Statutes requiring a party to a dispute to pay their opponent’s attorney fees can produce bitter results. Fee awards comparable to the damage recovery are not unheard of. In a construction contract context, these “fee shifting” provisions are found in prompt payment statutes and mechanic’s lien statutes. In both cases, the purpose is to compensate the party that was wrongfully denied payment.
A Kansas court addressed a situation in which a prime contractor made late payment to a subcontractor. The contractor said the late payment was justified by the sub’s refusal to sign lien waivers. The sub argued the subcontract language did not mandate waivers as a precondition to payment.
A Minnesota court was asked to apply a fee shifting provision in a mechanic’s lien statute. The contractor prevailed on its lien foreclosure action, but the project owner recovered a larger amount on its negligence counterclaim against the contractor. The owner argued it would violate the policy of the lien statute to allow the contractor to recover attorney fees under those circumstances.
The third case in this issue involved a termination for the convenience of the government. Restrictive language in the contract did not necessarily apply because the contract, when terminated for convenience, had been converted into a cost reimbursement arrangement.
