The Wrongful Act Doctrine: An Exception to the “American Rule” (Fall 2010 Litigation Quarterly)

Published: November 10, 2010 By: Justin Siegwald

If a hundred people were asked to name their ten most pleasurable experiences, it is probably a safe bet that not a single list would contain the word “litigation.” For many, litigation is a synonym for stress, time, and expense. There is also the potential cost of losing a case. To make that prospect worse, if certain factors apply, there is the additional hurt of being forced to pay the winning party’s attorney’s fees and costs, on top of any adverse money judgment.

The “American Rule,”1 as it has come to be called, provides for “certain factors” when the losing party in a legal dispute may be required to pay the prevailing party’s attorney’s fees and costs. Generally, fees and costs cannot be recovered unless that recovery is authorized by a contract or statute.2 For example, Florida statutory law provides that the prevailing party in a claim for unpaid wages may recover costs and reasonable attorney’s fees.3

Of course, the American Rule, like many rules, has exceptions. One such exception is the Wrongful Act Doctrine. Under the doctrine, a “wrongful actor” can be compelled to pay certain of a party’s reasonable attorney’s fees and costs even in the absence of a contract or statute. “Where a defendant has committed a wrong toward the plaintiff, and the wrongful act has caused the plaintiff to litigate with third persons, the wrongful act doctrine permits the plaintiff to recover, as an additional element of damages, plaintiff’s third party litigation expense.”4

The doctrine often springs its head when allegations of professional malpractice are in the air. One example of where this doctrine has arisen is in the context of a law firm’s handling of a probate matter.5 When the firm’s handling of the matter caused the administration of the estate to be more expensive than it should have been, the plaintiffs sued both the firm and the company procured by the firm to be the estate’s corporate fiduciary.6 After the plaintiffs settled with the fiduciary, they proceeded against the firm, seeking recompense for “avoidable probate expenses” and a return of the fees already paid to the firm.7 When all was said and done, a portion of the total damages the firm had to pay were the legal expenses the plaintiffs incurred in their litigation against the corporate fiduciary, pursuant to the Wrongful Act Doctrine.8

However, professional malpractice is not required in order to make a claim under the doctrine. An insurer, believing it had title to an automobile, brought an action against the vehicle’s current owner to repossess the automobile, which had been purchased with a forged check and then resold numerous times, eventually ending up in the hands of its current owner.9 The current owner, in turn, brought a third party action against the car dealer who sold him the subject vehicle.10 The dealer asserted claims against the insurer for negligence, malicious prosecution, and, among other damage claims, and attorney’s fees.11 While the court determined that the negligence and malicious prosecution claims were without merit, it did find that the dealer could seek recovery of the attorney’s fees it incurred in defending against the owner’s claim.12

The Auto-Owners case provides additional guidance, as well. Importantly, a party seeking damages pursuant to the Wrongful Act Doctrine is only entitled to recover fees to the extent they were incurred in litigation with a third party in connection with that particular dispute.13 In other words, the dealer was entitled to recover from the insurer the fees the dealer incurred in defending against the owner’s claim. The dealer was not entitled, however, to recover the fees it incurred in litigating the negligence and malicious prosecution claims against the insurer.

The distinction is an important one. In some professional negligence cases, claimant’s seek recovery for damages under the Wrongful Act Doctrine for all its legal fees, including those it was incurring in the instant litigation. That is not the Wrongful Act Doctrine; it is simply an attempted end-around the American Rule. Rather, the defendant must have caused the claimant to litigate with a third party. The claimant may then seek to recover from the defendant any fees connected to the litigation with the third party. The claimant may not seek to have the defendant pay the fees the claimant incurs in its suit against the defendant. Such a claim is no different than asking a defendant to finance litigation against itself.

Another important rule regarding the Wrongful Act Doctrine is that it is not an independent cause of action.14 It is, on the other hand, “a claim for attorney’s fees as special damages.”15 Thus, the doctrine cannot stand alone as a count in a complaint; the fees under the doctrine must be sought as damages under an independent cause of action such as professional negligence. Further, because the wrongful act damages are “special damages,” they must be specifically pled.16 The claimant must plead entitlement to fees under the doctrine; otherwise, the claim is waived.17

We all know litigation can be an unpleasant experience. An application of the Wrongful Act Doctrine could certainly contribute to the burden litigation can have on expenses, and thus add to the displeasure that often comes with being a party in a legal dispute. It is therefore important to understand that, in applicable circumstances, a claimant can seek payment of certain of its attorney’s fees even in the absence of a contract or statute.

Endnotes

1 As opposed to the “English Rule.” See Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145, 1147-48 (Fla. 1985) (discussing the differences between the “American” and “English” Rules.

2 The “English Rule” awards fees and costs to the prevailing party regardless as to whether recovery of the fees and costs is provided for by statute or contract. See id.

3 See § 448.08, Fla. Stat. (2010).

4 State Farm Fire & Casualty Co. v. Pritcher, 546 So. 2d 1060, 1061 (Fla. 3d DCA 1989) (emphasis added).

5 Gunster, Yoakley &Stewart, P.A. v. McAdam, 965 So. 2d 182 (Fla. 4th DCA 2007).

6 Id. at 183.

7 Id.

8 Id.

9 Auto-Owners Ins. Co. v. Hooks, 463 So. 2d 468 (Fla. 1st DCA 1985).

10 Id. at 471.

11 Id.

12 Id. at 478-79.

13 Id. at 478.

14 See Pritcher, 546 So. 2d at 1061 (emphasis added).

15 Id.

16 See Fla. R. Civ. P. 1.120(g); Robbins v. McGrath, 955 So. 2d 633, 634 (Fla. 1st DCA 2007); Winselmann v. Reynolds, 690 So. 2d 1325, 1328 (Fla. 3d DCA 1997).

17 See Robbins, 955 So. 2d at 634.