A $1,600 charge disallowed in 1796 still decides who pays your fees.

On August 12, 1796, the Supreme Court removed a $1,600 charge for counsel fees from a damages award. The report of Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, is only a few sentences long. Its rule remains the starting point for federal fee disputes.

Arcambel relied on practice, not extended reasoning

Arcambel came from the United States Circuit Court for the District of Rhode Island. The Supreme Court affirmed the decree below except for the $1,600 in counsel fees, which had been included in the estimate of damages annexed to the decree.

The Court held that counsel fees in the courts below could not be allowed as damages. "The general practice of the United States is in opposition to it," the Court said. Even if that practice was not strictly correct in principle, the Court considered it entitled to respect until changed or modified by statute.

There was no survey of authority and no doctrinal label. The Court suggested that counsel for the defendant in error enter a remittitur for the $1,600. A remittitur was entered.

The American Rule makes each party responsible for its own fees

The principle now carries a familiar name: the American Rule. In Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975), the Supreme Court stated it directly: "In the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser."

The Court later described the rule as its "basic point of reference" when considering an attorney's fee award. Each litigant pays its own fees, win or lose, unless a statute or contract provides otherwise.

The Court has traced the rule's common law roots to at least the 18th century. Peter v. NantKwest, Inc., 589 U.S. 23 (2019), cited Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121 (2015), which cited Arcambel. Summit Valley Industries, Inc. v. Carpenters, 456 U.S. 717, 721 (1982), said the rule had been "consistently followed for almost 200 years."

Congress adopted fixed docket fees rather than general fee shifting

Congress addressed federal court costs in the Act of February 26, 1853, 10 Stat. 161, commonly called the Fee Act. Alyeska described it as a far-reaching measure that specified the nature and amount of taxable cost items in federal courts. One purpose was to limit attorney's fee allowances charged to losing parties.

The substance of the Fee Act carried into the 1948 Judicial Code through 28 U.S.C. sections 1920 and 1923(a). Section 1923 remains in force. It permits attorney's and proctor's docket fees to be taxed as costs in fixed amounts.

Those amounts include $20 on a trial or final hearing, including a default judgment, in civil, criminal, or admiralty cases. The statute provides $5 for discontinuance of a civil action, $5 for a motion for judgment and other proceedings on recognizances, and $2.50 for each deposition admitted in evidence. Admiralty appeals carry tiers of $20, $50, and $100, depending on the amount involved.

Section 1923 was enacted on June 25, 1948, and last amended on November 6, 1978. Those are the figures the section still carries. Congress legislated a schedule of small fixed sums, not a general requirement that the losing party pay the winner's attorney's fees.

Alyeska left fee policy to Congress

Alyeska, decided May 12, 1975, rejected an effort to award fees under a "private attorney general" theory. Justice White's opinion held that federal courts could not create that exception to the American Rule. Only Congress could do so.

The Court cited Arcambel expressly. It understood the 1796 decision to mean that the judiciary would not create a general federal rule allowing attorney's fee awards without statutory authority.

Alyeska preserved established judge-made exceptions. They include the common fund or common benefit doctrine, under which a litigant recovers a fund for others, and awards against a party that acted in bad faith, vexatiously, or oppressively. Civil contempt may also support fees for willful disobedience of a court order.

Congress, Alyeska observed, had made "specific and explicit provisions" for fees under selected statutes. Congress responded the next year with the Civil Rights Attorney's Fees Awards Act of 1976. Now codified at 42 U.S.C. section 1988(b), it permits a court, in its discretion, to award a prevailing party a reasonable attorney's fee in actions enforcing listed civil rights provisions, including sections 1981, 1982, 1983, 1985, and 1986.

ASARCO and NantKwest require express authorization

In Baker Botts v. ASARCO, decided June 15, 2015, Justice Thomas wrote for the Court that Bankruptcy Code section 330(a)(1) does not authorize fees for work defending a fee application. A statute's failure to prohibit an award, the Court said, "neither specifically nor explicitly authorizes courts to shift [fees]."

NantKwest applied the same presumption to 35 U.S.C. section 145. NantKwest's patent application had been denied, and it filed a civil action against the PTO Director in the Eastern District of Virginia under a provision requiring an applicant to pay "[a]ll the expenses of the proceedings." After prevailing, the PTO sought the pro rata salaries of attorneys and a paralegal who worked on the case. The opinion noted that the PTO had not sought personnel salaries that way during section 145's 170-year history.

A unanimous Court held that "expenses" did not include those salaries. The American Rule applies even when a statute does not condition payment on prevailing-party status, asSebelius v. Cloer, 569 U.S. 369 (2013), also confirmed. Congress must provide a sufficiently "specific and explicit" indication that fees may be shifted. Elsewhere in the Patent Act, Congress did that directly. Section 285 authorizes reasonable attorney fees to the prevailing party in exceptional cases.

Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101 (2017), decided April 18, 2017, supplies the current measure for the bad-faith exception. Justice Kagan wrote for a unanimous Court that an inherent-authority sanction may cover only fees incurred because of the misconduct. The test is but-for causation.

Statutes and contracts supply entitlement, while Rule 54 controls the motion

A fee entitlement ordinarily comes from a statute or contract. Federal Rule of Civil Procedure 54(d)(2) generally requires a motion filed within 14 days after entry of judgment. The motion must identify the judgment and the statute, rule, or other ground for the award. It must state the amount sought or provide a fair estimate and, if ordered, disclose the terms of any fee agreement. Fees must instead be proved at trial when substantive law treats them as an element of damages.

Rule 54(d)(1) treats other costs separately. Those costs should be allowed to the prevailing party unless a federal statute, rule, or court order provides otherwise.

States also regulate contractual fee clauses. California Civil Code section 1717(a), for example, makes a unilateral contractual fee provision reciprocal in an action on the contract. The prevailing party on the contract may recover reasonable fees whether or not that party was named in the clause.

Three things the rule still decides

The rule sets the default, sets the standard a statute has to meet to displace it, and leaves the claim to be made on a schedule fixed by rule.