Loser-Pays System States

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 How Are Attorneys’ Fees Calculated?

Attorneys’ fees are the fees that a client is required to pay for the services of their attorney. The most common fee structure for attorneys’ fees is an hourly rate.

Depending upon the experience and location of the attorney, the hourly rate may vary considerably. Although an attorney who charges cheaper fees may be better for an individual’s budget, a more experienced and expensive attorney may be able to handle a case more efficiently and with a better outcome.

While a potential client is having their consultation with their attorney, they should remember to ask for an estimate of how many hours the individual can expect to pay for. Obviously, the attorney will only be able to provide an estimate, and the actual cost may be cheaper or more expensive.

In more predictable types of cases, a flat fee will typically be charged for all services that will be provided. If this is the case, it is important for an individual to find out exactly what services and expenses will be covered by that flat fee.

If an attorney only charges a contingency fee, it means they do not charge a fee during the case but will earn a percentage of the settlement or judgment, if one is awarded. A contingency fee is typically ⅓ of a settlement or judgment and may be negotiated. In some types of cases, however, contingency fees are prohibited.

A retainer fee is an advanced payment which is based on the attorney’s hourly rate. If a retainer fee is used, a client will put money into a specific account and the attorney will deduct fees from that account as their services are completed.

It is important to note that the portion of the retainer fee that is not used by the attorney, if there is any, is generally refundable to the client. If, however, the retainer fee does not cover all of the necessary work the attorney performs, the client may be required to provide additional payments.

Statutory fees are fees that are set by law. Certain types of cases require a court to set or to approve a fee, which may vary by state or jurisdiction.

An individual should always obtain proof of the fee agreement with their attorney in writing no matter which type of fee schedule is used. It is important to note that, in addition to attorney’s fees, a client will also be expected to pay certain expenses.

These additional expenses should be discussed prior to hiring a lawyer. The attorney should be willing to provide explanations of any charges with each monthly bill.

In general, a client will typically pay for the following expenses:

  • Photocopying charges;
  • Long distance telephone charges;
  • Courier, postage, and overnight delivery charges;
  • Filing fees;
  • Court reporter and expert witness charges; and
  • Reasonable travel and transportation charges when necessary.

In general, a client will not pay for the following expenses:

  • Standard secretarial and office staff services;
  • Standard office supplies;
  • Local telephone charges;
  • In-town meals; and
  • First-class travel costs, as well as out of town meals without restrictions.

What is Fee Shifting?

Fee-shifting rules and statutes vary from state to state. However, they generally require that the individual who does not prevail in a legal matter to pay for the legal fees and costs of the party that prevailed.

There are some circumstances, however, in which the fees are shifted so that a losing defendant is required to pay the reasonable attorneys’ fees and costs of the plaintiff. The intent of these statutes is to attract attorneys to handle public interest cases which otherwise may not appear to be worth the investment.

The American Rule requires that each party is responsible for their own attorneys’ fees in litigation, unless there is an applicable contractual exception or statutory exception.

A fee-shifting provision is an example of an exception to the general rule noted above. A client does not pay advance fees or retainers but, instead, the attorney will collect payments through the fee-shifting provision or through a settlement agreement.

The threat of being required to pay the attorneys’ fees of the other party may increase the pressure on a party to settle the case quickly. An example of a fee shifting statute is Massachusetts General Laws Ch. 186, Section 14.

This statute provides for reasonable attorneys’ fees in certain landlord-tenant disputes, including when a landlord is in violation and subsequently loses the case. An example of this would be that a tenant who is facing eviction generally faces the greatest difficulty in obtaining an attorney.

The availability of attorneys’ fees pursuant to these types of statutes, however, influences attorneys to be more likely to accept these types of cases on behalf of tenants against their landlords.

When Will Courts Award Attorneys’ Fees?

Each party to a lawsuit typically pays their own attorney in the United States. This is known as the American Rule, as noted above.

In other countries, the losing party will pay the attorneys’ fees, known as the English Rule. There are, however, two situations in which a court may order a losing party to pay the winning party’s attorneys’ fees, known as fee-shifting, as noted above.

Congress has passed several laws which permit fee shifting under specific circumstances. These typically involve cases that are associated with issues of public policy.

In these cases, fee-shifting is intended to level the playing field between a private plaintiff and a corporate or government defendant. Because of this, fee-shifting is most common in specific legal disputes, including:

Although it is not common, a court does have the authority to award attorneys’ fees. This may occur if a court believes that one party acted in bad faith, for example, with the actions in bringing the lawsuit, or by their conduct which gave rise to the lawsuit.

In these types of cases, a court may order that one party pay the other party’s attorneys’ fees.

What States Have a Loser Pays System?

There are several states which have a loser pays clause or an offer of settlement system in their state laws. These types of systems may either be one-way systems or two-way systems.

The states with these types of systems include:

  • Alaska has a loser-pays system. It requires, in almost every category of civil case, that the loser of the lawsuit pay a portion of the winner’s attorneys’ fees. Alaska is the only state that has a generally applicable two-way loser-pays system;
  • Oregon and Oklahoma have statutes that apply loser-pays principles to several areas of litigation;
    • In Oklahoma, defendants may choose an offer of judgment provision;
    • In Oregon, a lot of one-way loser-pays statutes have been converted into two-way loser-pays statutes;
  • Texas has an offer of settlement system. The defendant is required to state that the case is subject to the system. If an offer is objected to and the ultimate judgment is significantly less favorable the offering party can recover certain costs since the offer;
    • In certain situations such provisions are not allowed. This is, for example, the case in class action lawsuits, worker’s compensation cases and family law cases;
  • New York has a loser pays system when suing for unfair and deceptive business practices. In addition, there is an offer-settlement system if the outcome of the case is worse than a settlement offer;
  • California has a loser pays system when suing for unfair and deceptive business practices.
  • There is also has an offer-settlement system if the outcome of the case is worse than a settlement offer;
  • Illinois has a loser pays system when suing for unfair and deceptive business practices; and
  • Florida has an offer-settlement system if the final outcome is worse than a settlement offer.

Do I Need a Lawyer for Help With Attorneys’ Fees?

If you are a party to or are considering filing a lawsuit, it is helpful to consult with your attorney regarding the potential for fee shifting in your case. Your attorney will be able to advise you on the laws in your state regarding fee shifting and how they may apply to your case.


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