Colorado, like most states, follows the “American Rule,” which requires parties to a lawsuit to pay their own legal expenses. There is a significant exception though, if the parties agree, in a contract clause known as a “fee-shifting provision,” that the prevailing party will be entitled to recover its attorney fees and costs. Such fee shifting provisions are a commonplace feature of leases and commercial agreements.
Given the expense of litigation, parties required to pay fees under these provisions often have an incentive to litigate the amount of the fee and cost award against them, sometimes leading to another round of expensive litigation. Thus, the question: does a contractual “fee-shifting provision” apply to the additional fees incurred to recover the original fees (known as “fees on fees”)?
The Colorado Court of Appeals ruled in the recent decision of Munras Properties, L.P. v. Kabod Coffee, 2025 COA 71 that the answer is “yes.” A party that prevails in litigation may recover, under a fee-shifting provision, their fees on fees.
In a dispute between a commercial landlord and its tenant, the landlord prevailed at trial and requested $128,571.50 in attorney fees under a fee-shifting provision of the lease. The tenant asserted that the landlord was seeking an unreasonable amount of attorney fees and requested a hearing on fees. Prior to the hearing, the landlord supplemented their request to add $15,352.50 in post-trial attorney fees, including those associated with the attorney fees motion. The trial court declined to award the landlord its attorney fees incurred in connection with the motion for fees because such fees were not incurred “in connection with” the tenant’s default.
The Court of Appeals reversed, reasoning that the purpose of a fee-shifting provision is to make whole the nonbreaching party and deter further breach. As the Court put it, “[a] party compelled to file suit to enforce its contractual rights would not be made whole if, at the conclusion of the litigation, it prevailed but nonetheless faced a legal bill for attorney fees and costs that it would not have incurred absent the breach.”
The Court of Appeals also granted the landlord its appellate attorney fees. In doing so, it also answered a secondary question: a prevailing party is entitled to what might be called “fees on fees on fees.” Given the significant fees incurred at the trial, in filing the motion, and (almost certainly) on appeal, a fee-shifting provision may prove critical to a contracting party’s ability to enforce their contractual rights.
