The Hidden Mines: How the "English Rule" on Prevailing Party Attorneys' Fees Can Apply in Cross-Border Litigation in American Courts

By Pencu, Alexander D. | Defense Counsel Journal, July 2014 | Go to article overview

The Hidden Mines: How the "English Rule" on Prevailing Party Attorneys' Fees Can Apply in Cross-Border Litigation in American Courts


Pencu, Alexander D., Defense Counsel Journal


WITH the growing complexity and international nature of litigation in the United States, old bright line rules and customs have been increasingly abandoned by courts across the various U.S. jurisdictions for evaluating whether a particular statute or rule is deemed to be "procedural" or "substantive" for choice of law purposes. This is true with respect to the treatment of foreign "prevailing party fee statutes," which varies greatly across the American federal and state courts. A litigant should understand how the presiding court will treat a relevant foreign prevailing party fee statute since its applicability can have serious effects on the outcome of the litigation, especially for those litigants accustomed to the "American" rule where each party bears its own attorneys' fees.

This article provides an outline summarizing the pleading and procedural requirements for the recovery of attorneys' fees pursuant to a foreign prevailing party attorneys' fee statute. In addition, the article discusses the approaches utilized by the courts across the various jurisdictions for determining whether a foreign prevailing party attorneys' fee statute is treated as either "procedural" or "substantive" under a choice of law analysis. The article also discusses recognized factors militating against the application of a foreign prevailing party attorneys' fee statute even in circumstances where a choice of law analysis would otherwise justify its application. Finally, the article offers some practice pointers to litigants and transactional attorneys regarding how to maximize or minimize the likelihood that a particular foreign prevailing party attorneys' fee statute will apply in the event of litigation.

I. Procedural And Pleading Issues Surrounding The Recovery Of Prevailing Party Attorneys' Fees1

Courts have differed over the issue of when a party must plead or otherwise move to recover its attorneys' fees pursuant to a prevailing party attorneys' fee statute. Some jurisdictions maintain that a party must plead its intent to recover its attorneys' fees in its initial pleading consistent with Federal Rule of Civil Procedure ("FRCP") 9(g) because the attorneys' fees constitute "special damages" within the scope of the rule. Other courts have held that the recovery of attorneys' fees pursuant to a prevailing party attorneys' fee statute falls within FRCP 54(d)(2) and must simply be made on a motion within fourteen (14) days after entry of judgment. Yet other courts have compromised between these two bright line approaches and have held that a party must offer its adversary "reasonable notice" of its intent to recover its attorneys' fees under a prevailing party attorneys' fee statute. These three approaches are discussed below.

A. The Recovery Of Foreign Prevailing Party Attorneys' Fees As "Special Damages" Under FRCP 9(g)

FRCP 9 governs the pleading rules for "Special Matters" and provides the requisite content a plaintiff or counterclaimant must include in his initial pleadings to allege certain types of claims including, among other things, fraud and special damages. FRCP 9(g) titled "Special Damages" provides: "If an item of special damage is claimed, it must be specifically stated."

In an attempt to escape the old bright line rule of lex fori in which the recovery of attorneys' fees were deemed procedural in nature thereby ensuring that the "American Rule" applied notwithstanding the application of foreign substantive law to the underlying claims in issue, prevailing parties in international litigation began arguing that foreign prevailing party attorneys' fee statutes were substantive in nature.

Several courts have held that parties intending to recover their attorneys' fees under prevailing party attorneys' fee statutes must plead their intent to recover said fees in their initial pleadings because the attorneys' fees constitute "special damages" within the scope of FRCP 9(g) and failure to do so results in waiver of the rights to those damages. …

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