Wednesday, January 06, 2016

attorney fees - 42 Pa. C.S. 2503 - conduct prior to v. during litigation

F. Zacherl, Inc.  v.  Flaherty Mechanical Contractors, LLC – Cmwlth. Court – January 6, 2016

The trial court erred in finding that the losing party acted in bad faith and awarding attorney’s fees to the prevailing party  under Section 2503 of the Judicial Code, 42 Pa. C.S. § 2503, which provides, in pertinent part: The following participants shall be entitled to a reasonable counsel fee as part of the taxable costs of the matter: . . . . (7) Any participant who is awarded counsel fees as a sanction against another participant for dilatory, obdurate or vexatious conduct during the pendency of a matter. . . . . (9) Any participant who is awarded counsel fees because the conduct of another party in commencing the matter or otherwise was arbitrary, vexatious or in bad faith.

The trial court found that the defendant’s pre-litigation conduct was in bad faith, based entirely upon the party’s behavior prior to the institution of this lawsuit. This Court, however, has held that a trial court cannot award attorney’s fees under Section 2503 of the Judicial Code for behavior predating the lawsuit: 12 We review the trial court’s decision to award attorney’s fees pursuant to Section 2503 of the Judicial Code for an abuse of discretion. Maurice A. Nernberg & Assocs. v. Coyne, 920 A.2d 967, 969 n.3 (Pa. Cmwlth. 2007).  [A]n award for counsel fees under Section 2503 [owf the Judicial Code] is meant to compensate the innocent litigant for costs caused by the actions of the opposing party. [Section 2503 of the Judicial Code], by its very terms, is a “taxable costs” provision, thereby relating to the conduct of a party at some point during the litigation process. Thus, activity that occurs before litigation is commenced cannot form the basis for a counsel fee award. Carlson v. Ciavarelli, 100 A.3d 731, 745 (Pa. Cmwlth. 2014) (alterations in original) (citations omitted) (internal quotation marks omitted). Because the trial court relied entirely upon the District’s pre-litigation behavior, as opposed to the conduct of the District in commencing the matter or its conduct during the litigation, the trial court applied an incorrect analysis. We, therefore, vacate the trial court’s order to the extent that it awarded attorney’s fees under Section 2503 of the Judicial Code, and we remand the matter to the trial court so that it may apply the correct analysis to determine whether Zacherl is entitled to attorney’s fees under Section 2503 of the Judicial Code.

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