Legal costs (attorney’s fees)
In addition to damages, the successful party is entitled to be awarded his reasonable legal costs that he spent during the case. This is the rule in most countries other than the United States. In the United States, a party generally is not entitled to its attorneys’ fees or for hardships undergone during trial.
Attorney’s fee
Attorney’s fees (note that the use of the word ‘attorney’ connotes lawyers broadly: solicitors and barristers) are the costs of legal representation that an attorney’s client or a party to a lawsuit incurs. Attorney’s fees are assessed in a number of ways, usually set by contract in advance of the representation, including by billable hours, flat fees, or contingent fees. Attorneys who voluntarily accept work on behalf of indigent clients often work pro bono.
An upfront fee paid to a lawyer is called a retainer. Money within the retainer is often used to “buy” a certain amount of work. Some contracts provide that when the money from the retainer is gone, the fee is renegotiated.
In some jurisdictions, in a civil case, a lawyer for the plaintiff can take a case on a contingent fee basis. A contingent fee is a percentage of the monetary judgment or settlement. The contingent fee may be split among several firms who have contractual arrangements amongst themselves for referrals or other assistance. Where a plaintiff loses, the attorney may not receive any money for his or her work. Many countries prohibit contingent fees as entirely unethical. Most jurisdictions in the United States prohibit working for a contingent fee in family law or criminal cases.
In the United States, state laws or bar regulations, many of which are based on Rule 1.5 of the Rules of Professional Conduct, govern the terms which lawyers can accept fees. Many complaints to ethics boards regarding attorneys revolve around attorney’s fees.
Amount of fees
The range of fees charged by lawyers varies widely from one city to the next. Most large law firms in the United States bill between $300 and $500 per hour for their associates’ time, though fees charged by smaller firms are much lower. The rate varies tremendously by location as well as the specific area of law practiced. Typically insurance defense firms have lower billable hour rates than other professions, but are compensated by having steady, regular paying work provided. Locations like Salt Lake City will average $150 per hour for an associate’s time on a basic case, but will increase for larger firms.
The first American attorney to regularly charge a four-digit hourly fee ($1000 and higher) was Benjamin Civiletti in late 2005.
Loser pays
Most countries operate under a “loser pays” system, sometimes called the English Rule. Under the English rule, the losing party pays the successful party’s attorney’s fees, as well as other court costs. The United States is a notable exception, operating under the American Rule, whereby each party bears its own legal expenses. Some tort reform advocates propose adopting a “loser pays” rule in the United States.
Perhaps part of the theory behind the American Rule is that the risk of losing, and thus of having to reimburse defendants for their counsel fees, could dissuade plaintiffs from bringing even entirely legitimate claims. This risk would thus cause losses not only to the plaintiffs themselves, but also to society as a whole. Opponents of the rule argue that the American Rule allows plaintiffs to extract unmerited settlements by threatening to bring expensive suits, and that the American Rule encourages “lottery” litigation, where an organized group of plaintiffs’ attorneys can bring hundreds of meritless litigations in the hopes of winning a large judgment in one of the cases.
Awards of attorney’s fees in the United States
A number of laws provide for an award of attorney’s fees for a prevailing plaintiff in lawsuits involving:
- Class actions
- Civil rights violations
- Freedom of Information Act violations
- Copyright and patent cases
- Antitrust actions
- Lemon law cases
- suits against the federal government where the position of the government was not “substantially justified”
In addition, courts will allow the prevailing party to recover attorney’s fees in an action on a contract where the contract contains a provision allowing recovery.
There are many ways of calculating prevailing-party attorney’s fees. Most courts recognize that actual costs may be disproportionate and inequitable. Thus, many jurisdictions rely on other calculations. Many courts or laws invoke a lodestar’ calculation: reasonably expected billable hours multiplied by a reasonable hourly rate, sometimes multiplied by a factor reflecting the risk or complexity of the case. Courts in class actions frequently award fees proportionate to the damages recovered. The Class Action Fairness Act of 2005, which, among other provisions, regulates the fees that can be awarded in a class action, was passed in response to concerns that courts were not adequately overseeing the award of such fees.
Some statutes permit awards of attorney’s fees to prevailing defendants in extraordinary circumstances, such as proving that the litigation was frivolous, in the sense of it being objectively baseless and in brought in bad faith.
Tort reform and attorney’s fees
Some tort reform proposals in the United States seek to further regulate attorney’s fees. Florida passed a law limiting contingent fees in medical malpractice cases. Some object to these laws as an unfair restriction on freedom of contract.
See also…