Attorney’s Fees, Who Pays?

Lawsuits are expensive. That is not going to change any time soon. In fact, the cost of litigation gets more and more expensive every year. In 2015, the Washington State Bar Association’s Task Force on the Escalating Costs of Civil Litigation issued a report with various recommendations on how to decrease the cost of litigation. Why litigation is so expensive and how to decrease the cost of litigation could be debated at length.

But every client who is involved in a lawsuit or about to become involved in a lawsuit has the same question—will the other side have to pay my attorney fees if/when I win?

General Rule on Attorney Fees

In Washington, the general default rule is that each party in a lawsuit is responsible for its own attorney fees incurred in the lawsuit. This is known as the “American Rule”.  In contrast, the “British Rule” provides that the losing party in a lawsuit must pay the winner’s attorney fees.

The rationale behind the American Rule is that the threat of having to pay the other side’s attorney fees has a chilling effect on access to the courts and could dissuade potential litigants from bringing a valid case.

However, there are certain well-recognized exceptions to the American Rule that do allow the winning party to recover attorney fees against the losing party.

Exceptions That Do Allow Recovery of Attorney Fees

In Washington, there are three recognized exceptions to the general rule that each party must pay its own attorney fees. A party to a lawsuit can recover its attorney fees against another party in the following circumstances: (1) if a statute provides for the recovery of attorney fees; (2) if a contractual agreement between the parties provides for the recovery of attorney fees; or (3) some recognized ground of equity.

1. Statutes. A party can recover its attorney fees against another party if a law or statute that governs the case provides for the recovery of attorney fees. There are lots of different kinds of statutes that include these types of provisions. Examples include parties who prevail on a Consumer Protection Act claim, on a claim involving unpaid salary or wages, or on a claim of discrimination. However, each statute is different and should be read carefully. Some statutes are mandatory while others allow the court to exercise discretion in deciding whether or not to award fees. Some other statutes may only allow a winning plaintiff to recover fees, but not a winning defendant.
2. Contract. A party can also recover attorney fees if the dispute involves a contract that includes a provision that the prevailing party is entitled to recover attorney fees. It is actually quite common to see these boilerplate attorney fees provisions in contracts nowadays. Even if the contractual provision is written to only benefit one party—only party A can recover its attorney fees if it wins, but not party B—there is a Washington law that says such provisions are reciprocal, meaning that the benefit of the attorney fees provision applies to both parties equally.
3. Equity. If there are no statutes or no contractual provisions that apply, there are various equitable grounds upon which courts can decide to award attorney fees. But these grounds are narrow and usually only applicable in special, limited circumstances. One of the more common equitable grounds for awarding attorney fees is if the other side has engaged in some sort of bad faith in the litigation, but that is a high burden to prove and courts are reluctant to find a party engaged in bad faith.

Impact of the Right to Attorney Fees

Whether there is a right to attorney fees at the end of a lawsuit is important to know. And it is important to know this as early as possible. The answer can drive economic decisions in pursuing or not pursuing litigation. If the prevailing party will have a right to recover attorney fees, that could make it more palatable to pursue a lawsuit through to the end, especially for a party that has a strong case. But the flip-side of the coin is if the other side wins it will recover its attorney fees. So, the stakes are increased in attorney fee cases.

Conversely, in cases with no chance of attorney fees being awarded, it could cause the parties to reach a settlement. This is especially true in cases where there is a relatively small amount at stake in which attorney fees incurred to litigate the case would easily exceed the total amount that could be won.

So before getting involved in a lawsuit, or at the outset of a lawsuit, you should determine with your lawyer whether or not attorney fees could be awarded. It could be a game-changer.