“Dispute Resolution” Encompassed More Than Arbitration

    Dispute resolution provisions in a contract often provide for attorney’s fees, and when they do, distinctions between such terms as "dispute resolution", "arbitration", "mediation", "lawsuit", and "legal proceeding" may become very significant. Such was the case in Toro Enterprises, Inc. v. Pavement Recycling Systems, Inc., Case No. B234627 (2nd Dist. Div. 6 filed April 9, modified May 1, 2012) (Gilbert, P.J., author) (unpublished).

     Cross-Complainant and Respondent Toro Enterprises, Inc., a general contractor, sued Pavement Recycling Systems, Inc., for indemnity, in connection with a third-party tort claim brought by a person injured in an auto accident near a roadway construction project for the City of Oxnard. Toro Enterprises, Inc. lost its indemnity claim against its subcontractor, who then sought to recover attorney’s fees. The trial court denied attorney’s fees, based on its construction of the fee provision in the subcontract.

     One section of the contract governed third-party claims, and another provision related to arbitrated payment claims. Toro argued that its indemnity claim related to a third party claim, and that it was not an arbitrated payment dispute – and therefore, that the trial court was correct to deny fees.

     Wrong, said the Court of Appeal. Section 13 of the subcontract covered arbitrated payment disputes, but its fee provision was broader, authorizing fees to the prevailing party, "[i]n any dispute resolution between the parties." Based on its scrutiny of subcontract language, the Court of Appeal concluded that "dispute resolution" covered more than arbitration. Furthermore, the suit for contractual indemnity, though it was triggered by a third party claim, was a dispute "between the parties", i.e., between the contractor and the subcontractor.

     The result was reversal of the trial court’s order denying fees.