Remedies Clause

Attorney Fees and Costs

Determines which party pays legal fees if an NDA dispute ends up in court or arbitration, including fee-shifting provisions.

Medium Complexity

What This Clause Does

An attorney fees clause (also called a "fee-shifting" or "loser pays" provision) determines who bears the cost of legal representation if a dispute arises under the NDA. In the United States, the default rule is that each party pays their own legal fees regardless of who wins (the "American Rule"). An attorney fees clause changes this default.

Why This Clause Matters

Deterrent Effect: Fee-shifting provisions discourage frivolous claims and encourage settlement, since the losing party risks paying both sides' legal bills.
Access to Justice: If you're confident in your position, a prevailing party clause makes it economically viable to pursue smaller claims.
Risk Assessment: Before litigating, you must consider not just your own legal costs, but potentially the other side's as well.
Settlement Leverage: The risk of paying the other side's fees often pushes parties toward settlement rather than trial.
Asymmetric Impact: These clauses affect parties differently based on their litigation budget and risk tolerance.

Legal Context

Most U.S. jurisdictions enforce contractual attorney fee provisions, though courts may limit "unreasonable" fees. In some states (like California), attorney fee provisions are automatically made reciprocal by statute, even if drafted one-sidedly. Some jurisdictions also allow fee recovery for breach of contract claims even without a contractual provision.

Attorney's Fees In any action or proceeding to enforce the terms of this Agreement, the prevailing party shall be entitled to recover its reasonable attorney's fees and costs from the non-prevailing party.

Basic Version: Simple prevailing party language. Mutual and straightforward, but "prevailing party" can be ambiguous in mixed-outcome cases.

Attorney's Fees and Costs In any legal action, arbitration, or other proceeding brought to enforce or interpret any provision of this Agreement, or arising out of or relating to this Agreement or any alleged breach thereof, the prevailing party shall be entitled to recover from the non-prevailing party its reasonable attorney's fees, expert witness fees, and other costs and expenses incurred in connection with such proceeding, in addition to any other relief to which it may be entitled. For purposes of this section, the "prevailing party" means the party that obtains substantially the relief sought in the proceeding, as determined by the court or arbitrator. If neither party prevails on all claims, the court or arbitrator shall apportion fees based on the relative success of each party. This right to attorney's fees shall apply to any appeals and to any post-judgment collection proceedings. The prevailing party determination and fee award shall be made by the court or arbitrator as part of the final judgment or award.

Standard Version: Comprehensive coverage including appeals, expert fees, and clear definition of "prevailing party." Appropriate for most business relationships.

Attorney's Fees, Costs, and Expenses If the Disclosing Party brings any legal action, arbitration, or other proceeding to enforce this Agreement or remedy any breach or threatened breach hereof, and the Disclosing Party prevails on any claim therein, the Receiving Party shall pay all of the Disclosing Party's attorney's fees, expert fees, consultant fees, costs of investigation, and all other costs and expenses of every kind incurred in connection with such proceeding (collectively, "Enforcement Costs"). The Receiving Party's obligation to pay Enforcement Costs shall apply regardless of whether the Disclosing Party prevails on all claims, and shall include costs incurred in: (a) Any pre-litigation investigation and demand process; (b) All discovery, motion practice, trial, and appeals; (c) Any post-judgment collection or enforcement proceedings; (d) Any proceedings to obtain preliminary injunctive relief; and (e) Any criminal referral or regulatory complaint process. The Receiving Party waives any right to seek attorney's fees from the Disclosing Party, regardless of the outcome of any proceeding. This provision shall survive any termination or expiration of this Agreement and shall remain enforceable until all disputes are fully resolved and all fees are paid.

Warning - One-Sided: This version heavily favors the Disclosing Party. The one-way fee-shifting may be unenforceable in states with reciprocity statutes (like California). Receiving Party should negotiate for mutual provisions.

1
Insist on Mutuality: Push back on one-sided fee provisions. Both parties should face the same consequences for losing litigation. Many courts will make one-sided provisions mutual anyway.
2
Define "Prevailing Party": Clarify what constitutes "prevailing" - is it winning the case overall, winning on specific claims, or obtaining any relief? Ambiguity here creates disputes later.
3
Cap the Fees: Consider adding a cap on recoverable fees (e.g., "not to exceed $50,000") to limit exposure, especially if you're the smaller party.
4
Include Pre-Litigation Costs: If you want to recover demand letter and investigation costs, explicitly include them. Courts may not award these without clear language.
5
Consider Your Position: If you're less likely to breach (you're the Disclosing Party), you may want aggressive fee-shifting to deter violations. If you're the Receiving Party, mutual or no fee-shifting may be preferable.
6
Delete if Risk-Averse: If you have limited resources, you may prefer the American Rule (each party pays own fees). Fee-shifting increases litigation risk for both parties.

One-Way Fee Shifting

Provisions that only allow one party to recover fees create unfair incentives. The protected party can litigate freely while the other bears all risk. Push for mutual provisions.

Broad Scope Beyond Fees

Watch for language including "investigation costs," "consultant fees," or "all expenses of every kind." These can dramatically increase your exposure beyond just attorney fees.

Fees for "Threatened" Breach

Provisions allowing fee recovery for investigating "threatened" breaches (not just actual ones) can be abused. The other party might claim you "threatened" to breach just by negotiating.

No Reasonableness Limitation

Fee provisions should specify "reasonable" attorney's fees. Without this limit, the other party could hire expensive counsel and shift the entire cost to you.

Waiver of Fee Recovery

Language requiring you to "waive" any right to seek fees from the other party eliminates your ability to recover costs even when defending against frivolous claims.

Attorney Fees and Costs

What This Clause Does

Why This Clause Matters

Legal Context

One-Way Fee Shifting

Broad Scope Beyond Fees

Fees for "Threatened" Breach

No Reasonableness Limitation

Waiver of Fee Recovery

Related Clauses

Injunctive Relief

Indemnification

Dispute Resolution

Governing Law

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