Bringing down the fees Featured

8:00pm EDT August 26, 2009

One of the important factors in deciding whether to take a dispute to trial is the cost. Litigation is expensive and the cost can reduce the value of a favorable verdict to the point that the injured party is not really made whole.

The problem is solved if the dispute falls under a statute or agreement that allows the prevailing party to collect its attorneys’ fees and costs from the other side. However, in all other disputes, each party must bear its own attorney fees and costs.

“Because not all contracts include attorney fee provisions and the statutes allowing for fees are relatively few, most clients shoulder the burden of their own legal fees,” says Marissa C. Corda, an associate with Katz Barron Squitero Faust. “And now more than ever, they are hesitant to run up a bill.”

However, says Corda, there is a little known body of Florida common law called the “wrongful act doctrine” that may allow litigants to recover attorneys’ fees even where there is no other contractual or statutory basis for such an award.

Smart Business spoke with Corda about recovering fees under this law.

What is the wrongful act doctrine?

The wrongful act doctrine permits a plaintiff to recover from a defendant, as an additional element of damages, the plaintiff’s litigation expenses resulting from asserting a claim or defense in a third-party action. In order to recover such expenses, the defendant must have committed a wrong toward a plaintiff, and the wrongful act must have caused the plaintiff to litigate with third parties or placed him or her in such a position that it was necessary to incur legal fees to protect an interest.

The key element of the doctrine is that the fees recovered must be incurred in litigation with a third party, not in litigation with the defendant against whom the fees are sought. For example, Plaintiff Paul owns a car. Defendant Dan wrongfully takes possession of the car. Defendant Dan sells the car to Third-Party Tim. Plaintiff Paul is forced to institute a case against Third-Party Tim to get his car back. Plaintiff Paul also sues Defendant Dan because of his wrongful actions. As a result, under the wrongful act doctrine, Plaintiff Paul is entitled to his attorneys’ fees incurred in his lawsuit against Third-Party Tim but not the fees incurred in the case between Plaintiff Paul and Defendant Dan.

The doctrine is not without limitation. The doctrine does not create an independent cause of action. Rather, the doctrine simply allows a claim for attorneys’ fees as an additional element of damages where a cause of action already exists between the plaintiff and defendant. In the example above, Plaintiff Paul’s attorneys’ fees for the case against Third-Party Tim would be a part of the damages recovered in the case against Defendant Dan for his wrongful actions rather than an independent cause of action between Plaintiff Paul and Defendant Dan. If no independent cause of action exists between Plaintiff Paul and Defendant Dan, no claim for damages under the wrongful act doctrine can be made. Moreover, the doctrine is limited to those situations were the party seeking fees had a viable defense or interest to be protected in the third-party action. In the above example, Plaintiff Paul would not be able to recover under this doctrine if he simply brought an action against Third-Party Tim with no colorable claim or defense in the third-party action.

What constitutes a wrongful act?

The doctrine is primarily used where there is tort liability between parties, but the factual situations in which the doctrine has been invoked are very broad. It has been used in cases involving trespass, wrongful conveyance of a property interest, wrongful refusal to settle (in the insurance context), wrongful appointment of a corporate fiduciary, negligent failure to provide a construction bidding package and other negligence actions.

However, the courts are very clear that a party may not recover under the doctrine if one’s own wrong has contributed to the litigation. That would allow a party to profit from his own wrongful conduct and essentially receive a windfall.

Does anything special need to be done in litigation in order to receive wrongful act doctrine damages?

When attorneys’ fees are awarded pursuant to a contract or statute, the courts typically consider them during post-judgment costs proceedings. However, because wrongful act doctrine damages are an element of special damages, they must be specifically pled. This means that the special damages under the wrongful act doctrine must be pled with specificity in the complaint. If such damages are not specifically pled, evidence of special damages is not admissible at trial and special damages are not awardable. Therefore, if you may be entitled to such damages, it is imperative that your counsel alleges these damages in your complaint.

Does the wrongful act doctrine exist in other jurisdictions?

Florida is not alone, but it goes by other names in other states. Similar doctrines have been applied by courts in New York (the Shindler rule), Washington (the ABC rule), California (the tort of another doctrine), Indiana (the third-party litigation exception), and Wisconsin (the Weinhagen attorney fee rule), to name a few.