Fee shifting is permitted when a statute or contractual provision provides for the loser of a lawsuit to pay the winner’s legal costs. Generally in the United States, we follow the “American Rule” where each party in a lawsuit pays for their own legal costs. There are some public policy issues where the legislature wants to eliminate what is considered bad and now illegal conduct and pass laws allowing the plaintiff to be awarded reasonable legal costs. These costs could include attorney’s fees, experts’ costs, and court filings. Such laws in New Jersey include the Law Against Discrimination and the Consumer Fraud Act. Some federal laws also provide for fee shifting, such as Title VII cases (employment discrimination).

A recent case illustrates why it might be best for both sides to settle cases that involve fee shifting. Hugh McCabe was a student at Monroe Township High School and was severely beaten by another student over the false allegation he was gay. The beating followed repeated taunting and bullying with anti-gay epithets. The assault was captured on video by another student and resulted in a metal plate being implanted in McCabe’s face. McCabe sued the school district because teachers did not intervene.

At trial, a jury awarded McCabe $500,000. Because this was a discrimination case, fee shifting was available to the plaintiffs. The judge in the case awarded legal costs, fees, and pre-judgment interest amounting to over $800,000. That amounted to more than the judgment. The case was pending for 7 years.

I mediate many employment discrimination cases. They settle to avoid a loss by defendants and thus the risks of paying legal costs for both sides. The risk to the plaintiff in these cases is losing and not recouping legal costs. Imagine if in this case the plaintiff had lost and was out significant sums of legal fees/costs.

Settle your fee shiting case early. Mediation can help. Contact me to find out more.