Can I Recover my Attorney’s Fees if I Win? Part 2

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In my previous article, I discussed the law concerning the awarding of attorney’s fees to prevailing parties in litigation, some of the practical effects of allowing or not allowing an award of attorney’s fees, and the application of fee shifting provisions in certain commercial agreements. In this article, I continue to explore considerations as to whether to include fee shifting provisions in various agreements.  

Why would a party want, or agree to, an award of attorney’s fees in an agreement?

In employment agreements and other types of commercial agreements, the inclusion of a fee shifting provision can often be negotiated by the parties.

A fee shifting provision can be viewed as a disincentive to bad behavior; each party would know that if it acts contrary to the terms of the agreement, or does not try and reach a fair settlement of a legitimate dispute, they could be subject to paying their adversary’s legal fees, in addition to their own, if they lose in litigation. Also, a fee shifting provision may serve to level the playing field between parties of disparate means.

For example, in a dispute over the enforceability of a non-compete agreement after an employee leaves a company, or over an employee’s entitlement to severance, the employer may have substantially greater means than the employee, which would make it difficult for the employee to assert her claims. The presence of a fee shifting provision may make it possible for the employee to do so—perhaps a disincentive for an employer to include a fee shifting provision and an incentive for an employee to seek one. Therefore, whether or not a fee shifting provision is included in an agreement oftentimes reflects the interest of the parties, which may be the same or, if different, each party’s bargaining position.

With respect to federal and local statutes, provisions awarding a prevailing party in a lawsuit her legal fees is a reflection of public policy, which in many instances seeks to dissuade bad behavior. At the same time, fee shifting will oftentimes level the playing field, which may be particularly necessary in these types of cases. For example, an award of attorney’s fees to a successful employee under the FLSA and many state labor statutes serves as a disincentive to an employer to, e.g., not pay an employee overtime to which the employee is entitled, and also affords the employee the ability to commence a lawsuit to recover what is due her, which she might not otherwise be able to do.

Where one has a choice, such as in many commercial agreements, the decision of whether to include a fee shifting provision should be evaluated carefully by a party and her attorney. Thereafter, when a dispute arises, the party and her attorney should consider the presence or absence of such a clause in deciding their strategy and approach.

When one’s conduct—or, perhaps, misconduct—is governed by statute, a party should consult with their attorneys to make sure that they are not acting in a way that could result in it having to pay an adversary’s legal fees; and, of course, if a dispute arises, should consider carefully the presence or absence of such a provision in a statute when deciding their strategy and approach.

Contact me with questions or comments.

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