Under Tennessee law does a trial court have discretion to refuse to award attorney's fees to the prevailing party that are provided for in a contract between the parties?

Posted on Feb 26 2013 11:28PM by Attorney, Jason A. Lee

Brief Summary:  The trial court does not have discretion to refuse to award attorney’s fees that are to be paid by the “non-prevailing” party as provided for in a contract between the parties.


Analysis:  The Tennessee Court of Appeals in Gatlinburg Roadhouse Investors, LLC v. Charlynn Maxwell Porter, No. E2011-02743-COA-R3-CV, 2012 WL 6643809 (Tenn. Ct. App. December 20, 2012) recently decided a breach of contract case between two parties.  The contract in question had a provision requiring that the “non prevailing” party of any litigation pertaining to the contract pay the attorney's fees of the prevailing party.  The specific language of this term in the contract was:


The non-prevailing party shall pay all reasonable costs and expenses, including attorneys' fees and court costs, that shall be made or incurred by the prevailing party in enforcing the terms and conditions of this Lease.


Gatlinburg at 10.  In this case the trial court refused to award attorney's fees that were required in the party's contract.  The trial court specifically stated on the record that:


I will not award attorney fees rightly or wrongly from a legal perspective. I will not award attorney's fees. The problem here is you had all sort of ambiguity, and the ambiguity in the Interest Purchase Agreement and the amendment to the sublease, you had the original ambiguity about the sale of the restaurant which I held is an ambiguity. That's what I think, so you are going to enforce the terms of a document, you are going to award attorney fees for enforcement in terms of a document that's so ambiguous that each side in my opinion had a reasonable basis for their argument of what the terms of the lease was. So I don't think it's appropriate to award attorney’s fees, and therefore I do not.


Gatlinburg at 11.  The Tennessee Court of Appeals disagreed with the trial court and found that Tennessee law clearly allows the parties to contract for attorney's fees as an element of damages.  Gatlinburg at 11.  Additionally, case law in Tennessee provides that "a trial court does not have discretion to refuse to consider the provision of a contract awarding reasonable attorney's fees.  However, the determination of the amount of reasonable attorney's fees is within the trial court's discretion."  Gatlinburg at 11.


In this case, however, the Tennessee Court of Appeals found the trial court did not exercise appropriate discretion in not awarding attorney's fees.  The court specifically found:


Here, the lease provided for the non-prevailing party to pay the attorney's fees incurred by the prevailing party in enforcing the terms and conditions of this lease. Although the Trial Court's reasoning in denying Ms. Porter's request for attorneys' fees is appealing, and was an attempt at fairness, the law is otherwise. As a consequence, this Court remands to the Trial Court with instructions to set reasonable attorney's fees for Ms. Porter.


Gatlinburg at 11.  As a result, even in a case where there are great ambiguities in a contract or there are valid and sympathetic reasons for a trial court to not award attorney's fees, if the contract requires attorney's fees to be provided to a prevailing party then the trial court must grant those fees.  There is no discretion provided to the trial court in this circumstance.  The trial court does, however, have discretion to make a determination on what attorney's fees are reasonable and therefore there is some latitude for the trial court on this issue.

TAGS: Damages, Breach of Contract, Contracts, Attorney Fees
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Jason A. Lee is a Member of Burrow Lee, PLLC. He practices in all areas of defense litigation inside and outside of Tennessee.

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Tennessee Defense Litigation Blog
Jason A. Lee, Member of Burrow Lee, PLLC
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E-mail: jlee@burrowlee.com