Litigation in business can be a risky proposition for anyone, regardless of how strong their case may be. The reason is simple: the potential financial impact of a lawsuit. Even when someone prevails in court, they still have to spend a substantial amount of time and money to get to that point. In many cases, they will not be able to recoup their legal costs. The reason? In many cases involving business disputes, a bad contract.
In Arizona, absent a contractual provision explicitly stating the winner in a legal dispute is entitled to having their attorney’s fees and costs paid by the loser and/or a statute permitting the same, courts are generally hesitant to award anyone their legal expenses. There are a few exceptions to this principal, but they are rare and hard to prove. These include: “common fund” doctrine; “private attorney general” doctrine; “tort of another” doctrine; and, “bad faith.”
In addition to requiring that a litigant have either a contractual provision, statute, or doctrine of exception permitting an award of attorney’s fees and costs, the courts also scrutinize the legal costs using various factors in order for an award to be granted. Experienced litigators are capable of ensuring that your claims are conducted in such a way that a court would be inclined to substantiate such an award, however there are no guarantees. The factors include: time and labor required; novelty or difficulty; skill necessary; likelihood that the work will prevent the lawyer from doing other work; fee customarily charged by lawyers in the community for similar work; amount of money involved; results of the work; temporal limitations imposed by the circumstances; nature and length of the relationship between attorney and client; experience, reputation and ability of the lawyer; and finally, whether the fee is fixed or contingent.
To protect yourself and your business, it is essential that you at least “get your foot in the door” of recovery. That begins with contractual provisions ensuring you are entitled to recover when you prevail in a dispute. However, not all contractual provisions mandating an award will be enforced by a court. That is because Arizona courts have strict requirements for how a provision awarding attorney’s fees and costs must be structured. Consulting a local attorney is recommended. For example, a Phoenix business attorney if the case is in Maricopa County. In the event a provision doesn’t meet the requirements, a court will not enforce it. Conversely, if a provision isn’t strict enough in its structure, then it is likely it will not be sufficient to garner an award.
Performing the balancing act of proper drafting is essential to ensure the maximum protection of yourself and your business. You should always consult with an Arizona business attorney if you are considering litigation. The last thing a business owner needs is to prevail in court over someone who wronged them, only to be trapped with legal expenses which could easily dwarf the actual value of the disputed matter.
