#prevailing party

[ariela-wagner-me]

How to Recover Your Legal Fees When You Collect A Debt

The focus of this webinar is on how recover your legal fees when you collect a debt. The following points will also be discussed: Two ways to recover your legal fees, What happens when you sue on a written contract, What happens when you record a lien, How a Notice to Owner can help you recover your legal fees, What to do if you have a construction bond, Review a sample contract provision, Discuss who is a prevailing party.

[coloradoappeals-blog]

Fiore & Sons, Inc. v. W.O. Danielson Construction Co. [Unpublished], Colo. App. No. 13CA0558

One of the projects at issue: Sports Authority Stadium, Parker, Colo., 2009

Two companies agree to do business. Things go well for a time, but then there is a dispute; a falling-out; and ultimately, litigation. Each side brings claims against the other. But neither is blameless: the court enters judgment for one party on some claims, for the other party on other claims.

So: who won? 

When it comes to attorney fees, this can be the key question. Normally, under the "American rule," each party to litigation bears its own attorney fees — regardless of the outcome.  But many commercial contracts contain fee-shifting provisions, under which the "prevailing party" is entitled to collect its attorney fees from the other side. In cases with few claims or lopsided results, the prevailing party is easy to identify.

This was not such a case. A general contractor and one of its subcontractors wound up disputing payments owed for work done on two large projects for the Douglas County schools. Two suits were filed, with claims and counterclaims in each; everything was consolidated and tried together. The court found in favor of the general contractor on the largest monetary claim, but in favor of the subcontractor on several others. The court set off the various judgments against each other, and when the calculations were finished, the general contractor was awarded a total of $145,564 in damages.

Both parties sought an award of attorney fees, each claiming it had prevailed. The trial judge denied both requests, reasoning that while each party had prevailed on significant issues, neither won a victory sufficient to justify fee-shifting. Both sides, of course, appealed. (I do not know, but can confidently guess, that the amount of attorney fees at stake here were greater than the amount of damages awarded.)

In an unpublished decision, the court of appeals affirmed the trial court's judgment. Most significantly, the court rejected the general contractor's argument that the trial court was required to award fees under the "net judgment rule." This rule, as its name suggests, determines the prevailing party by looking to which party comes out ahead when all judgments are netted against each other.  In short, who ever got paid, won. The elementary school boys around my breakfast table think this rule makes sense. The court of appeals agreed, but only as a rule of thumb, not a bright-line rule:

Although a trial court does not necessarily abuse its discretion in applying a net judgment analysis to determine the prevailing party, Colorado has not adopted the net judgment rule. Accordingly, a court's decision to employ an analysis other than a net judgment analysis does not, for that reason alone, establish an abuse of discretion. [Internal citations omitted.]

After years of litigation and appeals, with their attendant fees and costs, I would guess that nobody in this case feels like they prevailed. 

Full Opinion (UNPUBLISHED, May 29, 2014)