If you have to hire and to pay a lawyer for a collection case, breach of contract case or to defend a lawsuit or arbitration proceeding brought against you by another party, is it possible for you to recover from the opposing party the money you have to pay your lawyer? In Nashville, and in the rest of Tennessee, the answer is: Maybe, but maybe not.
Tennessee operates under what is referred to as the "American Rule." Under the American Rule, no matter which party wins or loses, each party must pay its own lawyer's fees. There are exceptions to the American Rule. One exception to the American Rule occurs when the parties to the dispute have a contract which contains language that the losing party has to pay the prevailing party's attorney's fees. In cases involving such contracts, the losing party will be required to pay the attorney's fees (or some portion thereof) of the party which wins the lawsuit.
If the contract involved in your case contains a provision allowing the prevailing party to recover its attorney's fees, then the contract contains, so to speak, a double-edged sword. If you bring the lawsuit and win, you will be entitled to recover your legal fees. If you bring the lawsuit and lose, you will be required to pay the other side's legal fees.
What are other exceptions to the American Rule? If the Tennessee legislature has enacted a statute allowing the recovery of attorney's fees for the type of legal claim involved in your case, you may be able to recover attorney's fees even if you do not have a written contract allowing the recovery of attorney's fees. There are a number of Tennessee and federal statutes that allow for the recovery of attorney's fees and expenses in certain cases. For example, a prevailing employee may recover attorney's fees and expenses in many types of employment cases (e.g. employment discrimination cases, wage and hour cases and overtime pay cases under the Fair Labor Standards Act "FLSA"). Parties that win lawsuits for unfair or deceptive acts or practices under the Tennessee Consumer Protection Act may recover attorney's fees as may parties who win interference with contract cases.
One practical effect of the American Rule is that, if you bring a lawsuit, you may "win the battle, but lose the war" because your attorney's fees and expenses (not to mention lost time and headaches) may be too substantial to make the lawsuit worthwhile. This lawyer has spoken with many potential clients over the years who decided not to bring lawsuits even though it was highly likely, or even certain, that they would win and recover money because it did not make sense to pay legal fees that were likely to be more than what they would recover. If you don't have provisions for attorney's fees and expenses in your contracts, consider adding those provisions. It will probably be well worth the effort.