Litigation is expensive. Although every case is different, it is not uncommon for a case that runs through trial to cost each side hundreds of thousands of dollars in attorney’s fees.  As a result, a litigant should always evaluate whether he or she may have a right to recover their attorney’s fees if a case proceeds through trial.  That evaluation requires a case specific analysis.  Here are some general issues to consider when evaluating the recovery of attorney’s fees in litigation.

American Rule vs. English Rule:

The accepted “American Rule” of attorney’s fees is that each party bears its own attorney’s fees regardless of which side wins the case. Two well recognized exceptions to the American Rule are a fee shifting provisions in a statute applicable to the claim or a prevailing party attorney’s fees clause in a written contract between the parties.  Although each states’ laws are different, the American Rule and the exceptions noted above are generally applied by courts throughout the United States (hence its name).  The American Rule is often contrasted with the “English Rule” which provides that the prevailing party may recover its attorney’s fees from the losing party in most litigation.

It Only Happens After You Win

Assuming you have a statute or written contract that allows you to recover your attorney’s fees, it is important to keep in mind that your fees are only recoverable after you win, because it is only then that you will become the “prevailing party.” The vast majority of cases in litigation settle—including cases where a statute of contract would entitle the winner to recover his or her fees.

Is the Trustee in Litigation Entitled to Use Trust Funds to Pay its Attorney’s Fees?

Like most questions associated with the law, the answer to this one is the frustrating, “it depends on the case.” This question has been addressed by several appellate cases in California, and the decisions leave the issue unresolved.  Generally, a trustee defending the trust corpus or preparing a trust accounting is entitled to its attorney’s fees out of trust funds.  In addition, a trustee may pay attorney’s fees incurred in assisting the trustee in the performance of the trustee’s fiduciary duties.

Is a Beneficiary in Litigation Entitled to Use Trust Funds to Pay its Attorney?

Again, it depends. As a practical matter, most courts do not allow a beneficiary to access trust funds during litigation.  However, if the litigating beneficiary prevails, there is legal support for the position that he or she may be reimbursed from the trust for their attorney’s fees if the court believes the beneficiary’s litigation benefited the trust.