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Attorney Fees in Civil Litigation

Updated: Nov 11, 2023

Unfortunately, many attorneys dive into litigation without explaining the cost to their clients. Litigation is expensive, and parties often don't realize that they might not be entitled to attorney fees (which can sometimes exceed the party's damages).


The default rule is that each party pays their own attorney fees. This is called "the American Rule," and it is followed in almost all US jurisdictions (including California and Texas). The American Rule is often compared with "the English Rule," in which the prevailing party is entitled to attorney fees, and which is generally followed internationally.


The purpose of the American Rule is to discourage frivolous or abusive litigation. Of course, it often fails at that purpose.


The American Rule has exceptions. This post addresses two: (1) contracts and (2) statutes.


Contractual Attorney Fees


The prevailing party may be entitled to attorney fees when suing on a contract that provides for an award attorney fees.

Some caveats:

  1. Many contracts provide for "reasonable attorney fees"; "reasonable" does a lot of work there, and invites judges to reduce the actual amount of attorney fees;

  2. Not all contracts or similar documents provide for attorney fees; for example, oftentimes, operating agreements and home improvement contracts do not include attorney fees provisions;

  3. You must win on the contract cause of action; that is, if you sue for several causes of action, you will have to win on the breach of contract cause of action to be entitled to fees;

  4. There might be policy limitations; for example, California law requires mutuality (see Cal. Civ. Code section 1717), meaning if a contract entitles one party to attorney fees, it entitles the other party as well.

I'll also note that the award of attorney fees goes to "the prevailing party." This has important ramifications, and I'll address it in a future post (there are actual, case law instances when the winner was not necessarily a "prevailing party").


Statutory Attorney Fees


Litigants may also be entitled to attorney fees when authorized by statute. This section could go on, so I'm going to limit to four examples, two for California and two for Texas.


California


Cal. Civ. Code section 1750 to 1784 is called the "Consumers Legal Remedies Act." Prevailing plaintiffs are entitled to attorney fees, and prevailing defendants are entitled to attorney fees if the court is convinced that the plaintiff did not file in good faith.


Cal. Bus. & Prof. Code section 7168 covers home improvement contracts for swimming pool contractors. That section entitles a prevailing party in litigation to reasonable attorney fees.


Texas


Texas has many statutes allowing for attorney fees. If you have a contract in Texas, you probably have a claim for attorney fees pursuant to Tex. Civ. Prac. & Rem. Code section 38.001(b)(8).


Tex. Bus. & Com. Code section 17.50 provides for attorney fees award to a prevailing party under the Texas Deceptive Trade Practices Act (Tex. Bus. & Com. Code sections 17.01 to 17.955).


Tex. Fin. Code section 305.005 allows an award of attorney fees for someone who successfully sues for usury (charging too much interest).


(Edit: January 7, 2023) Tex. Civ. Prac. & Rem. Code section 37.009 allows an award of reasonable attorney fees in declaratory relief actions.


(Edit: August 7, 2022): It's worth pointing out that litigants could not recover attorney fees from all entities in Texas. Prior to September 1, 2021, litigants in breach of contract claims could only recover attorney fees from individuals and corporations; however, HB 1578 changed this to include other entities as well. See Tex. Civ. Prac. Rem. section 38.001.


Conclusion


Attorneys need to make their clients aware of the availability (or unavailability) of attorney fees in a given matter. Clients need to know that they might not be entitled to an award of attorney fees. This could affect the calculus that goes into the decision to litigate, or whether that litigation should be handled aggressively, and even how much an ultimate settlement might be.

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