“I won in court.  So why can’t I recover my attorney’s fees?

Consider this scenario:

You are sued in a Virginia state court.  You dutifully hire a lawyer to defend you.  You turn over thousands of pages of (what you thought were private) documents and emails to the other side.  You go to trial, sit on the witness stand and are cross-examined at length.  And you win.

Your team is ecstatic at the complete victory!

But then a thought crosses your mind:

You paid the lawyer tens of thousands of dollars to defend you.  Shouldn’t the bad guy who sued you – and lost! – compensate you for having to pay a lawyer just to defend yourself?

The American Rule

Under Virginia law, the answer is generally no:

“Absent a specific contractual or statutory provision to the contrary, attorney’s fees are not recoverable by a prevailing litigant from the losing litigant.” Ranger v. Hyundai Motor Am., 885 S.E.2d 156, 159 (2023).

This is called the “American Rule” whereby each party must bear its own costs for litigation, regardless of the outcome.

As the Virginia Supreme Court explains:

“…[I]ts purpose is to avoid stifling legitimate litigation by the threat of the specter of burdensome expenses being imposed on an unsuccessful party.”  Tonti v. Akbari, 553 S.E.2d 769, 771 (2001).

Or, as the U.S. Supreme Court explains:

“… [S]ince litigation is, at best, uncertain, one should not be penalized for merely defending or prosecuting a lawsuit, … [also] the poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included the fees of their opponents’ counsel.”  Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 718 (1967).

The English Rule

By contrast, the “English Rule” – or “loser pays” model – provides that “the loser, whether plaintiff or defendant, must pay the winner’s attorney fees.”  W. Kent Davis, The International View of Attorney Fees in Civil Suits: Why is the United States the “Odd Man Out” in How it Pays its Lawyers?, 16 Ariz. J. Int’l & Comp. L. 361, 403 (1999).

The English Rule is generally followed in Canada, England, Scotland and Australia among many other countries.  It “reflects the rationale that victory is not complete in civil litigation if it leaves substantial expenses uncovered.”  Id. at 405.

Importance of the Contract

Many business disputes arise due to a disagreement over a contract.

“[P]arties are free to draft and adopt contractual provisions shifting the responsibility for attorneys’ fees to the losing party in a contract dispute.”  Ulloa v. Qsp, Inc., 624 S.E.2d 43, 49 (2006).

Given the American Rule, if a business dispute spirals into a lawsuit for which a judge or jury must decide the winner, then whether the contract provides for the recovery of attorney’s fees is crucial.