Legal Fees In Civil Litigation: Should The Loser Have To Pay?

Should The Loser Have To Pay Francis king can helpA controversial subject in the law concerns the question whether the losing side in civil litigation should have to pay the prevailing party’s attorneys’ or legal fees.

In the United States, the general rule (called the “American Rule”) is that each party pays its own legal fees, no matter who wins the case. In contrast, in the United Kingdom, the prevailing party is entitled to recover attorneys’ fees from the loser (the “English Rule”).

There are, however, exceptions to the American Rule.  
For example, there are a number of statutes, both state and federal, that provide that the winner can be awarded attorneys’ fees against the loser.  In addition, parties can agree, in private contracts, that if there is a dispute, the prevailing party will receive such an award.

Proponents of the English Rule argue that its broad adoption in the United States would discourage frivolous lawsuits, and that it would be fair because the party who prevails and, therefore, was “in the right” in the first place, should not have to bear the burden of his or her own legal expense.

In my view, there are several problems with those arguments.
First, state and federal courts already have the authority, under certain statutes and rules, to impose sanctions against both litigants and their attorneys for pursuing truly frivolous lawsuits, and that includes the authority to order that they pay the other side’s attorneys’ fees.  So, if the idea behind broad adoption of the “English Rule” would be to discourage frivolous lawsuits, we already have a mechanism in place to deal with that.

Second, a lawsuit is not necessarily frivolous – and usually is not – just because a party does not win.  You can have a perfectly good faith basis for bringing a suit, yet not prevail.  If every losing party were required to pay the winner’s attorneys’ fees, it would have a chilling effect on the filing of potentially meritorious claims by persons who might fear that they would have to pay the other side’s attorneys’ fees if they lost.  Effectively, only prospective litigants who are sufficiently affluent to take the risk would feel safe about going to court in an effort to vindicate their rights.

Third, the “English Rule” is difficult to enforce.  For example, most personal injury suits are brought pursuant to contingent fee arrangements, pursuant to which the plaintiff pays no attorneys’ fees to her own lawyer unless she achieves a recovery, whether by judgment or a settlement.  In most cases, the plaintiffs in these cases would not have the financial means to hire attorneys absent such contingent fee arrangements.  How, then, would they pay the defendant’s legal fees if they lost?

Effects of the English Rule
My friends in the U.K. Bar have told me that, in England, while the prevailing party is supposed to get his fees from the loser, the fees must be “reasonable,” which requires a court determination. This can lead to years of “litigation after the litigation,” in which the parties battle over whether the fees sought by the winner and charged by his attorneys are, in fact, reasonable.  As a practical matter, the prospect of such ongoing litigation over the fee issue, combined with problems of enforcement and collection, often results in the issue not being pursued.

Effects of the American Rule
Finally, it should be noted that the vast majority of lawsuits in the United States are ultimately resolved pursuant to a negotiated settlement, which means that the issue of attorneys’ fee recovery usually never comes up.  Moreover, one of the major factors that encourages settlements is the desire of both sides to minimize or end the accrual of legal bills.  In a “winner prevails” system, more parties might be encouraged to eschew settlement in favor of rolling the dice at trial.  This could lead to more litigation and more legal fees – the very things that proponents of the “English Rule” argue it would avoid.