Attorneys’ fees are generally not the main focus of any piece of litigation, however, they are important at the beginning, throughout, and at the end of each case. No matter the size or type of case, it is critical to the case evaluation to determine whether attorneys’ fees are recoverable. Whether a party may recover attorneys’ fees largely turns on the relationship of the parties and the nature of the litigation. Equally as important, whether the party actually will recover attorneys’ fees depends on the attorney’s careful billing and timely petition for recovery. At the end of the day, each attorney not only wants to prove her case and win, but she also wants to recover her fees in addition to the damages award.
Similarly, a full recovery for a party may also include the recovery of expenses, costs and interest. For a winning party, the recovery of expenses, costs and interest truly makes that party whole by recouping reasonable out-of-pocket litigation expenses, and accounting for the time-value of money. The availability of attorneys’ fees, costs and interest should be considered in every case.
The actual amount of attorneys’ fees rarely matters unless a case is litigated to the end. Of course, the ability to recover attorneys’ fees can be a bargaining too during settlement negotiations, but parties typically settle a case for one lump sum without a specific number for attorneys’ fees, expenses, costs, or interest.
Identify the existence and type of fee-shifting provision early on and set realistic expectations for your client. Clients hear that you can recover attorneys’ fees from the other side and often assume that the fees are on top of any amount settled for. Make sure your client understands that if the case is settled, your fee comes out of the total settlement amount.[i]
Understand in your state how to claim attorneys’ fees. For example, in Virginia, be sure to claim reasonable attorneys’ fees, expenses, costs, and interest in your first pleading (Complaint or responsive pleading) with clear Rule 3:25 notice. It is prudent to make the Rule 3:25 notice a separate paragraph with some type of emphasis, i.e. bold or underlined.
Use the “reasonable” requirement of attorneys’ fees to your advantage if you are defending a case. In Federal Court, a defendant can use Rule 68, Offer of Judgment, and make a settlement offer. If the offer is rejected and the ultimate award is not more favorable to the plaintiff, the plaintiff must pay the costs incurred after the offer was made.[ii] Bill carefully and with detail. Only include actual legal work, not administrative tasks, and do not overbill for unproductive conferences, travel, or duplicative work. Keep in mind that a court is unlikely to award all fees incurred. Courts have discretion in considering the reasonableness of the fee and are likely to reduce the amount for which you petition.
The basis for recovering attorneys’ fees
The general rule for recovering attorneys’ fees in every state is the American Rule, which states that each party pays for its own attorneys’ fees and costs absent a contractual or statutory provision to the contrary.[iii]
Fee-shifting provisions found in contracts or in various statutes often contain some common elements. First, the provision is either mandatory or discretionary. This distinction is important, especially to the cost-benefit analysis often done in preparation for settlement, because a mandatory fee-shifting provision gives a plaintiff stronger bargaining power. In contracts, the provisions are generally mandatory, and often provide that a certain party is “entitled” to recover reasonable attorneys’ fees and costs in connection its breach of contract action. Statutes may use mandatory language like “the court shall award” attorneys’ fees and costs or discretionary language like “a court in its discretion may award attorneys’ fees.”[iv] Be careful to ascertain the nature of the attorneys’ fees provision early on.
The second common feature of a fee-shifting provision is the recipient of the attorneys’ fees award. Fee-shifting provisions benefit either the prevailing plaintiff alone or the prevailing party in general. Statutes may give courts the authority to award attorneys’ fees to a prevailing defendant, especially in cases of frivolous litigation. However, a fee-shifting provision that benefits one side regardless of whether that side prevails has been found to be unconscionable and unenforceable.[v] Thus, the first step in an attorneys’ fee award analysis is to determine if there is a fee-shifting provision at play, and if so, whether the provision is mandatory or discretionary as well as who may benefit from the provision.
Contract fee-shifting clause can look like the following:
- “The prevailing party shall have the right to collect from the other party its reasonable attorneys’ fees and costs incurred in enforcing this Agreement.”
- “If for any reason the amount due under this [contract/promissory note/agreement] is not paid when due, the [contractor/note holder/name of party] shall be entitled to its expenses and fees incurred in the collection of this agreement with interest on the unpaid balance.”
Fraud and equitable considerations
Some states, like Virginia, have also opened the door to the recovery of attorneys’ fees in situations beyond the traditional contractual and statutory bases for recovery. The Virginia Supreme Court has allowed the recovery of attorneys’ fees in cases of fraud where the request is injunctive relief. [vi]
In cases of fraud, the general rule is that a court has discretion to award attorneys’ fees but “must consider the circumstances surrounding the fraudulent acts and the nature of the relief granted to the defrauded party.”[vii] In Prospect, a couple bought a parcel of land, built a house, and spent a significant amount of money on landscaping based upon the representations of the subdivision developer that the adjoining lot would remain wooded and could not ever be built upon, due to the nature of the land.[viii] The subdivision developer had actually planned all along to build houses on the landowners’ adjoining lot and subsequently began removing trees.[ix] The landowners obtained a temporary injunction and brought suit for a permanent injunction and damages, alleging breach of contract and fraud.[x] The trial court granted the injunction, awarded monetary damages, and awarded attorneys’ fees.[xi] The Virginia Supreme Court held that there were no compensatory damages to be awarded, and the trial court erred in awarding damages.[xii] However, the trial court was correct to award $151,378.00 in incurred attorneys’ fees and costs because without those fees, the plaintiffs’ “victory would have been hollow.”[xiii] Equity required that the plaintiffs, who were successful in getting injunctive relief in a hotly contested case, recover their attorneys’ fees because of the deliberate fraudulent conduct of the defendant.[xiv]
Timely petition for recovery of attorneys’ fees and costs
Every state can be different, so check the rules. However, pursuant to the Federal Rules of Civil Procedure, Rule 54, the proper method to petition to recover attorneys’ fees and costs is with a motion. The claim “must be made by motion” unless the underlying statute provides otherwise. The motion “must: (1) be filed no later than 14 days after the entry of judgment; (2) specify the judgment and the statute, rule, or other grounds entitling the movant to the award; (3) state the amount sought or provide a fair estimate of it; and (4) disclose, if the court so orders, the terms of any agreement about fees for the services for which the claim is made.” It is important to keep these dates in mind and prepare as much material ahead of time to be able to submit a timely motion.
Given the fact that attorneys’ fees cannot be awarded until the underlying case is decided, a party or both parties, may wish to bifurcate the trial and/or stay discovery as to the attorneys’ fees issue, and this should be done at the beginning of the case. In federal court, the motion for attorneys’ fees need not even be made until the trial has concluded, so a judge may stay discovery on the issue of attorneys’ fees rather than bifurcate the trial.[xv]
Keep the Fee Petition Requirements in Mind while Billing
The legal standard for recovery is the reasonable hours times reasonable hourly rate (The Lodestar Test). This test is rarely differed from. For example, the Fourth Circuit Court of Appeals has adopted a three-step process for determining the fees and costs award. This approach, which is followed by the federal district courts in Virginia, set forth in McAfee v. Boczar. The court must first “determine the lodestar figure by multiplying the number of reasonable hours expended times a reasonable rate.”[xvi] Second, the court subtracts fees for hours spent on unsuccessful claims, and third, the court awards “some percentage of the remaining amount, depending on the degree of success enjoyed by the plaintiff.”[xvii]
Reasonable hourly rate: The first step is to establish the reasonableness of the rate charged, as only attorneys’ fees billed at a reasonable rate can be recovered. The applicant for the fee “bears the burden of establishing the reasonableness” of each attorney’s rate by showing that it is “consistent with the prevailing market rates in the relevant community for the type of work” performed.[xviii]
The prevailing market is one where the court sits to decide the action.[xix] The most important evidence for proving the reasonable hourly rate is expert testimony, usually by affidavit, as to the prevailing market rate in the area. The court will also consider the difficulty of the case and the experience of the attorneys.[xx]
What if the case transfers in the middle of litigation? In the rare case where a case is litigated for some time in one jurisdiction before being transferred to another, the fee applicants should be prepared to present evidence of the prevailing rates in both applicable jurisdictions for the work done in each locale. In Schwarz v. Sec’y of Health & Human Servs., the Ninth Circuit Court of Appeals considered how to calculate an attorney’s fees when the case was transferred to Portland after two years of extensive discovery that occurred while the case was pending in Phoenix.[xxi] In that case, the district court award fees on the plaintiff’s successful claim based on the house spent and the “going rate in Phoenix and Portland.”[xxii] The appellate court affirmed the decision.[xxiii] The Court agreed with the trial judge that the reasonable hourly rate should be calculated by the prevailing rate where the district courts sat, both in Phoenix and Portland during the relevant portions of the litigation.[xxiv]
In addition to showing a reasonable hourly rate charged by his lawyers, the party seeking fees must also show that the time expended was reasonable. Generally, courts will reduce hours due to block billing, duplicate work, vague billing, unnecessary group meetings, non-legal work done by attorneys, travel time, and other extraneous or unnecessary hours spent on legal work.[xxv] The Western District of Virginia has lately had a critical eye regarding the hours expended by attorneys.[xxvi]
Do not: block bill, have multiple lawyers doing the same work or bill for work that was not productive, make vague entries that fail to describe the nature of the work and/or the topics discussed, have an excess number of group meetings, or bill for administrative or clerical work.
Do : make detailed entries, make discrete entries if there are multiple claims in one case, and self-audit the bill.
The biggest battle in most fee petitions is the chance the fee applicant spent too much time or had too many lawyers working on the case, so the hours worked and the fees associated with those hours are unreasonable. The federal courts often follow a series of twelve factors, first identified in Johnson v. Georgia Highway Express, Inc.[xxvii] To determine the reasonableness of the hours worked, courts consider:
- The time and labor expended;
- the novelty and difficulty of the questions raised;
- the skill required to properly perform the legal services rendered;
- the attorney’s opportunity costs in pressing the instant litigation;
- the customary fee for like work;
- the attorney’s expectations at the outset of the litigation;
- the time limitations imposed by the client or circumstances;
- the amount in controversy and the results obtained;
- the experience, reputation, and ability of the attorney;
- the undesirability of the case within the legal community in which the suit arose;
- the nature and length of the professional relationship between attorney and client; and
- attorneys’ fees awards in similar cases.
Based on these factors, a court may adjust an attorney’s fee up (an enhancement) or down (a reduction) and may make the adjustment as a bulk, percentage increase of the total fee rather than a direct increase in the hourly rate. While reductions are common, enhancements should be rare and only permitted in exceptional cases.[xxviii] An enhancement should be supported by specific evidence and detailed findings that support the court’s decision to increase a party’s award.[xxix]
After a federal court determines the lodestar figure, it may then subtract fees spent on unsuccessful claims.[xxx] Virginia courts also consider the overall success of the fee-petitioning party. Virginia does not consider a purely mathematical approach, discounting all fees spent on any unsuccessful claim or part of a claim, rather, Virginia follows Supreme Court guidance, considering the results obtained as one factor of the analysis but also considering other factors like the type of award sought.[xxxi] Virginia Courts take the position that it lies within the court’s discretion to deduct unnecessary fees, if a claim, defense, motion, or attorney action was “frivolous, spurious, or unnecessary.”[xxxii]
Finally, the court will take into consideration the degree of success enjoyed. This analysis considers whether the reduction of an award is warranted based on limited results obtained compared to the overall litigation. The court first compares the amount of damages sought to the amount awarded.[xxxiii] However, the fact that a plaintiff did not recover as much as he expected does not automatically trigger a reduction in fees.[xxxiv] The question is whether the plaintiff’s degree of success warrants the amount of the fees claimed.[xxxv] This factor is the “most critical” factor in determining a fee award, but it lies wholly in the discretion of the court.[xxxvi]
It can be easy to bill with less precision on contingency fee cases because clients are less likely to scrutinize the bill. While the contingent nature of the fee may be considered by the court in calculating the reasonableness of the fee requested, it does not control the court’s discretion in setting the fee. For this reason, if a party has the potential to recover attorneys’ fees and costs as a remedy, the attorney needs to keep her time records on the case with the Judge as her audience, not just the client.
The general rule is well settled that, like attorneys’ fees, expenses incurred by the plaintiff in litigating his claim are not recoverable as an item of damages.[xxxvii] At common law, there existed no basis for recovery of costs, therefore, recovery now rests upon statute.[xxxviii] Most states provide by statute that the party for whom final judgment is given in an action or motion shall recover his costs against the opposite party, except as otherwise provided.[xxxix]
Exceptions to the General Rule include contractual provision can permit recovery of costs and other statutory restrictions .[xl] Taxable costs in federal court pursuant to 28 U.S.C. §1920. Costs Include: Clerk and Marshal fees; Fees for transcripts; Fees and disbursements for printing and witnesses; Fees for exemplification and copies[xli]; docket fees; and compensation of court appointed experts and interpreters. Costs are recoverable by the prevailing party pursuant to Federal Rule of Civil Procedure, Rule 54(d).
The ability to recover attorneys’ fees can have great impact on the development and outcome of a case. To that end, it is essential that an attorney evaluate whether attorneys’ fees are recoverable and timely request those fees. Throughout the case, the attorney must also bill precisely and carefully. When the time comes, the recoverability of attorneys’ fees also can be a useful tool in settlement negotiations. Further, costs and interest can be a significant part of any recovery, and should be considered when evaluating a potential recovery in the case as well as what losses your client may face if she is the losing party. This area is the law is still evolving, so stay up to date with new case law and always remember this important part of your case.
[i] There are a few statutory exceptions to this, like the False Claims Act.
[ii] FRCP R. 68. (emphasis added).
[iii]Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015); REVI, LLC v. Chi. Title Ins. Co., 290 Va. 203, 213 (2015).
[iv] See e.g. Va. Code Ann. § 16.1-378.18 (1950, as amended); Va. Code Ann. § 55-79.3(A) (1950, as amended); 42 U.S.C. § 12205; 31 U.S.C. § 3730. Lambert v. Sea Oats Condo. Ass’n, 293 Va. 245, 254 (2017).
[v] McIntosh v. Flint Hill Sch., 2018 Va. Cir. LEXIS 321 (Fairfax, Sept. 17, 2018).
[vi] See Prospect Dev. Co. v. Bershader, 258 Va. 75 (1999). See also MCR Fed., LLC v. JB&A, Inc., 294 Va. 446 (2017) (holding that the trial court erred in awarding attorneys’ fees based on fraud when the plaintiff did not properly bring fraud claims).
[vii] Prospect Dev. Co., 258 Va. at 92.
[viii] Id. at 81-83.
[xi] Id.at 80.
[xii] Id.at 91.
[xiii] Id. at 93.
[xv] See e.g. Advance Stores Company, Incorporated v. FrontStreet Facility Solutions, Case No. 7:17-cv-568, ECF Dkt. No. 20 (W.D.V.A., Aug. 6, 2018).
[xvi] McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013) (internal citations omitted). See Lamonaca v. Tread Corp., 157 F.Supp. 3d 507 (W.D. Va. 2016). See also Prison Legal News v. Stolle, 129 F.Supp. 3d 390 (E.D. Va. 2015).
[xviii] McAfee, 738 F.3d at 91.
[xix] Rum Creek Sales, Inc. v. Caperton, 31 F.3d 169, 175 (4th Cir. 1994).
[xx] See Hernandez, 41 Va. Cir. at 173-74.
[xxi] 73 F.3d 895 (1995).
[xxii] Id. at 899.
[xxv] McAfee v. Boczar, 738 F.3d 81, 90 (4th Cir. 2013); Doe v. Alger, 2018 U.S. Dist. LEXIS 15365 (W.D. Va., Jan. 31, 2018); Univ. Support Servs. v. Galvin, 32 Va. Cir. 47, 55 (Fairfax Cnty. Cir. Ct., 1993).
[xxvi] See Doe v. Alger, 2018 U.S. Dist. LEXIS 165957 (W.D. Va., Sept. 27, 2018) (J. Dillon).
[xxvii] 488 F.2d 714 (5th Cir. 1974) (superseded by statute in some states). There is some question as to whether these factors will continue to apply under the McAfee test.
[xxviii] Hensley v. Eckerhart, 461 U.S. 424 (1983).
[xxix] Craddock v. LeClairRyan, No. 3:16-cv-11, 2019 U.S. Dist. LEXIS 98209 (E.D. Va., June 11, 2019) (J. Payne).
[xxx] McAfee, 738 F.3d at 88.
[xxxi] Univ. Support Servs., 32 Va. Cir. at 54-55 (citing Hensley v. Eckerhart, 461 U.S. 424 (1983)).
[xxxii] Dewberry & Davis, Inc., 284 Va. at 496.
[xxxiii] Randolph v. Powercomm Constr., Inc., 715 Fed. Appx. 227, 231 (4th Cir. 2017).
[xxxv] McAfee, 738 F.3d at 92.
[xxxvi] Hensley v. Eckerhart, 461 U.S. 424, 436-37 (1983).
[xxxvii] Hiss v. Friedburg, 201 Va. 572 (1960).
[xxxviii] Scott v. Doughty, 130 Va. 523, 526 (1921).
[xxxix] Va. Code § 17.1-601.
[xl] Danburg v. Keil, 235 Va. 71, 365 S.E.2d 754 (1988).
[xli] Converting document file types constitutes making a copy, however ESI processing does not constitute “exemplification”. Country Vintner of N.C., LLC v. E. & J. Gallow WIndery, Inc., 718 F.3d 249 (4th Cir. 2013) (denying the prevailing party a six figure cost for ESI processing).