In United States for Use and Benefit of Cleveland Construction, Inc. v. Stellar Group, Inc., the Middle District of Georgia considered the issue of whether a contract provision allows a contractor to recover attorneys’ fees, even where that contractor did not prevail on all of its claims. 2019 WL 338887 (M.D. Ga. 2019). Stellar Group, Inc. (“Stellar”) subcontracted with Cleveland Construction, Inc. (“Cleveland”) to provide certain construction services. Following completion of those services, Cleveland brought suit against Stellar, and Stellar brought counterclaims against Cleveland.

The jury returned a verdict that awarded each party for some of its claims. This included an award of $2,481,060 to Cleveland and $1,300,000 to Stellar. Ultimately, the Court entered judgment in favor of Cleveland based on the setoff amount. Each party then brought motions to recover attorneys’ fees.

Because federal courts apply state law when ruling on the interpretation of contractual attorney fee provisions, the Court applied Georgia law to analyze a party’s entitlement to attorneys’ fees. Under Stellar’s motion, the critical issue was whether Stellar may recover all of its fees despite only prevailing on some of its claims. The provision between Stellar and Cleveland regarding attorneys’ fees stated as follows: “Upon any default, [Cleveland] shall pay to [Stellar] its attorneys’ fees and court costs incurred in enforcing this Subcontract or seeking any remedies hereunder.”

For Stellar to recover, the Court found that Stellar must demonstrate that the attorneys’ fees arose from its successful enforcement of the subcontract or its successful pursuit of remedies for a default by Cleveland. Because Stellar did not take this approach, the Court found that its fee claim was deficient. However, the Court believed that Stellar should be given an opportunity to amend its fee motion to attempt to establish its claim under the Court’s interpretation of the subcontract. The Court allowed Stellar to file an amended motion for attorneys’ fees. That motion is still pending.

Cleveland also filed a motion for attorneys’ fees, arguing the Court should employ its “inherent powers” to assess fees based on Stellar’s bad faith. Cleveland points to Stellar’s inconsistent positions regarding the responsibilities of various subcontractors for project delays. Cleveland argued that Stellar attempted to “double-dip” on recovery from delays to the project.

The Court disagreed with Cleveland’s arguments. It stated that Stellar presented sufficient evidence of Cleveland’s shoddy work and insufficient manpower resulting in substantial delay to the project. Therefore, the Court declined to exercise its inherent powers to award sanctions for bad faith and denied Cleveland’s motion for attorneys’ fees.

Though Stellar’s motion for attorneys’ fees is pending, this case demonstrates that where a contractor or subcontractor agrees to pay attorneys’ fees in the event of a default, it may be responsible for those attorneys’ fees even where judgment was in its favor.