Attorney’s fees in commercial litigation can get incredibly expensive, incredibly quickly. In a moderately complex commercial
litigation case, it can easily approach $150-200 thousand in fees and costs to get through a full jury trial and post-trial motions. These fees can often exceed the amounts sought in the lawsuit and can become a significant barrier to bringing a claim. Fees can become so substantial that they can eventually start to drive the litigation. So, at the conclusion of the litigation, who will pay these fees?
Generally, in the United States, each side is responsible for paying their own attorneys’ fees and most litigation costs, regardless of who prevails. However, there are exceptions to this general rule. In certain types of cases, the prevailing party will be entitled to seek fees from the losing party. These types of cases are generally identified by statute and vary widely. You will need to consult with your attorney as to whether you will be entitled to seek attorneys’ fees from your opponent if you win (or must pay fees to your opponent if you lose) at the inception of the case.
In commercial litigation, the most common “fee shifting statute” deals with cases “arising out of contract.” If you are a party in a case that arises out of a contract, and you prevail in that case, then you will be entitled to request the court to order the losing party to pay for fees. This statute is found at A.R.S. § 12-341.01. The applicable portion of that statute states as follows:
“In any contested action arising out of a contract, express or implied, the court may award the successful party reasonable attorney fees.”
There are several aspects of this statute that are typically litigated. First, the action must “arise out of a contract.” This is generally a straightforward matter in a simple breach of contract case, but becomes a more complex question when you are dealing with other claims (such as business torts) that may have a connection to a contract, but are not totally dependent on the contract. Under this circumstance, you will need to consult with your attorney on the likelihood of obtaining fees for these types of claims.
Next, you must be the “successful” party. Often, it is easy to determine who is the successful party, particularly where all or most of the compensation requested is awarded. However, who is the successful party where there were numerous claims that had different winners? Who is the successful party if the winner obtains a fraction of the requested compensation, which is less than the amount that could have formed the basis of a settlement? These issues can become very contentious and are dependent upon the specific facts of the case and its outcome.
Also, the action must be “contested.” This simply means that the defendant must put up some sort of defense to the claim. If the defendant defaults or otherwise does not contest the suit, fees will not be awarded. The prevailing party may only be awarded “reasonable” fees. The court may determine that the actual amounts you paid were reasonable. However, the court may determine that the amount you are seeking is excessive, and may reduce it. Once again, this issue is frequently disputed, and the losing party will typically attempt to contest the reasonableness of the time spent, the rate charged by the attorney, and the general reasonableness of the fees charged.
Lastly, under this statute, the court “may” award fees. It does not have to. Whether to award fees is entirely up to the court’s discretion, and its decision will typically not be overturned on appeal. While courts will often award fees when requested, they sometimes will not. An award of fees is not guaranteed under this statute.
Michael L. Kitchen