The producers of Buzzard Breath ran a series of ads in which two beautiful women came to life in front of two truck drivers who were drinking the beer. Mesmerized by the commercial and dreaming of similar results, Dateless Dan bought a case of the beer, drank it, and failed to see two women materialize. Dateless sued the bottlers of Buzzard Breath for false advertising, claiming emotional distress, mental injury and financial loss in excess of $10,000. The court dismissed all claims. Can Buzzard Breath Brewery make Dateless Dan pay the attorneys’ fees it paid to defend Dan’s claims?Probably not. The losing side does not ordinarily have to pay the winning side’s attorney’s fees. In the United States, the general rule (called the “American Rule”) is that each party pays only their own attorney’s fees, regardless of whether they win or lose. This allows people to bring cases and lawsuits without the fear of incurring excessive costs if they lose the case. In contrast, in England and other countries, the losing side is often required to pay the other side’s attorney’s fees after losing a trial.
Texas Legislature. This session two Texas legislators filed “loser pays” bills in the Texas House and Senate respectively. Although similar, the bills are not identical in recommending the circumstances when a losing plaintiff would be required to pay the court costs of defendants when a court determines a lawsuit is groundless or a jury determines a suit is frivolous. Each proposal is a notable departure from the American rule, which is the general rule in Texas and the United States. Proponents of the American rule argue it is necessary to ensure that even the poorest litigants can access the courts. Hailed as tort-reformers, State Senator Joan Huffman and State Rep. Brandon Creighton, say adopting the “English rule” would cut down on frivolous lawsuits while encouraging defendants to settle meritorious claims.
In Texas, there are already exceptions to the American Rule that permit the prevailing party to recover attorney’s fees. The most common is when a contract or statute (law) specifically allows for payment of attorney’s fees to the winner.
Tilting the Scales in Your Favor. Add a provision to your contracts that permits the winning party to recover its attorneys’ fees. Be forewarned that’s a double-edged sword if you lose the lawsuit. Often you will find that the party who drafts the contract provides that only it recovers attorneys’ fees if it prevails at the courthouse. However, Texas courts are permitted to judge contracts for fairness and to change contract terms or even cancel such a provision if a judge decides the provision was not negotiated by two parties with equal bargaining power.
Tilting the Scales to Manage Your Legal Risk. If you’re concerned or hopeful that the losing side would have to pay attorneys’ fees in your case, it’s generally a good idea to check (or ask your lawyer to check) if any exceptions apply to your particular case. Some states, like California, Wisconsin and Illinois have statutes providing the loser should pay the winner’s attorneys’ fees in cases with broader application than the exceptions currently permitted in Texas.