Don't Bet the Business

There’s no way around it; legal disputes are expensive. So, it’s not a surprise for attorneys when a new or potential client’s first question is, “Does the other side pay your fees if I win?”

The answer requires a detailed understanding of the factors at play in your case.

U.S. courts follow the “American Rule,” which mandates that each party is responsible for their legal costs. This rule has exceptions with most coming by the agreement of the parties or by statute.

It is important to note that provisions in contracts for awards of attorney fees are an exception to the general rule that the unsuccessful litigant in a civil action is not responsible for the payment of the opponent's fees.” Kaiser v. MEPC Am. Properties, Inc., 164 Ill. App. 3d 978, 983 (1st Dist. 1987)

The Agreement of the Parties Exception

In business, parties can “waive” the American Rule by agreeing contractually that the prevailing party in a dispute is entitled to recover all attorney’s fees and costs incurred. These “fee shifting” clauses are commonly seen in commercial contracts.

The wording of the fee shifting clause is key. Contracts stating a prevailing party “may” be awarded costs and fees does not require the court to make a fee shifting award.

“The plain and ordinary meaning of ‘may’ indicates the fee-shifting provision is permissive. Although courts will sometimes construe statutes using ‘may’ to mean ‘shall’ by examining legislative intent, due to the steep ramifications of fee-shifting provisions in contracts, we are bound to strictly construe them to mean nothing more, but also nothing less, than the plain language used by the parties.”

Cantrall v. Bergner, 2016 IL App (4th) 150984, ¶ 17

Illinois courts strictly construe fee shifting provisions in contracts. Powers v. Rockford Stop-N-Go, Inc., 326 Ill.App.3d 511, 515 (2d Dist. 2001)

For example, the court in Erlenbush v. Largent, 353 Ill.App.3d 949 was tasked with interpreting a fee shifting provision that allowed for attorney’s fees to the prevailing party in “an action with respect to this contract.” The trial court interpreted this provision to refer only to an action related to a breach of the contract.

The appellate court disagreed, stating that this provision was broad enough to encompass the plaintiff’s claims for fraudulent inducement to enter the contract because the action was one “with respect to [the] contract.” Id. at 953.

Statutory Exceptions

Some statutes allow for fee shifting. Like with contractual fee shifting provisions, the language of the statute should be carefully analyzed to determine whether fee shifting language is compulsory or merely available.

For example, the court can award attorney’s fees to the prevailing party in cases brought under Illinois’s Residential Real Property Disclosure Act but is not required to do so. 765 ILCS 77/55 (“[T]he court may award reasonable attorney's fees incurred by the prevailing party.”); Cantrall v. Bergner, 2016 IL App (4th) 150984, ¶ 31 (holding that “the trial court did not abuse its discretion when it denied [a prevailing] defendants’ request for attorney fees under the Act.”).

Conversely, a successful plaintiff in an Illinois Wage Payment and Collection Act claim shall be awarded reasonable attorney’s fees. 820 ILCS 115/14(a) (“In a civil action, such employee shall also recover costs and all reasonable attorney's fees.”). As such, under this statute the court must award reasonable attorney’s fees when a plaintiff is successful on a wage claim.

Statutory fee shifting provisions are interpreted narrowly. Meaning, for example, that a litigant who brings a successful case for multiple claims will only recover reasonable attorney’s fees attributable to the claims specifically allowing for fee shifting. See e.g. Huss v. Sessler Ford, Inc., 343 Ill. App. 3d 835, 843 (1st Dist. 2003) (“The law is clear, under the Consumer Fraud Act, that a plaintiff is entitled only to reasonable attorney fees and costs and this entitlement is limited to only those fees incurred by the plaintiff that were for work specifically related to the consumer fraud claim.”) (internal citations omitted). So, depending on the claims and contracts at issue, a litigant may be able to recover some, none or all reasonable attorney’s fees expended.

For a complete analysis of your potential claims, the associated costs and your likelihood of success (and recovery of attorney’s fees), it is always advisable to consult a qualified attorney.