An unpaid invoice can become more expensive to pursue than the balance itself. Before filing a collection lawsuit, California businesses and individuals should determine whether they can recover attorney’s fees from the other party. Recovery depends on a contractual provision, an applicable statute, or another recognized legal basis—not simply on obtaining a judgment. Here is how to evaluate that right, document your request, and account for the financial risks.
When can you recover attorney fees in collections?
California generally follows the rule that each party pays its own attorney’s fees unless a contract or statute provides otherwise. Code of Civil Procedure § 1021 recognizes contractual fee arrangements, subject to statutory exceptions. Code of Civil Procedure § 1033.5(a)(10)(A)–(C) identifies attorney’s fees authorized by contract, statute, or law as allowable costs. That provision does not itself create a fee entitlement; fees must be claimed under the governing authority and applicable procedural requirements, including § 1033.5(c) and relevant court rules.
A successful collection claim does not automatically shift your legal bill to the debtor. Start by identifying the specific authority that supports a fee request:
- Contract: Does the signed agreement authorize fees for collection, enforcement, or an action arising from the agreement?
- Statute: Does the particular claim include a fee provision, and who qualifies for an award?
- Scope: Does the provision cover the parties, claims, and work involved in your dispute?
A demand letter asserting a right to fees does not create that right. An attorney reviewing your debt collection options can evaluate the supporting documents before you decide whether litigation makes economic sense.
Read the fee clause before sending a demand
Fee provisions vary. One agreement may cover only a lawsuit to enforce payment. Another may expressly include collection efforts before suit, arbitration, appeals, and judgment enforcement. Whether particular work is recoverable depends on the language and applicable law.
Locate the agreement actually accepted by the debtor. A fee provision printed on an invoice after the transaction is not automatically part of the parties’ contract. Its enforceability depends on the existing agreement, incorporation, notice, assent, and any requirements applicable to contract modification. Keep signed agreements, incorporated terms, amendments, and evidence of acceptance together.
If you intend to pursue a guarantor, review the guaranty separately. Do not assume the debtor’s fee clause automatically applies to someone who signed a different instrument.
For consumer debts, adding collection charges requires particular care. The federal Fair Debt Collection Practices Act prohibits covered debt collectors from collecting amounts, including fees, unless expressly authorized by the agreement creating the debt or permitted by law. See 15 U.S.C. § 1692f(1). Its application depends on the debt and the collector. California’s Rosenthal Fair Debt Collection Practices Act and other California law may also restrict collection of attorney’s fees and other charges, including in circumstances involving creditors or first-party collectors not covered by the federal act.
A contractual fee right can work both ways
Civil Code § 1717 generally makes a qualifying contractual attorney-fee provision reciprocal in an action on the contract. Even if the provision names only the creditor, the debtor may recover reasonable fees if the debtor is the prevailing party on the contract. Section 1717 does not itself apply to tort or other noncontract claims; fee entitlement for those claims depends on the contract’s language and other applicable law.
This matters when an individual disputes a collection claim or a business argues that payment was withheld because the creditor breached first. A creditor should assess defenses and potential counterclaims before treating a fee clause as added leverage.
The prevailing-party analysis can also become complicated when each side obtains some relief. Under § 1717, the court may determine that neither party prevailed on the contract. For purposes of § 1717, there is no prevailing party when an action on the contract is voluntarily dismissed or dismissed pursuant to settlement. This rule does not necessarily bar fees on noncontract claims if the contractual clause independently covers them.
Settlement terms should therefore address fees expressly. Specify whether the agreed payment includes fees and costs, whether each side bears its own expenses, or whether a fee issue remains for court determination.
Request reasonable fees and support the amount
A contractual provision does not mean the court must award every dollar billed. For an award under Civil Code § 1717, the court fixes reasonable attorney’s fees. Courts commonly evaluate reasonable hours and reasonable hourly rates, along with the circumstances of the case. Where fees are fixed without the necessity of a court determination, California Rules of Court, rule 3.1702(e) provides for claiming them in the memorandum of costs.
Build the record while the case is underway rather than reconstructing it after judgment:
- Maintain itemized billing records describing the work, time spent, and person performing it.
- Separate unrelated matters and identify work tied to claims eligible for fees.
- Explain the rates requested and the experience of the professionals involved.
- Document why disputed or unusually extensive work was necessary.
A lawyer may also need to address whether work on different claims was sufficiently intertwined to support recovery. Fee requests have procedural requirements and deadlines. California Rules of Court, rule 3.1702 governs many requests for attorney’s fees in civil cases, so obtaining a judgment is not a reason to postpone reviewing the applicable deadline.
Account for enforcement costs and actual collectability
Obtaining a fee award and receiving payment are different steps. A debtor’s assets, competing creditors, exemptions, or bankruptcy may affect collection. Estimate the likely recovery rather than assuming a judgment will cover every expense.
Code of Civil Procedure § 685.040 addresses reasonable and necessary costs of enforcing a judgment. It permits enforcement attorney’s fees when the underlying judgment includes a contractual fee award of the kind specified in § 1033.5(a)(10)(A). Other legal authority may also support enforcement fees.
These amounts are not added without proper procedure. Code of Civil Procedure § 685.080 permits a judgment creditor to claim § 685.040 enforcement costs by noticed motion made before the judgment is fully satisfied and no later than two years after the costs were incurred. The motion must describe the costs and amount, include an affidavit stating that the costs are correct, reasonable, necessary, and unpaid, and be served on the judgment debtor. Discuss enforcement expenses early and preserve supporting records.
Talk to a California business attorney
Itkin Law offers a free consultation for businesses and individuals evaluating collection claims, contractual fee provisions, or potential fee exposure. Schedule a free consultation or call (424) 603-8888.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney–client relationship. The law changes, and this article reflects the law as of its publication date. Every situation is different — contact us to discuss how the law applies to your exact circumstances. See our full disclaimer.
