Ensuring that people can bring cases and lawsuits without the fear of incurring excessive costs if they lose the case is important. To further this goal, the losing side doesn't usually pay the winning side's attorney's fees. In the United States, the rule (called the American Rule) is that each party pays only their own attorneys' fees, regardless of whether they win or lose.
Even so, exceptions exist. Keep reading to learn when you might be responsible for your opponent's attorneys' fees.
If you're being sued, get tips on preparing a defense in Disputing a Small Claims Court Case: Fight Back.
Whether an exception to the "American Rule" will apply will depend on the type of case you're involved with and the state in which you live. For instance, you might have to pay when:
If you're concerned or hopeful that your opponent will have to pay attorneys' fees, check (or ask your lawyer to check) if any exceptions apply to your particular case. Here are the most common exceptions to the American rule.
It's common for attorneys' fees to be awarded when the contract at issue requires the losing side to pay the winning side's legal fees and costs. This usually occurs in a business context where the parties have specifically included an attorney fee requirement in a contract.
However, a requirement like this isn't always enforced (although it usually is). Courts can evaluate contracts for fairness and change the terms if doing so makes sense, or if one of the parties was forced into signing the agreement. But if a judge decides that a requirement to pay attorneys' fees is reasonable and that it was negotiated by two parties with equal bargaining power, then the judge will likely allow the fee provision to remain.
Keep in mind that judges don't want to be overturned by a higher court. So if the contract provision requiring attorneys' fees is clear, you're likely going to be held responsible for paying them.
Learn about bringing a breach of contract case in small claims court.
Many states have specific laws that require the losing side to pay the winning side's legal fees in certain situations. For instance, some states have laws requiring the losing side to pay attorneys' fees in lawsuits involving government entities or antidiscrimination laws. Also, some federal laws call for the losing side to pay attorneys' fees when the federal law is violated.
One type of attorney fee statute that's common in many states allows a judge to require attorneys' fees to be paid to the winning party in a lawsuit that benefited the public or was brought to enforce a right that significantly affected the public interest.
Another common state law allows for attorneys' fees to be paid by the losing side if an attorney for the losing side filed a lawsuit knowing there was no reason, or "grounds," for the lawsuit, such as bringing an unwarranted appeal or filing a case in the wrong venue). And a Wisconsin law calls for the losing side to pay attorneys' fees if their attorney files an appeal only to delay court proceedings.
Judges can use an equitable remedy to require the losing side to pay attorneys' fees if they believe it would be unfair not to do so. (In law, equity generally means "fairness," and an equitable remedy is a fair solution that a judge develops because doing otherwise would lead to unfairness.) This type of equitable remedy—granting attorneys' fees to the winning side—is often used when the losing side brought a lawsuit that was frivolous, in bad faith, or to oppress the defendant, and the defendant wins.
Also, once in a while, a judge will grant attorneys' fees in cases of extreme attorney misconduct, to warn the offending attorney. Find out what to do if you're upset with your attorney.
Sometimes the worst happens—you get involved in a lawsuit, lose, and end up responsible for the other side's attorneys' fees. Considering that the attorneys' fees for a litigated case that has made its way through a trial can run $100,000 to $500,000, finding out you've lost and have to pay your opponent's costs can add more than a little insult to injury.
So what do you do?
If you don't have the funds to pay, your attorney will likely recommend bankruptcy. Attorneys' fees are generally dischargeable, meaning you can wipe them out.
If your income is low, you will probably qualify for a quick Chapter 7 bankruptcy. Otherwise, you'll likely pay the fees off over five years in a Chapter 13 case. The amount you'll pay in Chapter 13 could be very little or the entire amount—it will all depend on your income, debt, and property value.
Find out how much you'll be responsible for in Chapter 13 in Unsecured Debt in Chapter 13: How Much Must You Pay?
You can learn more about working with a lawyer, see Nolo's The Lawsuit Survival Guide: A Client's Companion to Litigation, by Joseph Matthews. If you're a litigant in a small claims action, see Everybody's Guide to Small Claims by attorney Cara O'Neill (a specific guide exists for California cases).