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How You Can Recover Your Legal Fees in a NY Breach of Contract Case

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Let's start with the general rule: New York courts disfavor allowing parties to recoup their legal fees that are incurred in litigation. As New York's courts have put it: "It is well settled that legal fees are not recoverable unless provided under the terms of a contract or authorized by statute." See, U.S. Underwriters Ins. Co. v. City Club Hotel, LLC, 3 N.Y.3d 592, 597, 789 N.Y.S.2d 470, 822 N.E.2d 777 [2004] )). So, you may be wondering, how specific do you need to be, or what language do you need in your contract, in order to recover legal fees? Fortunately, New York's Appellate Division, First Department recently provided us with some guidance on this issue. In Nigri v. Liberty Apparel Co., Inc., the plaintiff sued to recover in breach of contract, and the defendants counter-claimed to recover the legal fees they incurred in defending the action, as well as in prosecuting their own counterclaims under the agreement. In affirming the trial court's award of a judgment allowing the defendants to recover their legal fees, the Appellate court cited the language in the underlying agreement that formed the basis for this ruling: "The parties’ contract provided, in pertinent part, that the plaintiff would pay certain €œGuaranteed Obligations, which were defined as “one-half of all claims, actions, litigation, and other liabilities, costs and expenses (a) in [certain pending legal actions, including a customs matter]…,” and “all out-of-pocket expenses (including reasonable attorneys'€™ fees and disbursements) incurred by [defendants]  in enforcing or collecting upon [the] Guaranty. The court went on to state that "[T]he clause 'all claims, actions, litigation, and other liabilities, costs and expenses' constitutes broad language that is generally interpreted to include attorneys'™ fees."

Category: Breach of Contract


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