Nearly all states follow the “American Rule” that unless the parties agree, or a statute provides for fees, each side is to bear its own fees in litigation without regard to victory. Some States, and a large number of nations follow the “English Rule” of the losing party paying the fees of the winner. As you consider your vote, here are some “pros” and “cons” of changing the current “American Rule.”
Case for keeping the Rule:
  1. The “little guy” with few finances faces financial ruin if he loses. Not so with the wealthy or corporations.
  2. The incentive to select meritorious cases is already in place because the contingency fee system places much of the burden of losing (and going unpaid) on the contingency fee lawyer, who therefore selects meritorious cases as a matter of self-preservation.
  3. Socially beneficial verdicts result from the gamble that a long shot case may pay-off big, and the verdict send a message to other offenders to change their ways.
  4. The fear of losing will be greater for persons with fewer assets (i.e., usually individuals taking on wealthy corporations), resulting in settlements that are driven not by justice or principle, but higher financial costs.    
Case for dumping the Rule:
  1. A party paying hourly fees to an attorney may have to pay much more in fees than the amount to eventually settle the case or pay the verdict.
  2. The prospect of paying not only your attorney, but also the other attorney has a sobering affect for settlement, and sharpens the cost-benefit analysis, thus producing more settlements earlier in the process.
  3. The original public policy behind the ‘American Rule’ of encouraging easy access to the courts no longer applies in an age of diminishing court budgets and congested calendars.
  4. People who are angry and want vengeance through litigation may have a moment of religion when they calculate the increased costs. Thus, smaller cases initially driven by negative non-economic factors may now drop out of the system.
Please take a moment and let me know how you come down on this issue.   I’ll report the responses in our next edition.    

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