January 2010

In this edition of Law and Mortar, the construction industry newsletter from Venzie, Phillips & Warshawer, we discuss when attorney's fees are recoverable in the context of construction disputes.

Our newsletter is intended to be a source of information relating to the management of construction contracts, risks and business practices for our clients, friends and others doing business in the construction industry. Please note the disclaimer below regarding the general content of this newsletter. We encourage you to forward this newsletter to your colleagues.

When Are Attorney's Fees Recoverable?


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In England, courts are empowered to award attorney’s fees to a successful plaintiff or defendant in litigation.  Our country, however, has not adopted England’s approach.  In the United States, the general rule is that a litigant, successful or not, has no right to recover attorney’s fees from his or her opponent.  This is known as the “American Rule”.  One theory behind the “American Rule” is that litigation is uncertain, therefore, one should not be penalized for merely defending or prosecuting a lawsuit.  Another theory is that those of lesser financial resources might be unjustly discouraged from commencing litigation to enforce their rights if losing may result in having to pay their opponent’s attorney’s fees.  There are, however, exceptions to the “American Rule”.    

Contracts

One exception to the “American Rule” is when parties agree by contract to pay the other party’s attorney’s fees.  The parties can set forth and describe in their contract the specific circumstances under which one can recover attorney’s fees from the other.  For example, parties may agree to include a clause in their contract which gives the prevailing party in any litigation the right to recover their attorney’s fees from the other party.  Courts will generally enforce such contract clauses as long as the language is clear and unambiguous.

Specific Statutes

Another exception to the “American Rule” is when a statute authorizes the recovery of attorney’s fees.  In New Jersey, for example, there are statutes that permit the prevailing party in consumer fraud and discrimination actions to recover attorney’s fees.  In Pennsylvania, there is a statute that entitles a litigant to recover attorney’s fees if the court determines that the conduct of the other party in commencing the litigation or otherwise was arbitrary, vexatious or in bad faith.

With respect to the construction industry, Pennsylvania, New Jersey and Delaware all have statutes that protect the right of contractors and subcontractors to payment for work performed and completed.  Loosely referred to as “Payment Acts” or “Prompt Pay Acts”, these statutes generally permit an award of attorney’s fees to the prevailing party in any proceeding to recover payment subject to certain conditions which vary in each specific statute.  These statutes only apply to disputes over contract payments and retainage. 

In a recent decision interpreting Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”), the Pennsylvania Superior Court held that a contractor that was awarded the full amount of its claim for work performed against an owner was entitled to recover the attorney’s fees it incurred not only with obtaining the judgment against the owner, but also the attorney’s fees that the contractor incurred in subsequent phases of the litigation to collect the judgment against the owner and to collect the attorney’s fees, which included the fees incurred at the appellate court level.  The court noted that “CASPA endeavors to make a contractor whole when failure to be paid promptly forces him to resort to litigation to collect a just debt.”

For a copy of the court's opinion, click here.

Addenda: Prior to submitting a bid, it is critical that contractors and subcontractors review and take into account any and all addenda to the drawings or specifications that have been issued by the owner/architect before the date bids are due.  If you have not received copies of the addenda, ask for and get them.  If the addenda require additional work, a contractor will not be entitled to additional compensation for such work if it was omitted from its bid.  However, if additional work is required by addenda issued after a contract is awarded then such work would be the proper subject of a change order request.  The addenda may also eliminate work in which case your bid will be overblown if you don’t adjust it to reflect the eliminated work.


VP&W Bulletin Board

1. In the fall of 2009, Bruce L. Phillips successfully defended U.S.-based Decon Laboratories, Inc. against a motion to dimiss for lack of personal jurisidiction filed by UK-based Decon Laboratories, Ltd in the U.S. District Court for the Eastern District of Pennsylvania. The ruling which analyzed in personam jurisdiction under Section 12 of the Clayton Act led to a settlement between the two competitors enaged in the business of manufacturing industrial cleaning agents and effectively voided a 1987 non-compete agreement between the two companies. For a copy of the Court's opinion, click here. You can also read an article from Law360 on the case.

2. Stephen A. Venzie has been named as the 2010-2011 Co-Chair of the Delaware Contractors Association's Young Executives Committee

   

Venzie, Phillips and Warshawer is a proud member of the following industry associations:

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An E-Newsletter From
Venzie, Phillips & Warshawer
For the Construction Industry

Editors

 Jeffrey C. Venzie, Esq.
 Stephen A. Venzie, Esq.
 Howard D. Venzie, Jr., Esq.

Do You Want to Learn More?

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For additional publications by our attorneys and other construction industry resources visit our website at www.venzie.com

Venzie, Phillips & Warshawer is a law firm located in Philadelphia, Pennsylvania serving all facets of the construction and surety bond industries since 1975. The firm engages in both the prosecution and defense of construction contract and other commercial litigation before the state and federal courts in the Commonwealth of Pennsylvania and the State of New Jersey, as well as those of other jurisdictions, and has substantial experience in the arbitration and mediation of construction industry claims and disputes before the American Arbitration Association and in the settlement of such claims and disputes through various forms of Alternative Dispute Resolution.

Recent Headlines

In January 2010, New Jersey's Governor Corzine signed a new law which, according to UTCA's January 13, 2010 Construction Advisory publication, "will bring relief to contractors and subcontractors concerning the escalation of fuel and asphalt material prices on local and county public construction projects. The new Law, P.L.2009, Chapter 187, requires that specifications for public works projects that are governed by Local Public Contracts Law must contain a pay item for asphalt and fuel escalation. The NJDOT Asphalt and Fuel Index will be the reference by which the material price adjustment is to be calculated. The requirement for the use of the asphalt and fuel adjustment clauses are for public works projects that contain 1,000 tons of asphalt and/or 500 gallons of fuel. A provision is included in the measure to account for change orders or extra work that would result in the 1,000 ton or 500 gallon threshold being met. This new law applies to all new projects bid on or after May 1, 2010."

 

 

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