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Can A Business Recover Its Attorneys’ Fees In A Lawsuit In New York?

Aug 16, 2016

A business is usually responsible for the payment of its own attorneys' fees in a lawsuit in the New York state courts.  New York follows the so-called "American Rule" that a litigant is not allowed to recover damages for the amounts expended in the successful prosecution or defense of its rights.  In other words, in the United States, the prevailing party is ordinarily not entitled to collect a reasonable attorneys' fee from the loser.

In New York, the right to recover attorneys' fees must be statutory or contractual; an award of attorneys' fees to the prevailing party in a litigation must be authorized by agreement between the parties, statute or court rule.

Examples of contractual provisions affording the right to recover attorneys' fees include "prevailing party" or "fee-shifting" clauses.  These provisions state that if a party to an agreement successfully prosecutes, or successfully defends against, a lawsuit arising under the contract, then that party is to be reimbursed by the losing party for its reasonable counsel fees incurred in the lawsuit. Note that, generally, the attorneys' fees must be "reasonable" as defined by the judge, who has discretion in setting the amount of the fee awarded to the prevailing party.

Various New York statutes and court rules either authorize a prevailing litigant to recover, from its defeated adversary, the attorneys' fees it incurred in the court proceeding or authorize a litigant to recover, from an adversary which engaged in frivolous conduct, its counsel fees.  

If neither an agreement between the litigants nor an applicable statute or court rule creates an exception to the pay-your-own-way "American Rule," then a business must bear its own counsel fees in a lawsuit in the New York state courts.        

Please contact Peter J. Gregory at 585.512.3506 or if you would like to schedule a consultation to discuss how this may impact your case.