Many clients ask whether they can recover their attorneys fees from the opposing party in a lawsuit. In Great Britain, the losing party is liable for the legal fees of the prevailing party, which is known as the English Rule. In the United States, each party generally must bear its own legal fees (known as the American Rule). The reason for this is that people should not be discouraged from pursuing a claim or from attempting to extend the law for fear of being liable for the other side’s legal fees.
However, there are many exceptions to this general rule. For example, in a lawsuit based on a written contract or lease, the prevailing party may recover its attorneys fees from the other side if the contract or lease so provides.
There are also many exceptions by statute. For instance, the New Jersey Consumer Fraud Act and the Law against Discrimination provide that a prevailing party under certain circumstances is entitled to recover its legal fees from the adverse party.
Court rules may also allow for recovery of attorneys fees. In New Jersey, in a foreclosure action, the plaintiff may recover a percentage of its legal fees in the final judgment of foreclosure as specified in the applicable court rule.
New Jersey also has a frivolous claim statute and rule which allows the defendant torecover its attorneys fees when it can show that the claim is frivolous because “no rational argument can be advanced in its support, when it is unsupported by any credible evidence, when a reasonable person could not have expected its success, or when it is completely untenable”. However, this statute is applied restrictively because the Legislature does not want to limit access to the courts or discourage honest and creative advocacy. Also, an award of attorneys fees under the frivolous claim statute is discretionary with the court.
When you consult with an attorney regarding the filing or defense of a lawsuit, exceptions to the American Rule should be a part of the discussion as applied to your case.