The winning and losing parties in most construction litigation have at least one thing in common - they both wind up paying their own legal expenses. That is fair enough for the losing party. But what about the winner who was forced into litigation to collect money that was legally due?
The economic reality of litigation is that without reimbursement for attorney’s fees, the prevailing party is not made whole even when awarded its full claim. The legal cost of collection substantially reduces net recovery so that the party who wins in court still suffers a considerable loss. That is so unless the prevailing party can collect its legal cost from the party who forced the litigation and lost.
In Massachusetts (like most American jurisdictions) a prevailing party can recover its attorney’s fees only where reimbursement is specifically provided for by statute or by the contract agreed to by both parties. There are three Massachusetts statutes that provide the possibility of recovering attorney’s fees in litigation involving construction disputes. All three are limited in their application. The first is G.L. c. 149, §29, the public bonding statute. That statute enables subcontractors and suppliers on public projects in Massachusetts to recover attorney’s fees based on time spent and result accomplished when they recover judgment for unpaid labor and materials covered by the statutory payment bond (See Construction Law Comments — Winter 1995). C. 149, §29 does not apply at all to private construction projects.
The second statute is c. 93A, §11 which permits contractors and subcontractors (among other commercial parties) to recover reasonable attorney’s fees and multiple damages against those who engage in unfair and deceptive commercial practices. The difficulty is establishing that the failure to pay for labor and materials was more than just a breach of contract, and involved some ulterior purpose that was highly unethical. (See Construction Law Comments — Fall 1992). Without such proof there can be no recovery of attorney’s fees under c. 93A.
The third and most limited statute permitting recovery of attorney’s fees is c. 231, §6F. Under that statute a court may award the prevailing party its attorney’s fees where the Court concludes the defenses raised by the losing party were frivolous and wholly without support. But, it is a rare case where the losing party does not have some arguable point which would avoid application of the statute.
Where none of these statutes applies, a party may recover its attorney’s fees only if reimbursement of such costs are provided for in the contract executed by the parties. Massachusetts’ courts traditionally enforce contract provisions requiring one party to pay the other party’s attorney’s fees. The difficulty is getting both parties to a contract to agree to a provision transferring the entire legal cost of litigation to the losing party. It is a risk some parties are unwilling to assume voluntarily.
There is a hidden benefit, however, to a provision requiring reimbursement of attorney’s fees to the prevailing party. When such provisions exist there is a much greater incentive to settle disputes short of litigation because the prospect of paying your own attorney, plus your opponent’s attorney if you lose, increases economic exposure to the point where compromise makes more sense than protracted legal warfare.
1A different approach exists in England where the prevailing party traditionally collects its full legal expenses from the losing party in every civil action.
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