Equitable Indemnity

“Washington State courts follow the ‘American Rule’—even as to a prevailing party, ‘attorney fees are not available as costs or damages absent a contract, statute, or recognized ground in equity.’”  LK Operating, LLC v. Collection Group, LLC, 181 Wn.2d 117, 123, 330 P.3d 190 (2014) (quoting City of Seattle v. McCready, 131 Wn.2d 266, 275, 931 P.2d 156 (1997)). 

One such equitable ground is the so-called “ABC Rule,” which applies when there is “(1) a wrongful act or omission by A [the defendant] toward B [the plaintiff]; (2) such act or omission exposes or involves B in litigation with C [a third-party]; and (3) C was not connected with the initial transaction or event, viz., the wrongful act or omission of A toward B.”  Id. (quoting Manning v. Loidhamer, 13 Wn. App. 766, 769, 538 P.2d 136 (Div. 1 1975)).  This is also known as the doctrine of equitable indemnification.  Porter v. Kirkendoll, 194 Wn.2d 194, 209, 449 P.3d 627 (2019).  B’s attempt to recover attorney fees often fails because C was connected to the transaction in which A wronged B.  E.g., Armstrong Constr. Co. v. Thomson, 64 Wn.2d 191, 195-96, 390 P.2d 976 (1964); Manning, 13 Wn. App. at 773-74.

There are exceptions. 

If, “in addition to the wrongful act or omission of A, there are other reasons why B became involved in litigation with C,” then A may not recover attorney fees.  Tradewell Group, Inc. v. Mavis, 71 Wn. App. 120, 128, 857 P.2d 1053 (Div. 1 1993); Western Community Bank v. Helmer, 48 Wn. App. 694, 700-01, 740 P.2d 359 (Div. 3 1987); Stevens v. Sec’y Pac. Mortg. Corp., 53 Wn. App. 507, 524, 768 P.2d 1007 (Div. 1 1989).

If for some reason B is drawn into litigation with C and is held liable for C’s attorney fees, B cannot recover those attorney fees from A.  Thomas v. Gaertner, 56 Wn. App. 635, 638, 784 P.2d 575 (Div. 1 1990).  B can only recover his own attorney fees incurred in litigation with C.  Id.