Litigating the amount of attorneys' fees.

• Author: Hauser, James C.
• Position: Florida

A Proposal for Reform

One of the most contentious battles that accompanies litigation is the determination of the amount of attorneys' fees to be awarded to a prevailing party who has proven entitlement to fees.(1) Prevailing parties are generally authorized to recover fees expended for successfully litigating the entitlement issue. Attorneys' fees incurred to establish the amount of fees, however, generally are not recoverable.(2) Beyond the sometimes difficult issue of separating fees incurred for proving "entitlement to" versus the "amount of" attorneys' fees,(3) the determination of the amount of fees--particularly in large and protracted cases--can easily become a "mini-trial" whose expense rapidly escalates and imposes additional burdens on the parties and an already strained judiciary. For this reason, methods for avoiding such litigation should be considered.

This article proposes a simple procedural tool to encourage resolution of disputes over the amount of attorneys' fees: the offer of judgment. The premise of the proposal is straightforward. Attorneys' fees incurred for establishing the amount of fees should be recoverable if the party seeking recovery has made a reasonable offer that was rejected. The prevailing party, who is in the best position to determine the amount of fees actually incurred, should be required to make an offer with supporting documentation. The nonprevailing party must either accept or reject the offer. If properly structured, this type of offer encourages settlement of disputed claims and shifts the risk of fees to parties who are unwilling to enter reasonable settlements.

In general, litigants have no entitlement to recover attorneys' fees expended in establishing the amount of attorneys' fees except in certain circumstances.(4) The caselaw, which holds that fees for proving the amount of fees are nonrecoverable, is based on the American Rule that parties bear their own attorneys' fees, unless authorized by statute or contract.(5) The caselaw also is based on the proposition that fees incurred for proving entitlement benefit the client, while fees incurred for proving the amount of fees are for the attorney's benefit.(6) Courts typically have made this distinction where the language of a contractual or statutory fee-shifting provision is phrased in such a way that it can be interpreted in this limited manner.(7) This distinction, however, is somewhat artificial because clients clearly have a keen interest in the amount of fees that ultimately are recoverable. Nonetheless, courts are unwilling to permit recovery absent specific statutory language authorizing recovery or a clear showing that the client is contractually obligated for such fees.(8)

Due to the general unavailability of recovery for establishing the amount of fees, an offer of judgment provides a mechanism and an incentive for resolving such disputes. Without a means of shifting the economic costs of litigating fee-amount disputes to opponents, parties are limited to traditional means of dispute resolution, which increasingly means burdensome and wasteful mini-trials. An offer of judgment would provide an additional, and perhaps highly effective, means not only of encouraging the parties to initiate settlement discussions, but also to narrow the focus of negotiations that ordinarily occur.

An offer of judgment for attorneys' fees has a significant potential for success for a number of reasons. First, unlike situations in which offers of judgment are made prior to trial when liability is uncertain, offers of judgment for attorneys' fees will arise only when the issues of liability and entitlement to fees have been decided and are certain. Because entitlement to attorneys' fees is already established, the remaining question is the amount of the attorneys' fees award. In other words, the prevailing party is only concerned with risks about the amount of attorneys' fees to be awarded. As such, the incentive to settle will be correspondingly greater because of the certainty that the court will enter a fee award in some amount.

Second, offers of judgment generally are more effective when the expected cost of litigation is proportionate with the amount of recovery at stake. If the costs of litigation and the anticipated recovery are about the same, a greater incentive to settle exists than if the possible recovery far exceeds litigation expenses. In other words, litigation costs become less significant as the magnitude of the overall expected recovery of litigation increases. For instance, a party seeking to recovery $10,000 in attorneys' fees (but having to incur $10,000 in attorneys' fees in doing so) typically will have a greater...