Judge: Curtis A. Kin, Case: 19STCV26450, Date: 2022-09-29 Tentative Ruling

Case Number: 19STCV26450    Hearing Date: September 29, 2022    Dept: 72

MOTION FOR ATTORNEY FEES

Date:               9/29/22 (8:30 AM)                                         

Case:                                                   Loraine Diego et al. v. Harold Fajardo et al. (19STCV26450)

TENTATIVE RULING:

Plaintiffs Lilac Care Residential Home, LLC and Loraine Diego’s Motion for Attorney Fees is DENIED.

Plaintiffs Lilac Care Residential Home, LLC and Loraine Diego seek an award of attorney fees against defendant Harold Fajardo pursuant to paragraph 35 of the Business Purchase Agreement (“Agreement”).  Paragraph 35 of the Agreement states: “In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorneys fees and costs from the non-prevailing Buyer or Seller, except as provided in paragraph 30A.” (Keeter Decl. ¶ 18 & Ex. 1.) There is no dispute that this action arose from the Agreement or that plaintiff prevailed. The issue is whether paragraph 30A of the Agreement disentitling plaintiff to fees is applicable.

Paragraph 30A states: “The Parties agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to arbitration or court action . . . .” Plaintiffs concede that no mediation took place before they commenced this action. (Mtn. at 3:11-13 [“Accordingly, while the parties did not mediate prior to commencing the action, they were excepted from doing so”].)

Instead, plaintiffs argue that they were exempt from their requirement to mediate due to paragraph 30C(2) of the Agreement, which states: “The following shall not constitute a waiver nor violation of the mediation and arbitration provisions: i) the filing of a court action to preserve a statute of limitations . . . .” The parties dispute when the breach of contract cause of action accrued and when the corresponding statute of limitations expired. However, regardless of when the cause of action accrued, paragraph 30C(2) would only serve to excuse the “filing” of the Complaint before the parties engaged in mediation.  Such a provision logically makes sense, as it anticipates that a party may need to act quickly in order to preserve claims by filing a case prior to expiration of the statute of limitations without first having to engage in mediation that may unduly delay the ability to file a Complaint before the statute runs.  Nonetheless, this timing provision does not obviate the need to mediate before embarking upon active litigation in court.  That is, paragraph 30A still required the parties to mediate before “resorting” to court action. (See Frei v. Davey (2004) 124 Cal.App.4th 1506, 1518 [in action concerning standard form residential purchase agreement, finding that provision allowing for filing of action before mediation so notice of pendency can be recorded did not “negate” requirement to mediate].)

Plaintiff does not contend that mediation ever took place or that plaintiff ever sought to mediate. (Keeton Decl. ¶ 6 [“Defendants' hard-fought defense in this litigation compelled Plaintiffs and my office to undergo significant trial preparations, as well as trial and post-trial work (which is still ongoing as of the preparation of this motion), as no reasonable offers of settlement or mediation was presented as an alternative”].) Because plaintiffs never attempted to resolve this action through mediation as the Agreement required, plaintiffs may not recover attorney fees under paragraph 35 of the Agreement, even if they are the prevailing parties.

The motion is DENIED.