Monday, February 7, 2011

Recovery of Attorney Fees as Damages.

The case law regarding attorney fees awardable as costs of an action is well-developed in Washington. When authorized, the determination of a reasonable attorney fee award is a matter within the discretion of the trial court. See Boeing Co. v. Sierracin Corp., 108 Wn.2d 38, 65 (1987). A party is not, therefore, entitled to have such a determination made by a jury. In re Marriage of Firchau, 88 Wn.2d 109, 114-15 (1977).

The case law regarding attorney fees recoverable as damages, however, is significantly less developed or evolved. In the majority of cases which have discussed attorney fee damage recoveries, such recoveries have been based on principles of equitable indemnity:

“[W]hen the natural and proximate consequences of a wrongful act by defendant involve plaintiff in litigation with others, there may, as a general rule, be a recovery of damages for the reasonable expenses incurred in the litigation, including compensation for attorney's fees.”

See Jacob’s Meadow Owners Ass’n v. Plateau 44 II, LLC, 139 Wn.App. 743 (2008) citing Wells v. Aetna Ins. Co., 60 Wn.2d 880, 882 (1962); Manning v. Loidhamer, 13 Wn.App. 766, 769 (1975). See also Tri-M Erectors, Inc. v. Donald M. Drake Co., 27 Wn.App. 529, 531 (1980) (noting that attorney fees incurred in defending suit against third party were recoverable pursuant to contractual indemnity provision as damages, the measure of which was determined by the jury). Pursuant to this rule, such attorney fees are considered to be damages rather than costs.

In several states, the case law is plain that attorney fees are awardable as damages, not only as a matter of equity, but also more generally as a potential form or measure of damages properly awarded upon proof that they were caused or incurred merely as a consequence of negligence. See e.g., Sindell v. Gibson, Dunn & Crutcher, 54 Cal.App.4th 1457 (1997) citing Prentice v. North American Title Guaranty Corp., 59 Cal.2d 618 (1963). In Washington, however, it appears uncertain whether the recovery of attorney fees as damages must be tied to a recognized equitable exception to the American Rule (where there is no other recognized basis for recovery) such as application of the ABC Rule or whether existing law would support such recovery solely upon a negligence theory of consequential damages.[1] Washington law seems headed in that direction if it is not there already.

[1] The Washington Supreme Court has explicitly recognized four equitable exceptions to the American Rule in allowing recovery of attorney fees: (1) the common fund theory, Grein v. Cavano, 61 Wn.2d 498, 505 (1963); (2) actions by a third person subjecting a party to litigation, Wells v. Aetna Ins. Co., 60 Wn.2d 880, 882-83 (1962); (3) bad faith or misconduct of a party, Miotke v. City of Spokane, 101 Wn.2d 307, 338 (1984); and (4) dissolving wrongfully issued temporary injunctions or restraining orders, Cecil v. Dominy, 69 Wn.2d 289, 291-94 (1966);Alderwood Assocs. v. Washington Envtl. Council, 96 Wn.2d 230, 247 (1981). See generally Philip A. Talmadge, Attorney Fees in Washington, Part. 5 (1995). While the traditional American Rule relates to attorney fees as costs, as noted above, at least two of the recognized equitable exceptions award attorney fees as damages. See, e.g., Cecil, 69 Wn.2d at 291, 418 P.2d 233 (attorney fees as damages in dissolving a wrongfully issued temporary injunction); Wells, 60 Wn.2d at 882 (attorney fees as damages in wrongful action by a third person subjecting a party to litigation). The Washington Supreme Court has also authorized the award of attorney fees as damages in slander of title and wrongful garnishment actions.Rorvig v. Douglas, 123 Wash.2d 854, 873 P.2d 492 (1994) (slander of title action); James v. Cannell, 135 Wn. 80, 82-83 (1925) (wrongful garnishment action), aff'd, 139 Wn. 702 (1926). Consequently, a perhaps more accurate statement of Washington's American Rule is attorney fees are not available as costs or damages absent a contract, statute, or recognized ground in equity. See also Flint v. Hart, 82 Wn.App. 209 (1996); Tradewell Group, Inc. v. Mavis, 71 Wn.App. 120 (1993) regarding application of ABC Rule.