Can I Recover Attorney Fees In A Business Dispute?
One of the most important considerations in any legal dispute is whether the prevailing party will be able to recover its attorney fees at the conclusion of the trial or arbitration. This is one of the most common questions business clients ask and, depending on the circumstances, can be a major driver of litigation. The prospect of recovering attorney fees, if they are available, can also be a significant source of leverage in achieving settlement. Sometimes, the attorney fees at stake in a case can be as much as or even exceed the amount in dispute.
The Default California Rule: Attorney Fees Are Not Recoverable and Each Party Pays its Own Costs of Litigation
The general or default rule that applies to litigants in California is that each party to the lawsuit or arbitration pays his or her (or its) own attorney fees. This is known as the “American Rule” and differs from the “British Rule,” which says that the winner will be able to recover attorney fees. The rule that each party pays its own fees applies unless a statute being sued under provides for the recovery of attorney fees, or if the parties have agreed in a contract that fees will be recoverable.
Contractual Attorney Fee Provisions
In a breach of contract case, or a case involving other claims common in business disputes, such as fraud or breach of fiduciary duty, attorney fees are not recoverable unless the parties have agreed otherwise in a binding contract.
Contractual attorney fee provisions are recognized by California law. California Code of Civil Procedure Section 1717 provides for their enforcement by the winning or “prevailing” party in a lawsuit or arbitration.
One important consideration in any discussion of attorney fee provisions in California is that Section 1717 automatically makes one-sided or “unilateral” attorney fee provisions two-sided or “bilateral.” In other words, in California, if a contract states that only one party can recover attorney fees, should that party be the non-prevailing or losing party, the other party will be able recover its fees even though the contract doesn’t explicitly state that it can.
Statutory Attorney Fee Provisions
Some statutes provide for the recovery of attorney fees for certain types of claims. These include employment-related claims, such as wage and hour claims and claims for discrimination or harassment in the workplace. Civil rights and consumer protection statutes also typically provide that a winning plaintiff can recover attorney fees. These statutes are the product of legislative decisions about public policy. The potential for recovery of attorney fees makes legal recourse affordable to people who otherwise couldn’t afford to hire a lawyer.
Court Costs Are Usually Recoverable by the Winning Party
Court costs, which include filing fees, appearance fees, and other costs, typically involve far less money than attorney fees, but can nevertheless be substantial, particularly in larger cases. They can generally (but not always), be recovered by the winning party.
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If you or your business are facing a legal issue or litigation, contact the Law Offices of Corbett H. Williams today at 949-679-9909 or contact us using the form below, and we will respond promptly.