By Paul Fletcher
BridgeTower Media Newswires
Attorneys’ fees are damages for purposes of determining the amount in controversy in a district court case, the Michigan Court of Appeals has ruled in a published case.
As a result, a tenant who won a dispute over a commercial lease had its damages and attorneys’ fees capped for a total of $25,000, the district court’s jurisdictional limit.
The tenant had sought more than $48,000 in fees, but the circuit court, and then the appeals court, upheld the lower figure.
The case is ABCS Troy LLC v. Loancraft LLC. The panel members were Judges Brock A. Swartzle, Kathleen Jansen and Stephen L. Borrello. Swartzle wrote the opinion.
The case arose after the tenant, a loan company, moved out of the landlord’s building in Oakland County. The landlord claimed the tenant owed $6,132 for repairs needed after its departure.
The parties’ lease included a fee-shifting provision awarding attorneys’ fees to the prevailing party, should any matter go to litigation.
After the landlord sued, the tenant counterclaimed for $2,692. After a bench trial, the court granted judgment to the tenant.
The tenant then sought $48,576 in attorneys’ fees as part of its victory. The district judge ruled that the court’s jurisdictional limit is $25,000, so that was all that the tenant could recover.
The tenant took the case up to circuit court, which affirmed the lower court, then the appeals court.
The appellate court similarly held the line at $25,000.
In his analysis, Swartzle noted that Michigan courts have long recognized the American Rule, which holds that each party bears the costs of its lawyers in litigation. Many contracts, including leases, contain fee-shifting clauses that require a losing party to pay the winner’s lawyers.
The factual pattern in this case really has not come up before, the judge said.
“Michigan courts have not squarely addressed how to treat contractual attorney fees with respect to the amount in controversy. Nor have we been able to glean much guidance on this specific question from our case law,” Swartzle wrote.
“Federal courts have a rich body of case law dealing with this question in a different context — whether attorney fees required by contract or statute are to be included in the amount-in-controversy calculation for purposes of diversity jurisdiction,” he said. “The weight of case law confirms that such fees are included.”
The court reviewed several federal decisions, then noted, “[L]ike with Michigan courts, the federal courts ... recognize that attorney fees that are sought under a fee-shifting provision are a form of damages, and damages are considered as part of the amount in controversy.”
Swartzle wrote, “It follows deductively that, like with federal courts, Michigan courts should recognize that a claim for attorney fees under the parties’ contractual fee-shifting provision is part of the amount in controversy.”
The district court and the circuit court reached the right result, the appellate panel said.
“[W]hen calculating the amount in controversy for purposes of a district court’s jurisdictional limit, a party’s claim for attorney fees under a fee-shifting provision should be included, and any award of such fees by the district court is subject to that court’s jurisdictional limit,” Swartzle concluded.
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