Utah Federal Court Dismisses Claim for Attorney Fees Finding That Neither the Indemnification Provision nor the Failure-To-Perform Provision Applies to a Lawsuit Between Contractor and Subcontractor

R&O Constr. Co. v. MBA Gen. Contracting, LLC, No. 1:18-cv-00042, 2019 BL 98680 (D. Utah Mar. 21, 2019)
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Michelle J. Cuozzo

On March 21, 2019, a Utah federal court granted Defendants MBA General Contracting, LLC and Cory Martin’s motion to dismiss R&O Construction Company’s claim for attorney fees.

R&O, as general contractor of a construction project, entered into two subcontracts with MBA to perform concrete work.  The first subcontract, entitled Master Subcontract Agreement, outlined general obligations between the parties.  The second, entitled Work Authorization Document, outlined more specific obligations.  R&O asserted various causes of action against MBA arising from MBA’s alleged breach of the subcontracts, including a claim for attorney fees.  MBA moved to dismiss the attorney fees claim, arguing that neither subcontract provides for such an award.

R&O unsuccessfully argued that the Master Subcontract Agreement provides for attorney fees in two provisions.  The first is an indemnification provision, which requires MBA to “indemnify, defend, and hold harmless” R&O against any “claims, demands, damages, liabilities, expenses, and reasonable attorney fees incurred” by R&O which arise out of or relate to the performance of the subcontracts.  The Court looked to Canopy v. Symantec Corp., 395 F. Supp. 2d 1103, 1114-16 (D. Utah 2005), which dealt with a similar indemnification provision and which found that “the use of the word ‘defend’ indicates that the parties intended the provision to apply only to third-party claims because the word would have no effect in a direct action between the parties.”  The Canopy court reasoned that in a direct action, neither party would be interested in being defended by the other.  Here, the Court agreed that it is illogical to interpret the indemnification provision as one that requires MBA to indemnify and defend R&O in a direct action between them.  Therefore, the Court held that the indemnification provision in the Master Subcontract Agreement only relates to third-party actions and does not permit an award of attorney fees in a direct action such as this.

R&O’s argument that the failure-to-perform provision permits an award of attorney fees was also unavailing.  The Court found that this provision allowed R&O to complete MBA’s work itself in the event that MBA did not complete its performance.  The provision permitted R&O to take into account any attorney fees when calculating the costs of completion.  However, the provision did not permit an award of attorney fees in subsequent litigation between the parties.

Therefore, because neither the indemnification provision nor the failure-to-perform provision permitted an award of attorney fees in this situation, Defendants motion to dismiss the attorney fees claim was granted with prejudice.

To view the full text of of the court’s decision, courtesy of Bloomberg Law, click here.
– Michelle J. Cuozzo