Checking Your Sound Post and Attorney Fee Provisions

Recently, I tried a violin by an esteemed modern luthier.[1] It was a well-made instrument but the sound did not seem as direct and focused as I would expect. I was thinking a different type of strings or a sound post adjustment might be appropriate.

 After I expressed my concerns to a professional violinist. He played the agreement and agreed with my assessment about the sound. Then, he looked at the instrument. He plucked the strings above and below the bridge[2] and declared that the bridge was out of place. He then proceeded to loosen the strings slightly so that the bridge could be adjusted.[3]

 As he moved the bridge (a task that always makes me nervous), we both heard what sounded like a pencil falling to a wood floor. He moved the violin back and forth, and sure enough, there was the telltale rattling sound that occurs when the sound post has fallen.

 A sound post is a small piece of wooden dowel less than the diameter of the typical pencil, which is wedged into place inside the violin from front to back. It looks like an ordinary piece of wood, but without it, a violin will not make much sound. And, without it, the pressure from the bridge and strings could cause the top of the violin to collapse.

 It takes practice and skill to reset a fallen sound post. It takes considerable craftsmanship to fit a sound post properly, since it must be carved to exactly match the curvature of the violin top and bottom so the luthier can wedge it into the proper location inside of the violin. Despite the importance of the sound post and the skill involved in crafting it, because it is inside of the violin many violinists do not think much about their sound post–until there is a problem.

 The same is true of many “boilerplate” contract clauses. The parties and even some attorneys may gloss over boilerplate language when reviewing and signing a contract. They don’t think about that language until there is a problem, but it actually takes careful drafting to get the boilerplate correct. This article is one of a series about “boilerplate” provisions in contracts. This article discusses attorney fee provisions.

What is an Attorney Fee Provision?

A typical attorney fee provision provides that if either party to a contract brings a lawsuit due to breach of the contract by the other party, the party that wins the lawsuit gets its attorney fees paid by the losing party. An example of a typical attorney fee clause might be:

If either party institutes any proceeding, claim or action, at law or in equity, in connection with or arising out of the terms, conditions, covenants and agreements contained in this Agreement, the non‑prevailing party in any such action, claim or proceeding shall reimburse the prevailing party for reasonable attorneys' fees, costs and other expenses incurred in connection with such proceeding or action. As used herein the term ‘prevailing party’ shall include, but not be limited to, a party who obtains legal counsel or brings an action against the other by reason of the other’s breach or default and obtains substantially the relief sought whether by compromise, settlement, or judgment.

Evaluation of this clause requires several considerations, among them:

·         To what type of actions does it apply?

·         What expenses must the party pay?

·         What is a “win” of the claim, triggering a payment obligation?

To resolve those questions, the parties first have to determine what they are trying to accomplish with their attorney fee clause.

Why Include an Attorney Fee Provision in Your Contract?

Although attorney fee provisions are commonplace, not every contract has one. And not every contract should have one.

In the United States, the general rule is that in a lawsuit or other dispute, each party pays its own attorney fees and expenses. There are some exceptions, which vary from state to state, but they frequently include discrimination claims, consumer claims, some landlord-tenant actions, and claims based upon fraud or other intentional, wrongful acts. These exceptions tend to punish bad behavior, many times where there is an imbalance of power between the parties.

Another exception is where the parties agree by contract that one party or the other will pay the attorney fees. That is where the attorney fee provision comes into play.

Contractual attorney fee provisions rarely address an imbalance of power, because if one party has more power, it is unlikely to agree in a contract to pay the other party’s attorney fees. Although contractual attorney fees provisions might incidentally punish bad behavior, they can have other, additional purposes.

Attorney fee clauses frequently serve to encourage certain behavior. A party that knows it not only will pay damages but also attorney fees might be less likely to breach a contract. Also, if a party knows it might have to pay the other party’s attorney fees, it isn’t likely to bring a lawsuit unless there is a strong case.

An attorney fee provision which is only triggered by winning a lawsuit might encourage settlement, but a broad attorney fee provision which applies to compromises and settlements might prolong litigation. Parties facing attorney fees due to a settlement might decide to gamble on a complete win by going to trial.

The parties should consider what they are trying to accomplish with attorney fee provisions. If the parties are satisfied with the default United States law, they may not want an attorney fee provision in their contract at all. If the parties do with their attorney fee provision, they should craft a provision to meet their goals.

To What Type of Actions Should the Attorney Fee Provision Apply?

There are two parts to this question. The first is whether there must be a lawsuit filed before attorney fees may be collected. The second is what nexus is required to the contract before the provision is triggered.

Attorney fee provisions can apply only to fees incurred in litigation in court. They can apply to other formal disputes, such as administrative actions, arbitration, or even mediation. They can even be written to apply to very informal disputes, including attorney e-mails, demand letters, and discussions among the parties.

The sample above applies to “any proceeding, claim or action, at law or in equity.” It applies if a lawsuit or other “action” is filed, but it also applies to any “claim,” which could be broader, and which also may create ambiguity.

The second consideration in the type of action to which the attorney fee provision applies is the nexus to the contract. Some attorney fee provisions only apply to claims by one party for a breach of the agreement. Others might also apply to disputes over interpretation or other claims that do not necessarily involve breach by a party.

The sample above applies to any action “in connection with or arising out of the terms, conditions, covenants and agreements contained in this Agreement.” The clause requires only a connection to the contract; it is not limited to claims for breach of the contract.

What Types of Expenses Should be Covered?

Attorney fees clauses typically include what is known as “costs,” or costs of pursuing litigation, such as expert witness fees, filing fees, and deposition costs. Sometimes, the clauses also include “expenses,” which might not be considered court costs, but which are paid by the attorney in furtherance of the claim. These might include investigator fees, messenger fees, and copying costs.

The sample above applies to “reasonable attorneys' fees, costs and other expenses.” By including the word “reasonable,” there is a disincentive for a party to intentionally run up the attorney fee bill with unnecessary expenditures, excepting the other side to pay for it.

What Event Triggers the Payment Obligation?

The final critical question for parties to consider is what event triggers the payment obligation. Many attorney fee clauses require that there be a final court judgment before there is an obligation to pay attorney fees. This, however, excludes alternative dispute resolutions, such as arbitration, mediation, and settlements negotiated by the parties.

Yet adding arbitration to the list of “trigger” events does not add much to the obligation. Arbitration awards can become a court judgment, which would trigger the attorney fee clause.

Adding settlements to the list of “trigger” events also is not particularly helpful. Since mediation and negotiate result in an agreed resolution, parties may agree on allocation of attorney fees in the settlement. Even if the attorney fee clauses requires payment upon resolution by settlement, the settlement agreement might waive that provision.

As with the other provisions, the parties should include the triggers that will create the type of business relationship they want.

Don’t Ignore the Boilerplate!

Parties should not overlook "boilerplate" clauses about attorney fees.  The decision whether to include a contract attorney fee provisions and the content of the provision should reflect the parties’ behavior and dispute resolution goals. Parties who ignore those clauses as “boilerplate” may find that they are unintentionally encouraging behavior inconsistent with their goals.

© 2018 by Elizabeth A. Whitman

DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information contained in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless and until a written contract is signed by all parties and any conditions in such contract are fully satisfied.

[1] A luthier is a person who makes or repairs violins and other string instruments.

[2] The bridge is a piece of carved wood, which looks like a bridge. It sits between the tailpiece and fingerboard and holds the strings of the violin up. Bridges vary in height depending in part, upon violinist preference, and are carved to exactly match the curvature of the top of the violin. However, the e string typically will lie closer to the fingerboard than the lower, thicker g string. A luthier also will carve out holes in the bridge to improve transmission of the sound from the strings.

[3] The bridge sits in between the two f holes on the top of the instrument. Ideally, the f holes will be carved so that the bridge sits on a line in between the two points on the middle of the f holes. Properly locating the bridge also involves acoustical physics. By plucking the strings above and below the bridge and listening to the pitches created, one can properly locate the bridge to provide the necessary resonance of the strings.