Fee Clause Interpretation: Fee Clause In PPM Did Not Cover Plaintiffs’ Negligence “Lost Investment” Lawsuit

Broader Language Might Have Led To A Different Result.

            Defendant won a negligent “lost investment” lawsuit brought by plaintiffs where there was a private placement memorandum (PPM) with an attorney’s fees clause.  The clause stated:  “If either party commences litigation for the judicial interpretation, enforcement, termination, cancellation, or rescission hereof, or for damages (including liquidated damages) for the breach hereof against the other party, then, in addition to any or all other relief awarded in such litigation, the substantially prevailing party therein shall be entitled to a judgment against the other for an amount equal to reasonable attorneys’ fees and other costs incurred.”   The lower court denied fees to the prevailing defendant, prompting an appeal.

            The fee denial was affirmed by the 4/3 DCA in Hammer v. Strategic Capital Holdings, LLC, Case Nos. G055369/G055430 (4^th Dist., Div. 3 May 31, 2019) (unpublished), authored by Justice Ikola.

            The reason supporting this result was simple:  the fee clause did not reach the negligence suit brought by plaintiffs.  Interpretation of the PPM was not at issue, just its adequacy.  Perhaps a clause more broadly worded to say it encompassed litigation “arising from or pertaining to the PPM” might have invoked fee exposure, but that is not how the clause read which was the subject of judicial review in this particular cause.