Parties to lawsuits sometimes try to seek solace in the fact that the ongoing attorneys’ fees they are paying will be recoverable at the end of their case. The reality of the situation is that just because an attorneys’ fees claim is proper does not mean those fees will ultimately be recoverable. In most cases, whether the case is resolved by settlement (as most are) or by a judge or jury, the successful party is not going to recover all of their attorneys’ fees. The reason for this is because judges and juries have wide discretion in awarding fees and settlements don't usually result in recovery of all fees.
The "American rule" for attorney's fees is basically that each party is responsible for the fees that they incur as part of any lawsuit. State legislatures and Congress created exceptions to this doctrine and have created claims or laws that permit recovery. In Texas, the successful party to a breach of contract claim can recover their attorneys’ fees under Texas Civil Practice and Remedies Code Section 38.001. These are also recoverable under other statutes like the Texas Deceptive Trade Practices Act.
So how are fees awarded? As any other damages would be awarded. If it is a bench trial or summary of judgment, the judge will be called upon to make an award of attorneys’ fees. While int the context of a jury trial, the jury will actually consider the testimony of an attorney, and then write down on the jury charge what they believed reasonable and necessary attorneys’ fees are. Many times juries have a hard time awarding a party attorneys’ fees. Usually this is because attorneys’ fees are disproportionate to the controversy for relative merits of each party to the controversy. So, if the jury thinks that a party should win but it is a close call, they can potentially hedge on attorneys’ fees and award less than what is being sought. The same calculation could be made by a judge as well.
Courts can consider a number of factors:
- The time and labor required, the novelty and difficulty of the question involved, and the skill requisite to perform the legal service properly;
- The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
- The fee customarily charged in the locality for similar legal services;
- The amount involved and the results obtained;
- The time limitations imposed by the client or by the circumstances;
- The nature and length of the professional relationship with the client;
- The experience, reputation, and ability of the lawyer or lawyers performing the services; and
- Whether the fee is fixed or contingent.
So what can a party do to ensure that they recover their fees? Other than trying to make sure that their lawyers bill is reasonable, not much. High-stakes litigation or litigation where injunctive relief is involved means high fees. Ultimately, each party evaluating the relative merits of the case has to understand that they may not be able to recover those fees that they are incurring. Recovery of 100% of fees like any other damage, is not likely and must be appropriately evaluated.