Can your business be reimbursed for legal fees when you file suit to collect money due?

Contributed by Danielle L. Dietrich

I often assist my business clients with collections matters.  Frequently my clients ask, “Can we make them pay your legal fees?”  If your business has a well-written contract and is successful in the collections lawsuit, the answer is often yes.

Generally, parties to litigation follow what is known as the “American Rule” – all parties pay their own legal fees.  Of course, there are exceptions to that rule.  One of those exceptions is when there is a contract providing for the recovery of legal fees if the business has to sue to get the bill paid.

It is surprising how many standard contracts neglect to include language that provides for the recovery of attorney’s fees and legal costs if collections actions are necessary.  All small businesses should examine their standard contracts to determine whether such a provision exists.  If not, they should consult an attorney to add appropriate language.  This will allow the business to ask for reimbursement of the legal fees that they will incur when chasing after unpaid bills.

However, I always caution my clients that the recovery of any such legal fees is not unlimited and must be proportional to the amount the business is seeking to collect.

One of the services that I offer my clients is to review and revise their standard form contracts, and provide advice on the most efficient and cost-effective methods to collect on outstanding accounts.  Please contact me if you are interested in this kind of assistance.

Danielle Dietrich is a litigation shareholder at Tucker Arensberg, P.C. and represents small businesses in a variety of legal matters. She is licensed to practice law in Pennsylvania, Ohio and West Virginia.  You can reach Danielle via email, telephone: 412-594-5605 or on Twitter at @DLDietrich.