No matter what kind of case you're involved in, a civil lawsuit can be very expensive. In addition to attorney's fees, you are required to pay for filing fees, copying fees, expert witness fees, court reporter fees, transcripts, and many other costs along the way to trial. When you finally win your case, you might expect to be able to recover all of these costs as part of the judgment you obtain against the opposing party. Let's look at when this is likely, and when you may be out of luck.
Costs May Go to the "Prevailing Party"
In most jurisdictions, courts award "costs" to the prevailing party in a lawsuit -- the side who wins, in other words. However, the "costs" that are allowable may not compensate the prevailing party for all actual out-of-pocket expenditures. Instead, awardable costs could be capped under an applicable state law, and that limit may not come close to making the prevailing party whole in terms of what was expended to successfully litigate the case. So, the prevailing party could end up covering a significant percentage of the actual costs incurred, thereby reducing the amount of its net recovery.
Costs are Different From Attorney's Fees
Attorney's fees are by far the largest component of a litigant's practical expenses in pursuing a lawsuit, but these fees are usually considered separately from "costs" when it comes to what the prevailing party may recover from the other side. Often a dedicated state law allows recovery of attorney's fees to the prevailing party in certain kinds of lawsuits, or the court considers a motion where the prevailing party requests reimbursement of their attorney's fees, based on the circumstances of the instant case. Learn more about Court-Awarded Attorney's Fees.
So, a litigant who prevails in court isn't automatically entitled to recoup its attorney's fees as part of that judgment. In many cases, the amount of attorney's fees incurred in bringing the case to trial constitutes a large percentage of the judgment amount; as a result, the net amount of the recovery may be quite small. As an example, a litigant may obtain a judgment of $50,000 in a breach of contract case, but they may have incurred $30,000 in attorney's fees in the process.
Finally, keep in mind that even when there is a statute that entitles the prevailing party to recover its attorney's fees, it still must be shown that the fees incurred were necessary and reasonable.
With respect to costs, the prevailing party must prepare and substantiate what is known as a "bill of costs" that itemizes expenses incurred in the litigation that are taxable under the jurisdiction's governing law. These costs usually include:
- filing fees
- fees paid to compel witnesses to attend court proceedings
- fees paid to expert witnesses
- document preparation fees, and
- miscellaneous costs associated with trial preparation and trial proceedings.
As a practical matter, what this means is that when you embark on a lawsuit you need to give serious consideration to the amount of money you will spend on the case, and the likelihood that you will be able to recoup those funds if you win the case. Many litigants are surprised to learn that even though they have prevailed and obtained a money judgment in their favor, the amount of their judgment is significantly reduced by the amount of unreimbursable costs expended. It's a good idea to get a realistic sense of the financial side of your case right at the outset. Otherwise, you may very well win the battle but lose the war.
A Note on "Costs" in Personal Injury Cases
Finally, what about personal injury cases, which are usually handled under a contingency fee agreement, where the attorney does not get paid a fee unless the client receives a settlement or court award? The client may still be on the financial hook for costs associated with their personal injury lawsuit, win or lose. Learn more: Who Pays "Costs" in a Personal Injury Case?