Construction Law Today : Construction Lawyer & Attorney : Joshua Glazov : Design Build Contracts, Construction Bankruptcy

How Much Is Reasonable?

Like deciding who is the prevailing party, how much a judge (this includes arbitrators too) will consider reasonable is impossible to predict.  What's reasonable to one is extravagant to another.  But for most contracts, the starting point is that the F&C provision limits the award to reasonable fees and costs.  If it does not say reasonable, you may get nothing.

Keep in mind that most judges are not familiar with the technical complexity or sheer volume of issues or data involved in a construction dispute.  To most, the amount of time and resources devoted to working on a construction case will seem excessive.  They'll consider the excessive fees and costs unreasonable and deny them.    

If you're in arbitration, the arbitrators may be private design professionals, construction managers or consultants, and construction lawyers.  Those arbitrators may be more familiar with what it takes to work on a construction dispute.  And they allow consider more fees and more costs to be reasonable.  But there's no guaranty. 

But keep in mind that whenever a prevailing party requests fees and costs, judges usually cut don't award all of it.  This isn't just in construction cases.  It's standard procedure in other types of contract cases, civil rights cases, antitrust cases, and any other case where the loser has to pay the winner's attorneys fees and costs.  The bottom line is that if you're the prevailing party and you get an award of attorneys fees and costs, expect your award to be a fraction of what you ask for.  And expect the numerator on the fraction to be a lot smaller than you'd like. 

The more detailed your description of fees and costs, the better the chances you'll convince a judge they're reasonable.  Most lawyers working on construction disputes charge on an hourly basis.  Their timesheets identify what they worked on and how long they worked on it.  Which one of these do you think a judge is more likely to consider reasonable?

"$845 - 2.6 hours - Attention to motion."

"$845 - 2.6 hours - Perform research on whether accumulated pre-judgment interest on subcontractor claim may be counted towards the minimum dollar amount needed to obtain diversity of citizenship subject matter jurisdiction in federal court, edit and revise memorandum of law opposing contractor's motion to dismiss for lack of subject matter jurisdiction, e-mails and phone calls with D. Olander and S. Lopez concerning arguments against motion to include in opposition and which to omit."  

To increase your odds of getting more fees and costs, consider talking to your lawyers about maximizing the detail in their time descriptions.  Most will be pleased to accommodate you.  But recognize that because one day they might be submitting these descriptions to a judge, they'll want to avoid revealing information that's privileged, confidential, or might give the other side, or a third-party, a strategic or tactical advantage in the continuation of your dispute, or in another dispute.

What Qualifies As A Cost?

What qualifies as a cost varies from place to place and from judge to judge.  Is $6,736 spent on copying documents you produced to the other side a cost you can get back after you win?  How about the fees you paid to an expert witness?  How about the expert's out-of-pocket expenses for transportation, room, and board? 

In most situations you have some control over what qualifies as a cost.  You can identify the costs in your contract.  The best way I've seen is to break fees and costs into three categories:

• Attorneys fees - fees for the services of lawyers, paralegals, summer associates, and other timekeeping professionals working at your law firm.  Do you have in-house lawyers?  Maybe you'll want to include them too.  But if you do, expect to show their time entries and their internal billing rates just like as if they were outside counsel.
• Dispute costs - payments to the judicial branch of government connected with the case or to a private organization administering arbitration (e.g., filing fees).
• Dispute expenses - other money you pay related to the dispute that does not qualify as attorneys fees or as costs.  Here is a short list of some off-the-cuff examples:
  • Process server charges.
  • Expert witness fees and reimbursements.
  • Consulting fees and reimbursements (e.g., non-testifying technical experts, electronic discovery consultants).
  • Court reporter charges and reimbursements (recording testimony and preparing transcripts).
  • Exhibit and trial aid preparation charges (e.g., demonstrative exhibits, re-creations, animations).
  • Copying charges.
  • Delivery charges.
  • Transportation (i.e., getting lawyers, witnesses, and consultants to and from depositions, hearings, and trial).
  • Room and board for traveling lawyers, experts, and consultants.
  • Electronic research service fees.
  • Overnight courier (e.g., FedEx) charges and postage.
  • Other government charges (e.g., filing and copying fees for FOIA requested submitted seeking evidence related to the dispute).

When composing the F&C provision in your contract, define the attorneys fees and costs that the prevailing party gets to include: (1) attorneys fees, (2) dispute costs, and (3) dispute expenses.  The judge may not grant all of these to you, but you don't get if you don't ask.

Miscellaneous Concerns

Even if your contract has an attorneys fee and cost provision, sometimes a judge won't apply it if the dispute does not fit the traditional paradigm - one side pursuing the other in arbitration or court for something like payment or defective work.  Some judges deny fees and costs when the dispute comes up as part of a bankruptcy or because some of the fees and costs are for an appeal.  If you want to get your fees, costs, and expenses for unusual things - like bankruptcy proceedings and appeal - you're odds are going to be much better if your F&C provision includes them. 

Do you want your F&C provisions to cover fees and costs spent not just on claims for breach of the contract, but for claims related to the contract?  Construction disputes often have claims that aren't for breach of a construction contract or architects agreement, but are related.  For example, unjust enrichment, quantum meruit, negligence, negligent misrepresentation, strict product liability, tortious interference with contractual relations, breach of fiduciary duty.  If you want a chance of getting your opponent to pay your fees and costs spent on asserting opposing these kinds of claims, you're better off using using broad language to describe what types of situations come under the F&C provision.  For example:

"...in any dispute or proceeding arising from, related to, or connected with, this Contract, the Work, or the relationship between the parties related to either this Contract or the Work...."

Every state I've looked at has a body of judicial decisions on attorneys fees and costs.  Some states even have statutes.  For example, under §57.105(7), Florida Statutes, if a contract allows one side to recover fees and costs if they prevails, the other side can get their fees and costs if they prevail too.  Even if the F&C provision in the contract says only one side can get fees and costs, the judge can award attorneys fees to the other side.  Before entering into your contract, it's usually a good idea to look at the law of the state where your project is located, and any other state whose law may be chosen as governing in the contract, to see what the cases and statutes say about attorneys fees and costs.

Conclusion 

• Real construction disputes usually don't have a clear winner.  There's often many sides with so many claims and so many defenses, that it's difficult to decide who is the prevailing party when it comes to an end.  That's then the start of another installment of collateral litigation just over who won an earlier installment.
• The prevailing party is usually limited to recovering their reasonable attorneys fees and costs.  And they'll be a lot better off if their F&C provision mentions this limitation.
• Consider identifying what costs and expenses will qualify as "costs" the prevailing party may recover.
• Recognize that an F&C provision may need special language to apply to fees and costs spent on non-contractual claims, appeals, or in bankruptcy proceedings.
• Check applicable law for cases and statutes that affect whether a prevailing party can get fees and costs, how much,  
• Last, and possibly most important, before you put an F&C provision in your contract, you have to ask yourself a question - am I willing to live with this if I'm the loser?  If the answer is no, maybe you should reconsider.