The Morrison Law Journal
Litigation of large scale construction disputes in California often involve enormous fees and costs for all of the parties. One of those costs, which can be significant, is that for private mediation where mediators often charge nearly $1,000 per hour plus administrative fees. Mediation fees charged to the parties in large scale construction cases can often exceed $100,000.
In large scale construction cases where there is no contractual prevailing fee and costs clause, a question that arises is whether the prevailing party may recover fees incurred for private mediation. The California Costs Statute, found in Code of Civil Procedure § 1033.5, does not explicitly address the recovery of private mediation fees but includes a provision which provides that items not set forth in the statute "may be allowed or denied in the court's discretion." See, Code of Civil Procedure § 1033.5(c)(4).
In Berkeley Cement, Inc. v. Regents of the University of California (2019) 30 Cal.App.5th 1133 ("Berkeley case") the Court addressed this issue in a large scale construction dispute involving the construction of a social sciences and management building at the University of California ("University") Merced campus. In that matter, Berkeley Cement, Inc. ("Berkeley") was the low bidder for the structural concrete for the University building. Various disputes arose concerning Berkeley's performance, but the building was completed and the University paid Berkeley the full contract price for its work. Following completion of work, Berkeley submitted a claim for equitable adjustment against the University which the University rejected. Berkeley filed suit and the University later prevailed after a jury trial. After prevailing at trial, the University sought to recover the fees it paid to mediate the matter as an allowable cost. The trial court agreed with the University and awarded nearly $16,000 for mediation fees paid by the University as allowable costs. Berkeley appealed on a number of grounds including that the trial court erred in awarding mediation fees to the University as allowable costs.
In the published portion of its opinion, the Court of Appeal affirmed the trial court's award of mediation fees. In that regard, the Court of Appeal initially noted that mediation costs are not listed among the costs that are expressly allowable or expressly not allowable under the California Costs Statute and held that mediation costs are recoverable in the discretion of the trial court if "reasonably necessary" to the conduct of the litigation rather than merely convenient or beneficial to its preparation. The Court of Appeal went on to acknowledge that there is a court-ordered mediation scheme governed
by Code of Civil Procedure sections 1775 through 1775.15 for matters involving disputes where the matter in controversy is $50,000 or less and that the statutory mediation scheme did not apply in that case. Nevertheless, the Court of Appeal ruled that mediation fees incurred for mediation that was not ordered by the court "are not categorically nonrecoverable" and may be reasonably necessary to the conduct of litigation. The Court of Appeal went on to conclude that the question of whether mediation fees should be awarded as costs in a particular matter must be determined based on the facts and circumstances of the particular action and, based on the record before it, affirmed the ruling of the trial court.