Iowa Court Examines Attorney Fee Provisions in Farm Lease Case

On May 13, 2020, the Iowa Court of Appeals issued an opinion concerning the award of attorney fees in a farm lease dispute. The court found the contractual attorney-fee clause of a farm lease allowed attorney fees to be awarded to the prevailing party, but this amount did not include the fees incurred after a settlement offer.

Background

A landlord entered into a farm lease with a tenant. The lease stated, “If either party files suit to enforce any of the terms of this Lease, the prevailing party shall be entitled to recover court costs and reasonable attorney fees.” Four years later, the landlord terminated the lease.

The tenant filed a two-count petition claiming breach of contract. The landlord answered and moved for summary judgment on count II. While the motion was pending, the landlord offered a settlement in the amount of $75,000. The tenant rejected the offer, and the court granted the landlord’s motion for summary judgment.

The case went to trial on the surviving claim. A jury found in favor of the tenant and awarded damages in the amount of $41,453.57. Both parties sought attorney fees and costs. The court awarded the tenant attorney fees and court costs, but denied the landlord’s request for the same. The landlord appealed.

Attorney Fees

Attorney fees are not allowed unless an express agreement or statute authorizes them. Van Sloun v Agans Bros., Inc., 778 N.W.2d 174, 182 (Iowa 2010). A plaintiff cannot recover court costs if the plaintiff recovers less in litigation than what a defendant offered in a settlement. Iowa Code § 677.10. Additionally, such a plaintiff must pay for the defendant’s costs which are incurred post-offer. Here, the landlord offered $75,000 to settle the complaint, which the tenant rejected. The tenant then obtained a smaller verdict of $41,453.57. The landlord claimed it was entitled to attorney fees as part of the costs incurred after the settlement offer.

Contractual attorney fees are taxed as part of the court costs. Iowa Code § 625.22. However, attorney fees are allowed only if the “agreement expressly authorizes” the recovery. The language in the lease allowed the “prevailing party” to recover attorney fees. This was the controlling language. “Prevailing party” is a term of art and is defined as the one “in whose favor a judgment is rendered, regardless of the amount of damages awarded.” Here, the jury found in favor of the tenant, making the tenant the prevailing party. Therefore, the landlord was not the prevailing party and could not recover attorney fees under the agreement.

Tenant Attorney Fees

The landlord next claimed the tenant should not be entitled to attorney fees because certain prerequisites required under the law were not fulfilled.  Specifically, Iowa law prohibits the recovery of attorney fees unless the party is aware of the claim and has the opportunity to pay the debt before the action is brought. Iowa Code § 625.25. In this case, the tenant did demand reimbursement before bringing a lawsuit. The landlord admitted to this in the answer to the complaint. As such, the tenant was entitled to attorney fees.

Post Settlement Offer Attorney Fees

The landlord also appealed the award of attorney fees to the tenant for the post-offer period. The tenant obtained a judgment for less than the landlord’s settlement offer. In its decision, the court cited to Brockhouse v. State, where property owners appealed the award of damages from the Department of Transportation’s (DOT) condemnation of their property. 449 N.W.2d 380, 381 (Iowa 1989). In Brockhouse, a jury awarded plaintiffs less than the amount for which the DOT offered to settle. The Supreme Court in that case found that while the statutory law required the DOT to pay all costs of the appeal, including attorney fees, the plaintiffs were not entitled to attorney fees for services provided after the DOT’s offer.  

In this case, the court found that when a plaintiff is prohibited by law from obtaining post-offer costs, such as under § 677.10, they cannot recover post-offer attorney fees under a different statute authorizing the taxation of attorney fees as costs. Therefore, because the tenant obtained a smaller verdict than the settlement offer and cannot recover post-offer costs, the court ruled that it could not recover post-offer attorney fees.