Attorney Fees in New Jersey: Does the Losing Side Pay?
By Peter J. Lamont, Esq.
“If we win, they have to pay our lawyer, right?” It is a reasonable question from a business owner who has already lost time and money because of a dispute. In New Jersey, however, winning a lawsuit does not ordinarily make the other side responsible for your legal bill.
Attorney fees in New Jersey generally follow the American Rule: each party pays for its own legal representation unless a recognized exception applies. A contract, statute, or court rule may provide a basis for shifting fees. The existence and scope of that basis need to be evaluated before you build a litigation budget around recovering the money.
A strong claim for unpaid work can still leave a business with legal expenses. Conversely, a contract containing a fee provision can expose a business to more than the amount demanded in the complaint. Both possibilities belong in the discussion at the beginning of the case.
The Starting Rule for Attorney Fees in New Jersey
The New Jersey Supreme Court reaffirmed the American Rule in Boyle v. Huff, 257 N.J. 468, 479 & n.1 (2024). The Court explained that parties ordinarily bear their own attorney fees, with exceptions supplied by statutory or judicial authority or express contractual language.
That starting point matters because frustration is not itself a fee provision. A business owner may have an excellent explanation for why the other side should have paid, performed, or stopped interfering. Those facts support an assessment of the underlying claims. They do not, standing alone, establish an entitlement to reimbursement of every legal expense.
Consider a hypothetical consultant owed $35,000. The consultant has signed work approvals and clear evidence that the project was completed. Counsel still needs to review whether the agreement addresses collection expenses or attorney fees and whether any applicable claim supplies another basis for recovery. The strength of the invoice claim and the right to fees are separate questions.
This is why the first consultation should include the contract and its attachments. Bringing only the unpaid invoices can leave out a provision that changes the economics of the entire dispute.
Read the Fee Clause Before Reading the Demand Letter
A contract may provide for reasonable fees incurred in collecting unpaid amounts. Another may refer to a prevailing party in an action to enforce the agreement. A third may address only particular breaches. These examples describe different drafting choices; their effect depends on the actual wording and applicable law.
Who can claim fees? What proceedings are included? Does the clause reach a dispute over termination, an appeal, or an effort to enforce a judgment? Does it apply to both parties or only one? Those questions are more useful than simply marking “attorney fees clause present” on a review sheet.
The phrase “prevailing party” can also become a point of disagreement. Litigation may end with each side winning something, a counterclaim being dismissed, or a settlement that does not identify a winner. Before signing a new agreement, discuss whether the provision explains how fees will be handled in the situations most likely to arise in that relationship.
Our New Jersey contract attorneys can review a proposed fee clause before a dispute exists. After litigation begins, the focus becomes what the parties actually agreed to and whether that language reaches the claims being asserted.
Indemnification Is Not a Shortcut Around the Analysis
An indemnification paragraph may mention counsel fees, but it needs to be read in context. Does it address claims brought by outsiders, claims between the contracting parties, or both? An obligation to reimburse expenses in one kind of dispute should not be assumed to cover another.
In Boyle, a trustee sought reimbursement from a condominium association for litigation expenses under an indemnification provision. The Supreme Court found the provision ambiguous and construed it against the trustee seeking indemnification. The Court also recognized that parties may provide for first-party indemnification when their intent is clear.
For business owners, the useful point is narrow: the appearance of “counsel fees” somewhere in a contract does not finish the analysis. Counsel must connect the language to the actual dispute. When drafting, a direct explanation of which enforcement expenses are recoverable can prevent an argument that vague language invites.
Do not edit the contract after a problem develops and assume the change applies to past events. Any proposed amendment requires careful consideration of agreement, timing, and scope. Preserve the version that governed the transaction so your attorney can assess the rights that existed when the dispute arose.
What a Claim for Fees Means for the Litigation Budget
Even when a viable fee claim exists, the business should plan for the cost of pursuing the case. An opposing party may dispute entitlement, the amount requested, or both. A recovery may come later than the bills your company must pay under its own engagement agreement.
Ask counsel for a budget based on the next meaningful stage of the case. The work needed to evaluate a demand is different from preparing discovery, taking depositions, or trying the matter. A phased discussion lets the business reassess spending as the evidence develops.
Keep damages and fees in separate columns when comparing possible outcomes. A claim for $50,000 in damages is not automatically a claim for $50,000 plus every dollar spent on counsel. Nor should a possible fee recovery be treated as cash already available to fund the lawsuit.
Collection deserves attention as well. A judgment that includes fees still has to be collected. Our article on collecting a judgment in New Jersey discusses why the debtor’s financial circumstances affect the practical value of a win. This question can influence settlement discussions well before trial.
Evaluating Attorney Fees in New Jersey During Settlement
Suppose a defendant offers a single payment to resolve the case. Does that amount include the plaintiff’s claimed fees and costs? Will each party bear its own expenses? Is anyone reserving a later application for fees? The settlement documents should address those questions expressly.
A business owner may focus on the principal amount while the lawyers are discussing the treatment of fees. Ask for an explanation of the net economic result. A seemingly higher settlement can have a different value once remaining expenses, timing, and payment risk are considered.
The same attention belongs on the defense side. If the other party asserts a contractual fee claim, request a candid assessment of exposure. Fighting over a modest principal balance can become more expensive if the agreement and the circumstances support an additional award. That possibility does not mean the demand is correct or that settlement is always the right choice. It belongs in the calculation.
Keep the discussion grounded in evidence. A threat that “you will pay all our legal fees” is a position taken by an opponent, not a court determination. Have counsel identify the claimed source of authority and explain how it applies.
What to Bring to a Fee Review
Gather the signed agreement, amendments, invoices, demand letters, and any complaint or answer already filed. Include documents incorporated by reference, such as a purchase order’s terms and conditions. Tell counsel whether the dispute is in court, arbitration, or still at the negotiation stage.
Ask three direct questions: What supports a fee claim? What limits it? What would pursuing or defending that claim cost? Those answers help a small business choose a sensible response without assuming that a victory will make the process free.
The Law Offices of Peter J. Lamont represents businesses in New Jersey contract and litigation matters. A review of the fee issue at the outset can give you a more realistic picture of what the dispute is likely to require from your business.
Contact us today to discuss your business or legal matter. Put our 20+ years of legal experience to work for you.
For detailed insights and legal assistance on topics discussed in this post, including litigation, contact the Law Offices of Peter J. Lamont at our Bergen County Office. We're here to answer your questions and provide legal advice. Contact us at (201) 904-2211 or email us at info@pjlesq.com.
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About Peter J. Lamont, Esq.
Peter J. Lamont is a nationally recognized attorney with significant experience in business, contract, litigation, and real estate law. With over two decades of legal practice, he has represented a wide array of businesses, including large international corporations. Peter is known for his practical legal and business advice, prioritizing efficient and cost-effective solutions for his clients.
Peter has an Avvo 10.0 Rating and has been acknowledged as one of America's Most Honored Lawyers since 2011. 201 Magazine and Lawyers of Distinction have also recognized him for being one of the top business and litigation attorneys in New Jersey. His commitment to his clients and the legal community is further evidenced by his active role as a speaker, lecturer, and published author in various legal and business publications.
As the founder of the Law Offices of Peter J. Lamont, Peter brings his Wall Street experience and client-focused approach to New Jersey, offering personalized legal services that align with each client's unique needs and goals.
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