Under the “American Rule” parties in litigation are expected to bear their own attorneys’ fees and costs. Generally, attorneys’ fees are recoverable when provided for by a particular law or when included in the contract in dispute between the parties, but not otherwise. Thus, when a particular claim is not based upon a law which provides for recovery of attorneys’ fees, or where there is no attorneys’ fees clause in the agreement in dispute between the parties, then neither party may recover their attorneys’ fees.
Among the exceptions to the general rule above is the use of an ‘offer of judgment.’ A proposal for settlement or offer of judgment allows for recovery of attorneys’ fees for the winning party, under certain detailed conditions. The underlying policy is to encourage the resolution of litigation by injecting the leverage of attorneys’ fees against the losing party. Under certain circumstances, attorneys’ fees may also be awarded to the prevailing party upon the Court’s determination that a claim or defense was not supported by the material facts necessary to establish the claim or defense, or that the claim or defense would not be supported by then existing law to those facts.
Inclusion of an attorneys’ fees clause can add leverage in litigation. Business clients may include an attorneys’ fees provision in their invoices and contracts, because if collection action becomes necessary, the business owner can recover their fees and costs, in addition to the amounts due, if they are successful in their case. This modest planning step enables the suing, prevailing party to gain leverage over the debtor above the amounts due, through recovery of litigation fees, so as not to diminish recovery of amounts owed by the expense of litigation. The presence of an attorneys’ fees provision can also serve as an incentive for settlement where each side bears their own fees, in order to avoid the downside risk of the losing party paying for both their own attorneys’ fees and that of the successful party.
Attorneys’ fees clauses can level the playing field to some degree between a smaller and larger company by providing a means for a smaller company to recoup its fees if successful in a dispute in which there is an attorneys’ fees clause. Occasionally, a contract may seek to provide for recovery of attorneys’ fees for only one of the parties. However, Florida law provides that contractual provisions for attorneys’ fees cannot be one sided. Thus, contractual attorneys’ fees clauses are generally construed by the courts to be reciprocal, so that the winning party is entitled to recovery of their reasonable attorneys’ fees. The reasonableness of fees is determined by the Court.
Both contract clauses and certain statutes which provide for recovery of attorneys’ fees may provide that the ‘prevailing party’ is entitled to recovery of a reasonable attorneys’ fee. This does not mean if a lawsuit is commenced and a settlement occurs, fees will be payable. Rather, in order for a party to become entitled to of attorneys’ fees as a prevailing party, there must generally be a corresponding alteration in the legal relationship between the parties. This ‘alteration in the legal relationship’ may include the necessity to obtain a successful judgment, a consent decree, or some other judicial imprimatur, such as a formalized settlement approved by the Court (with the retention of jurisdiction to enforce the terms of the parties’ agreement), before fees may be awarded. Due to the complexity of these fee shifting provisions, considerable litigation has occurred over the issue of fee entitlement.
Please do not hesitate to contact our Blalock Walters litigation team for further information on this topic.