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Most causes of action do not allow the winner to recover litigation and attorney fees. In other words, even if you “win” the case you will still be responsible for the attorneys’ fees it costs you to get the win.

What to know about litigation and attorney fees

But, breach of contract is a common cause of action that notoriously carries the opportunity for attorneys’ fees for the winner. The idea is that a party should not have to expend resources to enforce terms that the parties already agreed to.

Even in breach of contract claims attorneys’ fees are often not directly covered. This is because most cases, statistically, resolve via settlement.

What does settlement mean?

Settlement means the parties will resolve their dispute for some amount of money that the aggrieved party chooses to accept and that the breaching party chooses to pay. That typically means the issue of attorneys’ fees are handled within the agreement.

What’s an example of a settlement?

For example, a breach of contract settles for $100,000.00 and the Plaintiff spent $15,000.00 in attorneys’ fees. The Plaintiff will pay for the attorneys’ fees out of the $100,000.00 that was recovered via settlement.  Yet, if the same case resolved at arbitration or trial and the same amount was awarded, the Plaintiff would receive $100,000.00 in addition to the $15,000.00 in attorneys’ fees.

For this reason some attorneys even take breach of contact cases on a contingency basis, meaning they do not require the client to pay upfront and instead take their fees from the settlement or award.

The concept of winning party works the other way as well. If the defendant wins, is found not to have breached the contract, he or she would recover attorneys’ fees from the plaintiff as well.

Therefore a party bringing a breach of contract should be certain that there is in fact a reach of contract.

What if you are the losing party?

A protection from being the losing party is to make a reasonable settlement offer. Any time, up to thirty days prior to trial, a party may file an offer of judgment. This is a number that they are willing to pay to settle the case.

If the other party rejects the settlement offer and at trial does worse than the offer, the party who made the rejected offer is deemed the winner and is entitled to attorneys’ fees.

Here’s an example… prior to trial the defendant in a breach of contract case offered to settle for $150,000.00 and the plaintiff rejected that offer. At trial, the jury found in the plaintiff’s favor, i.e. found that the defendant did in fact breach the contract. The jury awarded the plaintiff $100,000.00.

Even though the jury found in the plaintiff’s favor, the defendant is actually the winner for purposes of awarded attorneys’ fees. This is because the plaintiff rejected a more favorable offer. The plaintiff will get their $100,000.00 that the jury awarded but it will not recover fees and the defendant will be entitled to their attorneys fees.

Why it’s important to know about litigation and attorney fees

This is a tool to mitigate risk and to encourage parties to accept reasonable settlement offers.

For these reasons, even simple breach of contract cases can be complex. We routinely handle these cases on behalf of businesses and consumers. If you’d like to speak with our team, you can call 480-681-5408 or book time with us here.

It is important to review the options of settlement. Also, it’s important to know your potential obligations when rejecting a settlement offer.