Contracts that require the losing party to pay the winner’s attorney’s fees.

Exception to the American Rule on attorney's fees

Contracts awarding legal fees

We previously wrote here about whether the other side in a lawsuit has to pay your attorney’s fees if you win.

As the previous post explained, Mississippi courts follow the “American rule.” The American rule states that in most cases a party must pay his own lawyer, even if he wins the lawsuit.

Exceptions to the American Rule.

The rule contains three general exceptions. Under Mississippi law, the party who wins can recover attorney’s fees if:

  • A contract between the parties contains a provision that the losing party will pay the other side’s fees.
  • The Mississippi legislature has passed a law that requires the losing party to pay in that type of lawsuit.
  • The losing party has acted in a manner that would justify an award of punitive damages.

In this post, we will examine the first exception – – a contract that requires the losing party to pay the other party’s fees.

What does the contract have to say?

There is no “magic language” that has to appear in the contract. Instead, the provision simply must be clear and express the intent of the parties.

Nevertheless, there are some “key” words that you should look for in a contract that provides for an award of attorney’s fees.

“Prevailing party”

Often, a contract will state that the “prevailing party” is entitled to be paid his attorney’s fees by the loser.

But, it is not always clear who prevailed in a lawsuit. For example, assume a plaintiff sued a defendant on four separate claims in a single lawsuit. Then, assume the plaintiff only won one of those claims.

Is the plaintiff a “prevailing party”? In this type of situation, the court would have to look at the nature of the claims, the amounts involved, and other circumstances to determine the extent to which the plaintiff is entitled to attorney’s fees.

Another example. Assume a plaintiff files suit for $10,000, and the defendant filed a counterclaim for $5000. Then, the jury returned a verdict in favor of both of them, meaning that the plaintiff has a net verdict of $5000.

Arguably, both parties prevailed. The fact that the plaintiff had a larger claim should not lead to the conclusion that the plaintiff was the only prevailing party.

“Reasonable fees”

Usually, an attorney’s fee provision will call for the losing party to pay the other side’s “reasonable” attorney’s fees. Even in the absence of the word “reasonable” in the contract, the court is very unlikely to award unreasonable attorney’s fees.

To recover fees, the prevailing party must prove to the court that the fees are reasonable. This is almost always done by way of a post-trial motion.

In state court, the most common test for determining whether a fee is reasonable is to apply the guidelines in Rule 1.5 the Mississippi Rules of Professional Conduct.

Rule 1.5 lists the following criteria for determining whether a fee is reasonable:

(1)  the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;

(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;

(3)  the fee customarily charged in the locality for similar legal services;

(4) the amount involved and the results obtained;

(5) the time limitations imposed by the client or by the circumstances;

(6) the nature and length of the professional relationship with the client;

(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and

(8) whether the fee is fixed or contingent.

Seek legal advice.

Before you sign a contract that could obligate you to pay the other sides attorney’s fees in the event of a lawsuit, contact the Panter Law Firm for a consultation at 601-607-3156.

Panter Law Firm, PLLC, 7736 Old Canton Road, Suite B, Madison, MS 39110.

www.craigpanterlaw.com

Craig Painter