Graham v. Cmty. Mgmt. Corp., Record No. 161066.
| Decision Date | 12 October 2017 |
| Docket Number | Record No. 161066. |
| Citation | 805 S.E.2d 240 |
| Parties | Heather GRAHAM v. COMMUNITY MANAGEMENT CORPORATION |
| Court | Virginia Supreme Court |
Glenn H. Silver (Erik B. Lawson ; Silver & Brown, on briefs), Fairfax, for appellant.
John E. Thomas, Jr. (David L. Greenspan ; Robert W. Loftin, Richmond; McGuireWoods, on brief), Tysons, for appellee.
PRESENT: All the Justices
OPINION BY JUSTICE STEPHEN R. McCULLOUGH
Heather Graham challenges the trial court's dismissal of her action, which sought to recover attorney's fees she incurred in defending a prior action. The trial court held that Rule 3:25 "precluded [her] from requesting attorney's fees because she failed to request said fees in the underlying litigation." We agree with the trial court, and affirm the judgment.
Graham worked for the Community Management Corporation as its Chief Executive Officer. Her employment contract contained a clause requiring her to keep certain information confidential. A separate Confidentiality Agreement provided that "[i]n the event that an action is brought for relief under the provisions of this paragraph, the prevailing party shall be entitled to an award of its attorney's fees."
When Graham obtained employment elsewhere, the Community Management Corporation filed a complaint in which it alleged that Graham had breached her obligation of confidentiality with respect to its proprietary information. Among other things, it asked for "attorney['s] fees incurred in connection with its prosecution of the action for breach of the Confidentiality Agreement." Graham filed a number of responsive pleadings, including two demurrers, several pleas in bar, and an answer. She did not, however, ask for attorney's fees in any of these pleadings. Graham obtained a defense verdict.
Following the conclusion of that case, Graham filed a new action of her own against the Community Management Corporation in which she demanded that her former employer pay the attorney's fees she incurred in defending the earlier action. The defendant demurred, arguing that Rule 3:25 required Graham to seek fees in the first suit, and her failure to ask for them in that case constituted a waiver. The circuit court agreed and dismissed Graham's complaint. This appeal followed.
"We review questions of law de novo." Amin v. County of Henrico , 286 Va. 231, 235, 749 S.E.2d 169, 170 (2013). "A lower court's interpretation of the Rules of this Court, like its interpretation of a statute, presents a question of law that we review de novo." Id.
Rule 3:25, captioned "Claims for Attorney's Fees" provides:
The language of Rule 3:25 is plain. Subpart (B) of the Rule required Graham to make a demand for attorney's fees in a counterclaim, cross-claim or a responsive pleading. The Rule also states unambiguously in subpart (C) that a failure to make such a demand "constitutes a waiver by the party of the claim for attorney's fees." This Court expressly so ruled prior to the present litigation. Online Res. Corp. v. Lawlor , 285 Va. 40, 61–62, 736 S.E.2d 886, 898 (2013) ("Rule 3:25 provides in pertinent part that
‘[a] party seeking to recover attorney's fees shall include a demand therefor’ and that ‘[t]he failure of a party to file a demand as required by this rule constitutes a waiver by the party of the claim for attorney's fees, unless leave to file an amended pleading seeking attorney's fees is granted under Rule 1:8.’ ").
Graham's arguments to evade the plain language of the Rule1 are without merit. Her basic contention is that she could not have pled a claim for recovery of attorney's fees until a defense verdict was rendered in the prior action. This thesis is mistaken in fundamental respects. Code § 8.01–230, on which Graham relies, specifies the date upon which—for limitations purposes rather than general pleading standards—a right of action is complete such that the statutory period in which to sue must commence running. While that statute formerly used the concept of a "cause of action" in the sense employed by Graham, it was amended in 1996 and for two decades has only spoken to the issue of when a "right of action" is so complete that the limitations clock must run from that date.2 Acts 1996, ch. 328. We pointed out in Thorsen v. Richmond SPCA , 292 Va. 257, 278, 786 S.E.2d 453, 465 (2016), that "[s]tatutes of limitation [governed by Code § 8.01–230's accrual concepts] do not affect a cause of action; they bar a right of action," and while "[t]he two may accrue at the same time," they "will not of necessity do so." (citing First Va. Bank–Colonial v. Baker , 225 Va. 72, 81–82, 301 S.E.2d 8, 13–14 (1983) ).
Graham focuses on when she would have had a claim for breach of contract against Community Management Corporation in the prior litigation. Her present claim, however, is not for breach of contract. It is a claim for recovery of fees under the contractual provision, and is not based on any breach of Community Management Corporation's duties under the contract. The assertion that such a contract-based fee recovery claim "would have to wait" until conclusion of the prior action is also incorrect. Graham's posture is no different from that of Virginia plaintiffs, who have long been required to plead a claim for attorney's fees (prior to the end of the primary action in which they hope to prevail) on pain of having that claim barred. See, e.g. , Lee v. Mulford , 269 Va. 562, 567–68, 611 S.E.2d 349, 352 (2005).
Just as a defendant may bring a claim for indemnification or contribution before she is held liable or required to pay a claim,3 a claim exists in favor of a party seeking recovery of fees when that party first incurs fee expenses in the action. In Virginia "[s]ome injury or damage, however slight," is enough to trigger a claim. Van Dam v. Gay , 280 Va. 457, 460, 699 S.E.2d 480, 482 (2010). See also Rule 1:6 (). Graham suffered an injury when she was required to retain counsel to defend against Community Management Corporation's action under the Confidentiality Agreement. Her right of action was not complete for statute of limitations purposes until she prevailed before the jury and—if no Rule had required her to plead the fee claim—it would not have been time-barred until five years after that verdict. Code § 8.01–246(2). But well before that verdict she had already sustained damage sufficient to plead her claim for recovery of attorney's fees. Just as a plaintiff who must plead a claim for fee recovery has incurred some attorney's fees at the pleading stage (and has not yet prevailed at trial) a defendant (having been sued and having engaged counsel to defend her) has experienced a loss or burden well before she is ultimately vindicated by a defense verdict in the first action. Both sides are required by Rule 3:25 to bring their attorney's fee claims at the pleading stage.4
The requirement of Rule 3:25 to bring attorney's fee claims is consistent with the fundamental tenets of Virginia practice that no litigant may recover on a right not pled,5 and that "[t]he basis of every right of recovery under our system of jurisprudence is a pleading" setting forth the basis for granting the relief sought. Allison v. Brown , 293 Va. 617, 626, 801 S.E.2d 761, 766 (2017) (quoting Ted Lansing Supply Co. v. Royal Aluminum & Constr. Corp ., 221 Va. 1139, 1141, 277 S.E.2d 228, 230 (1981) ).
Graham also contends that requiring a defendant to make a demand for attorney's fees would be tantamount to a compulsory counterclaim.6 It is not necessary in deciding this case to resolve whether a fee claim under a contractual fee recovery provision is a freestanding claim or one that is inherently ancillary to another contract-based action.7 In either event, a claim for recovery of fees is required to be pled under the clear language of Rule 3:25, and nothing in Code § 8.01–230, or Rule 3:9 forecloses the operation of a Rule designed, among other things, to require pleading of a claim for attorney's fees.
Virginia procedural statutes confirm that the Rules of Court are the statutorily specified mechanisms to govern pleading obligations in Virginia courts. See Code § 8.01–271 (). Specifically, a defendant's pleading of claims against the plaintiff "shall be governed by the Rules of the Supreme Court of Virginia." Code § 8.01–272. Whether claims for recovery of fees are viewed as ancillary to other contract claims, or as a freestanding right, or functionally a "counterclaim," Code § 8.01–281 broadly states that a defendant's claims (whether for indemnity or based on contract, express or implied) "may be based on future potential liability, and it shall be no defense thereto that the party asserting such claim [or] counterclaim ... has made no payment ... arising out of the transaction or occurrence." Thus...
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