A recent Reuters story by Barbara Grzincic, “5th Circuit Erases $526,000 Fee Award to Liberty Mutual” reports that Liberty Mutual made a six-figure mistake by suing the Housing Authority of New Orleans for breach of contract rather than using the dispute-resolution process both sides had agreed to, a federal appeals court. The 5th U.S. Circuit Court of Appeals overturned a $526,000 attorney fee award to Liberty, saying the dispute provisions of the contract remained in full force even after the Housing Authority had wrongfully terminated it.
The clauses – which required Liberty to submit a detailed written claim for payment to the Housing Authority and wait 60 days for a response – are plainly “meant to be binding even after a breach,” and Liberty’s claim to the contrary would render them “useless just when they are needed the most,” Circuit Judge Andrew Oldham wrote for the 5th Circuit panel.
“In other words, Liberty says the dispute-resolution clauses are binding — until a dispute arises. That can’t be right,” Oldham wrote. He was joined by Circuit Judges E. Grady Jolly and Jennifer Walker Elrod. According to the opinion, Liberty had acted as the surety to Parkcrest Builders, which had an $11 million contract with the Housing Authority to build affordable units. The initial completion date was in July 2014.
On remand, the judge set the fee award at $526,000. The Housing Authority filed a second appeal last year. This time the panel agreed with the Housing Authority, noting that its contract with Liberty authorized fee-shifting “upon the receipt by (HANO) of a properly presented claim.” “Because HANO never received a properly presented claim, it cannot be liable for fees,” the 5th Circuit concluded.