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Small case leads to huge attorneys’ fees in NC

A recent case out of the North Carolina appellate courts serves as a reminder of just how painful North Carolina's attorneys' fees Statute, NCGS §6-21.1, can be in small cases. The case, Crawford v. Mintz , resulted in an award of $175,000 in attorneys' fees for the Plaintiffs, on a jury verdict of $7,278.

The Wake County District Court case, filed in 2001, involved a claim of negligent misrepresentation against a real estate agent. The MLS listing agreement for the property stated that the house was hooked up to the city sewer when, in fact, it was on a septic system that started overflowing into the yard shortly after purchase. When the agent and the sellers refused to correct the problem, the buyers sued for the $7,278 cost to hook the house up to the city sewer system. The sellers filed for bankruptcy so the buyers pursued the agent.

According to an interview with Plaintiffs' counsel, the attorneys defending the agent in the case defended it to the hilt, serving up to five sets of discovery and wanting to take up to eight depositions. The case dragged on for quite some time. Plaintiffs' attorneys obviously racked up considerable time and attorneys' fees in pursuing the case and slogging through defenses and discovery raised by opposing counsel.

From a review of the case, it appears that the primary defenses raised in the case were an alleged lack of reliance by Plaintiffs and contributory negligence. It also appears that defense counsel was successful in having Plaintiffs' claims for unfair and deceptive trade practices and attorneys' fees dismissed at Summary Judgment.

Obviously the agent, insurance company and defense counsel all felt that they had a strong and meritorious defense to the lawsuit. However, in the end, regardless of whether the defense was meritorious, or whether the insurance company was fully justified in taking the case to trial, the jury believed the Plaintiffs and found in their favor. Following the jury's verdict, Plaintiffs' counsel moved an award of attorneys' fees.

For the uninitiated, NCGS §6-21.1 allows the court, in its discretion, to award plaintiffs their attorneys' fees in certain types of cases where the judgment is $10,000 or less. The purpose of the Statute is to balance the scales so that plaintiffs with meritorious but small cases are not discouraged from pursuing those claims because they have to pay an attorney. The Statute doesn't apply to all cases, but it does apply to cases that involve, among other things, claims for personal injury and property damage.

Interestingly, the judge in the case declined to award any attorneys' fees to Plaintiffs because of an earlier Summary Judgment Order ruling that Plaintiffs' claims did not fall within the Statute and as a result, attorneys' fees were not permitted.

Both sides appealed. Two of three judges at the Court of Appeals found for the Defendant, holding that there was insufficient evidence of reliance, an essential element of negligent misrepresentation. However, the third judge dissented, allowing Plaintiffs to appeal to the Supreme Court, which reversed the case, holding there was sufficient evidence of reliance.

On remand, the Court of Appeals held that Plaintiffs' claims for negligent misrepresentation with resulting property damage did fall within the attorneys' fee Statute and the trial court had discretion to award such fees. Defendant appealed that ruling to the Supreme Court but the case was not accepted.

In a recent decision, and nearly 10 years after the suit was filed, the District Court entered an Order awarding Plaintiffs $175,000 in attorneys' fees in a case with only $7,278 in damages.

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