Money (Photo credit: 401(K) 2013)
A frequent misunderstanding about civil lawsuits that I encounter is about the payment of attorneys fees and costs. A sizeable number of potential clients assume that they can ask for the other party to pay their attorneys fees. Their (logical) thinking is they wouldn’t have to pay for an attorney if the other side would have done the right thing. This type of system is usually called the “loser pays” system. However, most of the United States, including North Carolina, follows the “American Rule.” In our system, each side is responsible for their own attorneys fees. The theory behind the rule is that people would be more inclined to fight for their rights in the court system if they did not have to worry about paying the other guy if they lost. Critics of the rule point out that, particularly in modern America, individuals are far less able to prosecute a lawsuit against corporations, businesses, and governmental entities who can afford to drag out litigation. Even an individual defendant in a car wreck lawsuit is backed by an insurance company who is paying the defendant’s attorneys fees and costs. If not for the ability of plaintiff’s lawyers to pursue cases for their clients on a contingency fee basis (meaning they earn a percentage of what they recover) hardly anyone would be able to fund a modern lawsuit.
In North Carolina, there are exceptions to the American Rule. The North Carolina legislature can write specific laws that provide for attorneys fees. Some laws currently on the books that include attorneys fees are unfair and deceptive trade practices, frivolous lawsuits, suits against a city or county, and suits to enforce a lien.
In addition to statutory exceptions, if the claim involves a breach of contract, and the contract calls for attorneys fees, those can also be recovered. The fees in such a contract action can’t exceed 15% of the claim. Similarly, a homeowner's association can recover for attorneys fees for a violation of their declarations, including failure to pay assessments, if that power is given in the declarations.
Your attorney should advise you on whether or not any exceptions apply, but be clear you understand the ability and the likelihood of recovering attorney's fees when you make decisions on proceeding or settling your case.
--Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation. Please contact him at (910) 772-1678.