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Attorneys’ fees: It pays to know the rules

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Parties in legal disputes often ask about their ability to recover attorneys’ fees. The answer can dictate many aspects of dispute resolution, including whether a party files suit or settles. 

When attorneys’ fees are potentially recoverable, it may increase the pressure to settle. The more the parties spend litigating, the greater the potential exposure of an adverse court award. 

In general, Washington follows the American Rule.  Attorneys’ fees are only recoverable if authorized by a statute or provided for by a contract.  This article briefly discusses some of the more common situations where attorneys’ fees are potentially recoverable.

Contract

The court will award attorneys’ fees if an applicable provision in a valid and binding contract, lease, or other instrument (e.g., promissory note, deed of trust, real estate covenants) provides that attorneys’ fees shall be paid. 

An attorneys’ fees provision may read as follows:  “In the event of litigation regarding any of the terms of this Agreement, the substantially prevailing party shall be entitled, in addition to other relief, to such reasonable attorneys’ fees and costs as determined by the court.”

Under Washington law, the prevailing party is entitled to attorneys’ fees even if the language of the contract grants fees only to one side. This construction prevents one party from imposing on the other the exclusive risk of paying attorneys’ fees in the event of a dispute. Both parties share the risk equally.

It can be a difficult decision whether to include an attorneys’ fees clause in an agreement. Often, the party more likely to breach or to be sued will want to exclude an attorneys’ fees provision. 

For example, the seller of goods or services may want to exclude the clause due to the risk an unsatisfied customer may sue. This can be true despite the seller’s desire to have the attorneys’ fees clause in the event a customer fails to pay.

Statute

While numerous Washington statues permit the recovery of attorneys’ fees, not all the statutes read the same.  Some mandate the court award attorneys’ fees to the prevailing party. Other statutes give the court discretion to award or not award fees to the prevailing party. And, other statutes permit only the plaintiff to recovery attorneys’ fees. An overview of a few different statues is below.

Mandatory fee award

To encourage parties to settle cases where the amount in a civil dispute is $10,000 or less, the Washington State Legislature requires the court to award to the prevailing party attorneys’ fees when the party made an offer to settle that was rejected, and the rejecting party did not improve its position at trial. 

In the right circumstances, a party’s offer to settle can force the other party to accept and pay, or risk a sizable attorneys’ fee award when litigating a relatively small dollar amount controversy.   

Discretionary fee award

The Washington Legislature recently granted trial courts discretion to award attorneys’ fees to the prevailing party in certain types of adverse possession boundary disputes.  It did not mandate the court awarded fees, but stated that, “the court may award all or a portion of costs and reasonable attorneys’ fees to the prevailing party if, after considering all the facts, the court determines such an award is equitable and just.”

Unilateral fee award 

Certain federal and state statutes make a trial court’s attorneys’ fee award mandatory to one party only, when Congress or the State Legislature seek to prevent or punish certain behavior.

Civil rights statutes, which prohibit various forms of discrimination are a common example. Employers must pay attorneys’ fees to an employee, if the employee prevails. If the employer prevails, however, the employee is not obligated to pay its attorneys’ fees.

The amount of the attorneys’ fee award is usually left to the discretion of the trial court. The court decides a reasonable amount to impose based on a reasonable number of lawyer hours multiplied by a reasonable hourly rate under the circumstances of the case. 

On appeal, the amount of the court’s fee award is usually only reversed when the trial court abused its discretion.

In general, attorneys’ fee awards only apply until entry of the judgment. For example, courts have found a contract’s fees provision merges with the judgment, and the judgment debtor becomes obligated on the judgment and no longer on the contract that required the fee award. 

Brian Walker represents businesses and individuals in commercial, business, and real estate litigation and transactions from the Wenatchee office of Ogden Murphy Wallace PLLC.