In order to recover attorneys' fees, generally one must rely on either a statute or a provision in a contract signed by the party who is to pay the fees. Such statutory provisions are often found in federal and state consumer protection statutes. This article provides a broad overview of the standards governing contractual and statutory attorneys' fees and their potential application to banks, whether as the party paying or recovering attorneys' fees.
As a general rule, all attorneys' fee awards, whether based on contractual or statutory provisions, must be "reasonable" and require court approval. What is and is not "reasonable" has been the subject of much litigation and there is an extensive body of case law on the topic. In determining the reasonableness of a fee, the courts consider circumstances such as the time consumed, the effort expended, and the nature of the services rendered by the attorney as well as any other relevant circumstances.
When attorneys' fees are contested, an expert may be required to opine as to the reasonableness of the attorneys' fee amount that is requested. In addition, in order to recover attorneys' fees, either via contract or statute, one must actually be represented by an attorney.
Contractual Attorneys' Fee Provisions
Generally, if a bank is to recover attorneys' fees against a debtor, it will be based on a contractual provision that permits such a recovery. While there is a trend toward more debtor friendly rulings in consumer collection cases, most state courts in Virginia will find an attorney fee award of between 15 percent and 25 percent of the principal amount of the judgment to be reasonable. Where the note specifically enumerates an amount or percentage of attorneys' fees to be paid, the plaintiff is presumed to be entitled to recover attorneys' fees according to the terms of the note. So, where the note specifies an amount or percentage, the defendant/debtor must prove to the court that the fee agreed upon in the contract should not be enforced, usually because it was excessive or unreasonable. When the contractual provision does not specify a percentage, the court must determine, from the evidence, the reasonable amount of fees to be awarded under the circumstances of the particular case. The bank's attorney should submit an affidavit supporting the requested amount of attorneys' fees or otherwise be prepared to present evidence of the fees in order to assist the court in its analysis.
In addition, if future services of an attorney will be required in connection with a case, the court may make a reasonable estimate of their value. Accordingly, the bank's attorney may include prospective attorneys' fees in the total amount of the fee award in those situations where their services may be needed in the future to collect the judgment.
As with any judgment, an award of attorneys' fees is no more valuable than the debtor's ability to pay. Therefore, funds spent to support a request for attorneys' fees must be balanced against the prospect of recovery of the attorneys' fees, should the bank prevail.
Statutory Attorneys' Fee Provisions
If a bank is required to pay the attorneys' fees of an opposing litigant, it is generally because the court has determined that the bank violated a consumer protection statute that permits the recovery of attorneys' fees. The Great Recession has produced a material increase in such claims against banks and other lenders. In order to recover his/her attorneys' fees against the bank, the consumer must: (i) have an attorney; (ii) prevail against the bank on a claim asserting a violation of a consumer protection statute that has an attorneys' fee provision; and (iii) offer adequate proof that the requested amount of attorneys' fees is reasonable. Assuming items one and two are applicable, a bank may find itself in litigation attempting to reduce the fee amount requested by the consumer's attorney. While there is no clear rule, courts generally look to the overall success of the consumer's claim(s) in proportion to the amount of the attorneys' fees requested as one factor in evaluating an attorneys' fees claim.
While not a consumer protection case, the United States Fourth Circuit Court of Appeals recently addressed an attorney fee award dispute and reduced the trial court's attorney fee award by over $200,000. In McAfee v. Boczar, the plaintiff alleged violations of her civil rights due to an unjustified arrest and sought approximately $500,000 in damages asserting "great insult and humiliation," "mental anguish," and punitive damages to deter future civil rights violations. The jury awarded the plaintiff only $3,000 in out-of-pocket expenses.
In spite of the $3,000 recovery, the trial court awarded the plaintiff $322,000 in attorneys' fees based on its application of the "lodestar calculation," which is a multi-factor test used to determine a reasonable hourly rate and a reasonable number of hours expended on the case under the circumstances. The factors of the lodestar calculation are:
(1) the time and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to properly perform the legal services rendered; (4) the attorneys' opportunity costs in pressing the instant litigation; (5) the customary fee for like work; (6) the attorneys' expectations at the outset of the litigation; (7) the time limitations imposed by the client or circumstances; (8) the amount in controversy and the results obtained; (9) the experience, reputation and ability of the attorney; (10) the undesirability of the case within the legal community in which the suit arose; (11) the nature and length of the professional relationship between attorney and client; and (12) attorneys' fees awards in similar cases.
In reducing the attorneys' fees awarded by the trial court, the Fourth Circuit held that the trial court had not properly taken into consideration the plaintiff's lack of success in obtaining a "puritanically modest" recovery in light of the $500,000 that the plaintiff requested. The Fourth Circuit said that a "substantial disproportionality" between a verdict and an attorney-fee award may not, by itself, justify reducing the attorneys' fees, but a lack of litigation success will. Accordingly, a court is more likely to reduce an attorneys' fee request if the consumer was only successful on a small portion of their overall claims against the bank, or receives a relatively modest damages award in relation to the damages sought.
This article provides a very broad overview of some circumstances under which a court may award attorneys' fees either in favor of or against a bank. Even if a bank does not find itself in litigation regarding an attorneys' fee award issue, the information may prove valuable in working out defaults and/or disputes with customers. Note that this article does not reflect the law in all jurisdictions and should not be considered an exhaustive review of the topic or legal advice.
Robert H. Chappell III and Jennifer J. West are two of the attorneys at Spotts Fain PC who work with banks and other creditors on a wide variety of issues including lending, insolvency, workouts, creditors' rights, bankruptcy, and collections.
 This article does not address all situations in which a bank may recover or pay an attorneys' fee award. Other statutory provisions such as sanctions in discovery disputes, violations of court orders, and the pursuit of frivolous claims may permit the successful party to recover attorneys' fees. In addition, in an action involving fraud, a court may award attorneys' fees to a successful plaintiff.
 The attorneys' fees provisions found in loan documents generally only permit the recovery of attorneys' fees by the bank and not by the customer/debtor, even where the customer/debtor is successful in either defending a collection action or pursing an independent claim against the bank.
 Richard v. Breeding, 167 Va. 30, 34 (1936); Parksley Nat'l Bank v. Accomack Banking Co., 166 Va. 459, 462 (1936).
 Mullins v. Richlands Nat'l Bank, 241 Va. 447, 449 (1991).
 2013 U.S. App. LEXIS 24709 (4th Cir. 2013)
 For further analysis of the lodestar calculation, please see Barber v. Kimbrell's Inc., 577 F.2d 216, 226 n. 28 (4th Cir. 1978) (adopting factors set forth in Johnson v. Ga. Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)).