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Common Attorneys’ Fee Provision Might Not Be Sufficient

Where the parties’ agreement only provided that, “If the agreement needs to be enforced, the winning party is entitled to receive costs and reasonable attorneys’ fees,” such language did not satisfy the statutory requirements necessary to enable an award of attorneys’ fees.  Denver Property Partners, LLC v. Sisson, 2020 NCBC 34 (J. Robinson).  As a result, the Business Court held it had no authority to award the winning party its attorneys’ fees.

Plaintiff Bayport Holdings, Inc. (“Bayport”) filed various claims against Defendant Brian Sisson (“Sisson”), including breach of their Management Agreement (“Agreement”) in which Sisson (as an independent contractor) agreed to manage, operate and supervise Bayport’s gun range.  Sisson counterclaimed against Bayport, alleging, inter alia, that Bayport had actually breached the Agreement first. The jury returned a verdict in Sisson’s favor on the breach of contract claim, finding that Bayport had breached the Agreement first.  The Agreement contained a common provision: “Section 18: If this [Agreement] needs to be enforced, the winning party is entitled to receive costs and reasonable attorney’s [sic] fees.”  Following entry of the jury’s verdict in his favor on the breach of contract claim, Sisson moved for his attorneys’ fees pursuant to N.C.G.S. §6-21.6(c), which provides: “If a business contract governed by the laws of this State contains a reciprocal attorneys’ fees provision, the court… in any suit…involving the business contract may award reasonable attorneys’ fees in accordance with the terms of the business contract.”  The statute defines a “reciprocal attorneys’ fee provision” as: “Provisions in any written business contract by which each party to the contract agrees …upon the terms and subject to the conditions set forth in the contract that are made applicable to all parties, to pay or reimburse the other parties for attorneys’ fees and expenses incurred by reason of any suit, action, proceeding, or arbitration involving the business contract.” G.S. §6-21.6(a)(4).  Sisson contended the Agreement’s language in Section 18 constituted a “reciprocal attorneys’ fee provision” as defined by the statute, and he was therefore entitled to recover his attorneys’ fees.

Disagreeing with Sisson, the Business Court held that Section 18 did not “…set forth any terms or conditions regarding the payment or reimbursement for attorneys’ fees or expenses….” (Opinion, ¶22), but did not analyze in detail why Section 18 failed to provide the requisite conditions given that the provision was applicable to the “winning party.”  The Business Court further held that the Agreement did not satisfy the statute’s requirement because Section 18 “…did not expressly incorporate the factors set forth in G.S. §6-21.6(c) to guide the Court in its analysis.”  Id.  The Business Court concluded that it could not enforce Section 18 as written, notwithstanding its finding that Section 18 was a “reciprocal attorney’s fees provision.”  Id.

Based upon this decision, a business that has a reciprocal attorneys’ fees provision in any of its business contracts would be well-served to review the contract language to ensure that it explicitly provides: a) the conditions when attorneys’ fees can be recovered; and b) that such award is specifically subject to the conditions set forth in G.S. §6-21.6(c), with an explicit reference to the statutory section.

            Additional legal points from this decision:

  • A jury’s finding that a party’s actions were “fraudulent, willful or wanton” might support a claim for punitive damages, but it did not require a finding that the party’s actions had constituted an unfair or deceptive trade practice.  (Opinion, ¶12, fn.5).

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