Clients often ask if they will be able to collect their attorney fees from the opposing party if they win in court.  Payment of attorney fees is a valid concern for both you and your lawyer.  For the client, any litigation is a serious financial commitment; for the attorney, litigation is a serious commitment of time and the firm’s resources.  It is vital that there be a clear understanding between the attorney and client prior to commencing litigation on how and when the attorney fees will be paid.

There are generally two arrangements made for the payment of attorney fees prior to the commencement of a case.  Clients will be billed hourly with a retainer (deposit) due prior to the beginning of the representation, or the attorney will agree to handle the case on a contingency basis–that is the attorney will not bill the case on an hourly basis and will not require a retainer but will be paid out of any judgment entered in the client’s favor.  Typically in contingency cases the attorney will be paid approximately 1/3 of any judgment.  Contingency pay arrangements are usually seen in the area of personal injury cases while hourly billing is generally done in most other civil cases.  Many firms will charge a one-time flat fee for cases such as bankruptcy or in criminal matters.

Generally, courts follow what is called the American Rule.  The American Rule provides that unless there is a statute or a contractual agreement requiring the payment of fees, all parties to a lawsuit will pay their own attorney fees–regardless if you win or lose.  This being the general rule, all parties should plan on paying their own attorney fees and should not expect the other side to pay any of your fees or court costs.

There are, however, exceptions to the Rule.  First, in disputes involving a contract there is often a term in the contract requiring the losing party to pay the prevailing party’s attorney fees and costs.  If the contract contains such a term you will be in a good position to collect your attorney fees if you win.  Second, under Arizona law, there are several statutory provisions that provide for the payment of attorney’s fees by the losing party if a judgment is entered in the matter.  A good and often used example is A.R.S. 12-341.01.  This statute provides that the prevailing party in a suit based upon a contract (written or oral) may be entitled to the recovery of their attorney fees.  In order for this statute to apply there must be a final judgment or an arbitration award entered.  If the case settles prior to trial or arbitration typically no award of attorney fees is provided.  It is also important to understand that this statute, like many, is discretionary.  A judge can award all fees incurred, a portion of the fees, or none at all.  There is no guarantee.

If your case settles prior to trial–and over 90% do–you should not plan on the other side paying your attorney fees.  It is rare that either party will agree to pay attorney fees as part of a settlement and insisting that your fees be paid will likely be a hindrance to settlement in your case.

To sum all of this up, before the decision is made to go forward with any lawsuit it is important to have a frank discussion with your attorney about fees.  Generally you will be required to pay a retainer and then replenish that retainer once it has been exhausted.  Understanding what is expected of you as a client and what your attorney expects from the beginning will head off many problems down the road.