Thursday, November 26, 2020

Attorney Fees and the American Rule

Law Matters

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Many people think if they file a lawsuit they will win and get their attorney fees paid to boot. Some of those people are wrong about winning. More are wrong about getting their attorney’s fees paid.

Florida and a majority of states follow what is known as the American Rule concerning attorneys’ fees and litigation. The American Rule provides attorney’s fees are not recoverable unless provided by a contract or statute. There is no statute that says attorney’s fees are recovered in all cases. As with most rules, there are some exceptions.

The exceptions are limited. One exception is the Wrongful Act Doctrine. Under that exception, if someone’s wrongful act causes another to be in litigation with a third party, attorney’s fees can be recovered from the person committing the wrongful act as that was the basis for the lawsuit. The wrongful act forces an innocent party to court. That does not mean every wrongful act brings with it a claim for attorney’s fees, but only those which result in someone being dragged into litigation and the opposing party is not the person committing the wrongful act. 

Another exception is when dealing with certain funds. If an action creates a common fund in which others will benefit, attorney’s fees may be awarded to the prevailing plaintiff. When there is some uncertainty as to entitlement to funds held by someone who is without fault, the holder of the funds may file an interpleader action with the court and be reimbursed the fees and costs of filing that action from the funds held. The claimants to the funds pursue their claims against each other. When a lawsuit results in some benefit to society at large, attorney’s fees may also be awarded by the court. Courts can also impose attorney’s fee awards as a sanction for egregious for bad faith action by an attorney or party.

Contract cases do not bring with them an automatic award of attorney’s fees to the winner. If the contract does not include a provision for award of fees, fees are not generally available. This rule has a lot of exceptions carved out by various statutes. The statutes provide for award of attorney’s fees when the dispute involves claims that may or may not involve a contract, but if the dispute is within the ambit of a statute that provides for attorney’s fees, the statute will control.

Florida has many statutes providing for award of attorney’s fees to the prevailing party. Basis for most of the statutes is to provide a level playing field when one party to a lawsuit will almost always have a significant financial advantage and the ability to financially wear out an opponent. It could be hard for a financially disadvantaged party to find an attorney because the party simply cannot afford counsel. If the attorney could get paid by the opponent at successful conclusion of the matter, the legislature believes the financially disadvantaged would have a far better chance of being represented by an attorney and thus level the playing field.

The legislature has also addressed contracts that provide for attorney’s fees to only one party. Those contracts are usually drafted by the party with superior bargaining power. Continuing its effort to level the litigation playing field, Florida’s legislature enacted a statute that provides one-sided attorney fees clauses in contracts are made bilateral. The prevailing party under any contract with a clause for award of attorney’s fees will be entitled to fees and costs.

A secondary basis for statutes and contracts providing for award of attorney fees to the prevailing party is to discourage litigation. The thinking goes, why would someone want to start a lawsuit that could require them to pay their lawyer and their opponent’s lawyer if they lose? Sadly, that logic is lost on many who rush to court with supreme confidence that they will win the day and with it, attorney’s fees and costs. In many cases, a statute or contract providing for award of attorney’s fees to the prevailing party actually encourages litigation.

Landlord and tenant statutes provide for attorney’s fees and costs to the prevailing party. The statutes primarily benefit the tenants, since most of the leases are drafted by the landlord and would have an attorney’s fee provision if the landlord wants one. The statutes are intended to give the tenant ability to hire an attorney and get fees paid by the landlord if the landlord is in the wrong. 

The legislature did not see the same need to provide for attorney fees in mortgage foreclosures but does provide for prevailing party fees in construction lien foreclosures. It would be unusual for a mortgage to be without a clause providing for attorney’s fees. And, with a statute that provides one-sided fee provisions are made bilateral, most mortgage cases will have fees to the winner. But, many contractors s are not well-versed in paperwork and draft their own contracts without an attorney’s fee clause. The statutes protect those contractors if they perfect their lien and successfully sue for monies owed. At the same time, the property owner is protected if the property owner prevails. 

Other areas where the legislature perceives a likely imbalance between the financial position of the parties include disputes between owners and their condominium or homeowner association, claims for wages and overtime, worker compensation, actions on insurance policies and cases involving motor vehicle repairs. The legislature also recognizes certain areas where providing for attorney fees can help make sure attorneys are willing to work for clients in those areas. A good example of this latter concern is statutes addressing probate, which provide that attorney’s fees and representation of the personal representative receives priority payment from estate assets. Another is dissolution of marriage.

One area where the legislature feels attorney’s fees should be available all of the time is when fees are incurred by a party attempting to collect a judgment. That seems only fair, as once judgment is entered there is no longer a legal dispute concerning liability or the amount that is owed.

Florida’s legislature has provided for award of attorney’s fees in connection with pursuit of frivolous claims or defenses. Section 57.105 Fla. Stat. provides for award of attorney’s fees to be paid equally by the losing party and the losing party’s attorney when they knew that a claim or defense when initially presented was not supported by the material facts necessary or would not be supported by law. The statute requires a motion for fees be served on the opponent but not filed with the court until 21 days after service, which is to give the opponent time to amend or withdraw the frivolous pleading.

To encourage settlement, both the legislature and Florida’s Supreme Court have created a framework under which a party can make a formal offer of judgment against the offeror or a formal demand for judgment against the opponent. If the defendant serves an offer for judgment and the plaintiff gets judgment that is at least 25% less than the amount of the offer, the defendant may be awarded fees and costs from date of the offer. If the plaintiff serves an offer which is not accepted by the defendant, if the judgment obtained by the plaintiff is at least 25% more than the offer, the plaintiff may be awarded attorney’s fees and costs from date of the offer.

Litigation is expensive, time-consuming and stressful. It results from a problem and a need for resolution. Before proceeding down the litigation path, parties to dispute should make a real and concerted effort to resolve that dispute. Even with a contract or statute providing for award of attorney’s fees, settlement might be a better course. Consideration of the total costs of litigation and the possibility of losing should be factors discussed with experienced counsel before a lawsuit is filed. Litigation should not be the first choice, but the option pursued only after serious effort to resolve the dispute has failed.

 

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