Who Pays Attorney Fees?

When in a dispute, typically each side pays its own attorney fees. However, this is not always the case.

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In Michigan, attorney fees are generally not recoverable, unless a statute, court rule or common law exception provides otherwise.

If you are in a contractual dispute, it is essential that you know what your contract says about attorney fees, as this can change the standard.

Contracts can shift the burden of who pays the attorney fees, often to the losing side or even to the employee/smaller business. This is done as a tactic to avoid litigation and costly disputes.

Make sure you know what your contracts say about attorney fees before you sign them.

It is also important to know what the contract states about the type of fees that are recoverable. Is the other party able to recover actual attorney fees or just reasonable attorney fees?

For many years, Michigan courts only allowed the winning party to recover ‘reasonable’ attorney fees. If your contract allows for recovery of reasonable attorney fees, the courts will have to look at multiple factors to determine what is a reasonable attorney fee.

For example, the court may look at rates in the community, the amount of hours, the experience of the attorney, the type of case, and more. All of this will play into the amount that the court awards for reasonable attorney fees.

However, if your contract states that one party is entitled to ‘actual’ attorney fees, the court may award the total cost of the invoice.

This could result in the difference of thousands of dollars, depending on the litigation.

This recent shift may encourage you to revisit your contracts to see whether they allow for recovery of reasonable or actual attorney fees.

It’s also important to understand who can be awarded the fees. Could it be either party, depending on the outcome of the lawsuit? Or is only one party entitled to attorney fees?

Significant litigation will result in significant attorney fees. If a small business is required to pay not only their attorney fees, but another entity’s attorney fees as well, this can be devastating.

We recommend you reevaluate your contracts with your attorney.

If you need help with your dispute provisions, attorney fee provisions, or contracts in general, contact Rickard & Associates today!

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