MVA Litigation

As a matter of course, a prevailing party cannot recover its attorneys’ fees from an opposing party in North Carolina.  But, attorneys’ fees can be awarded if there is specific statutory authority.  At the conclusion of litigation, the last thing the prevailing party wants to face is the reversal of its award for attorneys’ fees.  The plaintiff in Brown's Builders Supply, Inc. v. Johnson et al., No. COA14-836 (N.C. Ct. App. Mar. 17, 2015), a home renovation-related contract dispute, found itself in this unfortunate position because the trial court’s order granting attorneys’ fees lacked the requisite factual findings to support the award.  The North Carolina Court of Appeals reiterated in Johnson that statutory authority is not the only prerequisite for recovering attorneys’ fees.  Where a statute allows for the award of reasonable attorney’s fees, the court must address four specific factual findings in its order to support the reasonableness of an award: (1) the time and labor expended, (2) the skill required, (3) the customary fee for like work, and (4) the experience or ability of the attorney.  The court’s failure to issue findings for each of these reasonableness factors puts the prevailing party at risk of losing the award.

In Johnson, the appellate court found the trial court’s order to be deficient because it only addressed factual findings regarding the time and labor expended by plaintiff’s attorney.  The statute at issue in Johnson, N.C. Gen. Stat. § 44A-35 (2013), gives the court authority to “allow a reasonable attorneys’ fee to the attorney representing the prevailing party” under certain circumstances related to liens on real property and model payment and performance bonds.  Accordingly, the appellate court found the trial court’s failure to address findings for the other three reasonableness factors – skill required, customary fee for like work, and experience/ability of the attorney – to be a fatal flaw.  The plaintiff had submitted the familiar affidavit and client billings to support the time and labor expended, and the appellate court even noted that its review of the record actually found evidence to support the necessary factual findings for the other three factors.  But, the award still was reversed because “the order itself does not contain these findings, as required.” (emphasis added)  The trial court may have discretion to issue an attorneys’ fee award, but that discretion is subject to appellate review, which is “effectively precluded” if all of the requisite findings are not included in the trial court’s order.  The Johnson trial court now must reconsider the award and provide sufficient support for its decision in order to allow the appellate court to conduct an abuse of discretion review, if necessary.

While it is easy and natural to focus on the time and labor expended by counsel, Johnson makes it clear that parties and the court cannot afford to treat the other three reasonableness factors as inconsequential or afterthoughts to be taken for granted.  Parties seeking and opposing fee awards should focus their attention on substantiating the facts to support their positions with respect to each of the factors.  Likewise, the court must explicitly articulate its factual findings on each of the factors in the order granting reasonable attorneys’ fees.  Parties on the receiving end of an order that may be deficient in its findings regarding any of the four reasonableness factors should determine the best course of action in consultation with counsel, which may include seeking an amendment or modification of the court’s findings or challenging the grant of award on appeal as in Johnson.  The appellate court’s ruling in Johnson ultimately may amount to only a setback for the plaintiff instead of a full-blown reversal of the attorneys’ fee award, but it is an unfortunate setback nonetheless.