You may have heard the joke about the new client who asked the lawyer, “How much do you charge?” “I charge $200 to answer three questions,” replied the lawyer. The client asked, “Isn’t that a bit steep?” “Yes,” said the lawyer, “What’s your third question?” As the joke indicates, it’s important to get a clear understanding about how fees will be paid when you hire a lawyer.
Under the “American Rule,” (applied in U.S. Courts), each party to a lawsuit must pay its own attorney fees, unless a statute provides otherwise. (For example, laws the prohibit discrimination allow employees who win in court to collect their attorney fees from the other party.) However, parties can change this default rule by signing a contract that requires the losing side in a legal dispute to pay the winning (or “prevailing”) side's attorneys' fees and costs. Below is a typical attorney fees provision.
EXAMPLE: Attorney Fees. The prevailing party shall have the right to collect from the other party its reasonable costs and necessary disbursements and attorneys’ fees incurred in enforcing this Agreement.
What are reasonable costs? Costs refer to filing fees, fees for serving the summons, complaint, and other court papers, fees to pay a court reporter to transcribe depositions (pretrial interviews of witnesses) and in-court testimony, and, if a jury is involved, to pay the daily stipend of jurors. Often costs to photocopy court papers and exhibits are also included. Typically, court costs are paid by the parties to the dispute. But with the inclusion of an attorney fees clause, the losing party is held responsible for both parties' costs
Watch out for one-way attorneys’ fees provisions. Under a mutual provision, such as the example above, the party that wins the lawsuit is awarded attorneys’ fees. This is fair and encourages the quick resolution of lawsuits. A “one-way provision” allows only one of the parties to receive attorneys’ fees, usually the party with the better bargaining position. One-way provisions, no matter which side they favor, create an uneven playing field for resolving disputes. Some states, such as California, have recognized this unfairness and automatically convert a one-way attorneys’ fees contract provision into a mutual provision.
Judicial enforcement. This type of clause is not always enforced. Courts are allowed to judge contracts for fairness and to change their terms if they decide that doing so is the more fair solution. If a judge decides that it would be unfair to enforce a requirement that one side pay the other's attorneys' fees or finds that one of the parties was forced into signing the agreement, the judge could cancel the requirement or change the amount of fees to be paid. But if a judge decides that an attorney fee provision is reasonable and that it was negotiated by two parties with equal bargaining power, then the judge will likely enforce it.