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April 30, 2015 by Bruce D. GreenbergDownload PDF

Getting The Other Side to Pay Your Attorneys' FeesBruce D. Greenberg

It’s all well and good to win your case, but most of the time you still have to pay your attorneys. Our courts follow what is known as the “American Rule.” Under that rule, a party, even one who wins the case, generally cannot shift its attorneys’ fees to the other side. The reason for this is the policy decision that adopting a “loser pays” regime would deter all but the wealthy from having access to the courts, since even a party with a valid claim might be afraid to sue given the risk, no matter how small, of having to pay the other side’s attorneys’ fees.

But there are times when a party can win its attorneys’ fees. There are dozens of “fee-shifting statutes” that provide for a defeated party (often, only a losing defendant, not a defeated plaintiff) to pay the winning party’s fees. These include both federal laws such as the Civil Rights Act and the Magnuson-Moss Warranty Act, and New Jersey statutes such as the Consumer Fraud Act and the Law Against Discrimination. 

In New Jersey state court cases, the New Jersey Court Rules list a number of other circumstances in which a party can recover its attorneys’ fees. For example, a successful claimant in an action on a liability or indemnity policy of insurance can win attorneys’ fees, and fees are likewise available in certain family, probate, and foreclosure cases.

One important context in which attorneys’ fees can be awarded is when an attorney’s efforts have created a fund that benefits his or her client or a class of clients. The attorney can claim a percentage of that fund as a fee, since without the attorney’s work, the fund would not have been created and the client or the class would have gotten no benefit at all. The law considers it unfair for an attorney whose efforts benefit a client or a class not to be compensated for those successful efforts, and the fund offers money to pay that attorney for what he or she has achieved. 

Contractual provisions offer still another way to recover attorneys’ fees. Parties who enter into a contract can agree that if litigation results from the contract, the losing party must pay the winner’s attorneys’ fees. Though courts often construe such provisions strictly, they can be enforceable. Thus, statutes and court rules are not necessarily the only source of a right to fee-shifting. Parties to litigation should check any applicable contracts to see whether they create the ability to recover attorneys’ fees.

Attorneys’ fees can also be assessed against a party, whether plaintiff or defendant, who takes frivolous positions in litigation, or who did not adequately investigate the factual or legal issues before commencing litigation. Both New Jersey and federal law allow for fee awards in such circumstances. Fees are also available when a party engages in misconduct during the course of a case, such as by failing to obey an order to produce documents or other discovery. Courts do not often find legal positions to be frivolous or order the payment of attorneys’ fees for discovery violations, but parties can still seek such awards in proper circumstances.

There are a number of other contexts in which one party can be made to pay another party’s attorneys’ fees.  Resourceful counsel are always on the lookout for ways to benefit their clients by shifting attorneys' fees to an opposing party.