Winner Ordered to Pay Opponent's Fees and Costs in CA Construction Defect Case
Bidding a construction project: is a little like going to trial: you put your best team of estimators together, they pour over the plans and specs, every contingency is thoroughly considered, and bingo, just like you planned, you're awarded the contract. Sometimes, however, the unexpected or unanticipated happens, and their goes your profit. An award at trial can be like that-you can lose even when you win, despite the excellent preparation and work by your trial team. The Supreme Court of California demonstrated this in a decision published February 4, 2010 (PDF), arising from a construction defect case that was filed in 2001.
Here's a summary of what happened: The homeowners bought a new home in beautiful Laguna Beach, California. Various construction defects surfaced shortly after the sale of the property. The homeowners sued everyone and their uncle, eventually settling with all but one of them. The trial court found the $230,000 in settlement money paid by five of the defendants was appropriate given the damages suffered and found that the settlement was done in "good faith," which meant that the settling defendants would be completely out of the lawsuit and no longer faced the threat of indemnity claims. The homeowners proceeded to trial against the non-settling defendant where the jury awarded them $146,000.
That was the good news; the bad news was the trial court ruled that even though the homeowners were awarded damages, the amount of the damages had to be off-set by the pre-trial settlement, resulting in a finding that the homeowners would get nothing as a result of the trial and, in fact, since they were not the prevailing party, they were ordered to pay the attorney fees of $132,000 and $12,000 in costs to the non-settling defendant.
The decision was based on the Supreme Court's interpretation of California statutes, and the statutes reflect the intent of California lawmakers and that of most state legislators to create a legal system that encourages settlement and punishes those who reject reasonable settlements and then do worse at trial than they would have done had they accepted the pre-trial settlement offer. This can be a shock to litigants. They learn the hard way the painful lesson that even if you win, you can lose at trial.
