Scenario 1

You are upset and about to file a lawsuit against the person or entity with which you have a problem.  You want them to pay for your attorneys’ fees because it’s all their fault that you’re in this predicament.

Scenario 2

You are upset because a person or entity just filed a lawsuit against you or your company. This is ridiculous and you want them to pay for your attorneys’ fees because it’s all their fault that you have to defend this suit.

Who Pays?  Litigation is often expensive and time consuming whether you’re a plaintiff or a defendant.  I am often asked about whether we can seek reimbursement for attorneys’ fees and the answer is: sometimes.

Under the English Rule, the losing party always pays the other party’s fees. However, Pennsylvania follows the American Rule.  The American Rule requires each party to pay its own attorneys’ fees unless otherwise permitted by contractual or statutory authorization, or grounds in equity.  This means that your fees can be reimbursed only if a contract exists which specifically allows it, a statute exists which specifically allows it, or some other established exception allows it. 

There are three reasons for the American Rule: 1) it would be unfair to punish a party for prosecuting or defending a lawsuit merely because they were unsuccessful, 2) poor parties might be prevented from defending their rights if losing a lawsuit automatically meant paying everyone’s attorneys’ fees, and 3) it would be too time consuming, difficult, and expensive for the court to determine reasonable fees in every case. 

Contract

Some contracts contain specific language relating to reimbursement and recovery of attorneys’ fees if either side brings a lawsuit to enforce the contract.  Courts will generally enforce an obligation to pay the other party’s fees where the parties have expressly agreed to do so in writing.  This can apply to leases, mortgages, loans, settlement agreements, and even contracts between spouses or other family members.  Such provisions may apply to whichever party prevails or wins the case.  This may apply whether the prevailing party is the plaintiff or the defendant, unless the contract states otherwise.  Loan documents will typically state that the bank is entitled to attorneys’ fees if the borrower defaults on the loan. For example, when the bank sues a borrower over an unpaid loan, the final judgment amount may end up being significantly higher than the original amount overdue because the bank’s attorneys’ fees have been added. 

Statute

Certain statutes allow for the recovery of attorneys’ fees.  Such statutes include the PA Unfair Trade Practices and Consumer Protection Law, the PA Trademark Act, and the PA Uniform Trade Secrets Act.  These statutes represent a desire to encourage and allow parties to file suit in order to protect rights which the Pennsylvania legislature has determined are of the utmost importance. You may see people claim that the Unfair Trade Practices and Consumer Protection Act entitles a plaintiff to recover their attorneys’ fees.  It does not.  It simply allows the plaintiff to recover those fees if the court determines that it is appropriate.  The plaintiff may request the fees but there is no guarantee that the plaintiff will receive them.

Established Exception

Established exceptions from the rule are limited.  Fees may be awarded if the other party has committed some serious misconduct related to the litigation.  The private attorney general exception allows recovery of fees in order to reduce the financial burden on a party whose efforts have benefited a large group of people in certain circumstances.  The established exceptions are quite narrow and uncommon compared to the previous two methods of obtaining reimbursement for attorneys’ fees. 

The answer in every case will be “it depends” because it depends upon the particular facts of each case including whether a contract is involved, what the causes of action might be, and whether any other circumstances give rise to an established exception. Unfortunately for many, courts will simply not allow a claim for attorneys’ fees when a party is upset about being involved in the lawsuit. One of the situations mentioned above must apply.

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To contact Attorney Schenck about your case, email her at [email protected]