FEI Enterprises Inc. v. Yoon
194 Cal. App. 4th 790
| Cal. Ct. App. | 2011Background
- FEI Enterprises, Inc. (FEI) provided low-voltage electrical subcontracting work on two Los Angeles projects for Pacific Construction Co. (a general contractor) and owner Kee Man Yoon.
- FEI asserted breach of contract damages and sought prompt payment penalties for late payments under the subcontracts.
- Pacific Construction cross-claimed FEI breached the subcontracts.
- The trial court awarded FEI on its complaint and against Pacific Construction on the cross-claim, denying FEI penalties based on a finding of a good faith dispute.
- Projects involved: Gramercy Drive (Gramercy Project) and Manhattan Place (Manhattan Place Project); owners were Kim and Yoon respectively.
- The appellate court affirmed the trial court, holding the good faith-dispute standard applied to penalties was objective and supported by the record.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standards for good faith dispute under §7108.5(c) | FEI argues an objective standard should apply. | Pacific Construction argues a subjective standard should apply. | Objectively applied standard governs good faith dispute. |
| Existence of good faith dispute in withholding payments | FEI contends no bona fide dispute existed about amounts due. | Pacific Construction contends there was a legitimate dispute about FEI's performance and amount due. | There was an objectively reasonable good faith dispute; penalties denied. |
Key Cases Cited
- Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of America, 133 Cal.App.4th 1319 (Cal.App.4th 2005) (defined good faith dispute in 7108.5 context (objective vs. subjective))
- Denver D. Darling, Inc. v. Controlled Environments Construction, Inc., 89 Cal.App.4th 1221 (Cal.App.4th 2001) (bona fide dispute where contract interpretation reasonable)
- Thompson Pacific Construction, Inc. v. City of Sunnyvale, 155 Cal.App.4th 525 (Cal.App.4th 2007) (good faith dispute in public contract context)
- Martin Brothers Construction, Inc. v. Thompson Pacific Construction, Inc., 179 Cal.App.4th 1401 (Cal.App.4th 2009) (footnote discusses bona fide vs good faith)
- Guntert v. City of Stockton, 43 Cal.App.3d 203 (Cal.App.3d 1974) (context for objective standard vs sole discretion)
- Barnhill v. Robert Saunders & Co., 125 Cal.App.3d 1 (Cal.App.3d 1981) (good faith dispute related to setoff/penalties)
- People v. Nunn, 46 Cal.2d 460 (Cal. 1956) (definition of good faith in state of mind context)
- Locke v. Warner Bros., Inc., 57 Cal.App.4th 354 (Cal.App.4th 1997) (subjective satisfaction cases vs objective preference)
- Storek & Storek, Inc. v. Citicorp Real Estate, Inc., 100 Cal.App.4th 44 (Cal.App.4th 2002) (objective reasonableness standard favored)
- Wilson v. 21st Century Ins. Co., 42 Cal.4th 713 (Cal.4th 2007) (insurance bad faith context supporting objective view)