Bill Wilson | Robinson+Cole
A common question from clients, when a dispute arises on a construction project, is whether they can recover their attorney’s fees from the other side if they pursue a case and win. More often than not, such fees are not recoverable. As a general rule (commonly known as the “American Rule”), each party to a dispute must bear their own attorney’s fees unless there is some statutory provision or contractual agreement between the parties allowing otherwise. Since most construction disputes involve claims for breach of contract and/or negligence, no realistic statutory provision often allows for attorney’s fees. Many construction contracts do not typically provide a prevailing party the right to collect attorney’s fees from the other side. However, even if the American Rule applies, there may be another path to recovering attorney’s fees if the parties agree to arbitrate their dispute under the American Arbitration Association (AAA) rules.
The AAA Construction Industry Arbitration Rules allow parties another opportunity to put attorney’s fees back on the table when faced with the American Rule. Rule R-49 Scope of Award, subsection (d) allows an Arbitrator to include “an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.” Attorney’s fees are possible if all parties request them, even when such an award is not authorized by law or in the underlying construction agreement. It’s unclear whether Rule R-49 requires the parties to formally agree to allow the arbitrator to award attorney’s fees to the winning party or if both parties simply need to request attorney’s fees in their respective filings. Rule R-49 Scope of Award, subsection (c) also authorizes an Arbitrator to assess administrative fees, arbitration expenses, and the arbitrator’s compensation against the parties in such amounts as the arbitrator determines is appropriate. If the parties in a construction dispute have agreed to arbitrate under AAA rules, the possibility of recovering attorney’s fees and other costs under the AAA rules may be enough to persuade a client wary of incurring potentially large legal costs into pursuing a claim in the first place.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.