10.05.2016

|

Updates

On March 1, 2017, the standard for awarding attorneys’ fees in civil actions under Idaho Code § 12-121 will change significantly to allow attorneys’ fees in all civil actions “when justice so requires.” Hoffer v. Shappard, 2016 Opinion No. 105, at *19-21 (Idaho Sept. 28, 2016).  The language of Section 12-121 itself has not changed.  Section 12-121 provides that “[i]n any civil action, the judge may award reasonable attorney’s fees to the prevailing party or parties.”  Rather, by a divided decision, the Idaho Supreme Court announced that Idaho Rule of Civil Procedure 54(e)—the rule it had promulgated in 1979 to temper and define the scope of Section 12-121—ignored the clear legislative intent behind the statute. 

Rule 54(e) currently limits the award of attorneys’ fees under Idaho Code § 12-121 to instances where a case was “brought, pursued or defended frivolously, unreasonably or without foundation.”  The Hoffer court found this rule to be invalid and adopted a new standard, which is based on an uncodified legislative statement of intent behind Section 12-121:  “It is the intent of the legislature of the state of Idaho that this act grant prevailing litigants in civil actions the right to be made whole for attorney’s fees and costs when justice so requires.” Hoffer, at *19-20.  Under the new standard, rather than limiting awards of attorneys’ fees to only those instances in which the court deems that a party’s claims or defenses are frivolous, courts may now award attorneys’ fees whenever the court determines that justice requires the granting of such an award.

Profound Effect on Litigants

Recognizing that its decision to amend Rule 54(e) may have “profound effects on litigants,” the Supreme Court used the Hoffer decision as an opportunity to give members of the public and the bar advance notice of the new rule before it goes into effect on March 1, 2017.  The court also noted that the new standard will only apply prospectively to “all cases that have not become final as of that date.”

Notably absent from the Hoffer decision is any guidance regarding how trial judges should determine “when justice so requires” the award of attorneys’ fees.  The only other rule of civil procedure applying this language is Idaho Rule of Civil Procedure 15(a)(2), which provides that courts “should freely give leave [to amend a complaint before trial] when justice so requires.” [Emphasis added].  The Idaho Supreme Court has interpreted Rule 15(a)(2) as requiring that permission to amend pleadings be liberally granted and that the decision to grant or deny permission is left to the sound discretion of the trial court.  City of Meridian v. Petra Inc., 154 Idaho 425, 454, 299 P.3d 232, 261 (2013).  To the extent the Supreme Court's interpretation of 15(a)(2) provides any guidance for the new rule announced in Hoffer, the frequency of attorneys’ fee awards in civil actions can be expected to increase.

Perhaps the Supreme Court will issue further guidance on how the new rule will apply before it takes effect on March 1, 2017.  But more guidance may not be necessary.  The court’s choice of an effective date for the new rule—March 1, 2017—does not appear to be entirely random, as it falls at the end of the 2017 Idaho legislative session.  This leaves plenty of time for the Legislature to amend Idaho Code § 12-121 if it disagrees with the court's new interpretation of the statute.

For now, litigants in pending litigation that will not be completed by March 1, 2017, must consider whether the new rule applies to their case.  The new rule does not affect the award of attorneys’ fees governed by other statutes like Idaho Code § 12-120, which provides for an award of attorneys’ fees to the prevailing party, as a matter of right, in cases such as those involving a commercial transaction.  But in other cases, such as tort actions or the like, non-prevailing parties may now be exposed to a greater risk of having attorneys’ fees awarded against them under Section 12-121, irrespective of whether they have asserted meritorious claims or defenses in the case.  Because federal judges frequently rely on state attorneys’ fee statutes to determine a party's entitlement to fees in federal court, the impact of the Hoffer decision is not limited to Idaho state courts.

© 2016 Perkins Coie LLP