Claims for Attorney’s Fees: A Multijurisdictional Approach
The satirical magazine The Onion once reported on the purported Burger King request of the late William Safire for two Whoppers Junior.[1] The linguist accuracy of the plural possessive has been a searing debate dividing the legal world for decades. Is the preferred term “attorney’s fees” or “attorneys’ fees”?
My desire to write the definitive article on the subject was unfortunately undercut by the discovery of an opinion by Judge Duross Fitzpatrick of the U.S. District Court for the Middle District of Georgia, who wrote:
The Court refers to the fees sought in this case as attorneys’ fees (Plural possessive) because the request involves fees charged by more than one attorney. But when referred to in a generic sense, or when quoting from a judicial opinion or a statute, the Court uses the phrase attorney’s fees (singular possessive), as that appears to be the prevailing trend when context does not indicate the need to use the plural possessive. See Bryan A. Garner, A Dictionary of Modern Legal Usage 91 (2d ed. 1995). [Bakari v. City of Byron, 2006 WL 42140 (M.D. Ga. 2006) (not reported).]
With that issue firmly resolved, I have turned my attention to an issue that is less definitively decided. What approaches have different States taken with regard to whether attorney’s fees may be recovered under the prior litigation exception to the American Rule?
American Rule
The American Rule provides that parties to litigation typically are responsible for their own attorney fees. See Fleischmann Distilling Corp. v Maier Brewing Co., 386 U.S. 714, 717-718 (1967). For centuries in England, there has been statutory authorization to award costs, including attorney’s fees. Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247 (1975). However, as early as 1796, the United States Supreme Court has held that the “general practice of the United States” opposes the award of attorney fees absent statutory authorization. Id. at 249-250 (citing Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, 1 L.Ed. 613 and numerous later opinions).
Prior Litigation Exception
This article concerns the attempts by litigants to seek reimbursement of attorney’s fees not as a prevailing party, but as compensatory damages for prior litigation. For example, Restatement (Second) of Torts § 914 (1979), provides that:
One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.
Although the common law of many States adopts some version of this prior litigation exception, the approaches of the different jurisdictions vary dramatically on the standard necessary to satisfy this exception.
Tender Requirement
The Restatement (Second) of Torts § 914 (1979) itself requires that for the prior litigation exception to apply, the Plaintiff must have tendered the claim in the prior litigation to the alleged tortfeasor:
When a cause of action or an alleged cause of action against the defendant in a proceeding exists only because of a tort of another, the defendant can notify the other to defend the proceeding and if the other fails to defend the defendant can either defend, subsequently recovering all the reasonable expenses of the defense, or refuse to defend, in which case he can recover from the tortfeasor the amount of any judgment obtained against him.
Similarly, 22 Am Jur 2d Damages § 455 provides that before recovery of attorney fees from prior litigation can be allowed, the plaintiff must have tendered the defense to the defendant.
This approach reduces the temptation of law firms who are representing a client in litigation allegedly caused by a third party from acting as if they have received a blank check for any and all attorney fees. Thus, for example, in Lundeen v. Lappi, 361 N.W.2d 913, 917 (Minn. App. 1985), the Minnesota Court of Appeals held that attorney fees from prior litigation are “available only where defense has been tendered and refused.” Similarly, both the New Hampshire Supreme Court and the Massachusetts Supreme Court have held that the prior litigation exception requires that the party seeking attorney fees must have tendered the claim to the defendant, and that the defendant refused the tender. Fairfield v. Day, 71 N.H. 63 (1901) (“it must further appear that he was notified to defend the suits, and refused to do so”); Inhabitants of Westfield v. Mayo, 122 Mass. 100, 102 (1877) (in order for a town to obtain attorney fees from an earlier litigation, it must have first notified the alleged tortfeasor “of the pendency of the action, and request[ed the tortfeasor] to defend it”).
Sole Cause Requirement
Other States have adopted the position that to invoke the narrow prior litigation exception, the wrongdoer’s conduct must have been the “sole cause” for the prior litigation. Thus, the Third Circuit held in Marshall Invs. Corp. v. Krones AG, 572 F. Appx. 149, 155 (3rd Cir. 2014) that the prior litigation exception did not apply where the party seeking attorney fees had been sued in the prior litigation for its own misconduct.
Appellant’s argument, if followed, would effectively convert the third-party litigation exception, which requires a determination of whether Appellant was sued for its own misconduct, into a determination of whether Appellant was ultimately responsible for the alleged misconduct. As previously explained, that is not the law of Minnesota and Wisconsin. Appellee’s motion to dismiss was not prematurely adjudicated by the District Court. The determination of whether a party has been sued for its own misconduct is an appropriate undertaking at the threshold of litigation and is properly conducted by looking at the face of the complaint and the docket filings in the cause of action for which a party seeks attorney fees.
Likewise, in Hoffman v. Champion Power Equip., Inc., 2017 WL 2672304, at *3 (M.D. Pa. 2017), the Court held that the prior litigation exception applied only when a party had been sued solely because of the tortious conduct of a third party:
Recovery under the third-party litigation rule is the exception and is permitted only when a party is sued solely because of the tortious conduct of a third party.” “There is no doubt that § 914(2) … should be applied narrowly, otherwise, the exception would swallow the rule.” Thus, a court must decide whether the matter sub judice is the “exceptional case that falls within the purpose of § 914(2)” or whether the American Rule endures. [Footnotes omitted.]
The Court explained further that the conduct of the tortfeasor must have been the legal cause of the prior litigation:
[T]he earlier action’s subject matter “must have been the tortfeasor’s tortious conduct,” and that conduct “must have been ‘the legal cause of the action.’ ” [Id. at *5; footnotes omitted.]
In Conrad v. Suhr, 274 N.W.2d 571, 578 (N.D. 1979), the North Dakota Supreme Court also held that the prior litigation exception did not apply where the prior litigation involved defense of allegations of misconduct by the party seeking attorney fees as an element of damages:
In the instant case, Suhr also defended exclusively against allegations of his own negligence, and, notwithstanding the fact that the negligence issue was taken from the jury when the case was finally submitted to the jury, we believe that because the defense was conducted for his own benefit, Suhr did not fit within the exception set forth in Davis, i. e. attorney fees are allowed if the defense is essentially being conducted for another’s benefit.
See also Spice v. Lake, 22 Wash. App. 2d 1014 (unpublished), review denied, 200 Wash. 2d 1021 (2022) (the prior litigation exception did not apply in a legal malpractice case because the wrongful act must be the sole cause of litigation between the plaintiff and a third party); O’Connell v. Jackson, 273 Minn. 91, 96-97 (1966) (attorney’s fees disallowed where the prior litigation included charges of wrongful acts against the party seeking attorney fees); In re Skinner, 519 BR 613, 620-621 (Bankr. E.D. Pa. 2014), aff’d, 532 B.R. 599 (E.D. Pa. 2015), aff’d 636 F. Appx. 868 (3rd Cir. 2016) (under New York law, “Section 914 recognizes that an injured party’s consequential damages may include, in addition to the injured party’s personal damages caused by the tortfeasor’s conduct, attorneys’ fees and costs incurred when defending itself in a prior action that relates to the same conduct of the tortfeasor that caused the injured party’s personal damages”); Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 631 (4th Cir. 1999); Inhabitants of Westfield v. Mayo, 122 Mass. 100, 102 (1877).
Fraud or Malice Standard
The illustrations supporting Restatement 2d Torts § 914 (1979), which derive from cases in a wide range of States, all involve circumstances of fraud:
Illustrations:
- With knowledge of their source, A sells stolen goods to B, who believes A to be the owner. B is arrested but not convicted on the charge of having received the stolen goods with knowledge that they were stolen. He is also sued for conversion by the true owner. B can recover the amount that he reasonably expends in defense of both the tort and the criminal proceedings and in satisfaction of any judgment against him.
- A, fraudulently purporting to be an agent for B, contracts with C, who, upon B’s failure to perform and in the belief that B is liable, brings unsuccessfully a suit against B. C can recover damages from A for the cost of the proceeding.
- A, who is B’s agent, collects money due from C to B. Later A represents to B that C did not pay him and B brings suit against C for the amount supposed to be due. B can recover from A the expenses of suit as well as the amount received by A.
This has led some States to impose a malice or fraud standard to satisfy the prior litigation exception. For example, in Estate of Kriefall v. Sizzler USA Franchise, Inc., 2012 Wis. 70, ¶¶ 72-73, 342 Wis. 2d 29, 69 (2012), the Wisconsin Supreme Court held that a higher standard than negligence is required:
[T]he Weinhagen exception’s wrongful act requirement demands more than an allegation of mere negligence that has involved a party in litigation; instead, “wrongfulness” requires something similar to fraud or breach of a fiduciary duty to the party seeking attorney fees. [Id.]
The Court believed that a negligence standard would not accord with sound public policy, and instead open the door to oppression and extortion, and lead to great abuses:
To hold otherwise would be to open the door to oppression and extortion, to penalize persons who appeal to the courts to adjudicate their differences. It would not be in accord with sound public policy. The temptation to institute litigation for the purpose of recovering from the opposite party generous fees would be very great and no doubt lead to great abuses. [Id., 342 Wis. 2d at 71.]
See also Horgan v. Felton, 123 Nev. 577, 585-586 (2007) (in slander of title case, recovery of attorney fees from prior litigation allows “some recourse against the intentional malicious acts of the defendant”).
In Slaughter v. Roddie, 249 So. 2d 584, 586 (La. App. 1971), the Louisiana Court of Appeals did not allow recovery of attorney fees under the American Rule even though accounting malpractice had caused the Plaintiff to hire an attorney to defend an audit.
In Suburban Real Est Servs, Inc. v. Carlson, 2022 Ill. 126935, ¶ 36, 193 N.E.3d 1187, 1195, the plaintiff alleged that it followed the defendant lawyers’ advice which led to being sued for breach of fiduciary duty. The Court rejected the defendant’s argument that the plaintiffs’ payment of attorney fees to new counsel constituted an injury that triggered the statute of limitations for a malpractice claim:
Merely hiring new counsel to defend against a lawsuit challenging the attorney’s legal advice and incurring fees does not, standing alone, trigger a cause of action for malpractice.
Michigan law holds that the prior litigation exception only applies where the party at fault is guilty of malicious, fraudulent or similarly wrongful conduct, not of simple negligence. In re Thomas Estate, 211 Mich. App. 594, 602 (1995); Brooks v. Rose, 191 Mich. App. 565, 575 (1991); Scott v. Hurd-Corrigan Moving & Storage Co., Inc., 103 Mich. App. 322, 347-348 (1981); G&D Co. v. Durand Milling Co., 67 Mich. App. 253, 259-260 (1976).[2]
No Heightened Standard
Some States do not impose any heightened standard. For example, the Alabama Supreme Court held in In Ex Parte Burnham, Klinefelter, Halsey, Jones & Cater, P.C., 674 So. 2d 1287, 1290 (Ala. 1995) that, “where the natural and proximate consequences of the defendant’s wrongful act [cause]the plaintiff to become involved in litigation with a third person, attorneys’ fees and other expenses incurred in such litigation may be recovered as damages.” See also Quad City Bank & Trust v. Elderkin & Pirnie, P.L.C., 870 N.W.2d 249, 259-260 (Iowa App. 2015); Spering v. Sullivan, 361 F. Supp. 282 (D. Del. 1973).
No Prior Litigation Exception
Arkansas apparently refuses to allow the prior litigation exception at all. In Universal Cooperatives, Inc. v. AAC Flying Serv., Inc., 710 F.3d 790, 798 (8th Cir. 2013), the Arkansas Supreme Court rejected any cause of action against a third party for attorney’s fees incurred in earlier litigation against another party. Similarly, Utah appears to limit the prior litigation exception to contractual actions, not litigation caused by tortious conduct such as fraud. Gardiner v York, 2006 UT App 496, ¶ 9, 153 P.3d 791, 794.
Summary
Different States have used vastly different approaches to the availability of attorney’s fees as compensatory damages under the prior litigation exception to the American Rule. One constant remains. Whether you use the term “attorney fees,” “attorney’s fees,” or “attorneys’ fees,” consistency within the document is required. California Style Manual.
[1] https://theonion.com/william-safire-orders-two-whoppers-junior-1819565735/
[2] The Michigan Supreme Court recently heard oral argument on a case involving whether to continue this standard for the prior litigation exception.