Recovering Fees and Costs
As I say a lot in person and on this blog, litigation is expensive. And so a question that many litigants ask is whether they can get their adversaries to reimburse them for the costs of litigation. And the answer is sometimes “no” and other times “kind of.” Whether this is a possibility depends on the applicable law and the terms of any applicable contract. And the actual mechanism of getting reimbursed is technical and requires work; it’s not at all automatic.
Why should you read this post about recovering costs and fees?
You don’t like this blog and you want your money back.
You just got your first legal bill and you want someone else to pay.
You think it’s unfair that you should have to pay for someone else’s wrongdoing.
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The Default Rules
In the United States, for most business disputes, parties need to pay their own attorney’s fees, even if they win.
But there are often rules that allow a prevailing party to recover certain other costs and fees. For example, there is an approximately $500 court fee a plaintiff needs to pay when filing a lawsuit in federal court. And under Federal Rule of Civil Procedure 54(d)(1), a prevailing plaintiff may be able to seek reimbursement of that fee. Similarly, other costs, such as photocopying costs and transcription costs may also be recovered. These amounts, though, are far less than the costs of lawyers.
Despite this rule, parties almost always mention in their pleading papers that they want the judge to order the other side reimburse their legal fees. And parties often demand this, too, in their negotiations. Still, judges rarely order it unless there is a specific rule or law requiring them to do so, or unless the judge is punishing one side for violating a court order.
Fee Shifting
Even though the default rule requires parties to bear their own fees, there are two situations where that rule does not apply.
The first is when a specific law says that the default rule does not apply to a type of case. For example, in employment disputes, many laws require an employer who loses to an employee in a lawsuit that alleges the violation of a labor law to pay the employee’s attorney’s fees. And the state of Texas actually has a law that shifts fees for many types of business disputes.
And the second is where the parties have a contract that expressly says that the prevailing party in a dispute between the them may recover her attorney’s fees. These provisions are very important when negotiating a contract because, without them, it may be more expensive to litigate a dispute than to recover for a breach, which would make the contract effectively meaningless.
Bills of Costs and Fee Applications
Once a party wins a lawsuit, they do not automatically get their costs and attorney’s fees repaid. Instead, they need to get the court to approve the amount of money they spent. This ensures that the prevailing party does not claim an exorbitant amount of fees and costs. To do so, they may submit a “bill of costs,” listing all of the expenses they incurred in the suit. A clerk may approve some and disallow others.
And, if the other side must pay attorney’s fees, they may submit a “fee application,” listing all of the work they did and the cost of that work. This process is actually a lot of work; It may involve reviewing years’ worth of attorney billing records, redacting attorney-client communications within them, and segregating out portions that were actually unrelated to the lawsuit or otherwise not appropriate for reimbursement. Sometimes the parties try to negotiate an agreed-upon amount of attorney’s fees to pay. But if they cannot agree, the court may review the application to confirm whether the attorney’s rates are too high (courts often bring these rates down) and whether all of the work should be paid for by the other side or whether some of it was excessive.