Idaho Supreme Court Redefines When Attorney Fees May Be Awarded to Prevailing Parties

Idaho Supreme Court Redefines When Attorney Fees May Be Awarded to Prevailing Parties

January 5, 2017

By: Paul S. Stewart

The Idaho Supreme Court in Hoffer v. Shappard, 160 Idaho 870, 380 P.3d 681 (2016), held that attorney fees available to a prevailing party under I.C. § 12-121 will be awarded in any case when “justice so requires.”  This is a departure from precedent based on I.R.C.P. 54(e)(1), which, until now, only permitted attorney fees under I.C. § 12-121 when a party prevailed against frivolous claims.  The Court announced that its new interpretation of I.C. § 12-121 will go into effect March 1, 2017.  Two dissenting justices characterized the majority’s decision as “a prominent step toward adopting the English Rule of attorney fee awards, whereby the losing party must pay for the prevailing party’s attorney fees.”  The result, according to the dissent, would “inhibit access to justice” and “chill litigation.”  The dissent further noted the “when justice so required” standard does not provide any direction to trial courts and makes it difficult for effective appellate review of attorney fee awards.

The new rule announced by the Idaho Supreme Court marks a significant departure from Idaho precedent.  Although the dissent’s concerns about the new rule inhibiting access to justice and chilling litigation are reasonable, they may not be fully justified.  The Court’s decision may, in fact, work against corporate defendants.

The rule change will shift Idaho courts’ attorney fees determinations from considering solely the merits of plaintiffs’ claims/defendants’ defenses to considering the totality of the circumstances.  While Idaho courts will still consider whether litigants’ claims and defenses are frivolous, they will also be able to consider other factors, the most obvious being the financial positions of the parties.  If the prevailing party is a large corporation or insurance company and the losing party is a low-income individual, a court may be reluctant to make the individual pay the corporation/insurance company’s attorney fees, even if the losing party’s claims/defenses were meritless.

This is the reality in Alaska, the only United States jurisdiction that adheres to the English Rule on attorney fees.  Alaskan legal commentators have recognized that Alaska’s rule on attorney fees works as a “one-way street” whereby defense attorneys are unable to collect fee awards from losing plaintiffs.

In sum, the Hoffer decision signifies a new approach regarding awards of attorney fees in Idaho.  But the effects of the decision may not be as momentous as argued by the dissenting justices.  As evidenced by the experience of Alaskan courts, adherence to the English Rule on attorney fees does not necessarily result in a “chill” on litigation; in fact, the rule may act more to the detriment of corporate defendants than to poor plaintiffs.

For additional coverage of this topic, see a recent news article available at http://www.spokesman.com/stories/2016/dec/18/new-loser-pays-rule-over-idaho-court-system-could-/.  We will continue to monitor judicial and legislative treatment on this issue.