“And I want my attorney fees, too.”
It is a phrase often heard from clients expressing their wish list in a contested legal matter, whether they are pursuing a claim in a lawsuit or defending one.
The basic rule in American courts is known, fittingly enough however, as the “American Rule,” whereby each party bears their own attorney fees, regardless of outcome, win or lose.
As with most things in the law, there are exceptions.
One exception is if the suit involves a contract that provides for attorney fees. Typical of these are financial agreements with banks, mortgage companies, and credit card companies. They virtually all have attorney fees provisions.
And, more often than not, these boilerplate contracts written by the legal department of the big institutions say, in essence, “if we, the big institution, win our case against you then we get our attorney fees too,” but not so often, “if there’s a lawsuit over this contract, then the prevailing party wins its attorney fees, whether is you, or us.”
Mutuality is rare with the big entities. They write the rules, and they typically write them their way. We get our fees, but not you.
Another exception to the American Rule is if a statute that creates the basis for a certain type of lawsuit provides for attorney fees, then courts are apt to award them. These types of claims include employment discrimination or harassment claims under state or federal law, claims by consumers under the consumer protection statutes, claims of civil rights violations under the civil rights statutes, and claims against financial institutions under the Federal Fair Credit Reporting Act or the Fair Debt Collection Practices Act.
And like the typical contract form used by a mortgage company, bank, or other lender, these statutory causes of action with attorney fee provisions tend to lack mutuality, in that if the little guy wins against the violator, then he gets fees to. But if the little guy loses, and the big entity defends successfully, they typically are not entitled to recover their fees incurred in defense.
It’s just the way it is.
Family law statutes also give courts discretion to award fees, as they may see fit. These cases include dissolution of marriage, paternity, and modification. However, more often than not, courts decline to award fees to either party these days, and the attorney whose client holds out for a settlement that includes payment of attorney fees by the other party typically does not succeed in that respect.
And of course, in criminal cases, the defendant must pay his own fees, win or lose, unless he is deemed indigent, and runs a significant risk of jail time, in which case he is entitled to free counsel under the Sixth Amendment.
In most tort and personal injury cases, the American Rule applies. On occasion I have heard propagandists of the insurance industry urge a “loser pays” system, purportedly to stifle frivolous claims.
In fact, I wish they would, because the injustice of frivolous claims brought against the insurance industry pales in comparison to the number of claims that get low-balled, because they are not large enough to justify or be cost effective in regard to getting an attorney involved.
If, however, we had a loser pay system with tort, damage, and injury claims, the effect on frivolous claims would be, in my estimation, minimal, in that frivolous claimants usually don’t have assets sufficient to make an award of attorney fees against them worthwhile. But, on a small claim that is legitimate but not being properly honored by the insurance industry due to its size, well, a loser pay system might just entice lawyers to take those cases, and not let the insurance companies slide, if they could get their fees paid if they prevail. Maybe, just maybe.
-- Ken Garten is a Blue Springs attorney. Email him at firstname.lastname@example.org