“Can we recover the company’s attorney fees in this case?” This is one of the most frequently asked questions I receive in discussing a potential breach of contract case with clients. Whether a party can be successful in recovering attorney fees in a breach of contract case depends on what the contract says on that point. If silent, the answer is usually “no” unless there are other grounds.
In deciding whether a party can recover attorney fees in a breach of contract case, Colorado courts and all arbitration venues would follow the American Rule, articulated by the Colorado Supreme Court as follows:
In the absence of an express statute, court rule, or private contract to the contrary, attorney fees generally are not recoverable by the prevailing party in a contract or tort action. This reasoning is based on the so-called American Rule, which requires each party in a lawsuit to bear its own legal expenses.
Alllstate Ins. Co. v. Huizar, 52 P.3d 816, 818 (Colo. 2002) (internal citations omitted)
The starting principle that each side pays its own attorney fees can be modified and stated as an express provision of the parties’ contract itself. Contractual fee-shifting provisions are generally upheld under Colorado law. A common, mutual, provision providing for the recovery of attorney fees might read:
In the event a lawsuit is brought by either party to enforce this contract, the prevailing party is entitled to recover all of its costs and attorney fees addition to any other relief available.
In Colorado, a contractual fee-shifting provision need not be mutual to be enforceable. Butler v. Lembeck, 182 P.3d 1185, 1190 (Colo. App. 2007). However, Colorado courts and arbitration panels will only enforce contracts that do not violate public policy. In review of a unilateral fee-shifting provision (i.e., a provision that only allows the recover of fees by one, and not “either party”), such provisions have been held not enforceable and to violate public policy. For example, in Klein v Tiburon Development, the Colorado Court of Appeals held that a party could not recover attorney fees on a breach of contact case that did not prevail in the case and was sanctioned during the litigation.
enforcing a unilateral fee-shifting provision in favor of a non-prevailing party that itself was sanctioned for frivolous and vexatious conduct would violate public policy.
Klein v. Tiburon Dev. LLC, 2017 COA 109, ¶ 29, 405 P.3d 470, 477 (Colo. App. 2017)
Recovery of attorney fees are subject to determination of whether the fees sought are reasonable. What amount of attorney fees is “reasonable” for a party to recovery is often hotly contested as is the entitlement to recover at all in a case where the “prevailing party” is not clear where it ended with mixed or nominal results.
Outside of the disputed contract’s express terms there are several other statutes and grounds under which a party may recover their attorney fees in Colorado lawsuits, including consumer protection laws, as sanctions for frivolous litigation, and under certain statutory claims such as a claim for “civil theft” brought in connection with a breach of contract case.