Often, a client seeking our advice asks if they can recover their attorney’s fees in a lawsuit. We explain that an award of attorney’s fees to a prevailing party only occurs in a few situations: when a Federal or State law mandates an attorney fee award to the lawsuit’s winner, or when a court, in its discretion, determines that the behavior of the losing party is so egregious that punitive damages and attorney’s fees should be awarded. We explain that the necessary egregious behavior needs to almost rise to the level of criminal activity before a court will even consider a request for attorney’s fees. While most clients believe that the wrongs done to them by adverse parties are always “criminal” in the sense of being intentional and outrageous, it is rare when a court will award attorney’s fees purely based on bad business behavior.
However, clients can dramatically improve their chances to recover their attorney’s fees by providing a loser pays requirement in their contracts, agreements, purchase orders, proposals, and even in their standard terms and conditions. These clauses are generally enforceable in court and provide a means for a wronged person to recover attorney’s fees when pursuing the adverse party for damages and compensation.
Critical to enforcement of a loser pays provision is the need to make it part of your contract or agreement. Therefore, care must be taken in the specific language of such clauses as well as how they are disclosed and agreed to by all of the parties in a business relationship to ensure enforceability. This is particularly true, if a loser pays clause is found in your terms and conditions. You should consult your legal advisor as to how best to impose and ensure enforceability of such provisions against other parties with whom you do business.
