Recovering Attorney’s Fees: No Easy Task

by | Oct 12, 2021 | Contracts

Construction clients believe that if they win their legal case, they’ll also recover the attorney fees they’ve incurred. But that may not be correct for a variety of reasons.

Recovery of fees is dependent on meeting a threshold requirement—does the underlying agreement or a state statute call for the award of such fees? Without ticking off this box, a client, no matter if he or she wins the dispute, will not be entitled to an award of fees.

Assuming the client meets this requirement, he/she then needs to actually be the prevailing party. This may sound easy enough to illustrate, but case after case has shown that ascertaining who really won a given dispute can be quite complex. There are any number of cases where one party prevails on a particular aspect of the case while the other party also prevails on some other portion of the dispute being litigated. Then what? Is there a winner?

WHO IS THE PREVAILING PARTY?

Courts have held that a prevailing party is one who prevails on the significant issues in a case and obtains some of the benefits sought in the litigation. How can these elements be proven? A recent case illustrated both the process as well as the difficulties that can be encountered in determining the prevailing party.

The Green Nursery entered into a contract for landscaping work on a commercial project. Before work was completed, the parties reached an impasse and ended up suing each other. The building owner sued Green and Green counterclaimed, each one alleging the other had breached its contract. Both sought recovery of legal fees under the contract.

The trial court found that Green did establish an initial breach by the owner but it then failed to prove up its damages. And the court found that the owner as well didn’t properly show it was damaged. The decision was that neither party prevailed and neither would recover fees. The parties appealed.

The appellate court analyzed the elements. Because the owner had initially breached the contract, the court found Green had been justified in not completing its work. As such, Green would have to be considered the prevailing party and Green should be awarded its incurred fees.

Because attorney’s fees and costs of litigation can sometimes exceed the amount in controversy, it is critical to determine from the outset if legal fees are recoverable, and if so, can it be shown that one party prevailed on the “significant issues” of the case.

Recovering legal fees is not just a matter of asking for them; the contractor is going to have to show it is both legally entitled to the fees and is the prevailing party in the dispute.

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