Allocation of Costs and Fees in Litigation
Many people embark on a lawsuit without taking into consideration all possible consequences. Litigation can be very costly and not all the costs are obvious. Most expect the costs of hiring an attorney and make payment arrangements, usually payable based on an hourly fee schedule or on a “contingency” basis (i.e., the lawyer is paid only if successful, usually out of any judgment or settlement).
Many states require that attorneys and their clients enter into written agreements regarding the representation. These contracts disclose that, generally, the client is obligated to pay certain costs and fees related to the lawsuit, regardless of the arrangement for the attorneys’ fees. The obligation to pay costs and fees exist whether the case is won or lost and even if the client decides not to pursue the case after it has already been filed.
Recoverable “Fees and Costs” by Prevailing Parties
In most states, and the federal courts, the prevailing party in any lawsuit is entitled recover certain costs and fees from the losing party. What costs are recoverable is usually set by state and federal laws and/or rules of procedure. Common items may include:
- Fees for filing documents with the court, e.g., for the complaint, answer, etc.
- Fees for “serving” the complaint or other documents on opponents. Process servers or certain authorities (such as U.S. Marshals) may be hired to personally deliver these documents and then file a sworn statement attesting to the service with the court. It is this personal “service” that, in part, gives the court jurisdiction over the parties to the action.
- Certain charges associated with depositions (i.e., recorded questioning under oath outside court). Commonly, the cost of obtaining a copy or copies of the transcript is recoverable, while in some courts fees paid to the witness for attendance and travel expenses of a party and attorney, plus the actual costs for the reporter in a deposition, may be recovered.
- Costs of transcripts for court proceedings, including trial.
- The costs of exhibits and copying exhibits for use at trial.
Determining the Prevailing Party and Filing to Recover Costs
It is not always clear who the prevailing party is. A plaintiff who receives a judgment in his or her favor is usually the prevailing party, as is any defendant found not to have any liability. Where neither party is totally successful, sometimes the court will declare the prevailing party, partly to clarify who can collect their costs from the other party. If the plaintiffs (i.e. those filing the suit) dismiss the lawsuit, with or without the right to file again at some later time, in many states, the other parties are considered to have “prevailed.” It there is a settlement, usually all parties will agree to bear their own costs or may include a provision specifying who must pay certain costs in the settlement agreement.
Within a period of time specified in applicable law and procedures, the prevailing party must file documents with the court (called a “memorandum of costs” in many states) requesting payment of allowable fees and costs. The other party then has a period of time to file objections. The court then makes a determination and award that may be enforceable as a judgment.
There are those who mistakenly believe that winning a lawsuit means that the opponent will pay for everything, including attorneys’ fees. In many countries, the losing side in a lawsuit must pay the winning side’s costs and fees, including attorneys’ fees. However, this is not the rule in the United States. Advocates argue that imposing such a rule would discourage plaintiffs from bringing meritless, frivolous lawsuits. Others point out that this would effectively bar the poor from the courts and favor those with greater financial resources.
In the U.S., there is no right to recover attorneys’ fees absent special circumstances, such as a statute authorizing recovery (e.g., there is a statute that authorizes taxpayers to recover attorneys’ fees from the IRS under certain circumstances) or a contractual clause that authorizes recovery by the prevailing party in any lawsuit over the contract. As with the recovery of costs, the prevailing party must usually bring a motion to recover attorneys’ fees (separate from the request for costs) within a specified period of time. The opposing party has a right to object and the court makes the award (usually after determining what is “reasonable”).
The danger is clear; plaintiffs may end up recovering nothing, still have to pay their own costs (and possibly attorneys’ fees) and may also have to pay for their opponents costs (and, in some cases, attorneys’ fees).
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