Many state court rules call for a losing party to pay the winning party’s attorney fees and other costs if the loser asserted its claim in bad faith or without substantial justification. A recent decision of Maryland’s highest court avoided the improper imposition of this severe sanction on a construction contractor.
The contractor had asserted a delay claim based on allegedly defective design documents. After considerable pre-trial discovery, the case was dismissed due to a procedural flaw. The trial court then ordered the contractor to pay more than $600,000 of the defendants’ attorney fees and costs.
On appeal, it was ruled there had been insufficient evidence of lack of substantial justification. The trial court had focused on the procedural flaw, a debatable point in itself, rather than the actual merits of the contractor’s delay claim.
Many people say there would be fewer spurious claims if the loser paid for the winner’s attorney fees. But this sanction is severe. So severe, it can be argued, that just the prospect has a chilling effect on even the most worthy claims. Comments are welcomed.
