The Menace of Mediation/Arbitration Fees
THE MENACE OF MEDIATION/ARBITRATION FEES
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, internet home of Malka & Kravitz, P.A. – Your Construction Law Firm .
You know from our prior articles that in Florida, as in most states, the general rule is that parties to a commercial dispute do not have a right to recover the Mediation/Arbitration fees they incur in resolving the dispute, unless an applicable contract provision or statute explicitly provides for such a right. On the front-end, during contract negotiation, it is prudent to consider whether Mediation/Arbitration fees should be allowed and, if so, exactly under what circumstances. That decision will be made somewhat in the dark because contracting parties are unlikely to know in advance what future disputes may be about and who will be on the winning and losing sides of those disputes. Further, even if you negotiate a contract that does not provide for Mediation/Arbitration fees, a statute may apply to provide either you or your opponent with a right to seek them.
One statute that allows for recovery of Mediation/Arbitration fees was enacted for the purpose of encouraging settlement. Under Florida Statutes, section 768.79, a defendant may make an offer of settlement and if the plaintiff fails to obtain a judgment of at least 75% or more of that offer, the defendant may be entitled to recover its Mediation/Arbitration fees. If a plaintiff makes an offer of settlement pursuant to the statute, the plaintiff may be entitled to recover fees if the defendant rejects the offer and the judgment obtained by the plaintiff is 25% or more than the offer. Section 768.79 has some tricky aspects to it, though, one of them being that if the offer is “ambiguous” such that the person receiving the offer cannot objectively understand what the terms of the settlement would be, the offering party will not be entitled to recover its fees even if it obtained a judgment for the “proper” amount.
In Jessla Construction Corp. v. Miami-Dade County School Board, Case No. 3D09-3018 (Fla. 3d DCA Nov. 17, 2010), Miami-Dade County School Board (“County”) served an offer of $1,000.00 under section 768.79 on Jessla Construction Corp. (“Contractor”) in Contractor’s lawsuit for improper termination. The offer would have required Contractor to sign a General Release. Contractor rejected the offer and County went on to obtain a judgment in its favor (zero dollars to Contractor). County then asked the trial court to award its Mediation/Arbitration fees for Contractor’s failure to procure a judgment of at least $750.00 as required by section 768.79. The trial court found in favor of Contractor and entered a judgment for fees against Contractor in the amount of $515,000.00. Contractor appealed.
On appeal, Contractor argued that the General Release that County attached to its offer was ambiguous because it “required the participation of nonparties” in that it was a release of all claims not only of Contractor but also its “past, present and future affiliates, subsidiaries, parent companies and all of its respective officers, directors, partners, shareholders, employees” etc. The appellate court found that the General Release did not require the participation of nonparties and that the foregoing language was typical of many general releases. Accordingly, the appellate court upheld the trial court’s fee judgment against Contractor.
As the Jessla case demonstrates, resolving disputes can be expensive. There, Contractor not only lost its claim for improper termination and paid its own Mediation/Arbitration but came out owing the County $515,000.00. Serious consideration should be given to the issue of Mediation/Arbitration fees, both in contract drafting and the statutory bases that may be available.