Recovery of Attorney’s Fees

Under the law in most state and federal courts a successful party to a lawsuit is not generally entitled to recover attorney’s fees spent for the litigation. However, there are two exceptions: ( 1 ) where recovery of fees is allowed by applicable statute, or (2) where the contract between the parties involved in the case provides for attorney fee recovery.

This is called the “American rule distinguishing it from the law in other countries and a few states which do allow recovery of attorney’s fees by the successful litigant.

The rule is supported by the theory that our courts should be freely available to parties having legitimate disputes and the automatic awarding of attorney’s fees to prevailing parties would prevent some parties from seeking redress in the courts because of the threat of having to pay not only their fees but the fees incurred by their adversaries as well. The rule is not without critics.

A recent trend in many states, usually by statute, permits a court award of attorney’s fees to a successful party where the claim or defense asserted by his adversary was frivolous or groundless. Under a 1984 Colorado statute the attorney for a losing party may also be held responsible for the other party’s legal fees if the attorney knowingly asserted a phony claim or defense or otherwise acted inappropriately. Section 13-17-101, et seq., Colorado Revised Statutes (1987 Repl. Vol. 6A).

Under the Colorado law whether to award such fees is at the discretion of the trial judge who, after having heard the case, is in a position to determine whether the claim or defense was asserted in good faith and with reasonable cause to believe that it had merit.

Most states have a variety of special statutes which allow attorney fee recovery. For example, persons involved in construction may have a statutory right to recover attorney’s fees in some states where they have IN successfully defended against a mechanic’s lien claimed for an amount larger than was actually due to the mechanic’s lien claimant.

To be enforceable a statute permitting recovery of attorney’s fees must be available to both parties. Early in this century a statutory provision which allowed the recovery of attorney’s fees by mechanic’s lien claimants was held unconstitutional because a corresponding right was not available to a party who may have successfully defended against a mechanic’s lien claim.

Inclusion of attorney’s fee recovery provisions in contracts is now becoming popular. Care must be given to assure that the provision goes both ways and is equally available to whoever might succeed in the litigation or arbitration. Failure to so provide may render the “one-way,’ fee provision legally unenforceable.

When attorney’s fees are not recoverable by the successful litigant under applicable law, persons considering the litigation of their disputes must analyze their position carefully. They should first determine how good and provable their claim might be, then how much in attorney’s fees they may have to spend to recover a judgment. Next they should consider whether their adversary has sufficient available assets from which a judgment can be collected.

Careful study may well dictate the conclusion that the economics involved do not warrant litigation and the claim should therefore simply be written off.

There is a substantial movement toward reducing the volume of what many people believe to be frivolous lawsuits. One popular deterrent is the abandonment of the American Rule-awarding attorney’s fees to the winning party.

There are many pros and cons to the argument. For example, it has been reported that the chief proponent of such a statute in medical malpractice cases, in a southern state, himself recently lost a malpractice case-and was also charged with his opponent’s substantial attorney’s fees. That doctor may now have had a change of heart!

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