Litigation is expensive. Attorneys’ fees are a large part of that expense. Correctly evaluating potential ways to make the other party pay for your attorneys’ fees, or potential exposure to liability for the other party’s attorneys’ fees, is critical.
Florida follows what is known as the “American Rule,” which provides that each party to a lawsuit must pay their own attorneys’ fees. There are exceptions to this rule. The two most common exceptions are when a contract or a statute upon which the lawsuit is based contains a provision that provides that the non-prevailing party must pay the winning or prevailing party’s attorneys’ fees.
It is a common misconception that a “loser pays” rule is always good. For example, there are many situations in which there may be clear liability but minor damages. Here, the loser pays rule may convert a minor and easily resolved economical loss into a major one because now attorneys’ fees may be claimed if litigation is pursued. This discourages settlement and encourages litigation. In a contractual setting, the parties have the opportunity to anticipate and prepare for potential liabilities and damages that may arise from their transaction during the contract drafting and negotiation process. A well-crafted attorneys’ fee provision that considers the character of foreseeable disputes is a critical part of contractual risk evaluation and mitigation.
Some statutes include a prevailing party, or loser pays provision. This is a double-edged sword. A plaintiff that asserts one or more such statutory claims as alternatives may become liable for the defendant’s attorneys’ fees if the plaintiff chooses to abandon such alternative claims prior to trial as a matter of strategy. It also creates a circumstance in which a well-represented defendant can strategically defeat a statutory claim to offset the potential economic impact of liability on other claims. There are also statutes that limit attorneys’ fee recovery one way in favor of the plaintiff. Statutory claims can be dangerous. Be prepared.
Florida also has a special combination “Offer of Judgment and Proposal for Settlement” statute and rule. This statute and rule combination allow a plaintiff or a defendant to potentially recover attorneys’ fees based on the strategic use of a demand or proposal for settlement. A plaintiff may make an offer to accept a certain amount from a defendant. The defendant has 30 days to accept, and if not accepted, the plaintiff may be awarded attorneys’ fees if the plaintiff recovers a judgment of 25% more than the offer. The defendant may similarly make an offer of a certain amount to the plaintiff. If the plaintiff does not accept it, the defendant may be awarded attorneys’ fees if the defendant successfully limits the judgment obtained by the plaintiff to at least 25% less than the offer. This statute and rule can be a very effective strategic tool in litigation.
Lastly, Florida case law recognizes the Wrongful Act Doctrine, which allows a party to claim attorneys’ fees as damages in separate lawsuit that were caused by the wrongful conduct of another party. This doctrine is best explained by example: If a surveyor negligently fails to locate property lines for a property owner, and the property owner gets sued because of this by the adjoining property owner, the first property owner may then sue the surveyor for damages that include the attorneys’ fees incurred from the first lawsuit with the adjoining property owner.
Risk arising from attorneys’ fee exposure and shifting or strategically addressing that risk is a critical component in contract negotiation and litigation. The business and litigation attorneys at Lacey Lyons Rezanka are ready to help you successfully navigate this as well as all your business and litigation issues.