Think Twice Before Adding Questionable Damage Claims Where Contractual Attorney Fees Are At Stake
The Wisconsin Court of Appeals, reviewing a Milwaukee County case, handed down a seemingly reasonable decision that will affect claim pleading and discovery responses for many. In Shadley v. Stys, the question was the interpretation of a clause in a house-moving contract providing that the “successful party” would recover its attorney fees from the “unsuccessful party.” Unlike whoever drafted the contract, you can, of course, see the potential problem already.
Damaged house courtesy abundantc flickr collection under creative commons license
Shadley sued Stys, seeking to recover about $100,000 in damages resulting from negligence and breach of contract when the Stys moved Shadley’s house. Her damages included things like her dauther’s tuition, painting the house walls, and damage to a piano she left in the house for the move. The Stys made a statutory offer to settle the case for $25,000, and at trial, the court awarded damages to Shadley in the amount of $14,976.
Shadley, of course, wanted her attorney fees paid, and so did the Stys, but the court was less than agreeable:
Shadley’s definitions of “successful” reveal the contract’s apparent ambiguity. It does not seem to us that Shadley “bested” the Stys or that the result was “favorable” to her when she recovered only $14,976 after claiming a right to over $100,000. That her recovery was not “favorable” seems especially true in light of the Stys’ previous $25,000 settlement offer. Additionally, it seems unlikely that Shadley’s “aim or purpose” was to receive a $14,976 damages award after spending significantly more on attorney fees and turning down a $25,000 settlement offer. Accordingly, even adopting Shadley’s definitions of “successful party,” it is not at all clear to us that she is the party that satisfies them.
Nor is it clear that the Stys are the successful party using Shadley’s proposed definitions of “successful.” Surely it was the Stys’ “aim or purpose” to be free from liability on all counts. The trial court’s findings, that the Stys breached the contract and were negligent in some respects, are certainly not findings that are “favorable” or that demonstrate that the Stys “bested” Shadley.
In the end, the court reached what appears to be a baby-splitting decision:
A more rational reading of the provision would grant Shadley that proportion of her attorney fees that equate to her success at trial. On remand, the trial court is directed to determine the total amount of damages Shadley sought to recover and calculate the percentage of that total on which she was successful, i.e., the amount Shadley actually recovered divided by the total amount of damages she sought to recover. Allowing Shadley to recover her attorney fees only in proportion to her success seems to us the better reasoned and rational interpretation of the parties’ contract provision. The Stys in turn, should receive that percentage of their attorney fees on which they were successful. That is the portion of Shadley’s claim on which Shadley was not successful. For instance, if the trial court were to determine that Shadley recovered only 20% of the total amount of damages she sought, she should receive 20% of her requested attorney fees and the Stys should receive 80% of theirs, for a total of 100%. With these directions, we remand the case back to the trial court to redetermine attorney fees and statutory costs.
Two lessons are immediately apparent. First, when drafting or signing a contract that contains an attorney fees provision, define your terms. Second, if you hold an affirmative claim in a case where there is an attorney fees clause, take care in advancing damages beyond your expectation of ability to obtain them from the final fact finder.
