§41.7 Recoverability of Attorney’s Fees

The Case: John Kohl & Co. P.C. v. Dearborn & Ewing , 977 S.W.2d 528 (Tenn. 1998).

The Basic Facts: Plaintiff sued lawyer and law firm alleging that it received improper advice concerning certain business matters.

The Bottom Line:

• "Turning to the issue of legal fees, we note that there are three categories of attorney's fees that may constitute damages resulting from legal malpractice: (1) 'initial fees' a plaintiff pays or agrees to pay an attorney for legal services that were negligently performed, (2) 'corrective fees' incurred by the plaintiff for work performed to correct the problem caused by the negligent lawyer, and (3) 'litigation fees,' which are legal fees paid by the plaintiff to prosecute the malpractice action against the offending lawyer. The trial court in this case correctly held that corrective fees were recoverable, and this ruling was not appealed. The trial court's ruling that initial fees were not recoverable was appealed, and the Court of Appeals properly reversed. Both lower courts agreed that the plaintiffs could not recover their legal fees in prosecuting the instant malpractice action. Relying upon Foster v. Duggin, 695 S.W.2d 526 (Tenn. 1985), the plaintiffs contend that this was error. They claim that attorney's fees should be assessed as part of their damages." 977 S.W.2d at 534.
• "In Foster, the plaintiffs retained the defendant as their attorney on a contingency fee basis to represent them in a personal injury action. The attorney failed to timely file the complaint, and the plaintiffs lost their claim. In the subsequent malpractice action against the attorney, the attorney sought to reduce the amount of the judgment against him by the amount of the fee he would have earned had he successfully prosecuted the original case. Thus, the issue before us in Foster was 'whether the defendant, an attorney liable for malpractice, is entitled to have the judgment against him reduced by the amount of the legal fee he contracted to receive for litigation he negligently conducted.' Foster, 695 S.W.2d at 526. We held that the attorney should be denied any credit for the contingency fee he would have received had he obtained a judgment for his clients. Id. at 527. Thus, the plaintiffs in Foster recovered initial fees in their malpractice suit. We made it clear that we were not awarding the plaintiffs their attorney's fees incurred in pursuing their malpractice claim. Id. at 527. Accordingly, the plaintiffs' reliance upon Foster for the notion that they are entitled to their litigation fees is misplaced." Id.
• "Although it is true that there is some authority for the proposition that a negligent attorney is responsible for the reasonable legal expenses incurred by a former client in prosecuting a legal malpractice action, see Bailey v. Pocaro & Pocaro, 701 A.2d 916, 919 (N.J. App. 1997), most jurisdictions that have considered the issue have adhered to the well-established American rule, which provides that attorney's fees may not be awarded to the prevailing party absent statutory authorization or an agreement between the parties so providing. See, e.g., Olson v. Fraase, 421 N.W.2d 820, 828-29 (N.D. 1988); Began v. Dixon, 547 A.2d 620, 624-25 (Del. Super. Ct. 1988); Whitney v. Buttrick, 376 N.W.2d 274, 281 (Minn. App. 1985); Stinson v. Feminist Women's Health Center, 416 So.2d 1183, 1185 (Fla. App. 1982); Sorenson v. Fio Rito, 413 N.E.2d 47, 51-53 (Ill. App. 1980). Tennessee courts have long adhered to the American rule, concluding that an award of attorney's fees as part of the prevailing party's damages is contrary to public policy. See, e.g., Pullman Standard v. Abex Corp., 693 S.W.2d 336, 338 (Tenn. 1985); Gray v. Boyle Inv. Co., [803 S.W.2d 678, 684 (Tenn. Ct. App. 1990)]; John J. Heirigs Constr. Co. v. Exide, [709 S.W.2d 604, 609 (Tenn. Ct. App. 1986)]; Pinney v. Tarpley, [686 S.W.2d 574, 581 (Tenn. Ct. App. 1984)]; Goings v. Aetna Casualty & Sur. Co., [491 S.W.2d 847, 848 (Tenn. Ct. App. 1972)]; Raskind v. Raskind, [325 S.W.2d 617, 625 (Tenn. Ct. App. 1959)]. We are not persuaded that legal malpractice claims should be made an exception to the rule. Without an agreement between the parties or a controlling statute, attorney's fees in legal malpractice suits, as in other litigation, may not be awarded. Accordingly, the lower courts properly declined to award the plaintiffs their legal fees incurred as a result of prosecuting this action." Id. at 534-35.

Recent Cases: Whitton v. Hoover , No. E2008-01749-COA-R3-CV, 2009 WL 3925298 (Tenn. Ct. App. Nov. 19, 2009) (holding contract for legal representation was not unconscionable, but finding the amount of the fee was unreasonable and reducing accordingly)