Arbitration & Mediation

Third Party Beneficiaries Not Entitled to Attorney's Fees Provided in Contract

By Christopher B. Hopkins, Esq.

Third party beneficiaries to a contract are not entitled to recover attorney's fees under that same contract, unless the fee provision is clear, specific, and unambiguous that it includes more than just the signing parties.

In Civix Sunrise, GC, LLC v. Sunrise Road Maintenance Association, Sunrise Golf Club Condominium Association, Homeowners Association of the Sunrise Golf Club Estates, Westwoods at Sunrise Country Club et al., the Second DCA (Kelly, Fulmer, Casanueva) reviewed a 99-year real estate lease where the land was to be used as a golf course. A merger occurred and the new owner sought to develop the land for residential use.

The golf course was surrounded by condominiums who sued, claiming they were third party beneficiaries to the lease which required the land to be used as a golf course -- note, indeed, the names of several of these condo/HOA associations actually reference the golf course in their names. Both the trial and appellate court accepted that the neighborhoods were intended third party beneficiaries and, moreover, that the conversion of the land was not proper.

The prevailing third party beneficiaries then sought to recover their attorney's fees on the theory that the lease said that "all parties" agreed that a prevailing party was entitled to fees. The court held that "all parties" meant signatories, not intended beneficiaries, and that the attorney fee language would have to be far clearer and specific to include anyone other than the signing parties.

This concept of "third party beneficiary" status has gained some traction in enforcing arbitration clauses, as we discussed very early in the year here and here.

Full post as published by Florida Arbitration Law on November 06, 2008 (boomark / email).