By Daniel Horwitz:
In a common-sense opinion that clarified a muddled conflict among lower courts, the Tennessee Supreme Court has held that fee-shifting provisions in divorce agreements must be enforced as written. Offering a forceful defense of the right to contract, Chief Justice Bivins’ unanimous opinion in Eberach v. Eberach instructs all lower courts that they do not have any discretion to deny attorney’s fees to a prevailing party if a contract agreed to by both parties makes such an award mandatory.
Eberach involved litigation between a former husband and wife following their divorce. In 2011, the couple divorced and entered into a “marital dissolution agreement,” or “MDA.” In lay terms, an MDA is a binding contract that sets out the terms of a divorce. Among other things, the parties’ MDA provided that:
“In the event it becomes reasonably necessary for either party to institute legal proceedings to procure the enforcement of any provision of this Agreement, the prevailing party shall also be entitled to a judgment for reasonable expenses, including attorney’s fees, incurred in prosecuting the action.”
Three years later, the ex-couple found themselves embroiled in litigation over the wife’s plan to relocate to Ohio with their three children. Ultimately, the trial court granted the wife permission to move to Ohio and awarded her $20,000.00 in attorney’s fees. Thereafter, the trial court’s decision was affirmed by the Court of Appeals, which upheld both the relocation and the trial court’s fee award. However, the Court of Appeals declined to award the wife additional compensation for the attorney’s fees that she had incurred on appeal.
Upon review, the Tennessee Supreme Court observed that various tribunals of the Court of Appeals had “been inconsistent in their analysis of claims for attorney’s fees in cases in which the claim is based on a contractual provision in a MDA.” One line of cases held that appellate courts have discretion to deny attorney’s fees to a prevailing party “even in the face of a controlling contractual fee provision requiring such an award.”[1] Another line of authority held that “when a MDA fee provision mandates an award of attorney’s fees to the prevailing party, the Court of Appeals does not have discretion to deny an award of appellate attorney’s fees.”[2] Additionally, a third line of cases “observed that an award of appellate attorney fees in Tennessee is within the court’s sound discretion,” but then went on “to award attorney’s fees on appeal solely on the basis of the parties’ MDA fee provisions without further discussion.”[3]
Clarifying this conflicting precedent, the Tennessee Supreme Court instructed with unmistakable clarity that “parties are contractually entitled to recover their reasonable attorney’s fees when they have an agreement that provides the prevailing party in a [lawsuit] is entitled to such fees.” “In such cases,” the Court explained, trial courts “do[] not have the discretion to set aside the parties’ agreement and supplant it with its own judgment.” The Court further instructed that “[t]he same is and must be true of our appellate courts.” Thus, “[a]bsent fraud, mistake, or some other defect, our courts are required to interpret contracts as written.”
As a general matter, litigants in the United States must pay their own attorney’s fees regardless of whether they win or lose. Under this so-called “American Rule”—to which Tennessee adheres—“a party in a civil action may recover attorney’s fees only if: (1) a contractual or statutory provision creates a right to recover attorney’s fees; or (2) some other recognized exception to the American Rule applies, allowing for recovery of such fees in a particular case.”[4] “Otherwise,” as the Eberach court observed, “litigants are responsible for their own attorney’s fees.” Of note, the general presumption that parties must bear their own legal fees places the United States at odds with the legal regimes of many European nations, which generally adhere to a “loser pays” framework.
The most common exception to the American rule is a private agreement between parties which provides that in the event of litigation, the loser must pay the winner’s attorney’s fees. Significantly, in Eberach, the husband and wife had executed such an agreement. Thus, the only question presented in Eberach was whether the Court of Appeals was required to enforce it.
Emphatically answering this question in the affirmative, the Court’s opinion in Eberach furthers Tennessee’s longstanding commitment to protecting the right to contract. In Tennessee, the right to contract has constitutional origins, and it is enforceable as a fundamental right.[5] Tennessee statutory law also provides that: “All contracts, . . . in writing and signed by the party to be bound, . . . shall be enforced as written.”[6] In keeping with this tradition, the Eberach court explained that “one of the bedrocks of Tennessee law is that our courts are without power to make another and different contract from the one executed by the parties themselves.” As such, the Court mandated that the terms of the husband’s and wife’s MDA be enforced.
Having resolved that the wife was entitled to attorney’s fees for her successful litigation in the Court of Appeals, the Court then remanded the case to the trial court to “determine the appropriate amount of Wife’s reasonable attorney’s fees on the appeal.” Additionally, applying its just-announced holding to itself, the Tennessee Supreme Court also explained that the attorney’s fee award must cover the costs of the wife’s appeal “to this Court” as well. Thus, going forward, litigants in Tennessee—and divorcees in particular—can have renewed faith that the terms of their contracts will, in fact, be enforced as written.
Read the Court’s unanimous opinion in Eberach v. Eberach here.
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[1] See Grisham v. Grisham, No. W2010- 00618-COA-R3-CV, 2011 WL 607377, at *11 (Tenn. Ct. App. Feb. 22, 2011) (holding that the trial court erred in failing to award wife her reasonable trial court attorney’s fees pursuant to MDA fee provision, but declining to award appellate attorney’s fees pursuant to the Court of Appeals’ discretion); Brown v. Brown, No. W2005-00811-COA-R3-CV, 2006 WL 784788, at *6 (Tenn. Ct. App. Mar. 29, 2006) (affirming the trial court’s award of trial court fees under the parties’ MDA, but equitably denying wife’s request for appellate fees pursuant to the Court of Appeals’ discretion); Elliott v. Elliott, 149 S.W.3d 77, 88 (Tenn. Ct. App. 2004) (affirming the trial court’s award of fees to wife pursuant to parties’ MDA fee provision, but denying wife’s request for appellate attorney’s fees); Dulin v. Dulin, No. W2001-02969-COA-R3-CV, 2003 WL 22071454, at *8, *10 (Tenn. Ct. App. Sept. 3, 2003) (affirming trial court’s award of attorney’s fees pursuant to MDA, but equitably declining to award either party attorney’s fees incurred on appeal).
[2] See, e.g., Beem v. Beem, No. W2009-00800-COA-R3-CV, 2010 WL 1687782, at *9-10 (Tenn. Ct. App. Apr. 28, 2010) (affirming trial court’s award of fees pursuant to MDA and holding that wife was entitled to attorney’s fees on appeal pursuant to the parties’ MDA); Treadway v. Treadway, No. M2014-00898-COA-R3-CV, 2015 WL 1396652, at *7 (Tenn. Ct. App. Mar. 24, 2015) (awarding appellate attorney’s fees pursuant to the parties’ MDA); Brinton v. Brinton, No. M2009-02215-COA-R3-CV, 2010 WL 2025473, at *6 (Tenn. Ct. App. May 19, 2010) (same); Corbin v. Corbin, No. W2008-00437-COAR3-CV, 2009 WL 454134, at *7 (Tenn. Ct. App. Feb. 24, 2009) (same); Waugh v. Waugh, No. M2006-021540COA-R3-CV, 2007 WL 2200278, at *4 (Tenn. Ct. App. July 30, 2007) (same); Hogan, 1999 WL 1097983, at *4-5 (reversing trial court’s denial of attorney’s fees, and awarding attorney’s fees to Mother for trial court and appellate level proceedings pursuant to the parties’ MDA).
[3] Wilkinson v. Wilkinson, No. W2012-00509-COA-R3-CV, 2013 WL 614708, at *10 (Tenn. Ct. App. Feb. 19, 2013); (citing Archer, 907 S.W.2d at 419) (emphasis supplied)). See also Hanna v. Hanna, No. W2014-02051- COA-R3-CV, 2015 WL 1951932, at *4 (Tenn. Ct. App. Apr. 30, 2015) (stating its discretion then awarding fees on appeal based on the parties’ MDA requiring that the “court shall award reasonable attorney’s fees to the party seeking to enforce [the MDA]”) (alterations in original); Williams v. Williams, No. M2013-01910-COA-R3-CV, 2015 WL 412985, at *14 (Tenn. Ct. App. Jan. 30, 2015) (affirming the trial court’s award of fees pursuant to the parties’ MDA, stating its discretion and determining that wife was entitled to attorney’s fees on appeal pursuant to the parties’ MDA); Dodd v. Dodd, No. M2011-02147-COA-R3-CV, 2012 WL 3193339, at *6 (Tenn. Ct. App. Aug. 6, 2012) (holding that Mother was entitled to recover her trial court attorney’s fees pursuant to the parties’ MDA, but using its discretion and concluding that Mother was justified in recovering attorney’s fees).
[4] Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn. 2009) (citing Fezell, 158 S.W.3d at 359; John Kohl & Co. P.C. v. Dearborn & Ewing, 977 S.W.2d 528, 534 (Tenn. 1998)).
[5] See Tenn. Const. art. XI, § 2; Tenn. Const. art. I, § 20. See also ARC LifeMed, Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005) (“equity respects and upholds the fundamental right of the individual to complete freedom to contract”) (quotation omitted).
[6] Tenn. Code Ann. § 47-50-112(a).