HOA Loses Award of $628,587.50 in Attorney Fees

This case involved a dispute between a homeowners association (“Association”), its property manager (“Manager”), and a third-party contractor recommended by Manager who installed a fire alarm system in a condominium building belonging to Association. Association, being dissatisfied with the system that was installed by Contractor, filed a lawsuit against both Manager and Contractor. Association’s lawsuit then triggered cross-complaints by Manager and Contractor against each other and against Association.

The contract between Association and Manager contained an arbitration clause which stated that controversies or claims arising out of, or relating to the management agreement would be settled by binding arbitration in accordance with the rules of the American Arbitration Association. However, neither Association nor Manager exercised their right to compel arbitration in accordance with the terms of the management agreement, and instead, litigated the entire case in the Superior Court. An important additional provision in the management agreement was that, “the Arbitrator shall have authority to award reasonable attorney fees to the prevailing party in the arbitration.” Believing that the provision that allowed for an award of attorney fees to the prevailing party in arbitration would apply equally to the prevailing party in litigation that took place in the courthouse, both sides requested an award of attorney’s fees.

After a jury trial, Manager was found liable to Association for breach of contract and Association was awarded damages in the amount of $88,500. The trial court further awarded Association attorneys’ fees in the amount of: