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Recovery of Attorney Fees under Construction Lien Act

August 8, 2014

By: Paige M. Steffen

(Clark Hill Summer Associate, Loyola University Law School)

The Michigan Court of Appeals recently confirmed that attorney fees may be awarded in  certain circumstances under the Construction Lien Act.
In Ronnisch Construction Group, Inc. v. Lofts on the Nine, LLC, the Owner contracted with Ronnisch Construction Group, Inc. for the construction of a loft-style condominium building in Ferndale, Michigan for the sum of approximately $6 million.  The Owner failed to pay the entire sum due Ronnisch, resulting in a deficiency of approximately $600,000.  Ronnisch recorded a claim of lien on the property, in addition to filing a complaint against the Owner in circuit court, alleging breach of contract, foreclosure of lien, and unjust enrichment.

In January 2012, the parties stayed the circuit court action to arbitrate the dispute, as stipulated in the construction contract.  In arbitration, Ronnisch was awarded the total amount of the deficiency, less approximately $200,000 of damage for incomplete work.  However, the arbitrator specifically declined to address Ronnisch's request for attorney fees and reserved the issue for the circuit court.  Defendant Owner paid the award, plus interest, to Ronnisch.

In February 2012, Ronnisch moved to confirm the arbitration award in circuit court and requested approximately $300,000 in attorney fees and costs.  In response, Defendant Owner argued that the award of attorney fees was not warranted since Ronnisch's breach of contract claim was resolved in arbitration, rendering the lien foreclosure claim moot.  The circuit court denied Ronnisch's request for attorney fees, claiming that the court did not have discretion to award plaintiff the fees under the Act because the circuit court never adjudicated the lien foreclosure claim.  On appeal, the Michigan Court of Appeals vacated the circuit court's order denying Ronnisch's request and remanded the case to the circuit court for a determination as attorney fees.

Noting that attorney fees are generally not recoverable unless a statute, rule, or common-law exception exists, the Michigan Court of Appeals explained that because Ronnisch was a prevailing lien claimant under the Act, Ronnisch was eligible to receive attorney fees.

In its reasoning, the Michigan Court of Appeals explained that the Construction Lien Act is remedial in nature and intended to protect the rights of lien claimants. The Michigan Court of Appeals noted that "not allowing the award of attorney fees just because a lienor pays off a lien before a court actually rules on a lien claimant's claim of foreclosure would be contrary to the purpose of the Act."

While the Michigan Court of Appeals ultimately held that Ronnisch was a prevailing lien claimant under the Act and was eligible to recover attorney fees, the Michigan Court of Appeals clarified that the circuit court is not required to award attorney fees on remand, and instead must use its discretion in deciding whether or not to award such fees.

While attorney fees can be said to be "rarely awarded" in Michigan, this case reiterates the potential to recover attorney fees as a prevailing lien claimant under the Michigan Construction Lien Act, even where the underlying dispute is resolved in arbitration.  When pursuing actions for non-payment on a construction project, consulting an attorney early on in the process can help ensure that you pursue all potential routes of recovery.  Clark Hill is one of the largest construction law practices and is routinely involved in every facet of the construction process.  For questions regarding collection actions or filing a claim of lien under the Michigan Construction Lien Act, contact any member of Clark Hill's Construction Practice Group at 313-965-8300.

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