Last week we saw the Menard court reject the use of an indemnity clause to shift fees in a dispute between contracting parties. This week, a very recent decision from Nevada highlights another creative way to shift fees where there is no statute or contract provision on point: offers of judgment (see Helix Electric of Nevada v. APCO Construction, Inc., 2023 WL 2987662 (Nev. Apr. 17, 2023)). Helix Electric involved a payment dispute between the electrical subcontractor, Helix, and the initial general contractor, APCO Construction, which left the project before it was completed. The gist of the dispute was whether APCO owed Helix retention that had accrued when APCO left the project. APCO argued that it did not owe the retention because (1) under the contract the retention did not become due and payable until project completion and (2) Helix and the new general contractor entered an assignment and novation of the subcontract thereby relieving APCO of its obligations under the original subcontract. Helix argued the retention provision was an illegal and unenforceable “pay-if-paid” provision. The lower court ruled in APCO’s favor, and the Nevada Supreme Court affirmed.
On the attorneys’ fees issue, the Nevada Supreme Court rejected APCO’s argument that it was entitled to recover under the fee-shifting provision in the contract. That’s because of the assignment and novation: Once the subcontract was assigned and novated, APCO was no longer a party to it and could not enforce it. Enter the offer of judgment, an often-overlooked procedural tool designed to encourage settlement that can be used to recover certain litigation costs and, in some jurisdictions, attorneys’ fees. In Nevada, Rule 68 of the Nevada Rules of Civil Procedure provides that any party may serve an offer of judgment at least 21 days before trial. If the offer is not accepted and the offeree fails to obtain a more favorable judgment at trial, the offerer may recover post-offer costs and reasonable attorneys’ fees.
That’s exactly what happened in Helix Electric. APCO made an offer of judgment more than 21 days before the trial. Helix did not accept the offer, and then failed to obtain a more favorable judgment. Helix was therefore ordered to pay APCO’s post-offer attorneys’ fees and expenses. Note that while most jurisdictions have a similar procedural tool, the mechanics of making an offer of judgment and what can be recovered (e.g., costs, fees or both) varies from jurisdiction to jurisdiction. Nevertheless, the next time you find yourself with no clear path to recover fees, consider making an offer of judgment. It may just be your ticket to stick the other side with your fees.