Thursday, March 6, 2008

The American Rule for Payment of Attorney's Fees

Coming out of the Court of Appeals of Tennessee at Nashville is a decision on whether the phrase "cost and expenses" in enforcing a declaration of easements and restrictions includes the recovery of attorneys' fees. The court says NO.

Cracker Barrel sued their neighbor alleging that the neighbor's plan to expand their building violated the declaration of reciprocal rights and easement and restrictive covenant. This declaration governed the use of the Cracker Barrel property and the neighbor's property. Cracker Barrel ended up winning. The provision in the declaration stated: "All costs and expenses of any suit or proceeding shall be assessed against the defaulting party."

The Tennessee Court pointed out that Tennessee "follows the 'American Rule' which provides that litigants must pay their own attorney's fees unless there is a statute or contract providing otherwise." The court goes on to cite a case that the rule in Tennessee requires that the statute or contract specifically provides for the recovery of attorneys' fees.

The dissenting judge found that the use of "all cost and expenses" should be given its ordinary meaning and would include attorney's fees. After all the biggest cost of a "suit or proceeding" is going to be attorneys' fees.

You can follow these links for the decision in Cracker Barrel Old Country Store, Inc., et al. v. Richard Epperson, et al. (M2006-02424-COA-R3-CV) and the dissent.

Remember to always include the words "attorney's fees" when drafting a contract provision for the recovery of costs and expenses.

In the first draft of this post I failed to thank Mike Frisch of The Legal Profession Blog for pointing out this case.

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