January 01, 2016

Will the “Wrongful Involvement” Exception Swallow the American Rule?

An increasingly invoked exception allows the recovery of litigation fees.

Andrew J. Wronski and Gregory N. Heinen

Litigators are well acquainted with the canonical American Rule requiring parties to bear their own attorney fees in most cases. Perhaps less familiar is the increasingly invoked “wrongful involvement in litigation” exception, which allows recovery of fees incurred when a party finds itself in litigation as a result of another’s wrongful conduct. In recent years, litigants have pushed to broaden the exception’s historically narrow scope, putting a noticeable dent in the American Rule. This expansion portends an increase in fee litigation, and litigators should familiarize themselves with the wrongful involvement exception and strategies for rebuffing spurious fee claims.

Under the American Rule, parties to litigation are generally responsible for their own attorney fees. See, e.g., Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717–18 (1967). This bedrock principle reflects strong policy considerations, such as ensuring that litigants are not deterred from seeking legitimate redress. The rule encourages the beneficial expansion of the law by enabling litigants to pursue trail-blazing (and therefore risky) claims and defenses. The American Rule also creates an incentive for parties to limit their legal fees, which facilitates the consensual resolution of disputes.

While the American Rule still reflects prevailing wisdom, like all rules, it has exceptions. Most are familiar. Fees may be awarded where authorized by contract or statute, or where a party has engaged in sanctionable conduct. The wrongful involvement exception, also known as the “tort of another” doctrine or the “third-party litigation exception,” is less familiar. As its name suggests, the exception permits recovery of attorney fees that a party is forced to incur due to another’s wrongful conduct. The exception finds its roots in section 914(2) of the Restatement (Second) of Torts (1979):

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