Attorneys’ fees unavailable in equitable indemnification suit

A construction company whose shoddily-made storefront curb caused a shopper to seriously injure herself will have to pay for the legal bills the store and a developer incurred defending themselves against the shopper’s lawsuit—but not the attorneys’ fees they amassed bringing an indemnification lawsuit against the construction company itself, the South Carolina Court of Appeals has ruled in a case of first impression.

In 2010 a woman injured herself when she tripped over the curb outside Fred’s, a discount store in Williston. She sued Fred’s and the project’s developer, Wildevco, and ultimately settled the case for $290,000. Fred’s and Wildevco in turn sued Tippins-Polk Construction Co., alleging that its substandard work had caused the fall.

After a bench trial in 2016, Barnwell County Circuit Court Judge Doyet A. Early III granted Fred’s and Wildevco’s motions for equitable indemnification, ordering Tippins-Polk to pay the cost of the settlement, plus attorneys’ fees, both for the defense against the shopper’s lawsuit, and the lawsuit against Tippins-Polk.

Tippins-Polk appealed, and in a Feb. 12 opinion Judge H. Bruce Williams, writing for a unanimous Court of Appeals panel, affirmed the decisions to grant the motions for equitable indemnification and award attorneys’ fees from the underlying lawsuit. But the court reversed the award of attorneys’ fees for the suit against Tippins-Polk, the first time South Carolina’s appellate courts have formally drawn such a distinction in cases involving equitable indemnification.

Williams wrote that the majority of jurisdictions around the country have adopted the rule that the right of indemnity includes the right to attorneys’ fees and litigation costs incurred in defending the underlying claim, but doesn’t extend to fees and costs incurred in establishing the right of indemnity. Requiring an at-fault party to hold a non-negligent party harmless for the costs associated with defending a plaintiff’s claims gives effect to the very nature of indemnity, which is to make the party whole, Williams noted.

“However, the same reasoning does not support a party’s recovery of the fees and costs incurred in establishing a right to indemnity because these fees and costs are not coupled with the claim indemnified against,” Williams wrote. “Rather, these are fees and costs incurred as a result of a non-negligent party’s decision to bring a separate claim to establish the right to indemnity.”

Williams wrote that such a distinction squared with the state Supreme Court’s rulings in other equitable indemnification cases and was consistent with both the standard “American” rule, which requires a party to bear its own expenses of litigation, and South Carolina’s rule that, with limited exceptions, attorneys’ fees aren’t recoverable unless authorized by contract or statute.

Regina Hollins Lewis and Lee Ellen Bagley of Gaffney Lewis in Columbia represented Wildevco. Matt LaFave of Crowe LaFave in Columbia represented Fred’s. Morgan S. Templeton and John Dodds of Wall Templeton & Haldrup in Charleston represented Tippins-Polk.

None of the attorneys involved in the case could be reached for comment on the court’s decision.

The 22-page decision is Fountain v. Fred’s Inc. (Lawyers Weekly No. 011-010-20). The full text of the opinion is available online at sclawyersweekly.com.

Follow David Donovan on Twitter @SCLWDonovan