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Pennsylvania Superior Court Overturns Fee Award in Construction Defect Case
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In Carlyle Condominium Association v. Spruce Street Properties, the Superior Court of Pennsylvania recently reviewed the Court of Common Pleas award of attorney’s fees and interest in a construction defect case. Developer Spruce Street Properties renovated the historic Union Bank Building in downtown Pittsburgh, creating 61 condominium units and forming the Carlyle Condominium Association to govern the building. Board members subsequently sued Spruce Street Properties for breach of contract, breach of fiduciary duty, and defective construction for allegedly failing to complete the units and the building’s exterior.
The case went to trial, and the Association was awarded damages based on several causes of action. The Association was subsequently awarded attorney’s fees in the amount $1,336,172 plus pre-judgment interest and compound interest. Spruce Street Properties appealed the ruling arguing, among other things, that the issuance of such exorbitant fees constituted an abuse of the trial court’s discretion.
On the issue of fees, the Superior Court agreed, observing that in calculating attorney fees, Pennsylvania courts utilize the “lodestar approach,” which requires that fees be calculated by the number of hours spent at a reasonable hourly rate. The party disputing the fees then bears the burden of proving that either the hourly rate or amount of time spent on the case is unreasonable. A court is expected to “thoroughly scrutinize the specific line items that are challenged” by the opposing party.
However, the Superior Court found that the trial court in that case erroneously stated that it was “not required to, and will not, partake in a line-by-line analysis of legal invoices in explaining how it arrived at its decision.” The Superior Court held that this was an abuse of discretion, overturned the fee award, and remanded the case back to the trial court for entry of a new award after scrutiny of the challenged billing entries.
The takeaway from the Carlye Condominium decision is that Pennsylvania trial courts are required to evaluate the reasonableness of fee application in terms of the hourly rate and time spent by the attorneys on a particular case. A fee award entered without such scrutiny is subject to appeal and reversal.
