Association Member Prevailing in Litigation is Entitled to Expenses For ADR Incurred Prior to Litigation

January 15, 2013. A California Appellate Court ruled that owner members of a homeowners association were entitled to recover attorney fees as the prevailing party that included the expenses the homeowner incurred in connection with a failed attempt at alternative dispute resolution prior to the filing of the litigation that followed.

Following an unsuccessful attempt to resolve issues regarding a fireplace and cabana that the homeowners built without prior approval through mediation, the homeowners filed suit against the HOA. The trial court rendered a judgment that required modification of the fireplace, and which found that a variance was not needed for the cabana. The trial court vacated a continuing fine imposed against the homeowners by the HOA and awarded the homeowners attorney fees as the prevailing party. The amount of the attorney fees awarded included fees for pre-litigation mediation.

The HOA appealed the trial court’s decision and the appellate court affirmed the lower court’s rulings finding that: (1) the lawsuit was an action to enforce the governing documents and the trial court determined the homeowner plaintiffs were the prevailing party; (2) because the Legislature has required Alternative Dispute Resolution, a party acts reasonably when it spends money on attorney fees and costs during pre-litigation ADR; and (3) when attorney fees and costs expended in pre-litigation ADR satisfy the other criteria of reasonableness, those fees and costs may be recovered in an action to enforce the governing documents of a common interest development.

See case decision: Grossman v. Park Fort Washington Assn