August 10, 2017
A recent Legal Intelligencer story by Lizzy McLellan, “Bank Blocked From Billing for In-House Counsel’s Work,” reports that Enterprise Bank has lost an appellate-level bid to charge counsel fees to a client in foreclosure for work completed by an in-house attorney and paralegal. That work is not included in the description of legal fees contained in Enterprise's loan documents, the Pennsylvania Superior Court ruled Aug. 8, affirming a trial court decision. However, the court did not address whether companies generally may bill clients for the work of in-house lawyers and legal staff.
"After careful consideration, we conclude that the language 'hire or pay someone else' is, at best, ambiguous," Judge Geoffrey Moulton wrote in a 10-page opinion. "Frazier makes a strong case for the proposition that 'someone else' necessarily means someone not then in Enterprise's employ. Otherwise, the meaning of the term is difficult to discern."
The Frazier family, a limited partnership, executed a business loan, promissory note and mortgage from Enterprise in 2012, the opinion said. Within the agreement was a provision regarding attorney fees and expenses, which said Frazier would be responsible for all attorney fees, including those used to "hire or pay someone else" to enforce the mortgage agreement.
In January 2014, Enterprise filed a mortgage foreclosure nearly equal in amount to the principal on the three loans. The foreclosure complaint included a request for reasonably incurred counsel fees.
Frazier filed preliminary objections, arguing that in-house counsel was not included in the attorney fee provision. Enterprise provided documentation of the hours billed by an in-house lawyer and paralegal and argued that they were clearly counsel fees. "Enterprise further asserted that it 'hired' in-house counsel 'to collect the debt and in this case, file a mortgage foreclosure' action," the opinion said.
But the Allegheny County Court of Common Pleas sided with Frazier, denying Enterprise's request for counsel fees. The trial court said any ambiguity in the loan agreements should be construed against Enterprise, since Enterprise drafted the agreements.
The Superior Court agreed on appeal. However, the court noted, there is a larger issue raised by the dispute on which the court was unable to rule. "Because we find the contract language ambiguous, and construe it against Enterprise, we need not reach the broader question, briefed by the parties, of whether a lender in Pennsylvania may recover for the work of salaried, in-house counsel," Moulton wrote in a footnote.