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ConstructionPro Week, Volume: 6 - Issue: 17 - 04/28/2017

Should Sanctions Be Applied to Unsuccessful Claims?

Many state court rules call for a losing party to pay the winning party’s attorney fees and other costs if the loser asserted its claim in bad faith or without substantial justification. A recent decision of Maryland’s highest court avoided the improper imposition of this severe sanction on a construction contractor.

 

The contractor had asserted a delay claim based on allegedly defective design documents. After considerable pre-trial discovery, the case was dismissed due to a procedural flaw. The trial court then ordered the contractor to pay more than $600,000 of the defendants’ attorney fees and costs.

 

On appeal, it was ruled there had been insufficient evidence of lack of substantial justification. The trial court had focused on the procedural flaw, a debatable point in itself, rather than the actual merits of the contractor’s delay claim.

 

Many people say there would be fewer spurious claims if the loser paid for the winner’s attorney fees. But this sanction is severe. So severe, it can be argued, that just the prospect has a chilling effect on even the most worthy claims. Comments are welcomed.
 

 

COMMENTS

We need to continue debating this matter until the number of spurious claims has been reduced significantly: and if necessary in the courts. ...and across all industries, not just construction.
Posted by: RAC - Friday, April 28, 2017 11:24 AM


Agree with the author. Fee shifting and sanctions should be reserved for truly frivolous and harassing claims, which no reasonable person could support. The courts must, however, address legally unfounded claims via early dismissal (prior to lengthy discovery).
Posted by: Michael Peters - Friday, April 28, 2017 11:49 AM


I believe that if the prevailing party's costs are paid for by the losing party it makes both parties, from the very outset, evaluate their true losses. Of course, one needs to define the word "prevailing"!
Posted by: Chris Mather - Tuesday, May 02, 2017 4:12 PM


It is not difficult to identify if a party's claimed direct costs are spurious or not, before these costs are claimed, by Counsel as a party's total costs are invariably verifiable before the claim is filed. Those who choose to submit inflated claims should be dealt with accordingly. Consequential damages are a lot less precise and careful consideration must be paid to the assumptions and philosophical input into the parameters that went into these kinds of damage quantification.
Posted by: Chris Mather - Friday, May 05, 2017 8:43 AM










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