New case from the Seventh Circuit Court of Appeals which outlines the availability of attorney’s fees and costs to a prevailing party in a maritime contract dispute.  The opinion is in the case of Fednav Int’l Ltd. v. Cont’l Ins. Co., 2010 U.S. App. LEXIS 22667.  The opinion can be found here.

Plaintiff brings claim in federal court asserting a cargo claim under the Carriage of Goods at Sea Act.  Plaintiff brought the suit in the wrong venue based on the forum selection clause and by the time the court ordered Plaintiff’s suit dismissed for want of venue, the statute of limitation had run.

So, the Defendant prevailed and brought a separate suit against the Plaintiff for recovery of its litigation costs.  Because the suit was brought under the federal court’s diversity jurisdiction (and not admiralty jurisdiction), the law of the forum state was the default substantive law governing the dispute.  As such, the issue was whether Illinois law allowed for attorney’s fees to prevailing parties in contract disputes.  In this case, neither the contract, nor COGSA, nor any other statute provided for such fees and refused to award them.  As such, the “American Rule” applied and the Defendant could not recover.

The court went on to state that even if federal substantive law applied, the American Rule (each side pays their own fees regardless of outcome) still applies.

Warning:  Hawaii law doesn’t follow the American Rule for contract disputes.