Virginia has expanded the ability of prevailing parties in construction disputes to receive attorneys’ fees.
Under the “American rule,” the prevailing party in a construction dispute can obtain reasonable attorneys’ fees if the construction contract provides for this.
As the Hirschler Fleischer Construction Law Blog explains, “For many years, however, many courts—including Virginia state courts— typically applied a percentage (anywhere from 10 to 25 percent) to the amount at issue in order to determine what constitutes a ‘reasonable’ amount for an award of attorney’s fees (or at least a ceiling on such an award.)”
This often results in awards that do not reflect the full amount of the prevailing party’s legal costs. This is especially true, according to the authors, in cases where the judgment is for a comparatively small sum.
The Supreme Court of Virginia addresses this issue in Lambert v. Sea Oats Condo Association, Sup.Ct. of Va., No. 160269, April 13, 2017. The court ruled that “merely applying a ratio or percentage to the damage award would not always guarantee a reasonable award of attorney’s fees” and “that Virginia trial courts could no longer use the amount of damages sought and awarded as a limit—or ceiling— beyond which no attorney’s fees could be awarded.”
This ruling was applied in a second Virginia case later in 2017.
The ramifications for construction litigation are significant. If the Supreme Court of Virginia ruling is adopted by other jurisdictions, it will reduce the number of “’frivolous’ or ‘vexatious’” suits that currently plague the construction industry.
Under the Virginia ruling, construction contracts must still contain language allowing for the recovery of attorneys’ fees by the prevailing party. For this reason, the authors “recommend that all construction and supply contracts contain such a provision.”
The Importance of Prevailing Party Attorneys’ Fees Provisions in Construction Contracts, Hirschler Fleischler, Attorneys at Law, Construction Law Blog, Nov. 21, 2017.