Fee-Shifting Clause in Contract Does Not Apply to Pre-Suit Fees and Does Not Permit Pre-Judgment Interest Unless Expressly Provided

On January 22, 2023, Justice Melissa A. Crane of the New York County Commercial Division issued a decision in Entech Engineering, P.C. v. Dewberry Engineers Inc., 2023 NY Slip Op 30221(U), holding that the defendant, as prevailing party, was entitled to its attorneys' fees, but refusing to award fees for work done before the lawsuit was filed and refusing to award pre-judgment interest on the amount of the fees, explaining:

[T]he court agrees with Entech that attorney's fees from before the inception of this lawsuit on 9/22/2015, are not chargeable to Entech. The contractual language clearly contemplated an award of attorney's fees "for any claim or other proceeding." Had the parties meant for an award of fees from before a proceeding started, they should have used the word "and," not "or." Therefore, the court subtracts $9,531.00 from the total fee award, representing all charges in the invoices (see NYSEF doc 258) from before 9/22/2015.

The court also denies Dewberry's request for prejudgment interest upon those fees. "[I]nterest may only be added to a contractual award of attorneys' fees if explicitly provided for in the agreement" (Ursa Minor Ltd. v. Aon Fin. Prods. Inc., No. 00 CIV 2474(AGS), 2001 U.S. Dist. LEXIS 7455, 2001 WL 1842042, at *9 [SDNY May 30, 2001]; see also Vista Outdoor Inc. v. Reeves Fam. Tr., No. 16 CIV. 5766, 2018 WL 3104631, at *12 [SDNY May 24, 2018]). Here, there is no provision in the contract providing that prejudgment interest can be awarded on top of an award for attorney's [*5] fees. The language of CPLR 5001 supports this conclusion. That language provides "Interest shall be recovered upon a sum awarded because of a breach of performance of a contract. . ." Here, there has been no chance for a breach of contract, as the court has only awarded fees today.

Under New York law, fee shifting between parties to a contract is permitted only if the contract makes "unmistakably clear" that that is what the parties intended. And even when the parties clearly include a fee-shifting clause, as this case shows, those clauses will be narrowly interpreted. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning fee shifting between parties to a contract.