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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