Attorney Fee Awards

By: James C. Busch

One of the most common questions people have regarding lawsuits concerns the possibility of the recovery of attorney’s fees. In the State of Georgia there is two statutes which allow for the recovery of attorney’s fees; Official Code of Georgia Annotated (O.C.G.A.) Sections 13-1-11 and 13-6-11.

While both of these statutes allow for the recovery of attorney’s fees in certain instances they have different requirements, are used in different circumstances, and differ in the method of recovery. O.C.G.A. 13-1-11 applies to the “validity and enforcement of obligations to pay attorney’s fees upon notes, etc.” In part, O.C.G.A. 13-1-11 states “… obligations to pay attorney’s fees upon any note or other evidence of indebtedness, in addition to the rate of interest specified therein, shall be valid and enforceable and collectible as a part of such debt if such note or other evidence of indebtedness is collected by or through an attorney after maturity …” O.C.G.A. 13-1-11 goes on to indicate that a note or other evidence of indebtedness can call for attorney’s fees up to fifteen percent (15%) of the principal and interest owing. However, if the note or other evidence of indebtedness fails to specify a percent then such a provision shall be construed to mean fifteen percent (15%) of the first five hundred dollars of principal and interest and ten percent (10%) of any principal and interest in excess of five hundred dollars.

In general terms, O.C.G.A. 13-1-11 may be utilized by anyone who can show “evidence of indebtedness” (i.e. note, contract, account, etc.). To properly enforce O.C.G.A. 13-1-11 one must, upon the maturity of the obligation, notify the debtor in writing that the provisions relative to payment of attorney’s fees shall be enforced if the principal and interest are not paid within ten (10) days of receipt of such written notice. In addition, the debtor must be notified of the source of the underlying debt with sufficient specificity. If the debtor pays the principal and interest within the ten days allowed then O.C.G.A. 13-1-11 attorney’s fees shall be void and no court shall enforce the agreement.

On October 24, 1991, in Professional Cleaners v. Phenix Supply Co. the Georgia Court of Appeals addressed the above ten day notice requirement. In Phenix, the notice indicated that the principal and interest had to be paid within ten days from the date of the letter not ten days from the receipt of the letter as required under the statute. While Phenix argued that they had substantially complied with the statute the Georgia Court of Appeals disagreed and held that Phenix was unable to collect their attorney’s fees.

The Georgia Court of Appeals again addressed attorney’s fees in a November 22, 1991 ruling, in Goodrum v Ensign Bank et al. where the Court held that Ensign had failed to substantially comply with O.C.G.A. 13-1-11 by sending a ten day demand letter which referred to a “contract executed in favor of Ensign” when in fact the debtor had signed a personal guarantee in favor of a separate corporation which was then assigned to Ensign. The Court of Appeals held that Ensign had not substantially complied with O.C.G.A. 13-1-11 due to their failure to indicate with sufficient specificity the source of the underlying debt. As you can see although the substantial compliance statutorily required is rather strictly construed. Thus, if you or (your attorney) are sending ten day demand letters it is imperative that full compliance with all requirements of O.C.G.A. 13-1-11 is made.

The second statute under which one can obtain attorney’s fees is O.C.G.A. 13-6-11. This code section unlike O.C.G.A. 13-1-11 allows for an award of attorney’s fees as “recovery of expenses of litigation”. In order to collect under this statute one must have specially plead and made a prayer indicating a request to recover under this statute. This pleading must indicate that the defendant has acted in bad faith in making the contract, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense. However, in order to recover under this statute the plaintiff’s damages must be recoverable.

O.C.G.A. 13-6-11 is generally utilized in cases where there is no contract or instrument calling for attorney’s fees but the plaintiff has been unnecessarily subjected to the expense of litigation. A second difference between O.C.G.A. 13-1-11 and O.C.G.A. 13-6-11 is how these attorney’s fees are generally awarded. O.C.G.A. 13-1-11 attorney’s fees can be awarded upon the presentation of an order and affidavit submitted to the court which, in turn, if properly presented is signed by the judge and thereby granted. However, attorney’s fees under O.C.G.A. 13-6-11 are generally awarded by a jury after trial or by the judge after presentation of evidence as to amount. Thus, under O.C.G.A. 13-1-11 attorney’s fees can usually be granted quicker than if one must first obtain a court date to present evidence as to the attorney’s fees incurred. An additional consideration is that under O.C.G.A. 13-1-11 attorney’s fees are limited to a percentage of the debt owed while O.C.G.A. 13-6-11 attorney’s fees are determined by the jury or judge in an amount they deem to be proper. Accordingly, if your debt is small your recovery under O.C.G.A. 13-1-11 will be low regardless of what your actual attorney’s fees are while if the amount of the debt is larger then it is possible that your recovery of attorney’s fees may exceed your actual attorney’s fees. By contrast, O.C.G.A. 13-6-11 attorney’s fees will more accurately reflect the attorney’s fees actually incurred. However, if the jury or judge feel that you have failed to meet the requirements of the statute then it is within their authority to award lower than actually incurred attorney’s fees or no attorney’s fees at all.

In conclusion, there are a variety of factors and variables that should be considered when electing the statute under which one wishes to recover attorney’s fees. If speed, certainty and minimal expense are one’s overriding concern then he or she may wish to proceed under O.C.G.A. 13-1-11. However, if one has large attorney’s fees, time is not an issue, and he or she is willing to take certain chances with a judge or jury then the election to utilize O.C.G.A. 13-6-11 may be more appropriate.

Mr. Busch is an attorney specializing in commercial and construction litigation for Busch, Reed, Jones & Leeper, P.C. in Marietta, Georgia