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Recovering Attorney’s Fees in Litigation in Illinois

Very few people enter into contracts or begin business relationships expecting the worst.  If they did, they really have no business proceeding with the contract or relationship.  As you can imagine, the universe of business relationships and contracts is nearly limitless, including such things as hiring a company to paint your home, starting a new company with friends, financing capital improvements to your company by raising new investment capital, and hiring a marketing firm to boost your online presence.  Let your imagination run wild, and the answer is:  yes, there is probably a contract or business relationship adjacent to your scenario.

In the real world, however, we know that our optimistic intentions don’t always materialize.  In some cases, the results are downright disastrous.  Truth be told, it’s the reason business lawyers exist.  Ideally, our job is to help clients consider unintended outcomes early in the process – before the stakes are high.  A seasoned lawyer once told me early in my career that, “disputes are always better resolved in the boardroom, rather than the courtroom.”  I know this to be true, because a few years later while negotiating a settlement at the Daley Center, the judge presiding over our case recited his mantra:  “The mark of a good settlement is when everyone leaves unhappy.”  Yikes.

So what do we optimists do with these warnings?  Certainly the wheels of commerce and opportunity don’t stop turning.  Of course, thinking through the possible pitfalls, and then planning how to mitigate or avoid them in the first place is the ideal prescription.  Nevertheless, sometimes disputes end up in court.  In a perfect world, the justice system would put the aggrieved party back in the same position as if the wrong had never occurred (or financially compensated them accordingly).  But that’s hard to do when you have to pay your lawyer to help get you there.

In Illinois, there are two situations where a successful party in litigation can have their attorney’s fees paid by the case’s losing party, a concept known as “fee shifting.”  First, fee shifting can occur where a specific Federal, state, or local law provides for it.  For example, the Illinois Mechanic’s Lien Act contains specific language allowing a court to order a property owner to pay the attorney’s fees of a lien claimant who has perfected and proven his or her claim.

The second situation is when the litigants are parties to a contact that provides for fee shifting.  These contract provisions are commonly referred to as “prevailing party fee” provisions.  If your contract doesn’t contain such a provision or the law doesn’t allow for the fee shifting, you’re out of luck – and on the hook for your own attorney’s fees.

Prevailing party fee provisions can be extremely useful tools.  On one hand, they allow an aggrieved party a clearer path to be “made whole” after things have gone awry.  On the other, they can be used to deter a party from delivering on the threat of litigation when they really don’t have a valid claim.  What was once just “hot air” can now become a huge expense if one has to pay for both sides’ lawyers.

Complicating these matters, however, is what to do when both sides of a dispute have valid claims against the other?  Often in both statutory and contractual fee-shifting scenarios, the court retains the power to apportion fees as it sees fit.  Put another way, a court may award some, but not all, of a party’s fees, according to “how wrong” each side was.  Still others may decline to award fees at all if the other side raises even one, tiny, valid claim or defense during the entire course of litigation – the logic being that your side didn’t fully “prevail.”  Either scenario requires a case to be brought all the way to final judgment; if you settle beforehand, you’re on your own to apportion fees into your settlement agreement, if at all.

Deciding whether to include a prevailing party fee provision in your contract depends on the nature of the contract or business, the position of the parties, the resources at stake, and a variety of other considerations.  The marriage between business and legal considerations is a fluid relationship that requires thinking of the “big picture,” often playing out “what if” scenarios.  This decision is just one of the numerous initial considerations to weigh when undertaking a new venture (or refining an existing one).  If you have any questions about contracts, business formation, or other commercial law matters, Winick & Gallaher, PC can help craft a “right size” solution for you.