Opinion ID: 2319344
Heading Depth: 1
Heading Rank: 12

Heading: The Attorneys' Fees IssueWCD's Cross Appeal

Text: In its cross-appeal, WCD challenges the trial court's judgment regarding attorneys' fees and the handling of the amount it had placed in escrow. In sum, the trial court declared that WCD's requests for [attorneys'] fees prior to July 2007 and for prejudgment interest are effectively mooted by the $100,000 cap set forth in the contract. The court determined that [t]he escrow returned to [WCD] was $56,907, and attorneys['] fees and costs amounted to $178,294.14[,] and [t]hese two sums far exceed the $100,000 cap. . . . Consequently, the trial court awarded WCD $43,093 in attorneys' fees (counting $100,000 minus $56,907 to arrive at $43,093). Section 14.2 of the contract limits NTV's liability to $100,000 against all Losses in excess of $50,000. Section 15.12, however, provides for all reasonable attorneys' fees to be awarded to the prevailing party. Although Section 1.1 of the contract includes attorneys' fees in the definition of Losses, WCD argues that Section 15.12 exempts attorneys' fees from the $100,000 liability cap, as attorneys' fees are considered cost and not damage awards. In addition, WCD contends that the $56,907 it placed in escrow should not have been included in the calculation of the amount awarded to it as attorneys' fees. NTV contends that the liability cap in Section 14.2 indisputably applies to WCD's fee request, and that the trial court correctly included the escrow amount in deciding the attorneys' fees to which WCD was entitled under the contract. This court generally defers to the broad discretion of the trial judge in the calculation and award of attorney's fees. Pellerin v. 1915 16th St., N.W., Coop. Ass'n, 900 A.2d 683, 690 (D.C.2006) (quoting District of Columbia v. Hunt, 520 A.2d 300, 304 (D.C.1987)) (internal quotation marks omitted). Moreover, we adhere to the American Rule under which. . . every party to a case shoulders its own attorneys' fees, and recovers from other litigants only in the presence of statutory authority, a contractual arrangement, or certain narrowly-defined common law exceptions. . . . Psaromatis v. English Holdings I, L.L.C., 944 A.2d 472, 490 (D.C. 2008) (quoting Oliver T. Carr Co. v. United Techs. Commc'ns Co., 604 A.2d 881, 883 (D.C.1992)) (internal quotation marks and other citations omitted). Whether we apply the contractual arrangement exception will depend upon whether the parties agree to fee-shifting as reflected by the language in the parties' contract. Estate of Raleigh v. Mitchell, 947 A.2d 464, 473 (D.C.2008). Accordingly, we must examine any relevant contractual language [that] is required to determine the scope of any claimed fee-shifting provision. Id. at 474. Here, based on our review of the contractual language, we conclude that the liability cap applies to the recovery of WCD's attorneys' fees. As a threshold matter, it is undisputed that the American rule does not control because the parties agree that there was a contractual arrangement governing fee-shifting, the prevailing party provision in § 15.12. See Psaromatis, supra, 944 A.2d at 490; see also BSA 77 P St. LLC v. Hawkins, 983 A.2d 988, 997 (D.C.2009). However, we do not stop there, because our task is reconciling § 15.12 with the liability cap in Section 14.2 to determine the scope of the fee-shifting provision. See Raleigh, supra, 947 A.2d at 474. In order to do so, we must also examine other relevant provisions to giv[e] a reasonable, lawful, and effective meaning to all [of the contract's] terms. . . . Debnam, supra, 976 A.2d at 197 (quoting 1010 Potomac Assocs., supra, 485 A.2d at 205) (internal quotation mark omitted). Section 15.12 of the contract states that [i]f any litigation or other court action . . . is sought, taken, instituted or brought by Seller or Purchaser to enforce its rights under this Agreement, all fees, costs and expenses, including without limitation, reasonable attorneys['] fees and court costs, of the prevailing Party in such action, suit or proceeding shall be borne by the Party against whose interest the judgment or decision is rendered. However, Section 14.2(a) subjects the Seller's liability to the limitations in the contract, including § 14.2(b), which states that [n]othwithstanding anything to the contrary in this Agreement, except for delay liquidated damages provided in Section 7.5, the Seller will not incur liability to the Purchaser for the first $50,000 in the aggregate amount of Losses incurred by the Purchaser for which Purchaser would otherwise be entitled to recover[], and the Seller's aggregate liability to Purchaser under or related to this Agreement . . . shall not exceed $100,000. Section 14.3 further states that [e]xcept for claims based on actual fraud, the recovery permitted under Section 14.2 shall be the sole and exclusive remedy of Purchaser with respect to any claim for Losses and Liabilities arising from or in connection with this Agreement. Because Sections 15.12, 14.2, and 14.3 refer to Losses and Liabilities, cross-referencing the contract's definitions of those terms is required. Under Section 1.1, Liabilities is defined as with respect to the Person in question, any liability, obligation, damage, loss, diminution in value, cost or expense of any kind or nature whatsoever . . . which is incurred by such Person, and Losses is defined as with respect to the Person in question, any actual liability, damage, loss, cost or expense, including, without limitation, reasonable attorneys['] fees and expenses and court costs, incurred by such Person. While it is true that where a contract provides that fees are to be awarded to the prevailing party, the fees will be collateral to the merits of the case and will not be an element of damages to be proved at trial, Calomiris v. Calomiris, 3 A.3d 1186, 1193 (D.C.2010), the distinction is not material to determining whether Section 15.12 controls in the instant case because Section 1.1 lumps both damages and reasonable attorneys' fees under Losses. Given that Section 14.2(a) limits the Seller's liability for the aggregate amount of Losses, and § 14.3 further provides that Section 14.2 shall be the sole and exclusive remedy of Purchaser with respect to any claim for Losses and Liabilities, we are constrained to conclude that the liability cap in Section 14.2(b) applies to WCD's recovery of attorneys' fees. Although WCD complains that this result places it at an unfair disadvantage, we note that it could have avoid[ed] the result adverse to it by a `more providently worded' provision governing the recovery of attorneys' fees, Carr, supra, 604 A.2d at 884 (quoting Ochs v. L'Enfant Trust, 504 A.2d 1110, 1119 n. 9 (D.C.1986)), particularly in light of the fact that Section 14.2(b) carves out an exception for delay liquidated damages, and Section 14.3 creates an exception for claims based on actual fraud. Nevertheless, we conclude that the trial court erred in applying the escrow funds towards the liability cap and awarding prejudgment interest on the escrow funds. [T]he nature of an escrow agreement, like any other contractual arrangement, must be determined by the intent of the parties as evidenced by all the facts and circumstances surrounding the creation of the escrow. Stuart v. Clarke, 619 A.2d 1199, 1200 (D.C.1993) (per curiam). Here, WCD agreed to put $56,907 in escrow as NTV's potential damages award if WCD was found liable for the delay in proceeding to closing; however, title for the funds would not be passed to NTV unless it won the dispute. Thus, the condition the parties agreed to for release of the escrowed funds . . . was a condition `[precedent] to passage of title to the matter in escrow.' Id. at 1201 (citation omitted). That condition never occurred, and hence, title never passed, and WCD was entitled to the return of the escrow amount. As there is no evidence that the parties intended for the escrow funds to be considered part of NTV's liability should WCD win the dispute, the trial court erred in counting these funds towards the cap under WCD's award of attorneys' fees. Since the parties agreed to put the funds in escrow pending resolution of all claims between them, we cannot say that prejudgment interest was properly awarded, as it is `an element of complete compensation' to a creditor for the loss of use of money that a debtor wrongfully withholds. District Cablevision Ltd. P'ship v. Bassin, 828 A.2d 714, 732 (D.C.2003) (quoting Riggs Nat'l Bank v. District of Columbia, 581 A.2d 1229, 1253 (D.C. 1990)). [13] Accordingly, for the foregoing reasons, we affirm the judgment of the trial court with respect to breach of contract and construction coordination fees, but we remand its judgment regarding the award of attorneys' fees, with instructions to award WCD the total sum of $100,000 in attorneys' fees,that is, the additional sum of $56,907 which it subtracted from the contract's $100,000 liability cap, without prejudgment interest. So ordered.