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Attorneys' Fees Awards: No License to Pickpocket
It is generally thought that a contract provision awarding attorneys' fees to a prevailing party will be enforced. The most recent saga in the Domino's system's equipment dispute confirms this principle, but, at the same time, suggests that courts will, when appropriate, restrict the amount of the award. (Background: In Bores v. Domino's Pizza LLC, 489 F. Supp. 2d 940 (D. Minn. 2007), the trial court ruled in favor of the franchisee-plaintiffs in a dispute about whether the franchisor could impose certain purchasing restrictions on its franchisees. The decision was reversed by the Eight Circuit, which remanded with direction for the trial court to enter judgment in favor of franchisor Domino's. Bores v. Domino's Pizza LLC, 530 F.3d 671 (8th Cir. 2008).) From a counseling standpoint, there are several lessons to be learned from the trial court's ruling, the main lesson being: Don't spend an attorneys' award until the money is in the bank.
If the true objective for awarding attorneys' fees is to reduce the cost of litigation if successful, the first issue for consideration is whether the other party will be able to pay. Usually, this is a problem for the franchisor, and not for the franchisee that prevails, although recent economic downturns might alter the presumption here. In a large percentage of the cases, the franchisee is gasping for air when proceedings have been commenced. Too many franchisees fail or have issues because they are undercapitalized. Where this is the case, the franchisor, if it prevails, may have problems collecting any judgment granted in its favor. Collecting attorneys' fees will only compound a collectability problem that may already exist.
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