Business Litigation And Attorneys’ Fees

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In California attorneys’ fees in business litigation can be recovered pursuant to a contract or a statute. In other words, lawsuits for breach of contract may involve a contract that provides for the award of attorneys’ fees to the prevailing party. Other lawsuit such as employment claims involve statutes that provide for the award of attorneys’ fees. Otherwise, parties to a lawsuit are generally expected to bear their own attorneys’ fees.

California Civil Code Section 1717: Award of Attorneys’ Fees for Breach of Contract

California Civil Code section 1717 provides in part that “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”

What Is A Typical Attorneys’ Fees Provision in a Contract?

The California ...
... Association of Realtors purchase and sale agreements include a fairly typical attorneys’ fees provision. “In any action, proceeding or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller except as provided in paragraph 34a.” [Paragraph 34a is a mediation clause in which a party waives the right to attorneys’ fees if they fail to mediate a dispute prior to filing a lawsuit].

The AIR Commercial Real Estate Association has a more detailed attorneys’ fees clause.

“If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term, “Prevailing Party” shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case maybe, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys’ fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach ($200 is a reasonably minimum per occurrence for such services and consultation).

Who Is The ‘Prevailing Party’ In A Breach Of Contract Lawsuit?

Business litigation attorneys must first ascertain who is the prevailing party in a breach of contract lawsuit. Some contracts, such as the AIR Commercial Real Estate Association documents, include their definition of the “prevailing party” as set forth above. If a contract does not specify who the prevailing party is, the court will look to California Civil Code section 1717. The Code defines a prevailing party in a breach of contract action as “the party who recovered a greater relief in the action on the contract”. The court may also determine that there is no prevailing party. Moreover, where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party under section 1717.

Attorneys’ Fees Can Affect A Breach of Contract Lawsuit

The availability of attorneys’ fees can make a big difference in the viability of a breach of contract lawsuit. In those business litigation cases where attorneys’ fees are not recoverable, the cost of litigation and attorneys ‘fees can exceed the amount being sought in damages. This does not make economic sense. However, if the contract provides for the recovery of attorneys’ fees, then there is less economic risk in pursuing the litigation and more incentive for the defendant to settle the lawsuit before the amount at issue grows unmanageable.

law firm los angeles : Laine T. Wagenseller is an attorney in Los Angeles who specializes in business and real estate litigation. He is the founder of Wagenseller Law Firm. For more articles on breach of contract lawsuits and other business litigation issues, please visit www.wagensellerlaw.com or contact Mr. Wagenseller at (213) 996-8338 or ltw@wagensellerlaw.com.