In nearly all countries around the world, the loser in a civil law suit has to reimburse either all or at least a significant part of the reasonable legal expenses of the prevailing party. This is commonly referred to as the “loser pays” rule and helps to discourage litigation–especially litigation of questionable merit as plaintiffs are less likely to sue if they know they will have to pay both their own legal fees and that of the winner if they do not prevail. The United states also conformed to this rule which we commonly refer to as the “British Rule” — which is itself a misnomer since it is not only the rule in Great Britain but also in nearly all world jurisdictions. By contrast, the “American Rule” requires each party to pay their own legal expenses whether they win or lose in court.
The genesis of the rule can be traced to the American Colonies and was directly related to allowing lawyers to raise their legal fees without fear that higher fees discouraging litigation by individuals who might fear having to pay not only their own (now higher) legal fees, but also those of the other party if they did not prevail in court. Today the debate is largely framed on “access to justice” arguments by scholars and practitioners who support the status quo. The argument is that if the loser must pay the reasonable legal fees fees of the winner (in whole of in part), then persons of limited means may be discouraged from suing out of fear that they could not afford to lose in court.
Reasonable people may differ on whether the “American Rule” benefits society or merely lawyers who unquestionably are the intended and primary beneficiaries of a rule invented by them and for their benefit in pre-revolutionary colonial days. A good friend and colleague at Hofstra University’s Frank G. Zarb School of Business, Eugene T. Maccarrone, and I co-authored a paper on the subject that should be required reading for all informed Americans on an issue that not only helps to maintain our dubious status as the most litigious nation on the face of the earth while inflating the cost of litigation and contributing to the backlog of cased in civil courts that require a delay of up to five years before a civil case ever gets to trial. The article was published in Vol 32 of the North East Journal of Legal Studies (NEJLS) pp. 1-20 (Fall of 2014). This double-blind, peer reviewed journal was previously available by subscription only to law schools and universities but, thanks to the efforts of its Editor in Chief, Dr. Sharlene A. McEvoy of Fairfield University, an electronic copy of the journal is now also available free of charge in electronic PDF format at this link: http://nealsb.info/j2014.html.
I urge you to read the article in its entirety and to forward it to anyone who may be interested as the issue is unlikely to be aired publicly outside of academic circles–and not even there.