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It's The Law: Attorney Fees Can Be Recovered If Provided By Statute Or Contract

Q: A company I do business with has threatened to sue me. I know law suits can be expensive and am wondering if I will be able to get my attorney fees paid as part of the suit?
A: With very limited exception, attorney fees are only recoverable if provided by statute or contract between the parties.

Statutes that provide for attorney fees include awards in divorce cases where the party most able to pay fees can be ordered to pay the other party’s fees, to the prevailing party in condominium disputes when pursuing action to collect on a bad check and when defending a governmental taking of private property. The statutes also provide for an award of fees where a party is forced to defend a frivolous law suit or when a formal settlement offer is not accepted and result at trial is at least 25% worse than the offer.

In most business disputes, the contract between the parties will determine if attorney fees can be recovered. The right to recover attorney fees is limited by the exact language of the contract and the courts often engage in strict interpretation.

For example, in the case of Bowman v. Kingsland Development, Inc. the plaintiff sought to collect on a promissory note. The note included a default provision that provided the debtor agreed “to pay all costs of collection, including reasonable attorney’s fees.” The debtor did not defend and a default judgment was entered including an award of attorney fees. The debtor appealed. The court ruled that attorney fees in the appeal were not a “cost of collection” and denied the creditor’s request for fees.

Another case involved an arrangement between a car dealer and a finance company. Contract between the dealer and finance company provided for recover of attorney fees by the finance company if the buyer financing purchase of a vehicle defaulted if the finance company suffered a loss because the buyer made a claim against the car dealer that could be transferred to the finance company. The contract between the dealer and the finance company also included a provision under which the dealer would apparently have to repurchase the finance contract under certain circumstances. Suit was filed in connection with the repurchase provision and the court held that no attorney fees could be recovered, because the repurchase provision of the contract did not contain an attorney fees clause.

In another case, a potential real estate buyer filed a law suit to determine if his planned commercial use of the property would violate restrictive covenants. The restrictive covenants provided for attorney fees to a successor or assignee of the original property owner for enforcement of the covenants. The court held that the buyer was not a successor or assignee of the original owner within meaning of the attorney fees provision.

In the recent case of Islander Beach Club v. Skylark Sports, L.L.C., the court reviewed an attorney fees provision in a lease between the parties. The clause read as follows:

“In the event that either party incurs legal fees or costs in the enforcement of this Lease or any provision hereof, whether suit is filed or not, shall be entitled to recover and to receive payment of reasonable attorneys’ and costs incurred by the other party”.

The court was troubled by the language. The trial court found the clause ambiguous and rewrote the clause to provide that attorney fees would be awarded to the prevailing party.

The appellate court reversed. It explained that although ambiguous contracts can be interpreted to carry out intent of the parties, an attorney fees clause would not be subject to a search for intent. If the clause does not clearly and unambiguously state its intention, it is unenforceable. The appellate court found the attorney fees clause made no sense and, therefore, unenforceable.

Attorney fees and costs can be greater than the amount in controversy. Before proceeding with litigation, you should retain an experienced attorney to discuss the facts and circumstances of your case. Contract language will be important. Potential for success will also be important. Good legal advice at the earliest possible time could be a real money saver under the circumstances of your case.

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