Prevailing Parties Get the Fees
Tennessee follows the “American Rule” concerning attorney fees. Accordingly, even if a party wins his case, he is not entitled to attorney fees unless there is a contract or statute providing a recovery. There are a few other narrow situations that provide attorney fees based on a recognized exception, but generally speaking, there will be no recovery of attorney fees unless a statute or contract provides it.
Many a client has been disappointed to hear this news: “Prevailing Parties Don’t Always Get the Fees.”
For this reason, we consider prevailing party clauses a prudent consideration in contracts. Prevailing party clauses are increasingly common in Tennessee. Such a clause is an important consideration for anyone who signs contracts, particularly in the construction industry. The issue of a successful litigant’s right to collect attorney fees under contract was recently the focus of a Tennessee Court of Appeals decision, Barrett v. Ocoee Land Holdings, LLC.
In Barrett, homeowners sued the real estate developer, home builder, and others seeking recovery for breach of contract, conspiracy to commit wrongdoing, and violations of the Consumer Protection and Fraudulent Conveyance Acts. After a series of procedural events, the jury returned a defense verdict, disagreeing with the homeowners’ claims. There was a provision allowing an award of attorney’s fees and expenses to the prevailing party in litigation as to the LLC defendants. However, the jury never heard anything about the costs of litigation during the trial, and there was no space for an award included on the jury’s verdict form.
After the jury returned a verdict for the defendants, the trial judge entered an order that was first approved by the attorneys for all the parties. Interestingly, the order reserved the issue of attorney’s fees and expenses for the trial court judge. Apparently, this concession to treat fees and expenses as “a matter for the Court and not for the jury” was made without much aforethought during the pretrial conference. The judge conducted a post-trial hearing on the issue and denied the defendants’ claims for attorney’s fees. Even the LLC defendants’ attorney’s fee claims were denied, despite contract provisions providing attorney’s fees to the prevailing party. It seemed that “Prevailing Parties Don’t Always Get the Fees,” even when they have a clear contract provision saying they should.
The Court of Appeals reversed the trial court on this point, finding that the LLC defendants were entitled to attorney’s fees under the prevailing party provision of the contract. In explaining its decision, the Court reviewed whether the “current litigation fits the factual scenario contemplated in the attorney’s fee provision.” The Court scrutinized the phrasing of the contracts, finding that all the players had agreed to an attorney’s fee award for the prevailing party in litigation “arising out of” the Contracts. Accordingly, the Court held that the defendants were “each entitled to the enforcement of their contractual right to recover reasonable attorney’s fees and expenses” under the “plain terms of the attorney’s fee provision.”
Needless to say, the homeowners got salt in the wounds of their jury trial loss as they found that “Prevailing Parties Shall Get the Fees.”
This case illustrates the necessity and risk of a prevailing party provision. This is an important contract term that deserves careful consideration. We have considerable experience drafting prevailing party provisions in Tennessee, and we would be happy to discuss an appropriate provision for your contract needs.
Photo: Mark MozThis entry was posted in Contract Negotiation, Contractors, Design Professionals, Subcontractors, Tennessee Case Law and tagged Attorney Fees, legal issues, Prevailing Parties. Bookmark the permalink.