“Jack, as my lawyer, you’re telling me that
we’ve spent three years and a million and a half in fees and
costs, prevailed at trial and on appeal, and the other side has to
pay $20,000 in ‘costs,’ but has no responsibility to
pay my attorneys’ fees? We won and we have to eat the
attorneys’ fees? Don’t get me wrong you’ve done a
magnificent job, but really?”
Not an unreasonable position for a client to take, right? Having
prevailed in protracted litigation, the winner often feels like the
outcome was clear from the start. Of course, if victory was always
assured, then the substantial sums spent on attorneys’ fees
must have been for naught. Shouldn’t the party who
necessitated that expenditure be made to pay the cost?
Putting aside that hindsight can sometimes produce an inaccurate
assessment of the facts, the “American rule” on the
award of attorneys’ fees is that each side pays their own.
There are few exceptions.
Although in the common parlance “attorneys’
fees” are a “cost” of litigation, they are not
what is considered a recoverable “cost.” Recoverable
costs consist of items like filing fees, stenographer charges (at
around $800 per deposition, not an insubstantial expense),
expenditures to compel witnesses to attend trial and expert witness
The philosophy behind the American rule is that parties
should be encouraged to settle their disputes in court.
The right of citizens to access the courts with their disputes is
one of the principles upon which our democracy is founded. Were
litigants worried about having to pay both their and their
opponent’s attorneys’ fees, they might be discouraged
from fully prosecuting or defending their claims and defenses.
Claims by injured parties would be especially compromised, as
many such individuals are already financially compromised by their
injuries. While some might argue that discouraging litigation by
whatever means is a good thing, we as a country subscribe to the
belief that the resolution of disputes on their merits in a public
forum is the better approach.
There are exceptions to the American rule. One is when the
parties have entered into a contract or other written agreement
(like a condominium association agreement) that specifies that the
prevailing party in any litigation is entitled to recover their
attorneys’ fees. With such an agreement, the courts will
likely require the loser to pay the prevailing party’s
attorneys’ fees. This exception is one to have in mind when
negotiating or otherwise binding oneself to an agreement.
A second frequent exception occurs when a statute provides for a
litigant to recover their attorneys’ fees and costs as part
of their remedy. This is often the case in employment
discrimination, civil rights and some whistleblower cases in which
the applicable statute is designed to make the harmed party whole
and to otherwise encourage such individuals to prosecute their
claims. Consumer protection, unfair business practices, and many
intellectual property statutes also often specify that injured
parties, should they prevail, are entitled to recover their
attorneys’ fees should they prevail. Where attorneys’
fees are awarded pursuant to a statute the ability to receive such
an award is often unilateral, meaning that it is the putatively
injured party who can seek an award of fees and costs if they
prevail, not whichever party prevails.
Another exception to the rule comes in those cases in
which one or the other party has been forced to defend or prosecute
a known right. In other words, when it can be proven that
no reasonable plaintiff or defendant would, respectively, bring or
defend the case, then the prevailing party can recover costs.
Although many litigants believe their adversary’s claims to
be without merit, there are very few cases that actually fit into
In analyzing the merits of filing a lawsuit, the prudent party
assumes that in the absence of one of the above exceptions the
attorneys’ fees they incur are a sunk cost that will not be
recovered. In that event, any recovery must compensate for that
cost if the lawsuit is to be worthwhile as a financial matter.
Published in NH Business Review
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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