The NC Court of Appeals ruled today on what it means to be a "prevailing party" under N.C. Gen. Stat. §6-21.5 so as to be entitled to recover attorneys’ fees. There was no North Carolina precedent — until now — on this issue.
The effect of the ruling may be that fees under the statute, which are allowed to a prevailing party "if the court finds that there was a complete absence of a justiciable issue of either law or fact raised by the losing party in any pleading," will be awarded on an issue by issue basis.
In the case decided by the Court of Appeals, Persis Nova Construction, Inc. v. Edwards, the trial court had dismissed the claims of the plaintiff as well as the counterclaims of the defendant on motions for summary judgment. When the defendant moved for an award of statutory fees, the Court denied the motion, reasoning that the dismissal of the claims of both parties meant that there was no "prevailing party."
The Court of Appeals reversed. It held that a party doesn’t have to be the outright and unquestioned winner of the lawsuit in order to be entitled to fees. The Court focused on the statute’s reference to the "losing party in any pleading," and reasoned that fees should be allowed to "a party who prevails on a claim or issue in an action." It is not necessary for the party requesting fees to prevail in the entire action.
The Court noted that the purpose of the statute is to "discourage frivolous legal action," and said that this purpose "would be circumvented by limiting the statute’s application to the party who prevails" in the lawsuit as a whole.
The conclusion of the Court’s opinion was as follows:
the trial court properly found that Plaintiff did not prevail on the claims set forth in its complaint and that Defendants did not prevail on the counterclaim set forth in their answer. As a corollary, however, Defendants prevailed on Plaintiff’s claims, and Plaintiff prevailed on Defendants’ counterclaim. Accordingly, the trial court erroneously concluded that Defendants were not prevailing parties in this action.
This means that fee petitions under the statute may start getting presented on an issue by issue basis. It means also that a plaintiff could prevail on virtually all of its claims, but still get socked for fees on the claims on which it was not successful, if that particular claim lacked a justiciable issue.
When the dust clears after litigation is over, it is sometimes hard to tell the score and who really won. The Persis Nova case may make it even harder.