Whether your legal malpractice case is being handled on a hourly basis, flat fee, partial contingency, or full contingency, an important potential source of damages are the legal fees you incur to pursue the malpractice case. However, there is something called the “American Rule.” In American courts, unless there is a statute or legal agreement to the contrary, both sides pay the cost of their own legal fees and expenses. This is very different than in England, where the loser pays all the legal fees.
There has been much written about which system is better and both systems have pluses and minuses. For example, while England’s system may eliminate questionable cases from being litigated, it may also dissuade someone with limited resources from pursuing a just cause of action.
Significantly, one area where some courts have held that the American Rule does not apply is legal malpractice. This can be of extreme significance to a litigant because legal fees or contingency fees may represent a substantial portion of any recovery.
This is a developing area of law (which few attorneys seem to know about) since there are a relatively small number of cases addressing the issue.
One state leading the way in carving out an exception for the “American Rule” for legal malpractice cases is New Jersey. The most important New Jersey case on this topic is found in Saffer v. Willoughby, 143 N.J. 256 (1996), which you can read here.
Since that case was decided by the New Jersey Supreme Court, it is the law of the land in New Jersey. However, there are many states where the question has yet to be answered in a published case or addressed by that state’s highest court (Different states have different names for the highest court, for example, in New York, the initial court is the Supreme Court, and the highest court is the Court of Appeals. In Connecticut and New Jersey, the highest state court is the Supreme Court.)
If you are considering a legal malpractice action, you should ask your attorney whether the courts of your state have addressed this question since legal malpractice litigation is time consuming and expensive whether your attorney represents you on a contingency or hourly basis.
Author: Howard Altschuler
(Click here for a brief summary of my other blog posts on various legal malpractice related issues)
(Disclaimer: Please note that nothing in this blog or website is legal advice, and this post does not create an attorney-client relationship. You should always consult with an attorney for any legal malpractice issues, fee dispute, or ethical concerns that you may have. Thanks!)
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