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Indemnity clause in commercial lease does not allow recovery of attorney fees by tenant


A person who is fired up about filing a lawsuit believes he will win and will recover his attorney fees. Lawyers in Missouri and most of the United States have to throw cold water on the prospective client, because attorney fees are not generally recoverable unless provided for by a statute or a contract between the warring parties. This is called the American Rule, apparently because the general rule is different in other countries, where the rule is “loser pays.”

I was surprised to read today an imaginative litigant had been able to convince a trial judge that an indemnity clause in a lease of commercial property would support an attorney fee award. The case is Morris Branson Theatre v. Cindy Lee LLC.

The appeals court reversed the trial court’s judgment in favor of a tenant, finding that the landlord had failed to adequately repair the leased premises from tornado damage. The trial court also ordered the landlord to pay the tenant’s legal fees, on the basis of a clause in the lease that required each party “pay, protect, indemnify and save harmless” each other from liabilities arising out of the other party’s violation of the lease. This language is typical for an indemnity clause.

The appeals court sent the case back to the trial court for additional findings of fact, based on the appeals court having determined that the definition for “premises” applied by the trial court was too broad.

Because the trial court’s judgment in favor of the tenant was set aside by the appellate court, the attorney fee award was also reversed as being moot. Anticipating that the same issue would arise again when the trial court addressed the case again (unless the parties choose to settle), the court of appeals advised the landlord and tenant and trial judge that the indemnity clause is only to be applied when landlord or tenant is required to defend a claim made by another party. The indemnity clause does not apply to litigation between the landlord and tenant.

Even though people in the Ozarks sometimes think they are quite exceptional, the court of appeals let this landlord and tenant and a trial judge know that the American Rule still applies.

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About Harry Styron

I'm a lawyer who lives in Branson, Missouri, whose professional interests involve real estate, construction and local government.

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