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A Better Partnership
July 28, 2016

MSC: A lien claimant who succeeds on a breach of contract claim may be a “prevailing party” entitled to attorney fees under the Construction Lien Act

According to the the Michigan Supreme Court in Ronnisch Construction Group Inc. v. Lofts on the Nine, L.L.C., No. 150029, a lien foreclosure claim and a claim for breach of the underlying construction contract are “integrally related” as the lien is but a means for enforcing payment of the debt arising from a breach of the contract.  Thus, a plaintiff who succeeds on a breach of contract claim is a “prevailing party” under the Construction Lien Act (“CLA”) and may be entitled to recover attorney fees even when the lien claim is not fully adjudicated.
 
The plaintiff-lienor, Ronnisch, contracted to build loft-style condominiums for the defendant-lienee, Lofts on the Nine.  After Ronnisch provided $5.5 million in labor and materials under the contract, Lofts on the Nine paid only part, leaving a $626,163.73 deficiency.  Ronnisch filed a claim of lien and then sued for breach of contract.  Lofts on the Nine asserted counterclaims, arguing that Ronnisch had provided faulty or incomplete work resulting in $1.1 to $1.5 million in damages.  An arbitrator determined both parties were entitled to damages, resulting in a net award to Ronnisch.  Lofts on the Nine subsequently paid the net award.  Ronnisch then filed a motion to confirm the arbitration award and obtain attorney fees as a lien claimant under the CLA.  The circuit court determined that because the arbitrator only adjudicated the breach of contract claim and not the lien foreclosure claim, Ronnisch could not be considered a “prevailing party” under the CLA and was thus not entitled to attorney fees.  The Court of Appeals disagreed, holding that a lien claimant under the CLA may be entitled to recover attorney fees for a breach of contract claim even when the lien claim has not been fully adjudicated. 
 
On appeal, the Supreme Court first concluded that Ronnisch was a lien claimant because it possessed “a right to a construction lien” under the CLA.  The Court also emphasized the integral relationship between a breach of contract claim and a lien foreclosure claim.  The Court opined that allowing a party to pursue both claims gives the party a better chance of receiving what is owed to it. Because a lien claimant becomes the prevailing party under the CLA by succeeding on the “main issue,” by prevailing on the contract claim, Ronnisch received the requisite conclusive determination in its favor.  Therefore, Ronnisch was the prevailing party in its action to enforce a construction lien through foreclosure, and the Supreme Court affirmed. 
 
Chief Justice Young, joined by Justices Zahra and Larsen, dissented, concluding that recovery of attorney fees under the CLA is allowed only for those parties who prevail on a construction lien.  The dissenters opined that Ronnisch was never more than a presumptive lien claimant that extinguished its lien (by accepting full payment for its damages incurred under the contract) before the validity of its lien claim was ever determined.  Accordingly, when Ronnisch moved in the circuit court for an award of attorney fees, it was no longer a party having a right to a construction lien under the CLA.

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