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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.
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