Going to court can be costly. Everyone knows that! Wouldn’t it be nice if the winning party could always recover its legal fees? In the United Kingdom and all jurisdictions that follow the so-called “English” or “British Rule,” the winning party in a lawsuit automatically is awarded its attorneys’ fees. Courts in the United States, however, have traditionally followed the “American Rule,” which dictates that each party is required to pay its own attorneys’ fees, no matter who wins.
Over time, American courts began to recognize some limited exceptions to the “American Rule.” The first such exception was for cases in which a state or federal statute allowed the winner to recover fees. For example, under the federal Civil Rights Act, prevailing civil rights litigants are entitled to recover attorneys’ fees . The other exception is more relevant for those involved in the construction industry: the second exception to the “American Rule” exists where a contract allows a prevailing party in a lawsuit to recover its attorneys’ fees.
This second exception can be a powerful tool for a construction business, protecting the rights of the side that did not do anything wrong, and discouraging others from filing “frivolous” or “vexatious” lawsuits. For many years, however, many courts—including Virginia state courts—typically applied a percentage (anywhere from 10 to 25 percent) to the amount at issue in order to determine what constituted a “reasonable” amount for an award of attorneys’ fees (or at least a ceiling on such an award). In larger cases, where the amount at issue was in the hundreds of thousands or even millions of dollars, the “percentage” or “formula” approach was generally adequate to cover what a litigant might actually be required to spend to win the case. But what about the more modest cases, where perhaps $20,000 or $25,000 is at issue? A “percentage” award might give the winning side a “hollow” victory, in which the winner had to spend a disproportionate amount to enforce its rights.
Earlier this year, this unfortunate circumstance began to change in Virginia. In the case of Lambert v. Sea Oats Condo Association, the Supreme Court of Virginia examined a case in which a condominium owner obtained a $500 judgment against her condo association for the association’s failure to repair an exterior door to her condo. The plaintiff sought attorneys’ fees (under the Virginia Condominium Act) in the amount of $8,232, to which the Condo Association objected on the basis that the attorneys’ fees were 16 times the amount of the judgment.
Under prior Virginia law, the attorneys’ fees would likely have been reduced on the basis of being disproportionally greater than the amount of the judgment. In this case, however, the Supreme Court of Virginia took a different approach, stating that merely applying a ratio or percentage to the damage award would not always guarantee a reasonable award of attorneys’ fees. The Court further stated that Virginia trial courts could no longer use the amount of damages sought and awarded as a limit—or ceiling—beyond which no attorneys’ fees could be awarded. In summary, the Court said that a trial court “cannot dismiss out of hand the costs of litigation inflicted on the prevailing party by the losing party’s insistence on its losing argument, based solely on the dollar value of the claim.”
Later in the year —in the first Virginia trial court application of the new rule announced by the Virginia Supreme Court in the Lambert case—the Hirschler Fleischer Construction Team obtained an award of attorneys’ fees of more than $117,000 for a Hanover County property owner’s association, a case in which the damages sought at trial were less than $60,000. Following a two-day jury trial in that case in February, a Hanover County jury awarded the plaintiff owner’s association compensatory damages for unpaid property owner’s association assessments. Judge J. Overton Harris of the Hanover County Circuit Court then ordered a separate evidentiary hearing on the association’s claim for attorneys’ fees. In July, after hearing all of the evidence as to attorneys’ fees, Judge Harris awarded the property owner’s association $117,155.81 in attorneys’ fees, relying on the Virginia Supreme Court’s new guidance as announced in the Lambert case.
We believe that these are positive developments for Virginia construction professionals with legitimate claims or legal defenses. A well-drafted and enforceable “prevailing party” attorneys’ fees contract clause is now more valuable and important than ever, and we strongly recommend that all construction and supply contracts contain such a provision.
As president of Hirschler and head of the firm's litigation section, Courtney knows how to lead people and projects to a successful outcome.
Leveraging deep experience in the construction industry, Courtney advises public and ...
Kelly’s practice focuses on construction law, commercial and product liability law, with an emphasis on dispute resolution—including mediation, arbitration, jury and bench trials in state and federal court. She routinely ...
Nate fully engages in each case and shoulders his clients’ needs. Communication, efficiency and careful judgment define his practice. In every case, he investigates competing claims to thoroughly understand their strengths ...
A professional engineer (P.E.) and an experienced lawyer, Webb began practicing at Hirschler following four years of work as a consulting engineer. His multidisciplinary practice focuses on general business and corporate law ...
SubscribeSubscribe to Hirschler by Email
- The Death of “Pay-When-Paid” in Virginia: Truth or Rumor?
- A New Trap for Unwary Contractors: Holding Payment on One Project for Claims in Another
- What Employers Need To Know About the OSHA Emergency Temporary Standard on COVID-19 Vaccination and Testing
- Kelly Bundy Appointed to the Virginia Safety and Health Codes Board
- Jaime Wisegarver Outlines Labor Department Guidance on Travel Time Pay in Construction Executive
- New Defense to Joint Liability Available to Contractors
- What Employers Need to Know About Virginia’s New Overtime Wage Act
- OSHA Increases Amounts of Civil Penalties for 2021
- Have Force Majeure Defenses Based on COVID-19 Been Successful This Year?
- Kelly Bundy and Liz Burneson Publish Article on Joint Employer Status in Construction Executive
- Government Contracts
- Dispute Resolution
- Occupational Safety and Health Act (OSHA)
- COVID-19, Coronavirus Outbreak
- Department of Labor (DOL)
- Little Miller Act
- Workforce Development
- Mechanic's Liens
- Miller Act
- Department of Professional and Occupational Regulation (DPOR)
- Fair Labor Standards Act
- Lien Waivers
- Force Majeure
- Virginia Employment Commission (VEC)
- Joint Checks
- Unjust Enrichment
- Virginia Workers' Compensation Commission
- Uniform Statewide Building Code
- Change Orders
- May 2022
- March 2022
- November 2021
- August 2021
- June 2021
- April 2021
- January 2021
- October 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- November 2019
- August 2019
- June 2019
- April 2019
- February 2019
- January 2019
- December 2018
- October 2018
- September 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- November 2017
- October 2017
- September 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016