Why Engagement Letters Should Provide for Recovery of Attorneys' Fees

Source: AICPA CPA Insider

Excerpts reprinted with permission from the AICPA.

Unless specifically addressed in a contract or a statute, each party to a lawsuit pays its own attorneys' fees.

It is, therefore, often advisable to include a fee-shifting provision in your engagement letters.

Because attorneys' fees are often a significant factor in litigation and sometimes dictate strategy, these provisions can often be used as leverage against the opposing party. For example, a defendant forced to defend against claims may be concerned not only with a potential judgment for damages and paying its own attorneys' fees, but may also be concerned with the prospect of having to pay the plaintiff's fees as well. This is often a contributing factor used to force settlements. Similarly, where a plaintiff files unwarranted claims, a defendant can use a fee-shifting provision to shift some risk of economic loss back to the plaintiff.

For the complete article, click here and read "Recovering Attorneys' Fees," in the April 6, 2009, issue.

From AICPA CPA Insider, June 8, 2009, www.CPA2biz.com.