Medina County Courthouse

Saturday, September 18, 2010

Using the "Tort of Another" Doctrine to Recoup Attorney Fees

By Attorney Julie Fenstermaker
Frantz Ward LLP

(Editor's Note: This article is reprinted with permission and is not intended to represent the opinion of Judge James L. Kimbler or any member of his staff.)

In these economic times, companies are keeping a watchful eye on legal expenses. One possible, and often underutilized, avenue of relief is the “tort of another” doctrine. This principle enables a company, in certain instances, to recoup the attorneys’ fees incurred in defending an action that was based solely on another’s wrongdoing.

While the United States’ legal system follows the “American rule,” which requires each party to pay its own legal fees, companies are usually familiar with a way to circumvent this outcome through a contractual provision providing that attorneys’ fees are paid to the prevailing party. In lieu of a contractual provision, or an applicable statute, however, the “tort of another doctrine” can provide another option depending on what jurisdiction you are in and the particular circumstances of the case.

Ohio courts follow the Restatement (Second) of Torts § 914, which provides:

One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorneys’ fees and other expenditures thereby suffered or incurred in the earlier action.

Thus, in Ohio, there is an independent tort exception to the traditional American rule. Such an exception could be extremely useful to companies that are involved in litigation solely because of an employee’s actions or those of a third party. For example, in Reiner v. Kelley, 8 Ohio App. 3d 390 (Franklin Cty. 1983), an action was brought against a law firm and both of its attorneys for fraudulent acts. After finding that one partner had neither participated in, nor ratified the fraudulent acts, the appellate court determined that the law firm was entitled to full indemnity, including both the cost of the judgment that was entered against it and the reasonable value of the fees it had incurred in defending against the third person’s [the plaintiff’s] claims.

Accordingly, counsel should evaluate whether they may be able to assert the “tort of another” doctrine. However, there are some limitations to consider before asserting the doctrine. First, a party invoking the “tort of another” doctrine must take care to introduce sufficient evidence of the specific legal expenses incurred in defending a particular action. In Wilson v. Cadwell, 1988 Ohio App. LEXIS 1883 (Ohio Ct. App., Cuyahoga Cty. 1988), the appellate court rejected the plaintiff’s contention that recoverable fees included those that arose as a “natural and proximate consequence of [the defendant’s] activities” because “the remedy does not encompass other damages incurred by the indemnitee as a consequence of the indemnitor’s tortious conduct.” Because no evidence was presented concerning the specific fees incurred in defending just against the plaintiff’s complaint, none were awarded.

Further, the Cadwell case also suggests that in Ohio a party cannot wait and file a subsequent action to recoup its attorneys’ fees. Instead, it must plead the “tort of another” doctrine as a separate cause of action in the complaint or cross-claim against the responsible party. Id at *8. Further, as the name of the doctrine suggests, it can only be applied where there has been an actual tort committed by the other party. Good Samaritan Hosp. & Health Ctr. v. Wright State Univ., 82 Ohio App. 3d 30, 33 (Franklin Cty. 1992). The doctrine cannot be expanded to seek indemnification from innocent parties. Id.

Finally, use of the “tort of another” doctrine may be limited if the cause of action is preempted by a federal statute. An example of this can be seen in Werner v. Primax Recoveries, Inc., 2008 U.S. Dist. LEXIS 102804 (N.D. Ohio August 6, 2008). While Werner recognized that a party can recover fees incurred in defending an action against a third person for fault of another, the claim in this case was preempted by ERISA, and, therefore, a moot issue.

Despite of such limitations, the “tort of another” doctrine potentially can be a powerful tool for a corporate defendant. Parties should consider this cause of action to recover fees incurred in defending claims in which they are held vicariously liable despite their lack of knowledge or participation in the wrongful acts.

Julie Fenstermaker is an attorney at Frantz Ward LLP where she focuses her practice on intellectual property, business disputes and general commercial litigation. For more information on the "tort of another" doctrine, please contact Julie at 216.515.1660.

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