#64: Recovering Attorneys’ Fees as Damages
Win, lose or draw, the usual rule in litigation is that “absent statutorily or judicially created exceptions, parties pay their own attorney’s fees.” Shelton v. Tamposi, 164 N.H. 490, 501 (2013). Judicial exceptions include “bad faith” litigation, for which “an award of attorney’s fees is appropriate where one party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons, where the litigant’s conduct can be characterized as unreasonably obdurate or obstinate, and where it should have been unnecessary for the successful party to have brought the action.” Bedard v. Town of Alexandria, 159 N.H. 740, 744, (2010) (quotations omitted).
In such two-party scenarios, attorneys’ fees are not awarded as damages caused by the defendant’s conduct, but “to do justice and vindicate rights, as well as to discourage frivolous lawsuits.” Jesurum v. WBTSCC Ltd. Partnership, 169 N.H. 469, 483 (2016) (quotation omitted). But matters are different in three-party scenarios, where A is forced to litigate with B due to the acts or omissions of C. Legal fees incurred by A in the skirmish with B may be recovered from C as damages, i.e., as the natural and foreseeable consequence of C’s wrongful conduct.
Suppose a design professional administering a construction contract advises the owner that a problem with the project is due to a construction defect when, in fact, it is the result of the professional’s own design error. If the owner sues the contractor for breach of contract and the contractor prevails, the contractor’s defense costs should be recoverable as damages in an action by the contractor against the design professional. This is sometimes known as the “tort of another” doctrine, after its formulation in RESTATEMENT (SECOND) OF TORTS § 914(2): “One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover . . . attorney fees . . . thereby suffered or incurred in the earlier action.”
The New Hampshire Supreme Court recently had this “tort of another” doctrine on its plate in Halifax-American Energy Co., LLC v. Provider Power, LLC, 2018 WL 794549 (February 9, 2018), but decided not to dig in. A Rockingham County Superior Court jury was instructed that it could award damages on this basis, and it did so; but when the defendant appealed on grounds that this was not the law in New Hampshire, the Supreme Court ruled that “the defendants did not argue before the trial court that the court's proposed jury instruction was inconsistent with New Hampshire law. Thus, we decline to consider that argument on appeal.” The Supreme Court left the jury’s award intact.
The lower court’s jury instructions certainly had some legs; there is precedent in New Hampshire for an award of attorneys’ fees incurred in litigating with a third party. Hubbard v. Gould, 74 N.H. 25, 28 (1906) (“If it is established that the defendants and not the plaintiff are responsible for the injury to Rogers’ horse, the expenses reasonably incurred in good faith by Hubbard in litigating the questions raised by Rogers’ claim are a part of his damages”). This result has been characterized by several implied, non-contractual indemnity cases as a proper item for indemnification. Morse v. Ford, 118 N.H. 280, 281 (1978) (“Our cases have held that attorney’s fees are proper when an indemnitor is primarily responsible for the injury to the third party”); General Contracting & Trading Co., LLC v. Interpole, Inc., 899 F.2d 109, 113 (1st Cir. 1990) (applying New Hampshire law) (“the indemnitee’s damages may include reasonable counsel fees and costs necessarily expended in defending against the principal claim”).
Whether analyzed under implied indemnity principles or labeled the “tort of another” doctrine, recovery of attorneys’ fees as damages does seem to be available in New Hampshire in three-party scenarios.