Because of the high cost of litigation, anyone thinking about filing a lawsuit—or defending one—needs to consider the opportunity for recovering attorney’s fees, which are one of the two main costs when it comes to business litigation (the other is out-of-pocket costs for expert witnesses, depositions, court filings, and fees, etc.). Most clients must bear the cost of prosecuting or defending their case unless they have obtained litigation financing.

In Arizona, each party to a lawsuit is responsible for paying their respective attorney’s fees no matter which side prevails — unless the suit involves a contract. For lawsuits “arising out of a contract,” Arizona law allows the court to award reasonable attorney’s fees to the prevailing party (ARS Section 12-341.01).

However, determining the prevailing party is not always as simple as it may seem since a plaintiff may win in court but not be considered a prevailing party if the defendant made and the plaintiff rejected a settlement offer that was equal to or greater than the final judgment.

For example: a defendant makes a written offer to settle a lawsuit for $250,000, but the plaintiff rejects the offer. The plaintiff then wins the case, but the judgment is only for $150,000. Under Arizona law, the defendant would typically be considered the prevailing party.

Therefore, it is often advantageous for a defendant to make the best possible settlement offer in order to avoid litigation. If the offer is accepted, the defendant has successfully avoided litigation at a price they are willing to tolerate. If the offer is refused, the defendant now has a lower bar to victory in the case.

Another way a party to litigation may recover attorney’s fees is if the contract at issue in the dispute has a provision that allows for an award of attorney’s fees. Parties to a contract may include these provisions and it is at their discretion as to how attorney’s fees may be awarded and how a prevailing party is determined.

In addition, Arizona law can be somewhat confusing when considering whether the case arises out of a contract. A breach of contract lawsuit certainly fulfills this requirement, but not every case that relates to a contract will necessarily fall within the statute allowing for the recovery of attorney’s fees. In addition, the statute gives full discretion to the judge as to the amount, if any, of attorney’s fees to award.

Before you proceed with a contract claim, be sure to review any attorney’s fee provision in your contract to determine your rights for recovery as well as your rights under Arizona law with an experienced business litigation attorney who can provide guidance on litigation strategies for recovering attorney fees.

Mestaz Law has the experience and reputation that you want when you are dealing with a business-related lawsuit. We are here to obtain the best possible outcome for your situation. Do not hesitate to contact Mestaz Law at (602) 806-2068, and see how we can help you resolve your legal matter.