Opinion ID: 538925
Heading Depth: 1
Heading Rank: 8

Heading: Recovery of Attorneys' Fees

Text: 83 Finally, we address the merits of First Alabama's cross-appeal. The bank claims that the court erred in ruling that it was not entitled to recover litigation expenses, including attorneys' fees, from Johnson & Higgins for expenses it incurred in suing First State. Specifically, the bank contends that it is entitled to recover attorneys' fees from Johnson & Higgins because Johnson & Higgins' breach of contract forced it to sue First State. We disagree. 84 In Alabama, attorneys' fees or expenses of litigation are not recoverable as damages, in [the] absence of a contractual or statutory duty, other than a few recognized grounds of equity principles. Elegante Inns, 361 So.2d at 1065-66 (citing State v. Alabama Pub. Serv. Comm'n, 293 Ala. 553, 307 So.2d 521 (1975); Hartford Accident & Indem. Co. v. Cosby, 277 Ala. 596, 173 So.2d 585 (1965)). However, one exception to the general rule that Alabama does recognize is that where the natural and proximate consequences of the defendant's wrongful act causes the plaintiff to become involved in litigation with a third person, attorneys' fees and other expenses incurred in such litigation may be recovered as damages. Id. at 1066; accord George E. Jensen Contractor, Inc. v. Quality Mill Works, 431 So.2d 1232, 1234 (Ala.1983); Johnson v. Martin, 423 So.2d 868, 871 (Ala.Civ.App.1982). In order to recover attorneys' fees against a defendant, the plaintiff must prove the following elements: (1) The plaintiff must have incurred attorneys' fees in the prosecution or defense of a prior action. (2) The litigation must have been against a third party and not against the defendant in the present action. (3) The plaintiff must have become involved in such litigation because of some tortious act of the defendant. Elegante Inns, 361 So.2d at 1066 (citation omitted). 85 Although Elegante requires that the plaintiff must have incurred the attorneys' fees in a prior proceeding, the Elegante court, as well as other courts, have declined to follow this requirement. Wood v. Old Sec. Life Ins. Co., 643 F.2d 1209, 1218 (5th Cir. Unit A May 1981) (applying Alabama law); see Mutual Fire, Marine & Inland Ins. Co. v. Costa, 789 F.2d 83, 89 (1st Cir.1986). Furthermore, while Elegante Inns involved a tortious breach of duty, the above rule, allowing recovery of attorneys' fees, also applies where litigation with a third party was the result of the breach of a contractual duty between the parties. Quality Mill Works, 431 So.2d at 1234. 86 In Elegante Inns, the court held that a restaurant owner was entitled to collect attorneys' fees from his insurance broker for his expenses in suing his insurer for reformation of the insurance policy. 361 So.2d at 1066. In that case, although the insurance broker was negligent for endorsing the policy over to the owner's lessee, the insurer was innocent of any wrongdoing. Similarly, in Wood, the court ruled that the plaintiff could recover its litigation expenses from its insurance agent for costs it incurred in suing its insurance company to recover under the policy. 643 F.2d at 1218. In that case, the insurance company was also innocent of any wrongdoing, but the insurance agent was negligent in procuring the insurance policy. As the Wood court stated, in both Elegante Inns and the instant case, the insured was required to sue the insurer to collect the proceeds of the policy solely because of the agent's (at best) careless conduct with respect to the insured's rights under the policy.... Id. (emphasis added). 87 In contrast, there is no indication that First Alabama would not have sued First State but for Johnson & Higgins' breach of contract. Since the bank asserted and prevailed on both its fraud and breach of contract claims against First State because of the company's misrepresentations and failure to disclose material facts, it is evident that First Alabama had a separate, independent interest in the litigation. Quality Mill Works, 431 So.2d at 1235. Because we believe that First Alabama would have pursued its contract and fraud claims against First State regardless of Johnson & Higgins' breach of contract, we do not believe that First Alabama is a mere passive middleman caught up in litigation with a third-party. Id. Thus, we agree with the district court that the presence of these independent causes of action against First State prevents the application of [Elegante Inns ] in the instant case. District Court's Memorandum Opinion (June 30, 1987), Rec. 201, at 5. 88 The district court correctly noted that the third-party exception to the general rule was not intended to allow a plaintiff to recover attorneys' fees in such a case. Id. at 7. In fact, an exception to the general rule prohibiting the recovery of attorneys' fees should be construed narrowly. See Cincinnati Ins. Co. v. City of Talladega, 342 So.2d 331, 339 (Ala.1977) (concluding that Sec. 16, a provision for award of attorneys' fees, applies only to labor and materials bonds); Alliance Ins. Co. v. Reynolds, 504 So.2d 1215, 1216 (Ala.Civ.App.1987) (refusing to extend the attorney fee exception in fraud cases beyond the common fund fact situation); see also Alabama Pub. Serv., 307 So.2d at 540 (noting that there are only a few recognized exceptions to the general rule prohibiting the recovery of attorneys' fees). Thus, if we were to allow the bank to recover attorneys' fees from Johnson & Higgins in this case, we would be improperly broadening Alabama's third-party exception. This is something we cannot and will not do. Thus, we affirm the district court's decision not to award the plaintiff attorneys' fees under the facts of this case.