November 22, 2017

Colorado Court of Appeals: District Court Properly Denied Attorney Fees to Non-prevailing Party

The Colorado Court of Appeals issued its opinion in Klein v. Tiburon Development, LLC on Thursday, August 10, 2017.

Attorney Fees—Fee-Shifting Provision—Contract—Violation of Public Policy—Substantial Justification.

Following remand, the district court denied the Kleins’ request for attorney fees and costs pursuant to a line of credit agreement (LOC) between them and Tiburon Development LLC (Tiburon). The district court granted Tiburon’s and Sell’s (a member of Tiburon) motions for attorney fees and costs.

On appeal, the Kleins contended that the district court erroneously denied their request for attorney fees pursuant to the fee-shifting provision of the LOC. However, enforcing  and awarding the Kleins their attorney fees and costs pursuant to the LOC would violate public policy because the Kleins lost the predominant and only contested part of the LOC claim, and they had only nominal success on the secondary and uncontested issue of entitlement to interest on the LOC. It would have been an abuse of discretion to conclude that the Kleins were the prevailing party on the LOC claim. Further, the Kleins were sanctioned for their conduct during the litigation and ordered to pay all of Tiburon’s attorney fees.

The Kleins next contended that the district court erred in awarding Sell the attorney fees he incurred in seeking an award of fees because Sell failed to carry his burden to prove that the Kleins’ defense to his fees motion lacked substantial justification, and the district court never found that the Kleins’ defense was frivolous. An award of fees incurred in seeking fees under C.R.S. § 13-17-102 must be supported by a determination in the record that the sanctioned party’s defense to the fees motion lacked substantial justification. Because the record in this case does not support that finding, the district court erred in including in its fee award the fees Sell incurred in pursuing his motion for fees.

The Kleins further contended that the district court’s award of fees to Sell unreasonably included fees Sell incurred to respond to the Kleins’ C.R.C.P. 59 motion, which they asserted was not relevant to their claims against Sell. It was not an abuse of discretion for the district court to award Sell the attorney fees he incurred to respond to the Kleins’ C.R.C.P. 59 motion, and the decision was supported by findings in the record.

The judgments denying an award of attorney fees and costs to the Kleins and awarding Sell the attorney fees he incurred to respond to the Kleins’ C.R.C.P. 59 motion were affirmed. The judgment was reversed insofar as the court awarded Sell the attorney fees he incurred in seeking fees against the Kleins, and the case was remanded for the district court to subtract the amount of such fees from the award.

Summary provided courtesy of Colorado Lawyer.

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