In 279 B.C. the Greek king Pyrrhus defeated the Romans at the Battle of Asculum but lost much of his army in the process. He reportedly said “If we are victorious in one more battle with the Romans, we shall be utterly ruined!” Thus was coined the phrase “Pyrrhic victory” – a win that inflicts such a cost on the victor that it amounts to defeat. And any trial lawyer you ask can point to cases in which the cost of litigation resulted in a Pyrrhic victory for the client.
Contracting parties can and often do agree that in the event of litigation between them, the “prevailing party” will be paid his attorneys’ fees incurred in the fight. On the assumption that any monetary judgment in the plaintiff’s favor, no matter how small, renders him the “prevailing party,” this type of fee-shifting provision is thought by some litigants to be a balm against the sting of Pyrrhus. And sometimes it is. A recent case from Tennessee affirmed an award of $201,255.50 in attorneys’ fees to a homeowner who sued for $12,400 and won a $6,800 jury verdict on a breach of contract claim. G.T. Issa Construction, LLC v. Blalock, No. E2020-00853-COA-R3-CV (Tenn. App. Nov. 23, 2021).
The fly in the ointment, however, is the court’s power to determine the amount of attorneys’ fees to be awarded. A “win” that is grossly disproportionate to the attorneys’ fees incurred in achieving it can lead to an award of less than all of those fees. In New Hampshire, attorneys’ fee awards take into account “the amount involved, the nature, novelty, and difficulty of the litigation, the attorney’s standing and the skill employed, the time devoted, the customary fees in the area, the extent to which the attorney prevailed, and the benefit thereby bestowed on his clients.” Funtown USA, Inc. v. Town of Conway, 129 N.H. 352, 356 (1987). The requirement to consider both the amount sought and the degree of success falls short of an explicit directive to compare the outcome of trial with the bill, but in practice that is often what happens. I have seen several New Hampshire courts cut down an award of fees where outcome and bill are wildly disparate. Pyrrhus lives!
Judicial reluctance to approve fee applications that dwarf the amount of a judgment or verdict is at its peak when the fee-shifting provision is contractual rather than statutory. In the statutory setting, fee awards are designed “to encourage suits that are not likely to pay for themselves, but are nevertheless desirable because they vindicate important rights.” Diaz v. Jiten Hotel Management, Inc., 741 F.3d 170, 178 (1st Cir. 2013) (affirming an attorneys’ fee award of $104,626.34 on a $7,650 verdict under a Massachusetts anti-discrimination statute). But a suit for breach of a contract with a prevailing party fee-shifting provision implicates no public policy to encourage suits that would otherwise not be cost-effective.
One way that courts reduce attorneys’ fee awards below the amounts incurred is by disallowing fees spent pursuing claims or legal theories on which the plaintiff did not prevail. LaMontagne Builders, Inc. v. Brooks, 154 N.H. 252, 261 (2006) (“Where a party prevails upon some claims and not others, and the successful and unsuccessful claims are analytically severable, any fee award should be reduced to exclude time spent on unsuccessful claims.”). In the construction setting, however, that type of severability is rare; it will almost always turn out that “the evidence necessary to prove liability under one theory was also relevant to proving liability under the other theory,” id. The prevalence of multiple claims in mine run construction disputes – breach of contract, unjust enrichment, negligence, Consumer Protection Act, etc. – will thus exacerbate the Pyrrhic problem.
Because parties are masters of their own contracts, they can craft fee-shifting provisions as they see fit. For example, a prevailing party fee-shifting clause might cap the plaintiff’s recoverable attorneys’ fees at the amount of the verdict or judgment, thereby maintaining a disincentive to sue over small disputes, while capping the defendant’s recovery at the amount of the claim, thereby incentivizing reasonable settlement offers.
Contracting parties can and often do agree that in the event of litigation between them, the “prevailing party” will be paid his attorneys’ fees incurred in the fight. On the assumption that any monetary judgment in the plaintiff’s favor, no matter how small, renders him the “prevailing party,” this type of fee-shifting provision is thought by some litigants to be a balm against the sting of Pyrrhus. And sometimes it is. A recent case from Tennessee affirmed an award of $201,255.50 in attorneys’ fees to a homeowner who sued for $12,400 and won a $6,800 jury verdict on a breach of contract claim. G.T. Issa Construction, LLC v. Blalock, No. E2020-00853-COA-R3-CV (Tenn. App. Nov. 23, 2021).
The fly in the ointment, however, is the court’s power to determine the amount of attorneys’ fees to be awarded. A “win” that is grossly disproportionate to the attorneys’ fees incurred in achieving it can lead to an award of less than all of those fees. In New Hampshire, attorneys’ fee awards take into account “the amount involved, the nature, novelty, and difficulty of the litigation, the attorney’s standing and the skill employed, the time devoted, the customary fees in the area, the extent to which the attorney prevailed, and the benefit thereby bestowed on his clients.” Funtown USA, Inc. v. Town of Conway, 129 N.H. 352, 356 (1987). The requirement to consider both the amount sought and the degree of success falls short of an explicit directive to compare the outcome of trial with the bill, but in practice that is often what happens. I have seen several New Hampshire courts cut down an award of fees where outcome and bill are wildly disparate. Pyrrhus lives!
Judicial reluctance to approve fee applications that dwarf the amount of a judgment or verdict is at its peak when the fee-shifting provision is contractual rather than statutory. In the statutory setting, fee awards are designed “to encourage suits that are not likely to pay for themselves, but are nevertheless desirable because they vindicate important rights.” Diaz v. Jiten Hotel Management, Inc., 741 F.3d 170, 178 (1st Cir. 2013) (affirming an attorneys’ fee award of $104,626.34 on a $7,650 verdict under a Massachusetts anti-discrimination statute). But a suit for breach of a contract with a prevailing party fee-shifting provision implicates no public policy to encourage suits that would otherwise not be cost-effective.
One way that courts reduce attorneys’ fee awards below the amounts incurred is by disallowing fees spent pursuing claims or legal theories on which the plaintiff did not prevail. LaMontagne Builders, Inc. v. Brooks, 154 N.H. 252, 261 (2006) (“Where a party prevails upon some claims and not others, and the successful and unsuccessful claims are analytically severable, any fee award should be reduced to exclude time spent on unsuccessful claims.”). In the construction setting, however, that type of severability is rare; it will almost always turn out that “the evidence necessary to prove liability under one theory was also relevant to proving liability under the other theory,” id. The prevalence of multiple claims in mine run construction disputes – breach of contract, unjust enrichment, negligence, Consumer Protection Act, etc. – will thus exacerbate the Pyrrhic problem.
Because parties are masters of their own contracts, they can craft fee-shifting provisions as they see fit. For example, a prevailing party fee-shifting clause might cap the plaintiff’s recoverable attorneys’ fees at the amount of the verdict or judgment, thereby maintaining a disincentive to sue over small disputes, while capping the defendant’s recovery at the amount of the claim, thereby incentivizing reasonable settlement offers.
RSS Feed
