You brought a lawsuit concerning a contractual dispute and prevailed. Is the losing side now responsible for paying your attorney fees? If you had a written agreement providing that the other party was obligated to pay for your fees in seeking to enforce the agreement, the answer generally is yes. If you do not, the answer generally is no. Like most American legal jurisdictions, courts in both Indiana and Kentucky follow the American Rule regarding attorney fee shifting. The American Rule provides that in the absence of a statute or contractual relationship allowing for fee assessment, parties generally are responsible for their own attorney fees no matter the outcome of the lawsuit. Conversely, under the minority English Rule, the losing party generally is assessed payment of the prevailing party’s fees.
The Indiana Supreme Court recently discussed two primary exceptions to the American Rule in Indiana’s courts. See River Ridge Dev. Auth. v. Outfront Media, LLC, 146 N.E. 3d 906 (Ind. 2020). The first exception, codified in Ind. Code § 34-52-1-1, provides that a trial court may award a prevailing party attorney fees if a losing party 1) argued a claim or defense that is “frivolous, unreasonable, or groundless”, 2) continued to argue the claim or defense after it became frivolous, unreasonable, or groundless, and 3) litigated in bad faith. The second exception provides that a trial court, in exercising its inherent authority to prevent abuse of the legal system, may award attorney fees even before an outcome is reached if a party acts in bad faith and such action is “calculatedly oppressive, obdurate, or obstreperous.” Both these exceptions, however, are narrowly construed and rarely implemented. Consequently, the only way to ensure a court will award you attorney fees in a contractual dispute is to make sure you have a written agreement providing for payment of such fees.