Attorney's Fee - Which Party Pays

Which Party Pays

Most countries operate under a "loser pays" system, sometimes called the English rule (in English law it is described as "costs following the event"). Under the English rule, the losing party pays the successful party's legal costs, as well as other court costs. The United States is a notable exception (except at the Federal level), operating under the American rule, whereby each party bears its own legal expenses. Some tort reform advocates propose adopting a "loser pays" rule in the United States. Federal district court and Court of Appeals judges award costs to the prevailing party under Federal Rules of Civil Procedure 54.

In some jurisdictions, statutes may permit judges and juries to independently impose "loser pays"; for example, a judge may say: "I am ruling for the plaintiff on the amount of $ plus all court costs and attorney fees." But generally, state court judges have no common law authority to award such fees against the losing party. Some settlement agreements, arbitration agreements and other extrajudicial contracts may also stipulate a loser-pays arrangement.

A number of federal laws provide for an award of attorney fees for a prevailing plaintiff, such as:

• Class actions
• Civil rights violations, see Civil Rights Attorney's Fees Award Act of 1976
• Freedom of Information Act violations
• Copyright and patent cases
• Antitrust actions
• Lemon law cases
• Suits against the federal government where the position of the government was not "substantially justified"

Note that these "fee shifting" awards are a characteristic of the law enforced and do not necessarily depend upon the court in which they were brought; state courts can and do sometimes hear lawsuits brought under federal law. So if, for example, a person brings a civil rights action in state court and wins, he may be entitled to an award of attorney fees.

Most states have statutes under which attorneys' fees may be awarded to a prevailing plaintiff, such as an action on a contract where the contract contains a provision allowing recovery, or an action brought under consumer protection laws. Both plaintiffs and defendants are sometimes awarded attorneys fees in divorce and child custody actions, although this is an unusual circumstance, since such awards are made under the court's power to divide property or award alimony and child support.

A majority of states allow generally for an award to any party in a lawsuit, if another party has forced him to expend money on attorneys fees to defend against a claim utterly or substantially lacking any possible merit and brought in bad faith (frequently called "abusive litigation" or a "frivolous lawsuit"). For example, in the 'state of Georgia, a trial court must award attorneys fees if a party has brought a claim "with respect to which there existed such a complete absence of any justiciable issue of law or fact that it could not be reasonably believed that a court would accept the asserted claim, defense, or other position"; meanwhile, a trial court may, but is not required to, award attorney's fees if a party has made a claim "that lacked substantial justification or...was interposed for delay or harassment, or if unnecessarily expanded the proceeding by other improper conduct...."

There are many ways of calculating prevailing-party attorney fees. Most courts recognize that actual costs may be disproportionate and inequitable. Thus, many jurisdictions rely on other calculations. Many courts or laws invoke a lodestar' calculation: reasonably expected billable hours multiplied by a reasonable hourly rate, sometimes multiplied by a factor reflecting the risk or complexity of the case. Courts in class actions frequently award fees proportionate to the damages recovered. The Class Action Fairness Act of 2005, which, among other provisions, regulates the fees that can be awarded in a class action, was passed in response to concerns that courts were not adequately overseeing the award of such fees.

The overriding principle in awarding attorney’s fees is reasonableness. Courts will often reduce attorney’s fee awards they find to be unreasonable and excessive. Common examples of unreasonable billing include; billing for overhead, overstaffing for uncomplicated tasks, rebilling recycled work product, and billing for improbably long days. In the private sector, many companies now use legal auditing to determine whether their outside counsel is billing them for excessive legal fees.