Tennessee courts have long followed the “American Rule” when it comes to deciding whether attorneys’ fees should be awarded to the prevailing party in a lawsuit. Under the American Rule, a prevailing party is entitled to an award of attorneys’ fees only under three circumstances. Those are: (1) Where the parties have a contract which contains a term providing for the award of attorneys’ fees; (2) where a statute provides for the award of attorneys’ fees; or (3) where there is some recognized exception to the American Rule which has been established by Tennessee courts.
There are very few recognized exceptions which fall into category three (3) above. Very few. One of those exceptions is where someone has deliberately used a power of attorney to benefit himself or herself. That exception to the American Rule was recently employed by the Court of Appeals of Tennessee in the case of Ellis v. Duggan (2021).
In the Ellis case, a niece had used a power of attorney granted to her by her aunt to pay about $175,000 for a house which was titled in the niece’s name. The large majority of the funds for the purchase were taken from an annuity, the beneficiaries of which were three grandsons of the aunt. The niece was not a beneficiary of the annuity.
The heirs who sued the niece for breach of fiduciary duty for misusing the power of attorney prevailed at trial, but the trial court did not grant their request that they be awarded the attorneys’ fees they had incurred. The trial court refused to make an award of attorneys’ fees, reasoning that such an award was not permissible under the American Rule because there was no “basis in case law” for such an award.