Is it time for the U.S. to adopt the world-standard “loser pays” rule for civil litigation?

The United States has the dubious distinction of being the most litigious nation on earth. We have more lawyers per capita than most every other nation as well. If memory serves, only Spain has more lawyers as a percentage of its population than the U.S. Perhaps one reason is that unlike in the U.S. where the study of law requires three years above the baccalaureate degree for would-be lawyers to earn their Juris Doctor degree, Spain dispenses with the liberal arts/humanities core and requires only a four-year degree where law is the preeminent subject of study. Spain also allows graduates to practice law without the equivalent of a bar exam upon successful graduation–and they can practice not only throughout the country (no regional licensure is required) and can also advise clients throughout the European Union, not just those in Spain.

The reasons for our litigiousness are not cultural as some would have us believe; rather, it is a direct result of our adversarial common law system with its complexity and unpredictability in contrast to the civil law system utilized throughout most of the world. One aspect of our legal system that further exacerbates litigiousness is our departure in colonial times from the world-standard loser-pays system whereby the prevailing party’s legal fees are paid in whole or in part by the loser. In the U.S. each party to litigation has to bear the cost of paying for their own lawyer, win or lose. Defenders of the “American System” base their arguments largely on the basis of access to justice; that is to say, they argue that adopting the “loser pays” world standard (that we refer to as the British system mostly to obfuscate the fact that it is the world standard, not just a competing system used by one county) would prevent persons with limited resources from accessing the courts to seek redress of wrongs for fear of having to pay the other party’s reasonable lawyer’s fees as well as their own if they lose. The obvious counterargument is that the ends of justice are not served by people pursuing weak claims, and that it is unjust to have parties sued by plaintiffs with weak, dubious claims to have to bear the cost of lawyer’s bills they would not have incurred but for a system that encourages litigation by insulating plaintiffs and defendants from suing or defending claims they have no reasonable hope of winning.

An interesting and telling historical fact that is often lost in the debate is that the American system whereby each litigant pays for heir own lawyer regardless of whether they win or lose in court is that it was adopted purely as a means of increasing lawyers’ fees and encouraging litigation when colonial lawyers argued for the removal of statutorily mandated fees. They wanted to be able to charge what the market would bear but feared losing revenue if the then-prevailing loser pays system was kept in place as both plaintiffs and defendants might balk at litigating what would become significantly more expensive claims due to fees that would no longer be set by statute but by each lawyer as he/she saw fit. The solution was simple: invent the American system whereby each person would be responsible “only” for their own legal fees and not the prevailing party’s legal fees in the event they ended up on the losing end of a lawsuit. That was a simple, elegant solution that had nothing to do with access to justice but rather was implemented to serve the interests of lawyers; it was a rule created for, of and by lawyers to serve their self-interest. And we are now saddled by it as a society, in my view at least.

In 2014, a friend and colleague and I co-authored an article that is now available online. You can read more about the issue and our proposed solution by clicking on the name of the article here: Leading the World in the Wrong Direction: Is It Time for the United States to Adopt the World Standard “Loser Pays” Rule in Civil Litigation?, Victor D. López and Eugene T. Maccarrone, North east Journal of Legal Studies, Vol. 32, (Fall 2014).

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