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The Expanding Scope Of Attorney’s Fees In Virginia Fraud Cases

On February 25, 2021, the Virginia Supreme Court in its opinion on the matter of St. John v. Thompson 854 S.E.2d 648 (2021) deviated and modified from the long-adopted standard for awarding attorney’s fees in fraud cases as previously articulated in Prospect Development Co. v. Bershader, 258 Va. 75 (1999). In Bershader, the Virginia Supreme Court deviated from the American Rule in holding that attorney’s fees could be recoverable, despite the lack of statutory authority or contract, in cases where actual fraud was found.

In St. John v. Thompson, the Supreme Court noted that Bershader stood for the proposition that “fees are proper if the trial court, exercising its discretion in a fraud case, awards equitable relief, and further determines that the circumstances surrounding the fraudulent acts and the nature of the relief granted compel an award of attorney’s fees.”

As stated in Bershader, the Supreme Court in 1999 held that “in a fraud suit, a chancellor, in the exercise of his discretion, may award attorney’s fees to a defrauded party. When deciding whether to award attorney’s fees, the chancellor must consider the circumstances surrounding the fraudulent acts and the nature of the relief granted to the defrauded party.” This standard has long been scrutinized and interpreted by the trial courts across the commonwealth in deciphering when, if at all, attorney’s fees should be awarded in civil fraud cases.

The appellants in St. John argued in part that “attorney’s fees [are] permissible under Prospect Development Co. only if the fraud is particularly egregious, and … maintains that the facts here do not rise to that level.” In response, the court in St. John reiterated the standard that the trial judge should consider in fraud cases the circumstances surrounding the fraudulent acts and the egregiousness – or lack thereof – as to the conduct surrounding the alleged fraud is not a central consideration. This assumedly gives Virginia trial court judges greater flexibility in awarding attorney’s fees in fraud cases where the analysis of the circumstances surrounding the fraud, and the impact on the court’s ultimate award, is less subject to scrutiny. The St. John decision vests trial court’s with almost carte blanche discretion that will not be disturbed on appeal with the removal or any guidance as to what circumstances, facts or other factors are relevant in awarding attorney’s fees.

Justice Stephen R. McCullough authored the opinion for the Virginia Supreme Court. William D. Ashwell of Ashwell & Ashwell, PLLC, represented the appellants.