Attorneys’ Fees Improperly Awarded Because Plaintiffs Were Not Prevailing or Successful Parties

On August 25, 2021, the Second Department issued a decision in Kefalas v. Valiotis, 2021 NY Slip Op. 04750, modifying an award of attorneys’ fees and holding:

[T]he Supreme Court should not have awarded attorneys' fees to the plaintiffs under the terms of the 2012 Purchase Agreement. That provision only allows for an award of attorneys' fees to the "successful party" in the event of litigation. In general, contractual provisions awarding attorneys' fees are to be construed strictly (see 214 Wall St. Assoc., LLC v Medical Arts-Huntington Realty , 99 AD3d 988, 990; see also Hooper Assoc. v AGS Computers, 74 NY2d 487, 491-492). "Only a prevailing party is entitled to recover an attorney's fee, and, to be considered a prevailing party, a party must be successful with respect to the central relief sought" (Blinds to Go [U.S.], Inc. v Times Plaza Dev., L.P., 191 AD3d 939, 942 [alterations and internal quotation marks omitted]; see O'Donnell v JEF Golf Corp.,173 AD3d 1528, 1532). "'Such a determination requires an initial consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope'" (Blinds to Go [U.S.], Inc. v Times Plaza Dev., L.P., 191 AD3d at 942, quoting DKR Mtge. Asset Trust 1 v Rivera, 130 AD3d 774, 776). Here, considering the scope of the dispute litigated and what was achieved within that scope, the plaintiffs constitute neither "prevailing" nor "successful" parties under the terms of the 2012 Purchase Agreement and thus are not entitled to an award of attorneys' fees pursuant to those terms (see Blinds to Go [U.S.], Inc. v Times Plaza Dev., L.P., 191 AD3d at 942; DKR Mtge. Asset Trust 1 v Rivera, 130 AD3d at776).

Under New York law, each party generally pays its own attorneys' fees. But an exception to this rule exists when a contract or statute provides otherwise. The attorneys at Schlam Stone & Dolan frequently litigate disputes concerning whether a party must pay its adversary's attorneys' fees. Contact the Commercial Division Blog committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning fee shifting.