Legal Guide

Who Pays Attorneys' Fees

by: Jeffrey P. Blumstein, Esq.

In a game of poker or a corporate merger, "winner takes all" often is an accurate description of the results. In the courtroom, however, things can be different. If you are involved in a contractual agreement with another party and they break the contract, you might win the case and still be stuck having to pay your attorney's fees. What follows is some advice about your rights and how planning now could avoid costs later.

Q. If I win, isn't it only fair that the other party should have to pay my legal fees in addition to any judgment?

A. It might be fair, but it is not necessarily the law. Even when it is established that the other side has breached a contract, in most instances you can't make them reimburse you for your legal expenses. The basis for this is the so-called "American Rule," which in our law reflects the belief that the judicial system functions best when each side bears his or her own counsel fees.

Q. Are there exceptions to this?

A. There are, and they depend to some degree on your foresight. For example, there is nothing preventing parties to a contract from stipulating in the contract that attorney fees will be assessed against the loser in any dispute. Not surprisingly, the ability to get the other side to agree to such a provision often takes superior bargaining power. That's why such clauses are usually found in bank loan documents and in sales or franchise agreements.

Q. If the contract provides for the award of attorney fees to the successful party in any litigation, am I covered as long as I win?

A. Not necessarily. The courts still reserve the right to decide just what are reasonable attorney fees under the circumstances. So be prepared to have your attorney submit a detailed affidavit specifying what services were rendered and why.

Q. Are there any cases where the court can award attorney fees even if there was no stipulation in the contract?

A. Yes. There are places where the law allows it. For example, a breach of contract that also constitutes an unreasonable or unconscionable practice under the New Jersey Consumer Fraud Act can result in attorney fees being awarded by the court.

Q. What if I am the target of frivolous legal action?

A. Here, too, there is a chance you can get reimbursement for attorney fees. The New Jersey Supreme Court has expanded the rights of litigants in this regard. If an attorney continues to prosecute or defend a claim in spite of having received notice that such conduct is frivolous, attorney fees can be awarded by the court. Another such case: if a party turns down a formal offer of judgment, and then fares worse in court than he or she would have by accepting the initial offer, the fees of the attorney for the party that made the offer can be included in the final judgment by the court.

Q. What is the best way to make sure I don't get caught holding the bag on attorney fees?

A. Without a doubt, the best thing to do is try to get the assessment of attorney fees against a breaching party written into your original contract. Though the cases where attorney fees might be awarded by the court are increasing, it is best not to have to rely on specific court rules or statutes applying to your case. If you can get an attorney fee provision in the contract from the start, it can save you money and help make the other side think twice about breaching its contractual obligations.

Szaferman, Lakind, Blumstein, & Blader, P.C.
Committed to Excellence