When Are You Entitled To Attorneys’ Fees in Business Contract Litigation?

Experienced business litigation attorneys in Los Angeles charge a lot of money for their services. In fact the prospect of extensive attorneys’ fees bills can change the cost/benefit analysis of your lawsuit.  A $50,000 business dispute is not worth it if the attorneys’ fees for prosecuting the case will cost $100,000 and are not recoverable.  Ask your trial attorney for a budget of expected expenses so that you know the potential fees and costs.  One factor you should ask your trial lawyer to examine is whether you will be entitled to recover attorneys’ fees if you win.

A party who prevails in a civil action is entitled to recover its costs as a matter of right unless otherwise provided by statute.  Code Civ. Proc. section 1032(b).  However, California law generally requires that a party to a lawsuit pay its own attorney fees, regardless of whether it prevails in the action.  There are a few exceptions to this general rule.  When a contract, statute or other law specifically authorizes it, a prevailing party can recover attorneys’ fees.

In breach of contract litigation, attorneys’ fees will usually be recovered because of a contractual provision which provides for it.  Normally any contract drafted by an experienced contract lawyer in Los Angeles will have a form attorneys’ fees provision that passes muster.  Clarity and enforceability will not usually be an issue.  However, a badly drafted contract can include ambiguous language which leaves the issue unresolved.  For example, when a contract provides for the “reimbursement of reasonable expenses related to the” arbitration or lawsuit, it raises the question of whether this is specific enough to constitute an attorneys’ fees provision.

California case law holds that “in the absence of some specific provision of law otherwise, attorney fees and the expenses of litigation, whether termed costs, disbursements, outlays, or something else, are mutually exclusive, that is, attorney fees do not include such costs and costs do not include attorney fees.”

Attorneys’ fees are addressed in California Civil Code section 1717.  “One purpose of section 1717 is to avoid uncertainty and clarify the issue of [attorney] fees, so both sides can make rational evaluations about the case, including prospects of settlement and so forth.  If a clause does not put the principals to [an agreement] on notice that it is an attorney fees clause, section 1717 does not give all parties a right to recover attorneys’ fees.”

In a breach of contract lawsuit, attorneys’ fees are a key part of your trial lawyer’s analysis.  Make sure that you know whether your contract includes an attorneys’ fees provision and whether it is clear enough to be enforceable.  Remember that Civil Code section 1717 also mandates that any attorneys’ fee provision be reciprocal.  In other words if you lose your trial you will have to pay for the other party’s legal fees.  This can significantly increase your potential downside and should also be taken into account.