Any lawyer will tell you that clients unseasoned in the litigation process almost always ask whether they can get their attorneys’ fees awarded at the conclusion of a lawsuit. That inquiry certainly is reasonable. This article is intended to put you in the know upfront about this topic. As always, however, because factors specific to a dispute might alter the outcome, it’s best to consult with an attorney about your rights before making any decisions.
In most states, including in the federal system, the answer in the U.S. is usually “no,” unless (1) your action springs from a statute that allows for attorney-fee awards; (2) the lawsuit derives from a written contract between the parties that contains a “fee clause”; or (3) the adverse party makes a claim, or asserts a defense, that is so baseless, i.e., “frivolous,” that the judge gets ticked off enough to award fees. This is called “the American Rule,” which stands in contrast to “the English Rule,” which goes the other way, and forces the loser in court battles to pay the winner’s litigation costs.
A couple states have modified or altogether rejected the American standard, and apply the English Rule. Advocates of both Rules claim their approaches disincentivize litigation and promote early settlement more than the other. Interestingly, studies show that settlement rates in pending litigation on both sides of the ocean are comparable.
The federal law of admiralty embraces the American Rule, and generally does not provide for attorney-fee awards except in cases of bad faith or abuse, or when the parties contractually agree that the winner of any dispute will collect its fees from the loser. If one of the parties writes up the contract (which can be a service contract, bill of lading, or any other manifestation of the parties’ agreement) so as to provide that only it (and not the other party) gets attorneys’ fees, courts generally will apply the provision reciprocally to both parties. You have to be careful though. If a bill of lading contains a fee clause that specifies the carrier will recover its litigation costs in the event of a freight charge dispute, courts will apply that clause reciprocally only to freight charge issues and not, say, to a damaged cargo claim.
So what happens if a shipping contract does contain an attorney-fee provision and you win? Do you automatically recover every nickel you paid your lawyer? No. You might, but first you have to go through a battle to determine whether your litigation costs, which include attorneys’ fees and disbursements, were “reasonable.”
Just ask carrier APL, which recently prevailed in a lengthy and difficult process to recover some 735 grand in litigation costs from shippers of defective hairspray and mousse which leaked throughout the holds of APL’s vessel. Those compressed products constitute hazmats, about which APL’s bill of lading required forewarning to the carrier under risk that the shipper pay any cleanup costs associated with the cargo. Apparently, the shipper neglected to advise APL about its potentially messy product, costing the carrier a pretty penny. The bill of lading also contained a Singaporean choice-of-law clause.
The U.S. District Court for the Northern District of California awarded APL its cleanup costs, but denied its attorney-fee application, ruling that the U.S. Carriage of Goods by Sea Act, which does not allow for attorney-fee awards, controlled the issue. The Ninth Circuit Court of Appeals reversed, and found that, per the bill of lading clause, the law of Singapore governs. That country’s law does allow fee awards to the extent similar to that of most states, which apply the “lodestar” method.
The lodestar method can be complex in practice. Boiled down to its essence, it allows courts to award fees based on reasonable billable hours expended, for legal tasks reasonably necessary toward a reasonable goal, at reasonable rates. Sound reasonable? On remand, the court found that rates APL’s counsel charged it were reasonable. However, some of the $824 grand in fees APL paid included time the court concluded was “duplicative,” i.e., two or more attorneys billing for the same task. Also, the court determined that one task was billed out excessively, and time spent pursuing a claim against one of the defendant entities was nixed altogether because that defendant prevailed in a dispositive motion. Other than that, the costs and fees charged were fine under the court’s analysis.
So how does a court adjust recoverable fees based on a imprecise “reasonableness” standard to determine an appropriate award. Imprecisely. Here, the court just reduced APL’s overall costs and fees by a flat 15% down to about $735 thousand, and called it a day. That’s the best we can reasonably do.
The risk of paying fees, either your own or someone else’s, should always be considered before litigation. Litigation costs, time, distraction and potentially damaged reputation may be bigger stakes than a claim or defense.
Ref: APL Co. PTE, Ltd. v. UK Aerosols, Ltd., et al., 2011 WL 337361 (N.D. Cal. 2011)
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