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March 25, 2004

In a lawsuit? Who's paying the lawyers?

  • Contractors must know if they're at risk for legal costs
  • By BOB MARCONI
    Stanislaw Ashbaugh

    Marconi
    Marconi

    The last phase of a construction project has been jokingly referred to as a lawsuit. Unfortunately, the truth is often stated in jest, and litigation is an all too common fact of life for contractors.

    When litigation is necessary, it is critical for contractors to consider whether they can collect attorney's fees and costs from the adverse party if they win. Contractors must also know if they could be at risk to pay attorney's fees and costs if they lose.

    Washington follows the “American Rule” concerning the right to recover attorney's fees and costs in litigation. Under the rule, attorney's fees and costs may be awarded only if authorized by contract, statute, or one of a few other narrow exceptions.

    Construction contracts often contain clauses stating that attorney's fees and costs will be awarded to the prevailing party. Absent a fee provision in the contract, some statutes in Washington provide one or more parties the right to recover attorney's fees and costs. The following sets forth ways a contractor may obtain attorney's fees and costs in public and private project disputes.

    There may be additional theories that can be advanced to attempt to recover attorney's fees and costs. When determining how to proceed in any dispute, always consider the issue of attorney's fees and costs.

    Public projects

    On a public project, attorney's fees may be awarded to the prevailing party under the following circumstances:

    1. If the applicable contract contains a fee provision.

    2. If a party presents an offer of settlement to the adverse party pursuant to RCW 39.04.240, that offer is rejected, and the party later obtains judgment for an amount equal to or greater than the amount offered.

    3. If the contractor prevails in an action against a payment bond pursuant to RCW 39.08.030.

    4. If the contractor prevails in an action against the retainage fund withheld by a public body pursuant to RCW 60.28.030.

    5. If a party prevails in an action to collect money under the prompt pay statute RCW 39.04.250.

    If attorney's fees are due to the prevailing party for any of the above reasons, the court has discretion to determine the “reasonable” amount of fees to be awarded.

    Private projects

    On a private project, attorney's fees may be awarded to the prevailing party under the following circumstances:

    1. If the applicable contract contains a fee provision.

    2. If the contractor prevails in an action to foreclose a private lien pursuant to RCW 60.04.181

    3. If a contractor prevails in an action to foreclose on a contractor registration bond pursuant to RCW 18.27.040.

    Contractors who prevail in an action to foreclose on a private lien pursuant to RCW 60.04.181, may or may not receive an award of attorney's fees. The decision is left to the discretion of the court. If a contractor is the prevailing party in a contractor registration bond action pursuant to RCW 18.27.040, attorney's fees are mandated but the total amount of damages and attorney's fees cannot exceed the nominal amounts set forth in the statute ($12,000 for general contractors and $6,000 for subcontractors.)

    RCW 60.04.081, also known as the “frivolous lien” statute, allows a party to challenge the validity and/or amount of a lien. In such an action, if the court determines that a lien is frivolous and/or clearly excessive, the court must award reasonable attorney's fees and costs to the prevailing party. Similarly, if the court rules that a lien is neither frivolous nor clearly excessive, the court is require to award attorney's fees and costs to the lien claimant.

    Frivolous lawsuits

    Pursuant to RCW 4.84.185, the prevailing party in any lawsuit in Washington may obtain attorney fees if the lawsuit was frivolous and brought without a basis in law or fact. Unfortunately, frivolous lawsuits are a reality in this and other jurisdictions.

    This statute serves as an important deterrent to filing meritless lawsuits for no other purpose than to harass. The award of fees for a frivolous lawsuit is discretionary with the court.

    Statute reciprocating contract fee provisions

    Another important statute for contractors to be aware of is RCW 4.84.330. This statute cures the situation where a contract fee provision allows only one party the right to recover fees in an action to enforce the contract. The statute requires that any court applying such a fee provision interpret it as though it is reciprocal and afford both parties the benefit of obtaining their attorney's fees if they are the prevailing party in the suit.

    Construction litigation is expensive. Unfortunately, contractors occasionally are forced to pursue claims and lawsuits in order to receive fair compensation for work performed. The ability to collect attorney's fees and costs is a critical factor when determining whether or not to initiate legal action. The right to collect attorney's fees can also be used as a tool to encourage early settlement of construction disputes.


    Bob Marconi is the chair of the Construction Law Group at Stanislaw Ashbaugh LLP.



     


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