You’ve just been sued. Or perhaps you’ve been injured or defrauded and want to sue someone. Invariably, one of the first questions clients have for us in these situations is, can I make the other side pay for my legal fees? In most cases, you cannot. But there are exceptions to the general rule (discussed below), and contingency fees offer a potential solution for cash-strapped litigants.
The “American Rule” versus “Loser Pays”
Under the “American Rule,” each party is responsible for its own attorney fees—win or lose. This is different than the “English Rule” or “loser pays” rule, where the losing party must pay the other party’s legal fees. Each system has its supporters. Proponents of a “loser pays” system argue that it acts as a deterrent to frivolous claims and defenses. Critics of the system argue that the rule acts as a bar to the courthouse and prevents parties who are financially strapped from protecting their interests.
For now, the general rule in America remains that each party pays its own lawyers.
Exceptions to Loser Pays—Claims That Allow Recovery of Legal Fees
Although the “American Rule” generally prevents parties from recovering their legal fees, there are exceptions. Two of the most common exceptions are attorney-fee statutes and attorney-fee provisions in contracts.
Certain federal and state laws allow you to recover attorney fees if you win your lawsuit. Examples of these statutes include the Fair Labor Standards Act (which allows employees to sue for unpaid wages) and the Missouri Merchandising Practices Act (which allows consumers to sue when they have been deceived or misled). With these claims, legislators have created a statutory right to attorney fees for plaintiffs who succeed on their claims.
These statutes do not, however, permit prevailing defendants to recover their fees. This is because the laws were crafted to protect Plaintiffs with valid claims who would otherwise be unable to afford an attorney. If, for example, a company defrauds a consumer into buying a $5,000 product, the consumer has little incentive to pay thousands of dollars in attorneys’ fees to recover pennies or even lose money. The business’s bad conduct would go unchecked, since an attorney would also have little incentive to accept the case on a contingency basis. By permitting successful plaintiffs to recover their attorney fees—and in some cases bring class actions—these statutes can act as a check on corporate wrongdoing.
In addition to specific claims that allow attorney fees to prevailing plaintiffs, a few states, including Alaska and Texas, have enacted laws that go against the “American Rule.” These laws allow the prevailing party in certain cases—whether plaintiff or defendant—to recover fees.
Contracting for Attorney Fees
The law favors freedom of contract. Put simply, this means that parties have wide discretion in crafting contract terms that fit their situation. Individuals and businesses use many types of contractual clauses to reduce their risk, and an attorney-fees provision is among the most common.
The typical attorney-fee clause states that if one party breaches the contract, the other party can sue and recover its attorney fees for bringing the suit. If you have a contract dispute or you if you are negotiating a contract, you should pay careful attention to any language on attorneys’ fees.
Attorney Fees by Claim Category
The ability to recover attorney fees varies with the specific facts and claims of each case, but the following is a summary of whether attorney fees are typically recoverable for certain claims:
- Personal-Injury Claims: Typically, attorney fees are not recoverable in personal-injury claims—auto accidents, medical malpractice, or slip and falls, for example. As discussed below, contingency-fee arrangements—where the attorneys only take a fee out of any recovery—help personal-injury victims bring claims they would otherwise be unable to afford. Occasionally, personal-injury claims can be brought under federal laws that allow injured persons to recover attorney fees.
- Consumer-Fraud Claims: Many consumer-fraud laws permit successful plaintiffs to recover fees. The Missouri Merchandising Practices Act, for instance, requirescourts to grant an award of attorneys’ fees to successful plaintiffs. If you have a consumer-fraud claim but are concerned over expensive legal bills, we recommend you contact an attorney to discuss fee recovery.
- Employment Claims: Like consumer claims, state and federal statutes generally allow successful plaintiffs to recover their attorney fees.
- Intellectual Property: If an intellectual-property claim is brought under federal law, a party may be able to recover attorney fees.
- Breach of Contract: Fees will typically only be recoverable if the contract contains an attorney-fees provision.
The Contingency Fee—Leveling the Playing Field
So what can you do if you have a legitimate claim that does not allow you to recover legal fees and you lack the capital to pay for an hourly lawyer? In some cases, a contingency fee is the answer. A contingency fee is a fee agreement with a lawyer that allows the lawyer to take a percentage of any recovery as his fee. Rather than charging for the time he spends on the case and sending you a monthly bill for his time, the lawyer will get paid on the backend of the case. If there is no recovery because the claim fails, the lawyer gets paid nothing.
Contingency fees have been called the “key to the courthouse,” because many personal-injury victims or small businesses who have suffered a loss are not financially able to spend thousands of dollars pursuing their rights. The contingency fee allows them to pursue their claims anyway.
Conclusion
How you will pay your lawyer, and whether you can recoup legal fees if you win, is one of the most important questions you can ask before considering litigation. All of the following factors can affect whether you can recover your attorney fees: the type of claim you’re bringing; where you’re bringing the claim; whether you bring the claim under state or federal law; whether there is an enforceable contract with an attorney-fees provision; and whether fees must be awarded or can be awarded at the Judge’s discretion.
To ensure you have an understanding of your potential claims and your ability to recover legal fees, please contact the attorneys at Pospisil Swift for a free initial consultation.
The information contained on this website is informational only and not intended to be, and does not constitute, legal advice. While we attempt to update our site regularly, the information does not necessarily reflect the most current legal developments. You should not act or refrain from acting based upon information provided on this site without first consulting legal counsel.
