When it comes to who pays attorney fees in civil litigation, there are two historical rules. First, the English rule, and it is the oldest rule, dating back to before America had its own legal system. The English rule mandates that the loser pays all the attorney fees for both sides. Second is the American rule, which has been adopted by all but Alaska. The American rule states that each side in a civil matter, pays their own fees, regardless of who prevails in the end.
The English rule serves to penalize, even an innocent actor who believes they have a legitimate claim, for ultimately having an unsuccessful court action. Whereas the American rule serves to give everyone a fair day in court.
Most states that have adopted the American rule have a statute on the books that allows trial courts to sometimes, at the trial court’s discretion, award attorney fees to the prevailing side where the losing side’s actions were extremely inappropriate, and/or in bad faith.
Indiana currently utilizes the American rule, that each side pay their own fees, with the trial court judge has some discretion to award fees for extremely bad behavior, but this is rare. In practice, granting of attorney fees is rare in most personal injury cases, and generally limited to situations where there is contempt, or frivolous motions.
Pursuant to Indiana Code § 34-52-1-1 “In any civil action, the court may award attorney’s fees…”(QUOTE 1) Some reasons a trial court might award attorney fees to the prevailing party are: if the action or suit was brought or if the defense presented was frivolous, unreasonable, or groundless; or if a party continued to litigate after it became apparent his or her argument was frivolous, unreasonable, or groundless; or if either party acted in bad faith throughout the litigation.
For example, if both sides have reasonable and sound legal arguments, but one side prevails, a judge may not address the issue of attorney’s fees. Or, if one side continues to file baseless motions throughout the litigation, just to harass the opposing side, to waste time, or otherwise, the trial court may chose to have that bad faith actor pay some of the other side’s legal fees, especially if the good faith actor had to expend considerable sums in attorney’s fees to defend against the claims. Ultimately, the trial court is not under any obligation to award attorney’s fees to the prevailing side, and it is entirely up to the judge to deviate from the standard American rule, that each side pays their own attorney fees.
A recently introduced bill in the Indiana legislature, Senate Bill 88(QUOTE 2), of the 2013 session, may change the entire landscape of civil litigation, and have a ripple effect beyond just attorney’s fees.
Senate Bill 88 would amend Indiana Code § 34-52-1-1, such that the trial court would no longer have the discretion to award attorney’s fees in certain circumstances, but rather mandate that the losing party pay the attorney’s fees of the prevailing party, in addition to their own. If Senate Bill 88 passes and is signed into law, it would amend Indiana Code § 34-52-1-1 to read as follows “In all civil actions the court shall award attorney’s fees as part of the cost to the prevailing party.”(QUOTE 3)
Senate Bill 88 is the first step towards tort reform. Torts refers to personal injury actions, i.e. the McDonald’s hot coffee was so hot it caused burns and scaring when accidentally spilled on someone’s lap. “Tort reform” has been a hot political topic for many years in an attempt to cut down on all the civil litigation in this country, and blame, legitimate or not, for one person causing another person injury. The theory may be that if the losing side always pays the attorney’s fees of the prevailing side, that someone will think a little harder, and consider his or her chances of prevailing with a little more weight, before initiating a law suit. The concept behind tort reform is to protect innocent actors from the very expensive costs of litigating and defending against frivolous claims.
However, Senate Bill 88 is broad and sweeping, it covers all civil litigation, not just personal injury/tort claims. Grouped into the civil arena is also divorces, paternity actions, and property disputes, among others.
Such a rule, requiring the loser to always pay, in a divorce or paternity action, may be very hard to enforce, because often, there are no winners and losers. Many divorces are settled out of court. In paternity and custody actions, the focus of the court is on the best interests of the child(ren), and not the parents, who are the litigating parties. It may be hard to decipher, when the judge finally makes a custody determination, and especially if that determination is joint custody, which parent is the prevailing party.
Senate Bill 88 is currently in committee, and would have to reach the floor for a vote, pass in the Senate and the House, and be signed into law by the Governor. It has a long road to travel and may never obtain a majority vote. However, if Senate Bill 88 makes it into law, Indiana would be in the minority, with only Alaska, adopting the English rule.
We hope that this blog has been helpful in understanding attorney’s fees in civil cases. Dixon & Moseley, P.C. practices throughout the state of Indiana. This blog post was written by attorney, Lori B. Schmeltzer.