Court Awarded Attorney Fees Explained
In any dispute, whether it be a contract, divorce or a tort, if a party has to sue in court in order to get the other party to fulfill their obligations, the party that prevails in court may have their attorney fees paid by the losing party. Essentially, the contract or law governs the outcome as to which party should pay the attorney fees. If you are successful, you are entitled to an award of attorney fees to be paid by the other side (in essence to be reimbursed for the fees you paid to the attorney). Court awarded attorney fees are available pursuant to the terms of the contract and/or within a particular statute. California Code of Civil Procedure § 1021 governs the payment of attorney fees for a dispute over an attorney fee. In Georgianna, the Court discusses when the award of attorney fees is appropriate: "Section 1021 codifies the ‘American rule’ of litigation expenses, which states that, with certain exceptions, ‘the prevailing party in a lawsuit must bear its own attorneys’ fees.’ (Children’s Hospital v . Blue Cross of Southern California (2000) 78 Cal.App.4th 598, 603, 92 Cal.Rptr.2d 193.) Section 1021 states, ‘[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties [citation], subject to such provisions as the Legislature may make regulating the same.’ The American rule means ‘there is no general right to recover attorney fees under California law unless the party seeking fees can identify either a contractual basis for recovery (usually in the form of a clause in the instrument sued upon) or some specific statute that provides for fees.’ (City of Oakland v. Oakland Police & Fire Retirement System (2013) 219 Cal.App.4th 1258, 1273, 162 Cal.Rptr.3d 753.) In other words, the award of attorney fees is not automatically or necessarily associated with the winning of a court case. The party prevailing in the court action must also prevail on the other issue for which attorney fees may be awarded.
What to Do Once Attorney Fees are Awarded
The moment you receive a court order awarding attorney fees should be a short celebration. By short, I mean that you should make a few quick calls to people involved in the case and notify them of the victory. Notify the client, but also notify the insurance agent or the defendant’s attorney, depending on the circumstances of the case.
Very shortly after winning an attorney fee award, you should submit a proposed order to the Court and request a hearing if necessary. There is a high level of detail in attorneys fees requests that must be presented in front of the judge.
The defendant or the insurance company will have a very short window of time to appeal a court order. So it becomes extremely important to get the order entered quickly. In many cases, an order is entered by the Court without a hearing in order to save the parties the expense there. However, if the order does not contain enough detail it will disappear and fall within the very short time limits to appeal an order. Some courts require a motion or request to enter a judgment. I prefer obtaining a formal pleading for the court to sign. If it provides too little detail the document becomes part of the record and is no longer a judgment of the court.
Attorneys are very careful in their pleadings to allow a court order to be entered for a very short time or completely without a hearing. It is very important to have a hearing in front of the judge if it is hotly contested including a detailed discussion with the court as to all of the reasons for the specific hourly rate requested.
Satisfying the Judgment for Attorney Fees
Once an award of attorney fees has been made, it must be enforced like any other judgment. For example, an attorney fee award obtained in litigation can be enforced by the normal civil enforcement mechanisms: wage garnishment, garnishment of funds held, or even by obtaining a judgment lien on real property and foreclosing on such a lien if the judgment is not paid. The statute of limitations on such a judgment would be 10 years. An award under the MCL 600.2549 scheme (i.e., the mandatory attorney fee statute) becomes a judgment immediately, and may be enforced directly as such. Usually, the creditor will seek to have such an order confirmed to provide a clear record of both the judgments entry and the statutory authority therefor. Additionally, a motion filed in the underlying case for payments to be made through the court under MCR 2.621 should accompany the confirmation motion so that the court can designate payments to be made through itself. All other procedural tools available for collection of a civil judgment can be used to enforce the attorney fee judgment itself. Under the MCL 600.2549 scheme a litigant is not limited to collecting a judgment directly from the party who was originally the losing party in the litigation who was assessed with attorney fees, but can seek to collect from any person who previously prevailed in litigation under MCL 600.2549. Of course, if the award of attorney fees is part of the final judgment, it should be enforced in accordance with the rules applicable to the enforcement of final judgments.
Obstacles to Collecting Court Awarded Attorney Fees
Even when the arbitration award is confirmed and the attorney is awarded fees on a quantum meruit or contract basis, collection may prove challenging. Debtors may take the position that the award is unenforceable because it was not accompanied by an order from a court other than the tribunal and because the World Trade Organization Dispute Resolution Panel Report on "United States: Measures Affecting the U.S. – Gulf Cooperation Council ("GCC") Free Trade Agreement" provides that awards of arbitrators may not be enforced against the United States if a U.S. agency is the judgment debtor. This position is based upon the trade policy of requiring a formal court order "to ensure that the Awards of WTO dispute settlement panels will be enforced by the United States." WTO Dispute Panel Report, WT/DS-442/R, WT/DS-444/R (August 31, 2011). Under these circumstances, the attorney could be without a financially responsible debtor. Although a court of competent jurisdiction can enforce the award of an arbitration tribunal, confirmation of the award under the United States Arbitration Act is required before a district court has jurisdiction to do so. 9 U.S.C. § 9. An attorney becomes entitled to collect a fully enforceable judgment upon confirmation of the award, and "the confirmation order, having the same finality and res judicata effect as the court’s judgment, may not then itself be called into question." Id.; see also Hayes, Inc. v. Cheatham, 942 S.W.2d 215, 217 (Tex. App.—Houston [14th Dist.] 1997, no pet.). However, should the debtor be a party protected from immunity by the Foreign Sovereign Immunities Act (FSIA), the situation can become even more complex. The FSIA recognizes a presumption of immunity for a foreign state that has been sued in the United States. While awards of arbitration experts normally are collected from the entity that appoints them and who has agreed to pay them, collection from a sovereign can be complicated, even when the requisite waiver exists.
Settlement Talks and Payment Plans
If pursuing a motion to obtain the amount awarded in a fee decision or settlement is either inappropriate, not possible, or otherwise unlikely to be successful, you may consider securing payment of a smaller amount and/or over a longer period of time. Negotiation of payments in installments or settlements could be pursued with your adversary, or even with a bankruptcy trustee if one were appointed for that adversary in bankruptcy.
If you are proposing a much smaller payment amount, or if you suspect that your adversary has few or no assets to pay you, you might consider offering to settle the decision or agreement in exchange for a significant discount from the awarded amount . This type of offer is similar to an offer of compromise made in bankruptcy and it may be appropriate to consider seeking court approval of such an agreement. Since many lawyers do not have experience with negotiating a settlement of a fee award (or a settlement agreement or a license revocation decision), the approval process could be unfamiliar to you.
It is also appropriate to ask the court to verify your adversary’s willingness to enter into a settlement agreement or to abide by a repayment schedule. Involving the court could be as simple as filing the agreement with the court (for approval or acknowledgement by the court) or providing the court with an entry of judgment upon default if the adversary fails to comply with the agreement.
Litigation to Collect Attorney Fees
When either or both parties disobey the support provision (or fail to pay any of the costs involved therein), which includes any court ordered attorney fees, you are not reduced to a passive state. The legal counsel of the prevailing party can file a motion for contempt under NRS 22.010 et seq. against the losing party, in which case the prevailing party is effectively requesting that the losing party be held in contempt for violating a court order and should be sanctioned. Contempt is defined in NRS 22.010(3) as "failure to obey the order of a court without legal ground or excuse." If the motion is granted, the losing party can be penalized, often by being incarcerated in the Clark County Detention Center until he or she does fully obey the order, even done via suspended sentence. If the court were to impose sanctions on the losing party, against whom the motion for contempt was filed and granted, those costs would usually be borne by the losing party and included in the support award to the prevailing party.
Another possibility is that the prevailing party should refile or reopen the original order in order to ask to the court to alter its provisions and make clearer what was originally ordered. Such a motion requires a showing that new facts now exist that were previously unknown, or that the circumstances of the situation have changed in a way so as to now require that the original order be modified by the court. In addition to the option of the filing of a motion for contempt, the attorney for the prevailing party also has the option of filing further motions to enforce the order. An exception to this rule is when the family court advises that it would not enforce the provisions of the order as to the contesting party. And finally, the best strategy for collecting court awarded attorney’s fees is to be particularly diligent about requesting them before, during and after the litigation process.
Tips for Collecting on an Award
Despite a client’s insistence that he will pay a court awarded fee, there is no guarantee. So what is the law firm to do? Before entering into a collection agreement with counsel, the enforcement of the judgment should be handled in-house. After all, a client may be unwilling to pay his final bill because he has not paid the attorney for litigation over the last four years and now feels obligated to litigate over payment of the final bill. There are two approaches.
The first is an avoidance strategy. Some states allow assignment of pending claims. If the client will sign the assignment of claim, advise the other party that the attorney will accept a W-9 in lieu of payment on the final judgment. Whomever is paying the attorney will then pay the attorney on behalf of the client directly. This is an excellent means by which to collect fees with a high success rate. However, if the plaintiffs or defendant are unable to make the final payment, more drastic measures are needed .
The second approach is to hire an outside third-party collection agency. Specialized collection agencies are experienced with attorney fee collection. The agency will mail letters informing the client that the matter has been referred for collection and that the agency will be contacting the client. Next, the third-party agency will "skip trace" the client through national databases to attempt to locate the client’s new address, phone number, employment, and employers’ addresses. Once the address and phone number are secured, the client will receive a phone call from the agency collective department and be given the opportunity to make payment arrangements. If the client refuses to enter into a payment plan, or makes no payment after an agreed upon period of time, the agency will garnish the client’s wages. On a successful collection, the client will be responsible for paying the agency a percentage of the amount collected.