Contracts: Negotiating Attorneys Fee Awards

Posted By Cliff Tuttle | October 14, 2008

Posted by Cliff Tuttle

In America, each party generally pays its own expenses when going to court. This can be a deterrent to litigation when the amount to be recovered is not very large and the prospect of success is not high. But, if attorneys fees are available as part of the recovery, this may tip the scale in favor of pursuing the claim.

There are a handful of statutes that award attorneys fees to a successful litigant. They are mostly what are called “remedial statutes”, created for the purpose of correcting a condition deemed to be unjust to a protected class of persons. Federal civil rights statutes fall into the category, as do some state and federal consumer statutes. For example, the Pennsylvania Unfair Trade Practices Consumer Protection Law, the subject of PLBT’s most recent Landlord-tenant post, authorizes the court to award attorneys fees to a successful plaintiff. In some of these statutes, the plaintiff is referred to as a “private attorney general” and the award of attorneys fees is deemed, in part, a reward for bringing benefits to other members of the public.

Another example is the Pennsylvania Contractor and Subcontractor Payment Act. The legislature undoubtedly felt that the bargaining power between the contractor and the subcontractor was grossly unequal and sought to motivate the contractor to pay subs on time by creating penalties, including an award of attorneys fees, if the subcontractor was required to sue.

Other awards of attorneys fees are found in the Rules of Civil Procedure, awarding sanctions against a party who disregards an order of court or certain duties under the Rules.

But statutes and rules of court which award attorneys fees are rather few in number and do not come into play in the vast majority of cases. Moreover, if you or your client are not one of those underdogs for whom the congress or legislature seeks to level the playing field, you are on your own.

However, all is not lost. The best and most reliable way to provide for attorneys fees in litigation is by contract.

The good news is that this benefit is often available for the asking. When the parties are feeling friendly and there are no disputes on the horizon, a contract provision that awards attorneys fees when a litigant has to go to court to collect money or assert other contractual rights will often attract no attention at all. It may even seem fair to the adverse party, who thinks that such a circumstances is so remote that it doesn’t matter.

When the other party, who holds most of the cards and will be collecting money from you or your client, is proposing this contract term and won’t budge, there is usually a way to make the deal better. Don’t let the other side collect attorneys fees unless the claim is successful and counter-propose that the losing side pay the attorneys fees of the prevailing party. The other party, who at this point expects to win all disputes, will often cheerfully agree. After all, fair is fair. But when the dispute arises, he/she/it may hesitate to bring a doubtful claim for fear of paying rather than collecting attorneys fees. This, in turn, improves the prospects of an advantageous settlement.

On the other hand, if the other party insists on getting attorneys fees win or lose, perhaps you are getting into the wrong deal. Review the whole contract for other one-sided provisions.

Sometimes a fixed amount or a cap on attorneys fees can be proposed. A stated high hourly rate (like $250/hour and up — what big law firms typically charge) can be a deal breaker. The word “reasonable” in front of “attorneys fees” (not an oxymoron, take my word) can postpone that issue to the day when a judge or arbitrator must decide the question. Judges will probably try to determine what the prevailing attorneys fee for conducting litigation of similar difficulty and importance in the jurisdiction might be. The size of the potential recovery would play a major role in this determination. If the amount in dispute runs into the millions, the proposed $250/hour rate is likely to seem reasonable to the judge. Not so for a $5,000.00 case.

CLT

Welcome

CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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