Often when embarking on business-related litigation, plaintiffs and defendants want to know their odds at recovering attorney fees from the other side.
Attorney Stephen Hulst, of Rhoades McKee, said the odds are not in anyone’s favor in most cases.
“The general rule in Michigan is you can’t recover your attorney fees from the other side,” Hulst said.
He said that includes cases brought before the Kent County Business Court.
Hulst has been closely following the decisions of the relatively new Kent County Business Court, which was created in 2013 following an eight-month pilot program to simplify business litigation, reduce the cost of that litigation, speed up the judicial process and clear up the court’s overall docket.
“Judges are often hesitant to award legal fees and court costs,” Hulst said.
Despite Michigan judges’ hesitancy at awarding legal fees when given the discretion to make those rulings, Hulst said there are some situations that can open the door for fee recovery.
Those exceptions include if someone has signed a contract that includes fee recovery provisions, if there is a statute that allows for fee recovery or if it’s provided by court rule.
Hulst said the language in the contract and the statute is important to whether a client will prevail in fee recovery. That’s because some language leaves it up to a judge’s discretion, while other language requires fee recovery.
“There are variations within statutes; some say the prevailing party shall be awarded reasonable attorney fees and court costs, meaning that they must be. In that case, the judge doesn’t have discretion to say ‘I’m not going to reward those,’ as opposed to some statutes which say the prevailing party may be entitled to recover their legal fees and court costs. In that sense it’s discretionary to the judge as to whether or not he or she will award those fees.”
He said the same goes for contractual language.
“A judge is going to very carefully analyze that language to see exactly what it says.”
Hulst said clients should be made aware at the onset what their odds are of fee recovery, particularly since litigation is very expensive.
“If a client comes in the door looking to pursue someone for a claim, the first step is getting our arms around the facts and documents and what happened here, because you can determine whether there is a viable claim under a particular statute or contract,” he said.
“If in either of those cases that statute or contract provides for a recovery of fees, you can at least tell your client there is a viable claim and if we can prevail on the claim you can at least seek and make the claim to recover your fees.”
He cautions he would never tell a client they will definitely prevail in collecting attorney fees or court costs from the other side.
In the case of the defendant, he said, the situation is similar.
“If a client has been sued, you have to look at the claims that have been filed and see if there are viable attorney fee claims that have been asserted and analyze the risk that if you go to trial and lose you may be on the hook for their legal fees,” he said.
Hulst said this means businesses need to pay particularly close attention to the language used in contracts.
“I would want to make sure the attorney fee language in an agreement is solid and clear so if you have to pursue somebody for breaching that agreement you are entitled to recover legal fees and court costs.
“It’s important to have those types of provisions in your agreements, because it provides the avenue to make that claim, which you otherwise couldn’t make.”
He also noted having that language included in a contract can serve as leverage to prevent a case from going to trial.
“It’s a good piece of leverage to have, to be able to say at the outset of a case, ‘you signed this contract and the contract language is clear that you are going to pay for my legal fees and costs if I prevail in this case.’
“On the other side it will present more of a risk to them if you have that sort of language in your agreement.”