Who pays the legal costs if we end up in court over this contract?
Under the American Rule, as the Supreme Court of Wisconsin stated it in Kolupar, the parties to a lawsuit bear the cost of their own attorney fees absent legislative authorization to shift costs, and the court listed Wisconsin statutes that do authorise fee awards, among them Wis. Stat. § 100.18(11)(b) (Deceptive Trade Practices Act), § 218.0171(7) (Lemon Law) and § 425.308 (Wisconsin Consumer Act). The Rule has exceptions beyond statute: in Estate of Kriefall the court denied a party attorney fees because 'the exception to the American Rule stated in Weinhagen v. Hayes' did not apply on those facts. Kriefall states that exception: an innocent party wrongfully drawn into litigation with a third party may recover the fees reasonably incurred in defending it, which has been read to require a wrongful act by the party from whom fees are sought, something closer to fraud or breach of a fiduciary duty than mere negligence, that forced the claimant into litigation with a third party or made it incur expenses protecting its interests against claims arising from the wrongful act. Sizzler failed it because the third-party claims it defended were primarily tort claims and could not be said to have arisen from the parties' contractual relationship alone.
The trap
Kolupar's formulation names legislative authorization, and Kriefall confirms there is at least one judge-made exception, and Kriefall records that a contract for the award of attorney fees is itself one of the recognised exceptions, alongside fee-shifting statutes, but no authority quoted here decides what a prevailing-party clause must say or how far it reaches. Kriefall adds the answer for the commonest case: where a contract does not address attorney fees, Wisconsin has declined to allow them as consequential damages under Wis. Stat. § 402.715. Where a statute does authorise fees, the amount is still the court's: when a circuit court awards attorney fees the amount is left to its discretion and is upheld unless that discretion was erroneously exercised. Kolupar is a decision about how a circuit court must set a reasonable fee, and it ends split: the $15,000 fee award was upheld because the fee applicant had not put in the documentation that would have made the court's thin explanation vulnerable, while the costs question went back because the court never explained awarding none.
12 authorities
The words that state the rule
Under the American Rule, the parties to a lawsuit bear the cost of their own attorney fees absent legislative authorization to shift costs.
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
Sizzler may not recover attorney fees from Excel because the exception to the American Rule stated in Weinhagen v. Hayes, 179 Wis. 62 , 190 N.W 1002 (1922), does not apply here.
The words that state the rule
The Wisconsin legislature has authorized courts to award costs and attorney fees to successful litigants in many contexts. See, e.g., Wis. Stat. § 100.18 (ll)(b) (2001-02) (Wisconsin Deceptive Trade Practices Act (DTPA)); Wis. Stat. § 218.0171 (7) (2001-02) (Wisconsin Lemon Law); 425.308(1-2) (2001-02) (Wisconsin Consumer Act (WCA)).
The words that state the rule
These aspirations are so important and desirable that we adopt Hensley's lodestar methodology and direct the circuit courts to follow its logic when explaining how a fee award has been determined.
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
The American Rule provides that parties to litigation typically are responsible for their own attorney fees. See Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717-18 (1967). Limited exceptions do exist, such as where statutes provide for the recovery of attorney fees for prevailing parties, or where the parties contract for the award of attorney fees. See Meas v. Young, 142 Wis. 2d 95, 101 , 417 N.W.2d 55 (Ct. App. 1987). In addition, we have developed a narrow exception to the American Rule, as we explained in Weinhagen .
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
In Weinhagen, 179 Wis. at 63-66 , we reaffirmed the American Rule, but held that an innocent party, wrongfully drawn into litigation with a third party, may recover those fees reasonably incurred in defending against such action.
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
Subsequently, Weinhagen has been interpreted to require that: (1) the party from whom fees are sought must have committed a wrongful act against the party seeking attorney fees; and (2) the commission of such wrongful act forced the party seeking fees into litigation with a third party, or required the party seeking attorney fees to incur expenses protecting that party's interests against claims arising from the wrongful act.
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
Accordingly, the Weinhagen exception's wrongful act requirement demands more than an allegation of mere negligence that has involved a party in litigation; instead, "wrongfulness" requires something similar to fraud or breach of a fiduciary duty to the party seeking attorney fees.
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
Here, although there were contracts between Excel and Sizzler, the third-party litigation that Sizzler was forced to defend cannot be said to have arisen from the parties' contractual relationship alone. The plaintiffs' claims here were based primarily in tort law. Sizzler's involvement arose because of Sizzler's potential liability for the alleged breach of a claimed duty of due care. Therefore, we conclude that Sizzler has not met the Weinhagen test of what constitutes a wrongful act by the party from whom attorney fees are sought.
- case2012 WI 70Estate of Kriefall v. Sizzler USA Franchise, Inc.Wis.decided 2012read it at the source ↗
The words that state the rule
Fidelity involved a claim for attorney fees pursuant to Wis. Stat. § 402.715 , in a breach of contract suit where the contract did not address attorney fees. Id. at 504-05 . Fidelity relied on our holding in Murray . *72 In Murray , we declined to allow an award of attorney fees under § 402.715. We noted that other courts that have considered this question under provisions similar to Wis. Stat. § 402.715 have held that no award of attorney fees as consequential damages is proper when the contract at issue does not address attorney fees.
The words that state the rule
When a circuit court awards attorney fees, the amount of the award is left to the discretion of the court. First Wisconsin Nat'l Bank v. Nicolaou, 113 Wis. 2d 524, 537 , 335 N.W.2d 390 (1983). We uphold the circuit court's determination unless the circuit court erroneously exercised its discretion.
The words that state the rule
We uphold the circuit court's decision to award $15,000 in attorney fees. The court's explanation mirrored the sparse information it had available to make its decision. If Kolupar had properly submitted the documentation supporting the number of hours reasonably expended, then the court's explanation would likely not withstand scrutiny. However, the circuit court's explanation comported with the type and amount of information it had in the absence of such documentation. As a result, the circuit court's explanation reflected Kolupar's unmet burden to demonstrate the reasonableness of the requested award. By contrast, although the circuit court understood that substantial costs were incurred, it did not explain why it concluded that no costs were appropriate. We therefore remand the issue to the circuit court to address the issue of costs.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.