In any legal dispute, clients are often focused on the wrong committed by the other party, the damages suffered, and the evidence available to prove both. And rightfully so. But there is another important factor that must be considered in evaluating any legal dispute: whether you can recover your attorneys’ fees spent in the litigation.
Why? Although you may be legally entitled to $30,000 in damages for a breach of a contract caused by another party, if the attorneys’ fees for prosecuting the case will cost you $100,000 and these fees are not recoverable against the responsible party, then pursuing those damages may not make economic sense. Therefore, it is important to determine early on if you are entitled to recover attorneys’ fees so that you can make an informed decision whether to pursue litigation.
The “American Rule” on Attorneys’ Fees
In California, each party in a lawsuit is responsible for their own attorneys’ fees and costs, which is known as the “American Rule”. In other words, win or lose – you pay your own attorneys’ fees and the other party pays its own attorneys’ fees. It does not matter if you did nothing wrong and were the one that suffered thousands of dollars in damages. This rule is harsh especially if you get sued for something frivolous and are forced to pay an attorney to defend against baseless claims.
Fortunately, there are exceptions to this rule. Two of the most common exceptions are when (1) parties have agreed in a contract that a prevailing party can recover their reasonable attorneys’ fees in a lawsuit; and (2) a statute expressly provides for the recovery of attorneys’ fees.
Contractual Exception
Under California Civil Code § 1717, parties can agree in writing that a prevailing or winning party in a lawsuit can recover its reasonable attorneys’ fees. In cases involving a business dispute, such as a breach of contract, fraud, or breach of fiduciary duty, you may be able to get your attorneys’ fees reimbursed if there is a provision allowing for such recovery in the governing contract.
If you enter a contract or business relationship with another person or entity, check to see if there is an attorneys’ fees provision in the agreement before signing. If you are concerned about recovering attorneys’ fees in the event of a dispute, you should insist on including such a provision in the agreement.
In the above example involving the $30,000 breach of contract case, if the controlling contract has an attorneys’ fees provision, you may be more inclined to pursue that litigation knowing that you can recover your reasonable attorneys’ fees if you prevail. The existence of such a provision can also help you settle the case because you can use the threat of recovery of your fees against the responsible party.
Statutory Exception
Depending on what type of legal dispute you have, you may also be entitled to recover attorneys’ fees as a prevailing party under a specific law. Some potential claims that statutorily authorize the recovery of attorneys’ fees include employment claims under the California Fair Employment and Housing Act (FEHA) such as for discrimination or harassment; wage and hour violations under the California Labor Code such as for failure to pay minimum wages or overtime; representative actions on behalf of aggrieved employees under the Private Attorneys General Act (PAGA); consumer claims under the California Consumers Legal Remedies Act; and civil rights claims under federal and state law, such as the Unruh Civil Rights Act, Ralph Civil Rights Act, Bane Act, and 42 U.S.C. § 1983.
It is important to understand at the outset of a case whether attorneys’ fees are recoverable because such recovery can have a meaningful impact on your decision to prosecute a civil suit. If you have been damaged because of someone else’s breach or fraudulent conduct, give us a call at (213) 468-8840. We’re here to Fight For Your Recovery.
