Klug: Recovering attorney fees & costs in litigation
There is a distinction in civil litigation between “attorney fees” and “costs.” Attorney fees are sums earned by an attorney for working on the case. Costs are basically all other out-of-pocket expenses of litigating a case, including such things as filing fees, service fees, court reporter costs, mediation fees, jury fees, witness fees, and copying costs. The general rule is that the winner is entitled to receive payment of costs from the loser in every case. However, when it comes to attorney fees, the general rule is that they are not recoverable by any party unless recovery is authorized by a statute, contract, court rule, or special case law exception. This is known as the “American Rule” and is in contrast with the “English Rule” where the loser pays the winner’s attorney fees in addition to costs in every case. When a person is thinking about pursuing a case, the facts and potential claims must be examined carefully to determine if there is a potential basis to recover attorney fees under one of the exceptions to the American Rule. It can be uneconomical to pursue even the most meritorious case without the ability to recover attorney fees. Even where there is a basis to recover attorney fees, it is important to remember that it may be merely permissible, not mandatory, for the court to award them … and, in any event, the court has discretion as to the amount of fees that will be awarded. Because of the uncertainties surrounding the issue, it is wise for litigants to make decisions as if they will not recover their attorney fees and treat it as a bonus if they do. While there are situations where only one side stands to recover attorney fees, it is more common that the fees are reciprocal and either side stands to recover them if they win. Litigants often use the threat of paying attorney fees and costs as leverage in pre-trial settlement negotiations.Some common situations where attorney fees may be recoverable by Colorado statute include divorce cases, claims by employees against their employers for unpaid wages, eviction disputes between landlords and tenants, claims by tenants against landlords for improperly retaining security deposits, and disputes between homeowner’s associations and their members. In addition, a court may generally award attorney fees in any case if it finds that a claim or defense asserted by any party was “groundless, frivolous, or vexatious.” While this sounds good in theory – what person doesn’t think their opponent’s case falls under one of these categories? – it is often difficult to enforce in all but the clearest cases because courts tend to give claimants the benefit of the doubt.Generally speaking, the issue of awarding attorney fees and costs is reserved until after trial when it is clear who won and lost what claims. A party with a winning claim for which attorney fees or costs may be awarded is required to file documents with the court asking for them and substantiating the amount. The other party can then challenge the request on various grounds and the court will ultimately decide the proper award. When a case includes some claims that were successful and some that were not, some claims that permit recovery of attorney fees and some that do not, or similar circumstances, the court may adjust the award of attorney fees and costs appropriately. An attorney cannot guarantee that some or all costs and attorney fees will be recovered in any case. Parties in litigation should be realistic about the potential to recover their costs and attorney fees and consider this issue carefully before pursuing a case. Noah Klug is principal of The Klug Law Firm, LLC, a general law practice in Summit County emphasizing real estate, business law and litigation. He may be reached at (970) 468-4953 or Noah@TheKlugLawFirm.com.
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