Court Affirms Award of Attorneys' Fees For Dragging In Unnecessary Third-Party Defendants in a Business/Construction Dispute

To be filed in the “gluttons for punishment” folder, the case of Fulton Homes Corporation v. BBP Concrete that was recently published by Division One.

The case affirms an award of $12,000, or $6,000 each, to two parties who Fulton dragged into a lawsuit because, well, “they could” under Rule 14.

In short, Fulton pulled in two third-party defendants to a lawsuit under the premise that they were responsible for any “workmanship” issues in connection with the plaintiffs’ complaint for damaged slabs. However, the plaintiffs did not seek damages for workmanship flaws, but for “design flaws.” In fact, the trial court specifically found that “it was obvious as early as 2003 [i.e., about two years before the two third-parties were dismissed] from a review of the pleadings and discovery/disclosure that no concrete workmanship problems were involved in this action.”

[As an aside and to be fair to Fulton, even the Court of Appeals noted the complaint had alleged that the homes were “designed and/or constructed in an unworkmanlike and substandard fashion,” which does seem to suggest that there were allegations of workmanship. Nevertheless, I do not think it mattered much in the final analysis, but you be the judge.]

In an almost satirical manner, the Court took Fulton’s various arguments apart.

When Fulton argued they had a “good faith basis” to include the two third-parties, the Court responded that “Courts regularly award fees against plaintiffs who bring good faith but ultimately unsuccessful contract actions.” When Fulton argued they were hardly “adverse” to the parties they dragged into the case because they effectively defended their workmanship, the Court responded that “Fulton sought to hold BBP and Trojan liable for any and all damages it became obligated to pay to the homeowners in connection with faulty concrete workmanship” and so “[t]he interests of the parties were not completely aligned.” And when Fulton argued that the two parties they agreed to dismiss were not “successful” because (get this) they “avoid[ed] indemnity only because the homeowners stipulated that they would not seek damages arising from faulty workmanship,” apparently ignoring the fact no such damages were ever sought by the plaintiffs, the Court noted that “[a]n adjudication on the merits is not a prerequisite to recovering attorneys’ fees under A.R.S. § 12-341.01.”

But the most charming part of Fulton’s argument is saved for the end where they argue the “chilling effect” of their being punished by having to pay $12,000 in fees. If you can believe it, Fulton actually argued it would be an “extreme hardship,” among other things. I know new home sales are down, but the Court did not buy it.

And, the coup de grâce, you guessed it, the Court of Appeals awarded attorneys’ fees against Fulton on appeal.