What Does “Prevailing Party” Mean?

A standard piece of boilerplate is a provision stating that the prevailing party in any dispute is entitled to recover costs. Such a provision might look something like this:

Recovery of Expenses. In any adversarial proceedings between the parties arising out of this agreement, the prevailing party will be entitled to recover from the other party, in addition to any other relief awarded, all expenses that the prevailing party incurs in those proceedings, including attorneys’ fees and expenses.

As a general matter attorneys’ fees are not recoverable in a commercial contract dispute unless provided for by statute. So if with respect to a given transaction you want to recover expenses, you should say so in the contract.

But one problem with such provisions is that the meaning of “prevailing party” has “spawned a great deal of litigation.” Robert L. Rossi, 1 Attorneys’ Fees § 6:8 (3d ed. 2010). If the plaintiff voluntarily dismisses its action, has the defendant prevailed? If a party’s case has been dismissed for want of jurisdiction, is has the other party prevailed? What if both a complaint and a counterclaim have been dismissed? If the plaintiff has recovered on its complaint against the defendant and the defendant has recovered on its counterclaim against the plaintiff, is the prevailing party the party in whose favor a net judgment was entered, or are both parties entitled to recover? Is a decision required, or can you prevail in a settlement or consent decree? Is a money judgment required, or do equitable remedies qualify? And to be the prevailing party in a dispute, do you have to succeed on all issues, or just some? Those are just some of the issues that can arise.

A stroll through EDGAR suggests that most expenses-recovery provisions don’t attempt to address any of these issues. That seems unhelpful. On the other hand, you wouldn’t want to weigh down such provisions with lots of verbiage. The following extracts from EDGAR show how some drafters have attempted to address these issues:

  • The term “prevailing party” means that party, as plaintiff or defendant, who substantially prevails against the other party. Notwithstanding the foregoing, if a written offer of compromise made by either party is not accepted by the other party within thirty (30) days after receipt and the party not accepting such offer fails to obtain a more favorable judgment, the non-accepting party shall not be entitled to recover its costs of suit and reasonable attorney’s fees and costs (even if it is the prevailing party) and shall be obligated to pay the costs of suit and reasonable attorney’s fees and costs incurred by the offering party.
  • The “prevailing party” means the party in whose favor a judgment, decree, or final order is rendered.
  • The term “prevailing party” means the party obtaining substantially the relief sought, whether by compromise, settlement or judgment.
  • For purposes hereof, prevailing party means the party in whose favor final judgment, after appeal (if any), is rendered with respect to the claims asserted in any such action or proceeding.
  • As used in this Agreement, the term prevailing party means that party whose position is upheld in a final judgment rendered in any litigation, or, if the final judgment is appealed, that party whose position is upheld by the decision of the final appellate body that considers the appeal.
  • For purposes of this Agreement, “prevailing party” means the party who receives any type of compensation or consideration regardless of whether any court decision or arbitration was obtained.
  • As used herein, the term prevailing party means the party who, in light of the claims, causes, or action, and defenses asserted, is afforded greater relief.
  • For purposes of this Agreement, “prevailing party” means the party that prevails (whether affirmatively or by means of a successful defense) with respect to claims having the greatest value or importance as reasonably determined by the court.
  • For purposes of the foregoing, (i) “prevailing Party” means (A) in the case of the Party initiating the enforcement of rights or remedies, that it recovered substantially all of its claims, and (B) in the case of the Party defending against such enforcement, that it successfully defended substantially all of the claims made against it, and (ii) if no Party is a “prevailing Party” within the meaning of the foregoing, then no Party will be entitled to recover its costs and expenses (including attorney’s fees and disbursements) from any other Party.
  • For purposes of this Section 7.8, “prevailing party” means the net winner of a dispute, taking into account the claims pursued, the claims on which the pursuing party was successful, the amount of money sought, the amount of money awarded, and offsets or counterclaims pursued (successfully or unsuccessfully) by the other Party. If a written settlement offer is rejected and the judgment or award finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle, the offeror is deemed to be the prevailing party from the date of the offer forward.
  • The “prevailing party” means any party (one party or both parties, as the case may be) determined by the arbitrator(s) or court to be entitled to money payments from the other, not necessarily the party in whose favor a judgment is rendered.
  • The “prevailing party” means the party determined by the arbitrator(s) or court, as the case may be, to have most nearly prevailed, even if such party did not prevail in all matters, not necessarily the one in whose favor a judgment is rendered.
  • For purposes of this § 13.14, the term “Prevailing Party” means that Party in whose favor any monetary or equitable award is made or in whose favor any dispute is resolved, regardless of any settlement offers.
  • For purposes of this Section 13.11, “prevailing party” means the net winner of a Dispute, taking into account the claims pursued, the claims on which the pursuing party was successful, the amount of money sought, the amount of money awarded, and offsets or counterclaims pursued (successfully or unsuccessfully) by the other Party. If a written settlement offer is rejected and the judgment or award finally obtained is equal to or more favorable to the offeror than an offer made in writing to settle, the offeror is deemed to be the prevailing party from the date of the offer forward.

After chewing them over, I see three main alternatives:

First, you recover if you get a judgment or any kind of dismissal. That has the benefit of being clear-cut, but it would allow a party to recover fees even after failing to prevail on most of its claims.

Second, you recover if you get substantially what you had sought. That has fairness in its favor, but given its vagueness, a court would likely have to decide this.

Third, you recover if you’re the net winner, regardless of what you had sought. So if you win one claim out of 20 and recover $10 and the other party wins its one claim and gets $9, you’re the net winner. If the idea is to encourage efficient resolution of claims, I’m not sure how fair this is.

So perhaps Koncision should offer users options one and two.

I think it makes sense to require a judgment (or the arbitration equivalent) or any kind of dismissal, because only when you have formal proceedings do people start spending real money.

But I can see the value of saying that if you turn down a settlement offer and end up with a decision that gives you less than had been offered, you recover none of your expenses. So I have in mind offering that as a Koncision option.

I won’t go public with any proposed language until I’ve chewed this over some.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.