• April 24, 2012

As nearly all civil litigators across the country know by the end of their first year of law school if not before, “the American rule” means that in most cases litigants/clients pay their own lawyers/litigators, whether they win or lose.

The so-called “British rule,” also called, “loser pays,” is thought to to “operate[] as a greater impediment to access to justice than does the American Rule.”

But under many circumstances (in a minority of cases), American courts do impose one party’s attorneys’ fees on the party’s adversary, if permitted by a particular statute or court rule.  This, however, presents many complications.  

The number of challenges posed by fee-shifting would be good subject matter for several lengthy law review articles rather than a blog post but, historically, the significant complexity of subject matter and the superficiality of blogging has never stopped Minnesota Litigator from touching on such issues.

So the recent decision from U.S. District Court Judge Susan R. Nelson (D. Minn.) on the petition for attorneys’ fees from the victorious plaintiff in RFC v. Terrace Mortgage, is sufficient impetus for passing mention of the complicated  issues related to fee shifiting.

Plaintiff RFC presented a 2-3 page affidavit from counsel of its attorneys’ fees.  Keep in mind, this is an affidavit from “an officer of the court,” (as lawyers are often called to remind them and everyone else of their ethical obligations as representatives of the rule of law).  And an affidavit is sworn testimony, signed under penalty of perjury, a felony, punishable with a prison sentence of up to five years.

This affidavit, however, was challenged by defendant Terrace Mortgage because it did not allow the loser/defendant to scrutinize claimed fees sufficiently.  Terrace would essentially have had to take its adversary’s word for the fees charged.

Judge Nelson agreed and gave RFC seven days to “resubmit its Affidavit, but supported by appropriate evidentiary documentation, with any privileged information or attorney work product appropriately redacted…” (That is, plaintiff’s counsel has  until Thursday of this week.)

The RFC v. Terrace Mortgage case was filed (in state court) in November, 2009 and the total claimed fees were about $233,000.00.  A mere $12,000+ in fees, itemized, looks like this.  So we are talking about a compilation roughly 20x more, to generate in seven days and remove all privilege claims to substantiate the fees claimed.

And how much 20/20 hindsight is warranted?  Would work that one might paraphrase like this:  “Research a dead end strategy, discuss dead end strategy, drop dead end strategy,” compensable?

Is it unrealistic or unfair to deny award for such fees because lawyers, advocating on behalf of their clients, cannot realistically perform their work flawlessly.

Also, the sacrosanct attorney-client privilege, like many subtle or nuanced legal issues is easily understood in the abstract but, in specific instances, can be quite thorny and complicated.  Lawyers having to make these determinations on short time constraints to be scrutinized by an adversary can be demanding.

And keep in mind that the RFC v Terrace Mortgage case has been appealed by the defendant to the U.S. Court of Appeals.  In theory, could Terrace Mortgage “flip” the decision against it and, by challenging RFC’s fee petition, gain access and insight to RFC’s case analysis and strategy to use later in the litigation?

Finally, at what point is the reward of fee-shifting consumed by the fight about the specifics of the fees claimed?  Presumably the plaintiff cannot tack on the fees it is being charged for the fight about the fees it is being charged.

Leave a Reply

Your email address will not be published. Required fields are marked *