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Litigants, beware: Losers may be on hook for winner’s attorney fees

Lose a lawsuit and you could be on the hook for the winner’s attorney’s fees as well as your own under a recent Idaho Supreme Court ruling. Former District Judge Mike Wetherell talks to defendants in his Boise courtroom in 2014.
Lose a lawsuit and you could be on the hook for the winner’s attorney’s fees as well as your own under a recent Idaho Supreme Court ruling. Former District Judge Mike Wetherell talks to defendants in his Boise courtroom in 2014. doswald@idahostatesman.com

Litigation, expensive as it is, can be doubly so if you lose your case and the judge orders you to pay the other side’s attorneys for their trouble, on top of your own. In Idaho, “loser pays” has been uncommon for almost 40 years, except where a statutory exception shifts fees and costs to the prevailing party. Now, without action by the Legislature, this will change.

Disputes over commercial transactions are an example of fee-shifting already authorized by the Legislature. Idaho Code says, “the prevailing party shall be allowed a reasonable attorney’s fee to be set by the court.” In other civil cases with no statutory fee-shifting provision, each side bears its own litigation costs unless the court determines the losing side brought or defended its case “frivolously, unreasonably, or without foundation.”

This “frivolous” standard was adopted in 1979 in response to concerns that discretionary attorney fee awards, authorized three years earlier by state law, were inconsistently made and hard to predict. Since most litigation involves a sincere disagreement over the facts and the law, judges have been hard-pressed to determine that the losing party had no business bringing its case.

In its recent decision, Hoffer v. Shappard, the Idaho Supreme Court announced that beginning March 1, Idaho courts will begin applying a different standard. The court reinstituted the broad discretion to award attorney fees to prevailing parties “when justice so requires.”

If you’re wondering what exactly that means, you’re not alone. The decision does not explain the standard, so attorneys throughout Idaho now wonder how “justice” will be defined from courtroom to courtroom. Some judges might be persuaded that “justice” almost always requires an award of attorney fees to make the prevailing party whole. Others might award fees only if the losing party, in addition to having a weak case, caused unnecessary delay and expense.

In the 2017 legislative session that began this month, the Legislature may analyze Hoffer before the new standard takes effect. The Supreme Court’s opinion makes clear that only the Legislature can change or limit the standard. Unless the Legislature acts, litigants face an increased and unpredictable risk if they don’t succeed.

Kirk Houston is a bankruptcy and commercial litigation associate in Holland & Hart’s Boise office. kjhouston@hollandhart.com or 208-383-3946. Sara Berry is a commercial litigation associate in that office. smberry@hollandhart.com or 208-383-3929. This column appears in the January 18-February 14, 2017, edition of the Idaho Statesman’s Business Insider magazine as part of a special section on commercial real estate. Click here for the e-edition (subscription required).

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