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Attorney Fee Clauses Really Do Work

by William L. Porter, Esq.

Have you ever wondered whether those attorney fee clauses your attorney insists you include in your contracts really work?  Or are they just words to be discarded when it comes time for a judge to make a decision in your lawsuit?  Here is a true short story to show that those clauses really do work.  The names have been changed to protect the innocent and avoid continuing to embarrass the guilty.

Thurn Construction was a California residential building contractor who performed remodel work on a home for Mr. Ananias*.  The contract between Thurn Construction and Mr. Ananias contained a standard provision granting attorney fees, costs and expert fees to the prevailing party in any legal action between the contractor and owner. At the completion of the job, Mr. Ananias falsely claimed that the work was poorly performed and withheld from Thurn Construction the final payment of $8,500. Mr. Ananias planned to coerce a compromise out of Thurn Construction for a few thousand dollars and bring the matter to a close. Mr. Thurn, knowing he had properly performed all his work and that he was entitled to payment in full, brought suit to collect his $8,500. Mr. Ananias, a licensed contractor himself as well as a law school graduate, decided his best bet on bringing the dispute to a quick conclusion was with a massive retaliatory counterclaim. Mr. Ananias responded by filing a counterclaim against Mr. Thurn for $500,000 and even made a claim against Mr. Thurn’s Contractors License.

The case went to California court and Thurn Construction’s claim for $8,500 was found to be completely meritorious. Mr. Ananias’ claim for $500,000 was found to be a complete fabrication.  Not only did Mr. Ananias lose on his counterclaim, but he had to pay all of Thurn Construction’s attorney fees and costs of over $100,000.  He also had to pay statutory interest under Civil Code sections 8810 - 8822 of 2% per month.  In addition, he had to pay Thurn Construction’s expert witness fees of over $18,000 and all the costs incurred by Thurn Construction in bringing the action and defending against the counterclaim. In the end Mr. Ananias had to pay Thurn Construction over $140,000. All this for stubbornly refusing to pay a legitimate claim of only $8,500!

Except for the names of the parties involved, all of the above is true.  The Porter Law Group is pleased to have represented Thurn Construction.  So if you ever wonder whether those attorney fee clauses really do work, just remember what happened to Mr. Ananias. When you know you are in the right, attorney fee clauses can and will work for you.

* ”Ananias”, a synonym for “liar,” is a Biblical figure who fell dead when Peter rebuked him lying and withholding a payment he had promised from the sale of his land.

Article written by William L. Porter, Esq. and revised in 2014. Mr. Porter is a principal in The Porter Law Group, Inc. in Sacramento, California. He can be reached by phone at (916) 381-7868.