Daniel Lund III | Phelps Dunbar
You win some, you lose some.
A surety and its principal (the general contractor) in litigation concerning an Air Force project in Nevada prevailed in the case and sought to recover their attorneys’ fees.
The dispute involved a first-tier subcontractor and the related subcontract, which contained an attorneys’ fees clause. At the end of the trial, the Nevada federal district court held: “‘[General contractor and surety] are the prevailing parties in this case and should be awarded their attorneys’ fees/expenses in an amount to be determined upon motions as directed in the Court’s Order.’” The subcontractor moved to have the court reconsider its awards of attorneys’ fees.
Noting the “American rule” that “litigants generally must pay their own attorneys’ fees in absence of a rule, statute, or contract authorizing such an award…,” the court re-examined its award of attorneys’ fees to the GC and surety. As regards the GC, a principal argument against the attorneys’ fees award was that the GC should not have been considered a “prevailing party” (the term used in the attorneys’ fees clause in the subcontract) entitling it to the recovery. The federal district court disagreed: the “prevailing party, for purposes of attorneys’ fees, is one that ‘succeeds on any significant issue in litigation which achieves some of the benefit it sought in bringing suit.’”
However, the inquiry on the award of fees to the surety went deeper: “…the court finds that it has committed a clear error and therefore will reconsider its award of attorneys’ fees to [the surety]. …[T]he Miller Act does not provide for attorneys’ fees as a matter of law…,” and “[surety] does not point to any other rule, statute, or contract that make an award of attorneys’ fees available.
“[Surety] argues that nothing in the …subcontract prevents it from recovering attorneys’ fees and costs. … But whether the subcontract prevents attorneys’ fees is not relevant; it must affirmatively provide that [surety] may recover them.
“[Surety] essentially argues that it should be considered a ‘party’ under the [subcontract]… . Previously, the court conflated [GC and surety] as parties to this contract. Upon review, that was clear error. …
“The relevant subsection allocating attorneys’ fees refers specifically to ‘the parties,’ which the contract defines in the recitals as [subcontractor and general contractor]. … The court erred in finding that [the surety] was entitled to fees under a subcontract it was not a party to. …”
(Of course, the likely upshot of the ruling against the surety is: the principal, because of its indemnity agreement with the surety, no doubt was required to reimburse the surety for its attorneys’ fees.)
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