Advantageous Contract Drafting of Mediation/Arbitration Fees Provision
ADVANTAGEOUS CONTRACT DRAFTING OF MEDIATION/ARBITRATION FEES PROVISION
By: Robert S. Tanner, Esq.
About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at [email protected]. For more information, please visit www.mkpalaw.com.
In Florida, a party generally may recover mediation/arbitration fees they incurred in litigation only if the contract that is at issue allows for recovery of mediation/arbitration fees or an applicable statute allows for recovery of mediation/arbitration fees. In the construction industry, it is common for contracts to contain mediation/arbitration fee provisions. But are all such provisions equal?
In Florida Hurricane Protection and Awning, Inc. v. Pastina, 2010 WL 3488714 (Florida 4 th DCA Sept. 8, 2010), Ethlyn Pastina was a homeowner (“Owner”) who entered into a contract with Florida Hurricane Protection and Awning, Inc. (“Contractor”) for the installation of hurricane shutters. The contract contained the following provision:
- Purchaser is responsible for all costs of collection including mediation/arbitration fees. And 1.5% of contract amount.
Contractor did not complete the project. Owner hired a replacement contractor and sued Contractor for breach of contract. Owner obtained a judgment against Contractor and then asked the trial court for an award of the mediation/arbitration fees she had incurred. Owner argued that the one-way mediation/arbitration fee provision in the contract was made a two-way provision by Florida Statute, sec. 57.105(7), which said:
- If a contract contains a provision allowing mediation/arbitration fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable mediation/arbitration fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract.
Contractor argued that the mediation/arbitration fee provision in the contract was limited to collections actions and was inapplicable in the breach of contract action. Owner argued that, as the customer, she would never have a collection action against Contractor and, therefore, the fee provision should allow recovery of mediation/arbitration fees to Owner under section 57.105(7) because she prevailed in an action with respect to the contract. The trial court agreed with Owner and awarded mediation/arbitration fees to her. Contractor appealed but the appellate court also ruled in favor of the Owner. Contractor appealed that decision as well.
The Fourth District Court of Appeal noted that section 57.105(7) is designed to even the playing field, not expand it and to give one party what it gave. Applying the statute to the case between Owner and Contractor, the Fourth District Court of Appeal found that, “Reciprocity would allow for [Owner] to receive fees if she prevailed in a collection action brought by [Contractor]. . . . To rule otherwise would be tantamount to re-writing the contract between the parties.” Thus, Contractor ultimately prevailed on the issue of mediation/arbitration fees due to the limited language of the contract.
It is worth noting that 6 of the 11 judges on the panel were in favor of Contractor’s position, while 5 of the 11 were against it. So, although such narrow mediation/arbitration fee provisions may be effective now, the advantage may not last.