Q: Recently my real estate brokerage firm found a buyer whom we consider to be ready, willing and able to purchase. The sellers, for reasons of their own, decided not to sign a contract. We have a listing agreement with the seller with a provison to pay our commission if we present a buyer who is able to purchase.
We now want to file a lawsuit against the seller for our commission, which we calculate will be approximately $5,400. We have discussed this with an attorney, who tells us that his fee probably will be more than half of the amount in question and that we will be obligated to pay that fee whether we win or lose.
Isn't there a way to get the seller to pay the legal fees, if we win?
A: The question of who pays the lawyer is controversial. As a general rule, the successful plaintiff in a lawsuit can collect attorney's fees from the defendant only under the following conditions:
(1) Where there is a statue specifically authorizing attorney's fees, such as in the antitrust laws or under truth-in-lending.
(2) Where the parties have contracted for the payment of such attorney's fees. For example, many deeds of trust permit the lender to collect attorney's fees in the event that legal action is necessary to collect on the mortgage.
(3) If a sum of money has been created as a result of a class action litigation.
(4) If the situation is so outrageous that the court decides for punitive reasons that the defendant should pay the legal fees.
In the absence of one of these four situations, our courts usually follow what is generally known as the "American rule" on legal fees. This rule specifically states that each side bears its own costs and legal fees, even where the plaintiff is successful.
In England, and in a few states of the U.S.A., the so-called "English rule" is followed, whereby the losing party ends up paying not only his or her own legal fees but also legal fees for the victor.
Needless to say, if we followed the English rule, and if you were unsuccessful, you would have to bear all of the legal costs. In the opinion of many observers, the English rule is a significant deterrent for many people to bring lawsuits -- even where the litigation is worthwhile to purse.
In your particular case, you will have to pay your own legal fees. You should shop and compare attorneys. Some attorneys may be willing to take your case on a contingency fee basis.
Under this arrangement, the attorney would get a percentage of your recovery if you are successful -- for example one-third or one-fourth -- but nothing if you are unsuccessful. Some attorneys will arrange for a modification of this contingency fee, whereby they may get a minimum retainer, for example $500, and the balance of the fee to be contingent on the success of the litigation.
Under any circumstances, most attorneys will insist on obtaining reimbursement for all out-of-pocket expenses, including transportation, photocopying charges and even postage.
You also should determine, in advance if possible, what experts will be required if your case goes to trial. Expert testimony often is required in litigation, and the professional fee for these experts can become expensive.