BFV Perspectives, Corporate Matters, Georgia Business Disputes, | Apr 30, 2014

Four Things To Know About Attorney’s Fees

When facing the prospect of filing a lawsuit, one of the first questions anyone asks is:  “Will I get my attorney’s fees back?”  The most appropriate (and yet probably frustrating answer) is: “It depends.” Below is quick summary of Georgia law on attorney’s fees explaining the circumstances under which attorney’s fees may be recovered:

1)  You May Be Entitled To Attorney’s Fees Under The Terms Of A Contract.  

If the claim arises out of a contract, there may be language in the contract allowing the prevailing party to recover his or her attorney’s fees. For instance, a contract may state that a party is entitled to recover up to 15% of the debt owed as its attorney’s fees.  So if one party owes $100,000, the party who sues to recover the debt will also be entitled to recover $15,000 as attorney’s fees. Georgia law, however, prohibits provisions that allow a party to recover more than 15% of the debt owed as attorney’s fees.

Often, a contract may only state that the prevailing party is entitled to recover “its reasonable attorney’s fees”.  This does not mean there is no limit on the amount of fees that may be recovered.  It, instead, means that a statutory formula applies to the fee calculation.  Georgia law allows the prevailing party to recover 15% of the first $500.00 of outstanding indebtedness, plus 10% of the remaining outstanding indebtedness.  Using the same example as above, the prevailing party would be entitled to recover $10,025 as attorney’s fees on a $100,000 debt.

2)  If There Is No Contractual Provision Allowing You To Recover Attorney’s Fees, You Will Need To Prove The Other Party Acted In Bad Faith Or Was Stubbornly Litigious.   

If there is no contractual language that allows for the recovery of attorney’s fees, a party will need to establish that the opposing party acted in bad faith, was stubbornly litigious, or caused unnecessary trouble and expense in order to recover attorney’s fees.  Bad faith warranting an award of attorney’s fees must have arisen out of the party’s conduct in the underlying transaction; in other words, the pre-lawsuit conduct.  The mere refusal to pay a debt, however, will not by itself show that a party acted in bad faith.

If there is no evidence of bad faith, a party may still be able to recover for the opposing party’s stubborn litigiousness or for causing unnecessary trouble and expense.  In that instance, the factfinder must determine that there was no “bona fide” controversy, or genuine dispute, regarding the opposing party’s liability.

3)  Attorney’s Fees Can Only Be Awarded If Damages Are Awarded On The Underlying Claim.

There can be no award of attorney’s fees unless there is first an award of damages or other relief on the underlying claim.  Thus, a party must succeed on its underlying, substantive claims in order to be able to recover an award of attorney’s fees.  

4)  It Can Be Difficult To Predict The Amount Of Attorney’s Fees That Will Be Awarded.

Finally, even if a party can make a showing that the opposing party acted in bad faith or was stubbornly litigious, that does not guarantee recovery of 100% of the attorney’s fees actually incurred.  If the case proceeds to trial, a judge or jury may award less than 100% of the attorney’s fees incurred. The factfinder will ultimately award what it believes to be a reasonable amount.

As always, please let us know if we can be of assistance for your business matter. 

BFV Perspectives, Corporate Matters, Georgia Business Disputes, | Apr 30, 2014