CAN YOU RECOVER ATTORNEY FEES IN CALIFORNIA LAWSUITS?
If you file suit against someone for $100,000 and win, but your attorney’s fees total $45,000, can you get the losing party to cover those expenses?
In California, as in almost every jurisdiction, the answer is no, but there are a few exceptions that may allow you to recover your attorney’s fees.
If you’re contemplating filing a lawsuit or have been sued yourself, you need to consider every aspect, including attorney fees, before deciding on the courtroom or the settlement process. If you’re in or around San Francisco, or nearby in San Jose, Santa Clara, San Mateo, Oakland, or Alameda County, contact the Law Offices of David H. Schwartz, INC.
Attorney David Schwartz has been involved in every aspect of civil litigation, representing both plaintiffs and defendants, for 45-plus years. He will listen to your upcoming or current case, advise you of your best options going forward, and represent you vigorously if need be.
The American Rule
California follows the “American Rule” when it comes to attorney’s fees. This means that both parties in a lawsuit are responsible for paying their own attorney’s bills.
The American Rule in California is codified in the California Code of Civil Procedure § 1021: “Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.”
Critics of the American Rule have long pointed out that it leads to frivolous lawsuits. Faced with a bogus claim, a person or entity has to decide whether it’s worth the cost of an attorney's hourly billings to defeat the other party or just throw in the towel and make a settlement.
Exceptions to the American Rule
California Civil Code Section 1717 allows for the collection of attorney’s fees if there is a clause in a contract specifying such a provision. The provision, however, cannot be “one-sided,” meaning both the plaintiff and defendant should be able to recover attorney’s fees if they win.
Section 1717(a) provides, in “an action on contract … the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”
Enforcing the provision in court, however, depends largely on the wording of the contract. For instance, it cannot simply call for the “reimbursement of expenses incurred in any legal action;” instead it must specify the attorney’s fees.
When a Third Party Causes You to Sue
Another exception is called the “Tort of Another” doctrine, which covers cases in which one party sues a third party because of the wrongful or negligent action of another party. This is also sometimes called “implied indemnity.”
The Tort of Another exception is defined by the California Supreme Court as: “A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred.”
The Tort of Another doctrine is often used in real estate transactions. An escrow company or real estate agent might be held liable for their actions or inactions in causing, for example, a buyer to sue a seller. In other words, a tort – or a civil as opposed to a criminal wrong – by a third party caused the lawsuit.
The Tort of Another doctrine does not apply only to real estate transactions, but it does have a limited applicability. The doctrine, however, can prove useful as a bargaining chip in the run-up to filing a lawsuit.
Generally, the American Rule applies in California, which presumes that each party in a lawsuit must bear its own attorney fees, regardless of the outcome of the case. However, there are significant exceptions to this rule that allow for the recovery of fees under specific circumstances. Understanding these exceptions can be crucial for both parties involved in litigation.
Statutory Basis for Recovery of Attorney Fees
One of the most common routes to recover attorney fees in California is through statutory provisions. Certain statutes provide for the award of attorney fees to the prevailing party in various types of cases. Some notable examples include:
Contractual agreements: If a contract includes a provision for the recovery of attorney fees, the prevailing party may be entitled to recover those fees after successfully enforcing the contract. California Civil Code Section 1717 establishes that a party may recover attorney fees in contract disputes if the contract allows for such recovery.
Consumer protection laws: California has several consumer protection statutes that allow for the recovery of attorney fees for the prevailing party in specific cases, such as the Consumers Legal Remedies Act (CLRA) and the Unfair Competition Law (UCL). These statutes are intended to encourage individuals to enforce their rights against unfair practices without the fear of incurring prohibitive legal costs.
Family law cases: In family law proceedings, such as divorce or child custody disputes, the court has broad discretion to award attorney fees to ensure fairness in the legal process. Family Code Section 2030 allows for the recovery of attorney fees based on the parties’ relative abilities to pay.
Equitable Basis for Recovery
In addition to statutory provisions, attorney fees may be recoverable under equitable principles. These principles generally apply in cases where one party has acted in bad faith or where significant misconduct has resulted in additional legal costs for the other party. Some circumstances that may warrant equitable fee recovery include:
Bad faith litigation: If a party engages in frivolous claims or defenses, they may be held liable for the opposing party's attorney fees as a penalty for their actions. Courts often look unfavorably upon litigants who use the legal system for harassment or intimidation.
Unreasonable denial of settlement offer: If a party unjustifiably refuses a settlement offer that ends up being more beneficial than the ultimate judgment, courts may decide to award attorney fees, as the refusal can prolong the litigation and increase legal costs.
Factors Influencing the Court's Decision
While there are clear pathways to recover attorney fees, several factors can influence a court's decision on whether to grant such requests. These factors include:
Nature of the case: The court will take into account the type of case involved. Cases that reflect a public interest or that affect a significant number of people may be treated differently than private disputes.
Conduct of the parties: The court will review the conduct of both parties during litigation. If one party has acted particularly directly or has engaged in vexatious litigation tactics, this could sway the decision to award attorney fees.
Local rules and practices: Different courts may have their regulations that affect how attorney fees are determined. For example, some jurisdictions may have recommended schedules for calculating reasonable attorney fees based on experience and expertise.
Important Considerations for Claiming Attorney Fees
If you intend to seek attorney fees in your California lawsuit, several important considerations must be taken into account:
Documentation: Ensure that you have detailed records of all legal fees incurred during the litigation process. This includes time spent, the tasks performed, and any relevant invoices or billing statements. Courts require clear documentation to ascertain reasonable attorney fees.
Timeliness: Many statutes impose strict deadlines for seeking attorney fees. Be mindful of these timelines, as failing to adhere to them could negatively impact your ability to recover fees.
After the judgment: Typically, requests for attorney fees should be made after a judgment has been rendered or a settlement has been reached unless specifically stated otherwise in the relevant statute or contract.
Potential Challenges and Defenses
Recovering attorney fees is not always straightforward. The opposing party may present various defenses against your claim for fees, including:
Challenging the reasonableness of fees: Opposing parties may argue that the fees claimed are excessively high or not reflective of the market rates for legal services.
Contractual limitations: If the contract stipulates a different arrangement regarding attorney fees, the court may enforce this agreement, potentially limiting recovery.
Dispute over prevailing party status: The question of which party is the “prevailing party” can often be contentious. The party that ultimately wins the case is not always the one entitled to recover fees if the circumstances of the case dictate otherwise.
Seeking Legal Guidance
Understanding your rights regarding attorney fees in California lawsuits is critical for effective litigation strategy. Given the complexities of the law surrounding fee recovery, consulting with experienced legal counsel is advised.
The Law Offices of David H. Schwartz, INC. offers skilled guidance in navigating these issues to ensure that your legal rights are protected throughout the litigation process. If you have questions about your potential to recover attorney fees in a California lawsuit, don’t hesitate to reach out for professional legal support.
If you’re located in the greater San Francisco Bay Area, or in the neighboring Alameda County areas of Oakland, San Jose, San Mateo, or Santa Clara, reach out today.