The Importance of Fee-Shifting Provisions - Tulsa Litigation Attorney Carson Glass
August 16, 2018
By: Carson K. Glass
The Journal Record
Clients should be encouraged to include attorney fee provisions in contracts. A recent Oklahoma Supreme Court decision shows one reason why. In many cases, Oklahoma litigants rely on 12 O.S. § 936 for recovery of attorney fees in certain types of contract actions. Section 936 allows a prevailing party in an action to recover on certain types of contracts to recover reasonable attorney fees. Contracting parties often rely on Section 936 for attorney-fee recovery instead of explicitly bargaining for attorney fees within the agreement. However, in Tulsa Adjustment Bureau, Inc. v. Calnan, the Oklahoma Supreme Court addressed a circumstance where fees would not be available under Section 936. Contracting parties can address this gap with a good attorney fee provision in their contract.
In Tulsa Adjustment Bureau, the creditor filed an action to collect outstanding medical bills. Shortly after the Petition was filed, the debtor paid his debt in full. Tulsa Adjustment Bureau moved for summary judgment, seeking recovery of its attorney fees under Section 936 for having to file the action. However, no judgment was necessary on the debt because the debtor had already paid. The trial court granted summary judgment and ordered the debtor to pay attorney fees.
On appeal, the Oklahoma Supreme Court noted that, “without some judgment or judicial decree that has changed the relationship between the parties so that defendant is judicially required to do something, i.e., some enforceable judgment, plaintiffs cannot be said to be the successful or prevailing parties entitled to an award of attorney fees.” Because the debtor paid his outstanding debt in full before judgment, there was no action that the trial court could take that could change the relationship between the parties. Therefore, Tulsa Adjustment Bureau could not be considered a prevailing party. The Oklahoma Supreme Court reversed the award of attorney fees.
With this new decision, parties may wish to avoid relying solely on fee-shifting statutes for recovery of attorney fees. Parties are always free to bargain for attorney fees in a contract. By including a fee-shifting provision in the contract, they can avoid the dilemma in which Tulsa Adjustment Bureau found itself: Spending attorney fees to file a lawsuit, but denied recovery of those fees because the debtor paid before judgment.
To address this issue, a good fee-shifting provision would require payment of fees spent in enforcement of the debt, regardless of whether judgment is necessary.