A person who is thinking of filing a civil lawsuit against another person or entity may wonder who pays the attorney’s fees and costs of the respective parties to a civil lawsuit. It is a common misconception that the person or entity who loses a civil case has to pay the attorney’s fees and costs of the winning side. This is far from true.
The general rule regarding attorneys’ fees is that each party to a civil lawsuit must pay their own attorneys’ fees and costs unless a contract or a statute allows the court to order that the loser pays the winning side’s attorney’s fees.
Even though the person losing a lawsuit does not automatically have to pay the attorney’s fees of the winning side’s attorney, when it does happen, it may be quite costly. Of course, if that were to happen, the person would be responsible for paying their own attorney’s fees and costs as well as those of the other side.
Attorney’s fees alone may amount to tens of thousands of dollars, and the losing side may have to pay court costs and expert fees as well.
What Does One-Way and Two-Way Loser-Pays Mean?
A one-way system means that only the plaintiff may be liable to pay the fees of the defendant’s lawyer if the plaintiff loses their case. A two-way system means that the party to a lawsuit that loses is liable to pay the attorney’s fees and costs of the party that wins. It does not matter whether that party is the plaintiff or the defendant.
What Is an “Offer-of Settlement” System?
Some states have enacted an offer-of settlement system. This type of system means that some costs are paid by the opposing party if that party has turned down an offered settlement and then does worse at trial. Texas is a state that has adopted this system, as is explained below.
What Does the Loser-Pays Principle Mean?
If there is a good chance the client will win and it is possible that a statute at issue in the case provides for the winning side to recover their fees and costs from the losing side, then the attorney who represents the side expected to win may agree to take the case on an attorney-fee-award basis. This means that the lawyer charges an hourly fee but does not collect it from the client.
If the court orders the losing side to pay the winning side’s attorney’s fees at the end of the case, the attorney collects their fee. If the client does not win, they pay no attorney’s fees or costs.
Do Some Lawyers Charge an Hourly Fee Anyway?
As noted above, a lawyer may modify this all-or-nothing approach by having the client pay a small hourly fee and the costs of litigation costs along the way.
Does the Judge Have a Say in How Large the Attorney’s Fee Award is?
Even though some statutes include a provision for an award of attorney’s fees, judges may have the authority to refuse to award them or to reduce them significantly. Of course, a judge must have some legal authority to justify their refusal to award attorney’s fees or to reduce them. A judge may not do this on a whim.
Texas is a state that has adopted a version of a “Loser Pays” law. It operates in ways that are quite technical. For example, one provision of the law allows a court to award the costs of a lawsuit under certain circumstances to a party who offers to settle the case if their offer is rejected.
The award might compensate the winning side only for the costs incurred after a settlement offer is made and rejected. Then, the judgment awarded to the party who rejected the settlement must be 20% or more less favorable financially than the settlement offer.
For example, a plaintiff may offer to settle their case for $100,000.00. The defendant rejects the offer. The plaintiff wins an award of $120,000.00 or more. The plaintiff would be awarded compensation only for their attorney’s fees and the costs of litigation incurred after the settlement offer was rejected.
Likewise, if a defendant offers to settle for $100,000.00, the plaintiff rejects the offer, and the plaintiff gets a judgment of $80,000.00 or less, but more than $0.00, the defendant is awarded their attorney’s fees and costs. That amount is deducted from the amount of the plaintiff’s judgment.
The limits on the amount that may be awarded have been changed. The change increases the amount that can be recovered as attorney’s fees and costs. Essentially, these costs may potentially be awarded to plaintiffs in an amount that is equal to the total amount of a plaintiff’s judgment in a case. The costs that may be awarded to a defendant is an amount up to the total amount of their judgment.
What Are Some of the Situations in Which the Losing Side Pays?
It is important to keep in mind that laws change all the time. A loser-pays provision may be added to a statute or removed from it. In addition, different states have different provisions regarding loser-pays laws. In addition, loser-pays system states have varying laws.
There are three types of cases in which the losing side may be required to pay the winner’s legal fees in some states as follows:
- Family Law, Challenges to Wills or Trusts, and Real Estate Disputes: These are the types of cases for which the law in some states requires the loser to pay the winner’s attorney’s fees.
- Contract Provision: If a contract specifically states that the losing side pays the winning side’s legal fees in a breach of contract lawsuit, a court is likely to enforce the contract.
- State or Federal Law Requires It: Cases that involve violations of state or federal laws, where the law itself requires the loser to pay the other side’s legal fees, presenting another situation in which the loser may have to pay the winner’s attorney’s fees. These cases may involve claims made against a government entity, a business, or another organization for violations of privacy or anti-discrimination laws. This is the case in certain cases that involve civil rights laws or cases that involve environmental protection laws.
Examples of states other than Texas that have loser-pays laws are as follows:
- Alaska: Alaska is the only state that has a two-way loser-pays law that applies in most civil cases. In almost all civil cases, it requires that the loser of the lawsuit pay a portion of the winner’s attorneys’ fees.
- Oregon and Oklahoma: These 2 states have statutes that apply loser-pays to several types of lawsuits.
- In Oklahoma, defendants may choose an offer of judgment provision;
- In Oregon, a number of loser-pays statutes have been changed to two-way loser-pays statutes.
- New York: New York has a loser-pays system that applies only in cases involving unfair and deceptive business practices. In addition, there is an offer-settlement system if the outcome of the case is worse than a settlement offer.
- California: California also has a loser-pays system that applies only in cases involving unfair and deceptive business practices. There is also an offer-settlement system if the outcome of the case is worse than a settlement offer.
- Illinois: Illinois has a loser-pays system that applies in cases involving unfair and deceptive business practices.
- Florida: Florida has a loser-pays rule that applies if the final outcome is worse than a settlement offer that was rejected.
How Can a Lawyer Help Me?
You want to know whether there is a loser-pays law that might apply in your case. You need to talk to an attorney to find out how such a law might affect any lawsuit that you might bring. LegalMatch.com can quickly connect you to a lawyer who can explain your state’s laws regarding who might pay attorney’s fees and costs in your case.
