Fourth District Court of Appeal ruled yesterday.
Div. One, in an opinion by Justice James A. McIntyre, reversed and remanded the trial court’s denial of attorney’s fees to San Diego Expressway, L.P.. The trial judge decided that Expressway could not be considered the prevailing party in the matter since there was the possibility of additional litigation between it and Otay River Constructors, the general contractor that had sought arbitration for a contract dispute.
The parties had previously entered into two design-build contracts. The “gap/connector” contract, as the Court of Appeal described it, provided for litigation in the event that negotiations and dispute resolution talks did not resolve disputes, while the “toll road” contract required binding arbitration in lieu of litigation.
The two parties also entered into a “coordination agreement” which would provide the ways in which the two contracts would work with each other. Under this contract, any disputes would be resolved by the toll road contract’s dispute provision and therefore by arbitration.
Otay would eventually seek arbitration to resolve disputes regarding changes to certain drawings and a refusal to adjust the contract price. These claims, Otay admitted, arose out of the gap/connector contract but since a dispute under the coordination agreement existed, arbitration was proper.
The trial court denied Otay’s petition to compel arbiztration. After Expressway’s motion for attorney fees and costs was denied, it appealed.
In determining appealability, the Court of Appeal decided that this denial of attorney’s costs and fees was a “special order after final judgment” under Code of Civil Procedure section 1294(e). This held true even though more litigation could be contemplated for the future since only the arbitration issue had been resolved.
The court compared this case to Christensen v. Dewor Devolpments (1983) 33 Cal.3d 778 in which the California Supreme Court found that the prevailing party on a petition to compel arbitration could move for attorney fees under Civil Code section 1717 despite the potential for future litigation.
“Although our high court in Christensen did not directly address the question of whether an order denying attorney fees after an order denying a petition to compel arbitration was appealable, it presumably concluded that the order denying arbitration was a judgment on the only issue before the trial court and the later order denying attorney fees was appealable as an order after the judgment.”
The court also found that Expressway was eligible to recover these fees as the prevailing party. Referring to Civil Code Section 1717(b), it decided that Expressway should be able to receive these fees as the party who received the larger amount of relief from the action.
McIntyre wrote, “[E]xpressway was the prevailing party as a matter of law because it defeated the only contract claim before the trial court in this discrete special proceeding.”
The case is Otay v. San Diego Expressway, 08 S.O.S. 53.
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