Superior Court nixes attorneys fees on counter-claim in contract dispute

By Elizabeth Alt | Aug 31, 2017

HARRISBURG – The state Superior Court ruled on Aug. 4 that Sea-Z Inc. may be eligible to receive compensation for attorneys fees incurred fighting a 2011 lawsuit against the company by a contractor.

HARRISBURG – The state Superior Court ruled on Aug. 4 that Sea-Z Inc. does not have to pay the attorneys fees incurred by a company that fought a counter-claim from Sea-Z.

Judge Anne Lazarus and her colleagues ruled that, though Sea-Z must pay attorneys fees to International Management Consultants, it does not have to pay fees IMC incurred fighting a counter-claim because a jury awarded Sea-Z $58,000 for that counter-claim. 

Sea-Z had filed a motion appealing the decision in favor of contracting company IMC, seeking to include interest, attorneys’ fees and expenses under the Contractor and Subcontractor Payment Act (CASPA).

Sea-Z claimed that the work was not completed in time, causing substantial monetary damages, which is why it did not pay IMC. Sea-Z alleged that the trial court erred in deciding that it acted in bad faith withholding payment from IMC for these reasons.

IMC was contracted to supply materials and labor to remodel and build additions for Sea-Z’s warehouse and office in King of Prussia. Sea-Z agreed to pay IMC allotted sums throughout the project, and the contract stated that the work must be substantially completed enough for the company to occupy or perform work in by 208 days after the work began in June 2010.

IMC filed suit against Sea-Z in August 2011, claiming that Sea-Z was withholding money in bad faith after the two companies could not agree on the date that the work done by IMC was done to substantial completion.

Sea-Z’s counter-claim alleged that the incomplete work consisted of more than 50 items, and that IMC’s work on several of those items did not conform to the contract. Sea-Z also asserted that the cost to complete IMC’s unfinished work and to correct non-conforming work exceeded the unpaid contract balance, the opinion states.

IMC offered evidence at the trial in Montgomery County to support the jury’s determination that Sea-Z acted in bad faith, including not making timely and complete payments to IMC throughout the project, failing to notify IMC of any alleged deficient items, and falsely stating to IMC that the bank was the party withholding funds until those non-conforming items were completed, the opinion states.

The Superior Court ruled against Sea-Z’s claim that the jury was incorrect in concluding that Sea-Z did not have a good faith basis to withhold paying IMC because Sea-Z had the opportunity to and should have objected during trial. Sea-Z failed to object at trial, immediately after the charge was read to the jury, following deliberations and the verdict, and prior to the discharge of the jury.

Sea-Z also claimed that the jury’s verdict does not reflect what portion of its award to IMC constitutes: the amount that was owed under the parties’ contract; the amount of delay damages, the amount properly retained under the contract; and the amount withheld in bad faith.

In the court opinion, Lazarus referenced a 2012 Superior Court case of similar issue, stating “appellate review of weight claim is review of exercise of discretion, not of underlying question of whether verdict is against weight of the evidence.”

After the trial court jury determined IMC breached its contract with Sea-Z, Sea-Z was awarded damages. 

"Notably, the $58,000 recovery is less than 10 percent of what Sea-Z sought in damages for non-conforming work,” Lazarus said.

IMC was also awarded more than $124,000 damages, but that verdict was also  molded to add almost $150,000 in attorneys fees.

The Superior Court found that because IMC was not the prevailing party on the counter-claim, it was not entitled to attorneys fees on the counterclaim, and decided that Sea-Z is entitled to have the amount of attorneys’ fees and expenses awarded to IMC offset by the amount of fees and expenses paid out to defend against the counterclaim.

The case has been remanded to trial court to determine "reasonable" attorneys’ fees. IMC will be required to submit supporting documentation to substantiate the reasonable amount of fees incurred solely in litigating its CASPA claim.

Superior Court of Pennsylvania Case Number 704 EDA 2016

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