By Suzanne Sutherland

The Court of Appeals recently has issued a contractor-favorable decision regarding recovery of attorney fees under the Michigan Construction Lien Act. Ronnisch Construction Grp, Inc. v. Lofts on the Nine, L.L.C. (July 2014). The Court of Appeals expanded the definition of a “prevailing lien claimant” in a case over a contract to build loft-style condominiums.

Lofts on the Nine hired Ronnisch Construction as the general contractor on a project in Ferndale. Lofts failed to pay Ronnisch over $600,000, so Ronnisch filed a claim of lien. Ronnisch later sued Lofts for breach of contract, foreclosure of lien, and unjust enrichment. The contract required the parties to arbitrate their dispute.

After reducing the lien amount due to counter-claims Lofts raised, the arbitrator awarded $451,000 to Ronnisch. The arbitrator left the question of whether Ronnisch was entitled to attorney fees under the Construction Lien Act for the circuit court to decide. The court denied Ronnisch’s request, stating that Ronnisch was not a “prevailing lien claimant” because the arbitrator awarded damages for breach of the contract, not foreclosure of the lien.

The Court of Appeals disagreed, suggesting that it would undermine the spirit of the Lien Act to deny Ronnisch status as a prevailing lien claimant. The Act gives a court discretion to award attorney fees to a prevailing lien claimant, even if contract claims are included. The Court of Appeals adopted a broad approach that provides a contractor the best opportunity to realize the benefits intended by the attorney fee portion of the Act. The ruling is a victory for contractors, who are now eligible for attorney fees in more circumstances, including cases where the underlying contract claim is arbitrated. If a lien is valid and the contractor prevails against the owner because of that lien, the court can make the owner pay the contractor’s attorney fees.