When Can a Party Recover Attorneys’ Fees in Litigation?

Many persons, both individuals and businesses, approach potential litigation with an expectation that, if they are successful, they can recover the attorneys’ fees that they incur in the litigation from the other party.  Given the expense that a party may incur in attorneys’ fees in a lawsuit and how much this amount may affect the net amount a party may actually recover (as a plaintiff) or be forced to pay (as a defendant), the accuracy of that assumption and what can be done to ensure that attorneys’ fees can be recoverable may have a large impact on the decision of whether to litigate at all or at what amount to settle a lawsuit.

The General Rule in New York on Recovery of Attorneys’ Fees

Many people assume that, in any case, they are entitled to recover their attorneys’ fees if successful.  While that result has been enforced in England (“the English Rule”) for centuries, it has never been a universal rule in courts in the United States and, particularly, not in New York.  Indeed, the New York Courts have repeatedly stated as our State rule as to recovery of attorneys’ fees: “Under the general rule, attorney’s fees are incidents of litigation and a prevailing party may not collect them from the loser unless an award is authorized by agreement between the parties, statute or court rule.”  This rule is probably one of the main reasons that such a large percentage of litigated matters are settled between the parties either without proceeding to litigation or before the litigation reaches any definitive conclusion.

Exceptions Which Allow the Recovery of Attorneys’ Fees

But, of course, the rule itself offers alternatives that permit the recovery of attorneys’ fees, and these alternatives should generally be considered BEFORE a dispute even arises or reaches a point that requires a decision as to whether or not to litigate. First, in recent years more and more statutes under both Federal and New York State law now permit a party to recover attorneys’ fees in specific situations.  (For example, in New York private litigants in civil actions against the State may recover attorneys’ fees under certain standards; a successful tenant in a landlord/tenant case may recover attorneys’ fees if the lease would otherwise permit the landlord to recover its fees if successful; and a person who brings a proceeding to have a guardian appointed for a mentally incompetent person may recover his/her attorneys’ fees from the assets of the person declared incompetent.)  And as for Court rules, if a party files a claim or defense in a lawsuit that the Court determines to be “frivolous” (completely without legal merit or any actual factual basis and known to be so defective by the party asserting such claim or defense), the opposing party may recover its attorneys’ fees for successfully defeating such a frivolous claim.

An Important Step to Consider to Permit the Recovery of Attorneys’ Fees

Perhaps the most important action any person or business can take is, in the case of virtually any kind of contract or business arrangement, to include in the contract document a provision permitting that person or business to recover its attorneys’ fees from the other party if successful in any litigation under the contract.  The only caution here is that very few parties also involved in such a contract will ever agree to a one-sided attorneys’ fee provision but will insist that the provision permit whichever party prevails in any litigation to recover its attorneys’ fees.  But at least such a provision opens the door to the recovery of attorneys’ fees.

Conclusion

At a minimum, before commencing or beginning to defend any litigation, any client should consult his/her/its attorney for an estimate of the potential attorneys’ fees that the client might incur and whether there is a contractual or legal basis to recover those fees if successful and weigh those facts against the amount in dispute and the likelihood of success before proceeding with the litigation.

This article is intended for general informational purposes only and should not be considered legal advice or counsel, nor does it create an attorney-client relationship.