One of the first questions many attorneys are asked when a client is considering filing a lawsuit is whether the fees and costs they will incur in the litigation are recoverable.
In virtually all personal injury and property damage cases and in many business disputes, under what courts have dubbed the “American Rule,” the answer is no. Because the cost to a client of pursuing a claim is an important factor to be considered when evaluating a case (a $100,000 claim that will cost $50,000 in unrecoverable fees and costs to litigate is only worth $50,000 even if successful), knowing when and how fees can be recovered is key.
In this series of posts, we will explore “fee-shifting” including when it is available, which party has the burden of proof and how that burden can be met, what courts will look at when deciding if and how much to award, how a party that intends to seek its fees can lay the groundwork for a successful recovery as the litigation progresses, and the recovery of costs.
There are four major categories of cases in which the prevailing party can claim attorney’s fees:
- Cases in which it is mandatory or discretionary under the federal or state statute at issue for the court to award the prevailing party its reasonable attorneys’ fees (e.g., Fair Labor Standards Act, Civil Rights Act, State and Federal trade secret claims, State and Federal Class Actions, State Consumer Protection Act claims, State Unfair Claim Settlement Practice Act claims);
- Breach of contract claims in which the contract at issue entitles a party to recover the fees it incurred in an action to enforce the contract;
- Fees authorized by common law (e.g., in certain jurisdictions, an insured that is compelled to litigate with its insurer to obtain a defense under a liability policy can recover the fees associated with the coverage action); and
- Breach of contract claims in which an element of the damages caused by the breach are attorneys’ fees (e.g., in Maryland, where an insurer breaches a policy’s duty to defend, the insured can recover the costs of its defense).
In all of the above scenarios, the party that intends to seek recovery of attorney’s fees must include a claim for attorney’s fees in their complaint. Under Maryland state law, different fee-shifting scenarios are governed by subsections of Maryland Rule 2-703, and reference to the appropriate rule section should be included in the complaint.
In the first three categories above, the reasonableness of the attorney’s fees is generally litigated in a post-judgment fee petition, while in cases where fees are an element of a party’s substantive damages claim, they will likely be litigated as part of the case itself like any other category of damages.
In our next post, we will address the burden of proof applicable to a fees claim and whether an expert should be retained to support a fees claim. In the meantime, if you would like the experienced attorneys at Luchansky Law to review your contracts to ensure that they include an enforceable attorney’s fees provision, give us a call at (410) 522-1020 to set up an appointment.