For some Los Angeles companies, occasional involvement in civil litigation is just part of doing business. For the most part, these are big businesses with highly skilled lawyers at their disposal.
For smaller businesses the prospect of suing someone – or getting sued – is much more daunting. Among other things, civil litigation is expensive. And even if you win, there’s no guarantee you’ll be able to recoup certain expenses, such as your attorneys’ fees.
In this post, the experienced civil litigators from the Los Angeles Law Office of Parag L. Amin P.C. discuss what you need to know about collectingyour attorneys’ fees if you win your case.
A brief explanation of the American Rule
Contrary to popular belief, there is no automatic legal provision in the United States mandating that the losing party in a civil lawsuit pay the winning party’s attorneys’ fees. In fact, the opposite applies.
The legal provision stipulating that each party pay his, her, or its own attorneys’ fees regardless of which one“wins” is called the American Rule. Its purpose is ensuring that anyone pursuinglegal recourse doesn’t have to worry about incurring disproportionate costs if they don’t win.
California’s version of this rule is found in section 1021 of the Civil Code of Procedure. As it specifically states, “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties…”
In other words, the winning party cannot ask the losing party to pay their attorneys’ fees unless: 1) a contractual provision allows them to do so; or 2) a statutory provision (law) allows them to do so.
Contract provisions allowing for recovery of attorneys fees
So let’s assume that you signed a contract that allows the “prevailing party” in a lawsuit arising from a contract dispute to recover their attorneys’ fees. In this case, the other party must pay your attorneys’ fees if you win, and vice versa.
The legal basis for this is stated in section 1717(a) of the California Code of Civil Procedure. It states: “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”
Section 1717(b)(1) of the California Code of Civil Procedure authorizes the court to make a determination regarding who prevails on the contract upon “notice and a motion by a party.” The court is authorized to do so regardless of whether the lawsuit reaches final judgment.In this context, the prevailing party is that which “recovered a greater relief in the action on the contract.”
It is well worth noting, however, that these laws don’t always apply and aren’t always enforced when they do. For example, the court may find that there is no party prevailing on the contract in certain circumstances. The court will reach this conclusion if the parties voluntarily dismiss the suit, or if it is dismissed in accordance with a case settlement.Furthermore, courts are generally empowered to assess contracts for fairness. If the court concludes the terms were unfair or a party signed under duress, it may change the terms accordingly.
Recovery of attorneys fees in implied indemnity cases
Implied indemnity is the legal term used to describe a situation in which someone’s actions harm someone else and you are also named as a defendant in the resulting lawsuit.
If this happens and you are compelled to defend yourself in the matter, you may be able to recover your attorneys’ fees. Specifically, you can force the person or entity at fault to pay your attorneys fees if you prevail in the matter.
Here’s an example. Let’s say that you own a business and the company you use for snow and ice removal only clears one part of the sidewalk. A tenant slips on an icy patch, falls, breaks their leg and sues you and the snow removal company. If you happen to win the case, you can recover your attorneys’ fees from the snow/ice removal company.
In California, your ability to collect your attorneys’ fees in an implied indemnity case is codified in Section 1021.6 of the Civil Code of Procedure.
Collecting attorneys’ fees under California Code of Civil Procedure Section 1028.5
As a small business owner or duly licensed entity in California, you may be able to recover litigation costs – including your attorneys’ fees – incurred when a state regulatory agency sues you.
You can only do so if:
- You “prevail” in the matter; and
- The court finds there was no “substantial justification” for the agency’s action.
There are several things to be aware of here. First, a small business or licensee “prevails” when there is no judgment, provision, or acknowledgment of liability on its part. Second, a “small business” is one that meets the criteria set forth in the Carpenter-Katz Small Business Equal Access to Justice Act of 1981. Lastly, a “licensee” in this context is defined as “any person licensed by a state agency who does not qualify as a small business, but whose annual gross receipts from the use of such license do not exceed one million dollars ($1,000,000).”
You should also keep the following in mind. An award of “reasonable litigation expenses” including attorneys’ fees is made at the court’s discretion. “Reasonable litigation expenses” are defined as any expenses capped at $7,500, which the judge finds “were reasonably incurred in opposing the agency action…”
Contact LawPLA to learn more about recovering your attorneys’ fees today
There are plenty of other circumstances in which you may be able to recover attorneys’ fees. To learn more, contact the Los Angeles Law Office of Parag L. Amin P.C., (LawPLA) today. You can reach us by completing the contact form on our webpage or calling one of our LA offices. Either way, we look forward to hearing from you.