Shouldn’t the Loser Pay The Winning Party’s Attorney Fees?
It goes without saying that civil litigation can be expensive, so when is the loser responsible to pay the winner’s attorney fees in Pennsylvania? The “American Rule” rule — followed in both state and federal court in Pennsylvania — is, each party pays its own attorney fees, absent a statute on point. Some say, how is this fair? There’s a “winner,” shouldn’t the loser pay be responsible for all costs?
First, What is a “Winner” in Court?
To understand civil litigation, ask yourself: what does it really mean to “win” in court? Let’s say, for example, a Plaintiff (the party seeking money) won a verdict for money. Does it mean everything she said was correct? Was she awarded every dollar she demanded in court? If not, a robust defense may have been necessary, to bring to bring key facts or a different view point to light. Perhaps there were arguments, facts, or issues that the Plaintiff had not considered before filing suit, arguably. For that, who should pay?
Litigation is a process. There are at least two sides to every story. Getting to the heart of the matter often requires a robust debate where both side to litigate to bring facts to light, without undue fear one party paying everyone’s court costs.
The “American Rule” Applies to Most Areas of Law in PA
Thus, for most garden-variety civil litigation claims — for negligence (landslides or dangerous conditions of property, limited tort, bike injury, e-bike crash, e-scooter mishap) –– each side pays its own attorney fees.
The same goes for basic breach of contract disputes. These include debt collection, failure to pay credit card debt, non-compete enforcement, and breach of a commercial building contract. For these, each side pays their own attorney fees. Same for mechanic’s lien actions for new builds or improvement to property.
Does that make sense? Still not convincing?
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Recovering Attorney Fees Despite the “American Rule”
Even under the “American Rule,” there are many instances where one party can recover an award for attorney fees from the other. These instances fall into three broad categories. It depends whether the gist of the action sounds in:
(1) contract,
(2) tort (negligence or defamation / disparagement), or
(3) a statutory provision creating the right to claim attorney fees.
Attorney Fees For Breach of Contract Claim
In general, a claim for breach of an agreement does not allow the winner to make the loser pay his attorney fees. Thus, failing to re-pay your credit card debt means you may owe fees for interest to which you agreed to pay, but not the bank’s attorney fees. However, if the contract allows for the “prevailing party” to recover her reasonable fees paid by the opposing party, such language is valid and enforceable. Examples of this can be found in many commercial contracts plus credit card debt or other loan agreement. This can have major consequences on where to file questionable objections to a lawsuit, for example, since the “loser” may pay all costs.
Therefore, the first question our Pittsburgh lawyers typically ask is: is there a contract indicating who pays the other’s attorney fees? If so, it can drastically change our litigation plan.
A Claim For Attorney Fees Relative to Tort (Negligence, Defamation or Fraud)
Aspiring lawyers take a class in law school called “torts.” This embodies various types of claims for civil damages, involving:
- Negligence causing a landslide or premises liability for a fall,
- Motor vehicle accidents (full tort, limited tort)
- Bike Accidents, and
- E-Bike and E-Scooter crashes.
The area of “torts” law also involves defamation, invasion of privacy, or trade disparagement, and fraud. For each of these, once again, each party pays his own attorney fees, for casual oversights, or negligence, or garden variety damage to another’s reputation.
However, there is one big exception. This is where the act or omission is done intentionally, recklessly, or outrageously. This means, an act or omission with disregard of a high likelihood of harm to another party. The same goes for fraud. In these instances, a party can often claim both punitive damages and award for attorney fees.
Statutory Rules Allowing Recovery of Attorney Fees
Often there are specific statutes allowing for a recovery of attorneys fees in certain cases. Below is a list:
- PA’s Unfair Trade Practices and Consumer Protection Law (UTPCL). The UTPCL is a major exception. Here, if the dealings are between a merchant and consumer (for personal use, not a commercial contract for profit), the special rights may exist on the part of the consumer, for reliance on even innocently false statements.
- Home Improvement Contracts — for improvements of one’s home versus rental property. Here, there exists in Pennsylvania the Home Improvement and Consumer Protection Act, creating special rights on the part of home owners.
- Breach of a Fiduciary Duty. For some relationships between parties, the law recognizes a heightened duty to not only prevent harm to another, but to protect another parties interests. This is a fiduciary duty. Some examples include a lawyers’s duty to safeguard a client’s money, or the duties between owners of a company to the company, to act in its best interest. There is liability for breaching a fiduciary duty, which includes an award for attorney fees.
- Violations of the Uniform Trade Secrets Act – which was adopted in PA. It includes the misappropriation of trade secrets, such as customer lists to a competitor.
- Fighting Frivolous Suits via the Dragonetti Act and Otherwise. This pertains to the filing of a frivolous lawsuit. This is one having no basis whatsoever. Note that a party may file suit even without key facts to support the suit. In fact, the courts exist for the parties to conduct discovery to bring fact to light, so it’s not necessary that all fact be known to be true at the time a lawsuit is filed. Rather, the Dragonetti Act exist to punish those who file a suit for an improper purpose: i.e;., one other than finding the facts.
- Bad Faith Conduct by an Insurance Company. In Pennsylvania, when you sue another party for striking you on your bicycle, for example, the defendant may have insurance. However, the defendant’s insurance company does not owe you any special duties of “good faith.” However, your own insurance company owes you duties to avoid acting in “bad faith,” by acting promptly, pay reasonably, and to protect your interests. Otherwise, in a bad faith action against your insurance carrier, you may be entitled to an award for attorney fees.
- Condominium Association Claims – here, Pennsylvania’s Uniform Condominium Act (68 Pa.C.S. § 3101 et seq.) allows a condo association to recover its attorney fees relative to a dispute with a condo owner.
- Contractor and Subcontractor Payment Act. A collections claim for non-payment for commercial construction or renovation that falls under the Contractor and Subcontractor Payment Act entitles the “prevailing party” to an award for his reasonable attorney fees. Recently, PA’s Superior Court ruled in favor of property owner and general contractor in a $3.2M case, for attorney fees.
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