Enforceability of Attorney Fee Clauses in Contracts

A reoccurring question by clients involved in contract litigation is, “if I win, can I have the other side pay my attorneys’ fees?” The answer generally is no. Pennsylvania employs the “American Rule”, which states that one party cannot recover attorney fees from another party. The exception to this rule is when there is express statutory authorization stating otherwise, or a contractual provision between parties agreeing that attorney’s fees will be paid.

When there is in an attorney fee award provision in a contract, a court must determine if the contract between the parties is valid. If there is a valid contract, the court must next find a breach of the contract, entitling a party to damages. After these two requirements are met, and a valid attorney fee award provision is found, the court will then determine a reasonable amount to reimburse for attorneys’ fees. Even where a attorney fee award provision fails to state that an award should be reasonable, the court will still read this qualifier into the clause. McMullen v. Kutz, 603 Pa. 602, 985 A.2d 769 (2009).

What constitutes reasonable attorneys’ fees can be difficult, and highly fact sensitive. As such, a Court will consider the following details:

the amount of work performed; the character of the services rendered; the difficulty of the problems involved; the importance of the litigation; … the degree of responsibility incurred; whether the fund involved was ― “created” by the attorney; the professional skill and standing of the attorney in his profession; the results he was able to obtain; the ability of the client to pay a reasonable fee for the services rendered; and, very importantly, the amount of money or the value of the property in question.

Holz v. Holz, 850 A.2d 751, 761 (Pa. Super. 2004).

Accordingly, an attorney fee clause will not be a windfall to the prevailing party in an action, and will be subject to judicial review.