Contract Having “Each Side Bear Fees” Provision Did Not Trump Statutory Fee Recovery.
The appellate court in Cleveland Wrecking Co. v. West Bay Builders, Inc., Case Nos. A124033/A125811 (lst Dist., Div. 4 Aug. 9, 2011) (unpublished) dealt with a case where a winning subcontractor–entitled to fee recovery under the prompt payment statute codified in Public Contract Code section 7108.5 (the prompt progress payment fee shifting provision)–was denied fees by the lower court based on its perception that a specific subcontract clause trumped the statutory scheme by providing that each side should bear its own fees and costs.
The appellate court reversed, in a very analytical decision by Justice Rivera.
Initially, contractor defending the fee denial argued that the appeal was untimely because it was made 60 days after notice of entry of the fee denial order. However, there was a motion for reconsideration, with the order being appealed less than 30 days after notice of entry of the reconsideration denial decision. Although found to lack merit, the reconsideration motion was proper in form and content such that the appeal inside the 30 day period was timely. (Branner v. Regents of University of California, 175 Cal.App.4th 1043, 1048 (2009).)
On the merits of the fee denial, the Court of Appeal found that the language of the fees clause was not so broad as to trump the prompt payment statutory violation and fee recovery allowed thereunder.
The language talked about bearing fees and costs in a “dispute arising as a result of the Agreement,” with the statutory violation being found separate in nature. Also, the plain language of the prompt payment statute evidenced a clear legislative policy decision to give subcontractors additional, extracontractual remedies, a policy that would be “seriously undermined were we to conclude that the statutory attorneys’ fees remedy can be avoided simply by including in a construction contract a clause which does no more than restate the so-called American rule that each party bear its own attorneys’ fees.” (Slip Opn., p. 38.)