5th Circuit erases $526000 fee award to Liberty Mutual

New Orleans, Louisiana, U.S. March 27, 2020. REUTERS/Drone BaseRegister now for FREE unlimited access to Reuters.comLiberty Mutual jumped the gun by suing instead of dispute resolutionEven though New Orleans’ housing authority had wrongfully terminated the contract(Reuters) – Liberty Mutual made a six-figure mistake by suing the Housing Authority of New Orleans for breach of contract rather than using the dispute-resolution process both sides had agreed to, a federal appeals court held Tuesday.The 5th U.S. Circuit Court of Appeals overturned a $526,000 attorney-fee award to Liberty, saying the dispute provisions of the contract remained in full force even after the Housing Authority had wrongfully terminated it.The clauses – which required Liberty to submit a detailed written claim for payment to the Housing Authority and wait 60 days for a response – are plainly “meant to be binding even after a breach,” and Liberty’s claim to the contrary would render them “useless just when they are needed the most,” Circuit Judge Andrew Oldham wrote for the 5th Circuit panel.Register now for FREE unlimited access to Reuters.com“In other words, Liberty says the dispute-resolution clauses are binding — until a dispute arises. That can’t be right,” Oldham wrote. He was joined by Circuit Judges E. Grady Jolly and Jennifer Walker Elrod.The housing authority’s lawyer, Carl Butler of Butler Law Firm, declined to comment on Tuesday.Liberty’s attorneys at Krebs Farley & Dry did not immediately respond to requests for comment.According to the opinion, Liberty had acted as the surety to Parkcrest Builders, which had an $11 million contract with the Housing Authority to build affordable units. The initial completion date was in July 2014.In April 2015, the Housing Authority terminated Parkcrest’s prime contract and Liberty stepped in to complete the project, as the surety bond required.Liberty considered the project substantially complete in June 2016, but the Housing Authority disagreed. It fired Liberty, hired a new contractor, and declared the project substantially complete the following March.Liberty successfully sued the Authority for breach of contract in federal court in New Orleans, obtaining a verdict of $438,000 in damages “plus reasonable atttorneys’ fees” in 2018.The authority appealed. In 2020, the 5th Circuit affirmed the ruling on damages, but declined to consider the fee award since the amount had not yet been determined.On remand, the judge set the fee award at $526,000. The Housing Authority filed a second appeal last year.This time the panel agreed with the Housing Authority, noting that its contract with Liberty authorized fee-shifting “upon the receipt by (HANO) of a properly presented claim.”“Because HANO never received a properly presented claim, it cannot be liable for fees,” the 5th Circuit concluded.The case is Liberty Mutual Insurance Co. v. Housing Authority of New Orleans, 5th U.S. Circuit Court of Appeals No. 21-30005.For Liberty Mutual: David Krebs, Craig Mangum and Laetitia Solouki of Krebs Farley & DryFor Housing Authority of New Orleans: Carl Butler of the Butler Law FirmRegister now for FREE unlimited access to Reuters.comOur Standards: The Thomson Reuters Trust Principles.