Will a Nebraska court make the losing side pay our attorney fees under this prevailing-party clause?
No. In Nebraska the fee clause itself is void, and this is the single most important thing to know about a Nebraska contract. The general rule is that “attorney fees may be recovered only in such cases as are provided by statute, or where the uniform course of procedure has been to allow such recovery”, and in Quinn v. Godfather's Investments, Inc. the Supreme Court took a lease clause reading “in the event of any dispute or litigation involving this lease, that the prevailing party shall be entitled to recover all costs of suit, including reasonable attorneys fees” and held that “the provision for attorney fees is void and unenforceable under any circumstances.” Parkert v. Lindquist restates it as a holding: “We have additionally held that a contract provision requiring that in the event of litigation the prevailing party will be entitled to attorney fees is contrary to public policy and void.” Stewart v. Bennett was an invitation to overrule that rule: “Bennett asks us to revisit our previously established rule that a contractual provision for attorney fees, where such fees are not provided by statute or uniform course of procedure, is against public policy and will not be judicially enforced”, and the Court declined. There are two real exceptions. OUT OF COURT the clause works: Parkert holds that “in the light of a strong policy allowing parties the freedom to contract, we decline to extend the rule to nonjudicial proceedings”, so a deed-of-trust provision charging the borrower the lender's reasonable attorney fee as a cost of a nonjudicial collection or foreclosure is valid. And a STATUTE can supply what the contract cannot: Neb. Rev. Stat. § 25-1801 allows fees “On any lawsuit of four thousand dollars or less” after a ninety-day wait, and it is small (“the attorney's fee shall be ten dollars plus ten percent of the judgment in excess of fifty dollars”), and it “does not apply to a cause of action alleging personal injury”. In construction, Neb. Rev. Stat. § 45-1211 is a second statutory door, so far unlitigated: a plaintiff suing for a violation of the Nebraska Construction Prompt Pay Act may be awarded “reasonable attorney's fees and costs as the court determines is appropriate.”
The trap
The clause is not merely unenforceable against you: it is void, so it does nothing for EITHER side, and asking for fees under it first does not stop the other side from attacking it. That was exactly Stewart v. Bennett: the Stewarts moved for fees under the clause, lost, and were then allowed to defeat Bennett's own fee claim on the ground that the clause was against public policy; unclean hands, waiver and estoppel did not save it. Second trap: drafting around it does not work. Quinn's rule reaches back to 1879 and has been applied to a mortgagee's foreclosure fee provision (Security Co. v. Eyer, quoted in Quinn), to a defence-cost provision in a city's contract (City of Gering v. Smith Co., quoted in Quinn), and to a security agreement's “any and all costs and expenses incurred in recovering possession of the Collateral” (First Nat. Bank in Ord v. Schroeder). Calling the fees costs, expenses of collection, or damages does not change the answer once you are in court. Third trap, and it is the one that costs money: the Parkert line is about NONJUDICIAL proceedings. If your Nebraska security instrument charges collection fees, they are collectible when you never sue; the moment you file, the same clause is void. Fourth: none of this touches the narrow bad-faith exception the Court recognised in Holt County Co-op Assn. v. Corkle's, Inc., which Quinn describes as “[t]he exception relating to vexatious, unfounded, and dilatory conduct by counsel, amounting to bad faith” and holds “has no application here”. That is about a litigant's conduct, not about your contract.
22 authorities
The words that state the rule
The general rule in this jurisdiction is that attorney fees may be recovered only in such cases as are provided by statute, or where the uniform course of procedure has been to allow such recovery.
The words that state the rule
In addition to the grounds mentioned in the order of the trial court, we believe that the provision for attorney fees is void and unenforceable under any circumstances.
The words that state the rule
J. The Lessor and Lessee each agree that in the event of any dispute or litigation involving this lease, that the prevailing party shall be entitled to recover all costs of suit, including reasonable attorneys fees.
The words that state the rule
The exception relating to vexatious, unfounded, and dilatory conduct by counsel, amounting to bad faith, established in Holt County Co-op Assn. v. Corkle’s, Inc., 214 Neb. 762 , 336 N.W.2d 312 (1983), has no application here.
The words that state the rule
We have additionally held that a contract provision requiring that in the event of litigation the prevailing party will be entitled to attorney fees is contrary to public policy and void.
The words that state the rule
Although we have applied the American rule to invalidate contracts providing for fees to prevailing parties in judicial proceedings, we have never applied the rule to nonjudicial proceedings.
The words that state the rule
Thus, in the light of a strong policy allowing parties the freedom to contract, we decline to extend the rule to nonjudicial proceedings. Accordingly, we hold that in a nonjudicial proceeding, a contract provision requiring payment of a reasonable attorney fee is not against public policy.
The words that state the rule
Bennett asks us to revisit our previously established rule that a contractual provision for attorney fees, where such fees are not provided by statute or uniform course of procedure, is against public policy and will not be judicially enforced.
The words that state the rule
In Quinn we specifically held that a provision in a contract which provided that in the event of litigation involving the contract, the prevailing party shall be entitled to costs, including attorney fees, was contrary to public policy and void.
- statuteNeb. Rev. Stat. § 25-1801enactment date not established
The words that state the rule
On any lawsuit of four thousand dollars or less, regardless of whether the claims are liquidated or assigned, the plaintiff may recover costs, interest, and attorney's fees in connection with each claim as provided in this section. If, at the expiration of ninety days after each claim accrued, the claim or claims have not been paid or satisfied, the plaintiff may file a lawsuit for payment of the claim or claims.
- statuteNeb. Rev. Stat. § 25-1801enactment date not established
The words that state the rule
when the judgment is over fifty dollars up to four thousand dollars, the attorney's fee shall be ten dollars plus ten percent of the judgment in excess of fifty dollars.
- statuteNeb. Rev. Stat. § 25-1801enactment date not established
The words that state the rule
This section does not apply to a cause of action alleging personal injury, regardless of the legal theory asserted.
- statuteNeb. Rev. Stat. § 45-1211enactment date not established
The words that state the rule
In addition to an award of damages, the court may award a plaintiff reasonable attorney's fees and costs as the court determines is appropriate.
The words that state the rule
If public policy of Nebraska precludes awarding an attorney fee as costs otherwise authorized in a contract for which suit is brought, the corollary prohibits an attorney fee awarded as part of the costs in a suit involving a security agreement which provides that the secured party shall recover from the debtor “any and all costs and expenses incurred in recovering possession of the Collateral and incurred in enforcing” the security agreement.
The words that state the rule
We decline to overrule the line of cases which clearly hold that the attorney fee provision at issue in this case is invalid.
The words that state the rule
The doctrines of unclean hands, waiver, and estoppel clearly do not apply to the Stewarts’ claim that the attorney fee provision is invalid.
The words that state the rule
Consequently, we hold that a provision in a security agreement which seeks to impose an attorney fee on a debtor as a part of the costs of suit to enforce the security agreement and its underlying contract is contrary to the public policy of Nebraska and, therefore, void and unenforceable.
The words that state the rule
Under the circumstances the district court erroneously awarded an attorney fee to First National.
The words that state the rule
In Security Co. v. Eyer, 36 Neb. 507, 510 , 54 N.W. 838, 839 (1893), the plaintiff attempted to enforce a provision in a note and mortgage for the mortgagee to recover an attorney fee in the event of foreclosure. In holding the provision invalid this court stated:
The words that state the rule
This court in repeated decisions has held, and it is now the settled law of this state, that stipulations of this character found in contracts executed since June 1, 1879, the date of the taking effect of the act repealing the attorneys’ fees statutes, are invalid and will not be enforced.
The words that state the rule
In City of Gering v. Smith Co., 215 Neb. 174, 180-81 , 337 N.W.2d 747, 751-52 (1983), we said: Smith, by way of cross-appeal, urges us to enforce the provisions of the City’s contract which provide that in the event either of the parties institutes a lawsuit against the other and the party instituting the suit does not recover all damages sought, the defendant should be entitled to the cost of defense as determined in accordance with the terms of the contract. While this court has recently reexamined its position with regard to the awarding of attorney fees and has, in limited instances, now made an exception (see Holt County Co-op Assn. v. Corkle’s, Inc., 214 Neb. 762 , 336 N.W.2d 312 (1983)), we nevertheless continue to adhere to our longstanding rule first stated by us in Higgins v. Case Threshing Machine Co., 95 Neb. 3, 7 , 144 *444 N.W. 1037, 1039 (1914), wherein we said: “It is the practice in this state to allow the recovery of attorneys’ fees only in such cases as are provided for by law, or where the uniform course of procedure has been to allow such recovery. As a general rule of practice in this state, attorneys’ fees are allowed to the successful party in litigation only where such allowance is provided by statute.” See, also, Gates v. Howell, 211 Neb. 85 , 317 N.W.2d 772 (1982). Thus, absent a statute or evidence of long-standing custom, we are not prepared to extend our prohibition concerning the allowance of attorney fees beyond that which we have recently provided in the Holt County Co-op Assn. v. Corkle’s, Inc., case, even though the contract provides for such fees. We do so on the basis of our earlier holdings to the effect that such contracts are contrary to public policy and therefore invalid.
The words that state the rule
Because the fee was not collected in a judicial proceeding, the contract provision was valid.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.