By Carol L. O’Riordan
Concluding a long-running dispute between two construction companies that had engaged in a joint venture to renovate a D.C. public school, the D.C. Court of Appeals ruled on October 6, 2016, that the James G. Davis Construction Co. must pay $775,000 in attorney’s fees to its former joint venture partner, HRGM Corp. It affirmed a ruling by a D.C. trial judge in doing so. The fee amount that was upheld by the appeals court amounted to about 10 times the total of compensatory and punitive damages that a jury had awarded to HRGM.
When the two companies were working together to renovate McKinley Technical High School in Northeast D.C. nearly a decade ago, a dispute broke out between them. HRGM contended that Davis had breached the joint venture agreement in several ways and Davis countersued for unpaid capital contributions. In 2011, a jury awarded HRGM $5,056 in compensatory damages and $70,500 in punitive damages and rejected Davis’s counterclaim.
Next, HRGM applied for attorney’s fees based on a provision of the joint venture agreement that permits the award of fees if a breach of the joint venture agreement is found. The trial court awarded about $775,000 in attorney’s fees to HRGM.
This appeal concerned only the attorney’s fee issue. Davis contended that HRGM wasn’t entitled to the fees because the punitive damages portion of the jury award already took into account the fees that HRGM had to expend, and thus the award of fees amounted to HRGM getting paid twice for the same thing. In support of that argument, Davis noted that the trial judge had instructed the jury to “consider ‘any attorney’s fees that [HRGM] has incurred in this case’ as one factor in its calculation of punitive damages.”
As the appeals court noted, HRGM replied that punitive damages and contractual attorney’s fees “serve wholly different purposes” from each other in that punitive damages are designed to punish and deter, whereas contractual attorney’s fees are intended to compensate the prevailing party for the harm that it suffered. In support of this assertion, HRGM cited decisions from other jurisdictions in which trial courts were permitted to award attorney’s fees even though the jury had already considered the expense of litigation in awarding punitive damages.
The appeals court was unable to find any D.C. precedent squarely bearing on this issue, but it looked at these precedents from other jurisdictions and agreed with HRGM.
“This award under the clause was compensatory in nature, in contrast with the jury’s award of punitive damages,” the court wrote. “Although the jury was instructed that it could consider attorney’s fees incurred alongside other factors, its goal was to produce an award ‘sufficient to punish the defendant for his or her conduct and to serve as an example to prevent others from acting in a similar way’ rather than to make HRGM whole. Thus there was no double recovery although HRGM benefited from two separate monetary awards based on overlapping factors.”
The court also rejected Davis’s argument that the fee award was excessive since it was much larger than the actual and punitive damages award by the jury and thus amounted to an abuse of discretion. The court said that the case was never primarily about money and that HRGM achieved its major objective in filing suit – to show that Davis acted with willful disregard of its rights. Thus the trial court acted within its discretion in awarding the fees.
The full text of the appeals court ruling can be found here.