Clients often ask whether they can collect attorney’s fees from their opponent if they win the case. They are often disappointed by the answer, which is “maybe – maybe not.”
New York follows what is known as the “American Rule.” Under this rule the prevailing party in litigation is not allowed to recover attorney’s fees from the loser. Each party is responsible for its own litigation costs, win or lose. But there are exceptions. A party may be awarded attorney’s fees:
1) If a statute applicable to the claim allows it;
2) If there is a contract been the parties which provides for an award of attorney’s fees or other costs of litigation;
3) In the absence of contract, if one party is entitled to common law indemnification from another, that party may recover the cost of its defense, including attorney’s fees to defend the action.
As to Item 1, in most cases a party will need to consult with an attorney to determine if there is an applicable statute that allows recovery of attorney’s fees. There is no “rule of thumb.” Knowledge of the law is required.
Item 2 illustrates why it is important to involve an attorney in contract preparation and negotiation. An experienced attorney can draft a litigation costs provision that is most advantageous to your dealings – or point out provisions in the other party’s proposed agreement that could cost you money down the road.
Item 3 is a case specific situation that often arises between defendants in personal injury litigation. An attorney who practices in that field will recognize when there is a potential for recovery of legal fees and costs.
The cost of litigation is a significant factor in deciding what course of action to pursue. As a practical matter, litigation costs often drive decision making. The wise business person seeks counsel early on to put themselves in the best position to recover attorney’s fees.