Loser Pays
Marie Gryphon has a paper out from the Manhattan Institute advocating the adoption of a “loser pays” model for civil litigation:
The United States struggles with a uniquely costly civil justice system. The direct costs of tort litigation, in particular, reached $247 billion in 2006, or $825 per person in the United States. Moreover, tort costs in the U.S. as a percentage of gross domestic product are far higher than those in the rest of the developed world—double the cost in Germany and more than three times the cost in France or the United Kingdom. The amount that is spent on tort litigation every year is greater than what Americans spend every year on new automobiles. [...]
This study explores the likely effects of adopting a “loser pays” rule for attorneys’ fees in the United States. Loser pays, sometimes called the “English rule” but actually, in essence, the rule in place in the rest of the world, refers to the policy of reimbursement by the parties who lose in litigation of the winners’ legal expenses, including attorneys’ fees. This study argues that loser pays could be an important part of a larger effort to reduce litigation costs, better compensate prevailing litigants, and better align tort law with its goal of deterring socially harmful conduct.
The whole thing seems plausible to me. And certainly the litigation-heavy nature of American society and the American economy seems problematic especially because it’s difficult to make the case that this boatload of litigation is really doing a great job of delivering just outcomes. But of course other countries don’t merely have things like the “loser pays” rule, they also have less structural dependence on litigation to remediate harms. They rely more on things like prophylactic regulation and collective bargaining agreements to handle things that in the United States are handled by lawsuits or fear of lawsuits.
Business types would tell you that things like regulations and unions put an intolerable burden on the economy. But it turns out that run-amok litigation also puts an intolerable burden on the economy and does so in a more arbitrary, less fair manner. Making the switch would be a good idea. But what the business world seems to want is neither preemption regulation nor post hoc litigation . . . instead they just want to be able to get away with malfeasance.
97 Responses to “Loser Pays”
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December 3rd, 2008 at 5:23 pm
Stick to politics, Yglesias.
December 3rd, 2008 at 5:25 pm
“But what the business world seems to want is neither preemption regulation nor post hoc litigation . . . instead they just want to be able to get away with malfeasance.”
Doctors too.
December 3rd, 2008 at 5:27 pm
More or less right. It’s important to see that a switch to “loser pays” without many other significant changes would mostly just mean “normal people cannot bring a suit against a big company in many, many cases.” So, by itself at least it’s a really bad idea.
December 3rd, 2008 at 5:28 pm
So if I’m a plaintiff with a contingency fee agreement with my attorneys of, say, 30% of the damages we win, does the corporate loser pay damages and then 30% on top of that to cover the attorney fees?
December 3rd, 2008 at 5:30 pm
Wow, you’re taken in pretty easily, aren’t you? Loser pays is a HIDEOUS idea that works almost completely to the advantage of business. You’re telling me that someone’s child is killed because of some defective product, they sue and because the company can afford unlimited legal fees the plaintiff loses, and you want the plaintiff to turn around and pay the company’s legal fees? Are you fucking out of your mind? You would basically make it an impossible risk for normal to file lawsuits against wealthy wrongdoers.
Idiotic.
December 3rd, 2008 at 5:33 pm
GAH!
Why not just give every company legal immunity except against other company?
December 3rd, 2008 at 5:33 pm
During law school I had the incredible opportunity to spend some time in Europe comparing the different legal philosophies and systems. Based on that alone, I would say that a blanket loser pays regime is a terrible idea for our system.
The differences between our adversarial system with liberal pleading and discovery rules and the civil system which gives the judge a much more independent investigatory role but has significantly higher hurdles for plaintiffs is more relevant than you know.
December 3rd, 2008 at 5:36 pm
7: Well I think the judges roll in European cases is almost exactly why loser pays can work there and explains why it would be a terrible idea in the United States.
December 3rd, 2008 at 5:45 pm
This idea is as old as mold when I was in law school 20+ years ago. Until we see evidence that there are systematically too many or too few lawsuits (judged not by the total cost of litigation but relative to the number of actionable wrongs), how are we to know whether litigation is to be supressed. The evidence i’ve seen suggest that most medical malpractce goes unchallenged. I don’t know about product liability etc. We could adopt more systems of no fault insurance (like worker’s comp). Unless we do so, this just looks like it would just encourage bad behavior because of wealth effect. (Surely with the economic meltdown, no one believes in the efficient market of tort claims
December 3rd, 2008 at 5:45 pm
It would be interesting to see how much of that $247 billion is companies suing other companies, rather than the much maligned personal injury claims. Take away company’s right to sue for fraud or trespass and see how fast that gets shot down.
I also think that one way to stop these lawsuits is to make corporate management strictly liable for the actions of their businesses. Instead of being sued for say, dumping a boatload of oil all over Alaska, the CEO of Exxon could have spent five years in a cell with a 300 pound ax murderer.
December 3rd, 2008 at 5:53 pm
This also seems to me like a terrible idea. No one without deep pockets would take such a risk.
December 3rd, 2008 at 5:54 pm
Why are you assuming that every penny of tort litigation is somehow unfair? If there was $247 billion worth of tort awards in 2006, that’s because juries awarded that much (and probably much more.)
There are laws on the books that need to be enforced and the civil law system is one way of doing it. The Chamber of Commerce and others have been doing a remarkably successful job of slamming the courthouse door in the faces of real people who have been severely wronged.
Frankly, I’m kind of shocked that you jumped on the tort-reform bandwagon so easily. It’s kind of worrisome.
December 3rd, 2008 at 5:54 pm
Doesn’t Rule 13 of the Federal Rules of Civil Procedure already cover this? If the plaintiff’s case is frivolous, the judge can impose the costs on them. The problem is judges almost never use Rule 13.
The solution, ISTM, isn’t to change our entire legal system. It’s for judges to use the tools they already have.
December 3rd, 2008 at 5:55 pm
Instead of being sued for say, dumping a boatload of oil all over Alaska, the CEO of Exxon could have spent five years in a cell with a 300 pound ax murderer.
What justawriter said. Or make them don orange vests and clean up along the NJ Turnpike – Exit 15W need some cleaning (accident debris, the occasional mattress, scenic toxic swamp location).
December 3rd, 2008 at 5:58 pm
Oops. It’s Rule 11. I should look these things up before posting.
December 3rd, 2008 at 5:59 pm
You are usually right Matt but I think you are wrong about this. Leaving aside the debate about the merits of a loser pays system, the idea that business does not want regulatory preemption is badly flawed. In fact, most businesses would probably prefer regulatory preemption to be far more prevalent than it currently is in the US and in fact that is something that the Bush administration has pushed. If you look at an area like healthcare regulation, the drug manufacturers would love it if there was regulatory preemption by FDA standards. The FDA is so overwhelmed (in terms of both manpower and $) that the approval process for drugs has become badly flawed. See this NYT article:http://www.nytimes.com/2008/10/27/health/policy/27device.html. If approval by the FDA gives a drug company immunity, it would be disastrous for the consumer because the FDA is not only clearly overwhelmed but also subject to significant “revolving door” effects. Regulatory preemption would be fantastic for big business and terrible for the consumer.
December 3rd, 2008 at 5:59 pm
Rule 11 is for sanctions. Much like the union stuff, Matt loves bashing big business so much he ends up sounding like a complete moron. It’s pretty clear he has no idea what he’s talking about here.
December 3rd, 2008 at 6:00 pm
I think loser-pays is a terrible idea for all of the reasons stated above. But I’d like to add that collective bargaining relationships require a ton of litigation/arbitration. If they didn’t I’d be out of work.
December 3rd, 2008 at 6:05 pm
“But it turns out that run-amok litigation also puts an intolerable burden on the economy and does so in a more arbitrary, less fair manner. Making the switch would be a good idea. ”
Matt, please provide me stats on this alleged litigation crisis that your buddies at the Chamber of Commerce have told you about. The last ten years of so-called tort reform has made it harder for legitimately injured persons to obtain justice. Frivolous lawsuits get dealt with by summary judgment at both state and federal levels. There are also motions for sanctions and other procedural devices to punish the “Whiplash Willies” of the world. In many states and in federal court, you can actually get socked with a bill of costs for the litigation if you lose. Attorney’s fees, however, are not included.
The threat of a loser pays rule will have an adverse chilling effect on victims of modest means from challenging a large corporation or the wealthy. If they bring their claim and lose, then they will be victimized again. This dumb rule will effectively become legal immunity from lawsuits for big business and the rich. Yeah, great idea Matt until you get injured. I can’t wait for your plan for health care. What will you propose, an injury tax?
December 3rd, 2008 at 6:12 pm
The problem is judges almost never use Rule 11.
Leaving aside that many cases are in state courts with elected judges who are even *more* hesitant to tell their lawyer constituents that an action is “frivolous.”
From my p.o.v. as a liberal who works at a (largely) insurance-defense law firm, I agree that “loser pays” won’t work without some restructuring of our system to put the burden of discovery (& associated legal fees) on the courts. And that is not going to happen.
December 3rd, 2008 at 6:14 pm
Imagine what that rule would have done to tobacco litigation.
December 3rd, 2008 at 6:15 pm
A couple of things. First, note that, at least in some instances, the tort system in the US fills in for the absence of a social safety net (hence, damages calculated with an eye toward ongoing medical costs, which might be irrelevant or unnecessary if everyone were provided with medical care); absent the net, we should be wary of raising the danger of failure for vulnerable plaintiffs. Second, the virtue of the plaintiff’s contingency fee is that it ensures even the poorest have access to the tort system, while allowing plaintiffs lawyers to be the sorting mechanism for unwinnable or small cases (which, in the tort system, has to serve as proxy for “frivolous” cases); other countries without the contingency fee lack this sorting effect and so need to raise the cost of failure for potential plaintiffs.
That said, perhaps some sort of stronger Rule 13 is a good idea.
December 3rd, 2008 at 6:17 pm
“But what the business world seems to want is neither preemption regulation nor post hoc litigation . . . instead they just want to be able to get away with malfeasance.”
Matt ignores the fact that many plaintiffs are non-profits, governments, school districts, individuals, small business, etc. And when large corporations are the plaintiffs, they can often pass the costs onto consumers.
A system that imposes costs on plaintiffs even when they’re exonerated by juries is fundamentally unjust no matter who the plaintiffs are.
December 3rd, 2008 at 6:20 pm
How very Republican of you, Yglesias. That ranks right up there with medical malpractice is the reason medicene costs so much.
Does our system need some reform? Sure, it does, but it’s not nearly as broke as corporations would have us believe. Loser pay is a very bad idea.
December 3rd, 2008 at 6:23 pm
One thing that everyone is missing: nearly 99% of all lawsuits are settled before they even go to trial. Thus, the net effect we’re talking about isn’t as great as that “study” would have you believe.
December 3rd, 2008 at 6:27 pm
Yeesh, this is a terrible idea.
December 3rd, 2008 at 6:29 pm
“Loser Pays” and “Tort Reform” are shorthand for corporate immunity, and its surprising that you’d post this sort of “study” without more meaningful comment.
Not only do corporate defendants have access to vastly greater resources, which would allow them to even more effectively bury plaintiff’s in paper until they are broken on the wheel, corporate defendants, through their common insurers, have much greater weight with the courts than do plaintiffs. Even the biggest plaintiff’s firm will only have so many cases in any particular court. But defendant/insurers always have scores of current cases. So they become familiar to the judges and maintaining a nice, cozy relationship is a good way for a judge to clear his case backlog. And because defendant/insurers also are the largest employers of attorneys, judges frequently have or will work for them before or after (or both) they are on the bench. Or the offspring of judges are or will be employed by defendant/insurers.
The “study” seems to get a little hazy when it gets around to defining what is a “low merit” lawsuit. My guess is that this whole thing is funded by the defense bar whose bias is such that every suit short of a bank-busting-verdict-upheld-through-every-available-appellate-court as “low merit”. Any plaintiff lawyer will tell you the system is already hostile to claimants and there is no sense in taking on and filing “low merit” suits because they are unsustainable and non-remunerative. The defense bar views plaintiffs as fall-down artists, presumptive frauds dressing up boo-boos for a shake-down buck. The only innocent victim is always the poor corporate defendant. Even when they screw up through laziness and settle out a weak case or botch a trial, it somehow redounds to the defendants benefit, because it becomes fodder for tort “reform” such as “loser pays”.
It is plain sloppy, self-indulgent and self-pitying thinking to incline toward any proposal that “discourages litigants”. Sure, who doesn’t hate the blood-sucking lawyers, but when someone is injured by someone else in this country they are supposed to have access to the courts.
December 3rd, 2008 at 6:31 pm
Matt, you’re out of your element on this one. For all the reasons you’re commenters have set out, “loser pays” would be a simply terrible idea. Unless, of course, you really do want to bar the courthouse door to the unmonied. Under “loser pays”, people with valid claims would rationally choose to forego them, rather than risk having to pay hundreds of thousands of dollars to the corporation that injured them.
As for this query at No. 4:
does the corporate loser pay damages and then 30% on top of that to cover the attorney fees?
No. There are numerous situations now (primarily in contract disputes, but also in some tort claims) where attorneys’ fees are recoverable. Contingency plaintiffs recover the “reasonable” value of their attorney’s time, which is some hourly rate consistent with what local attorneys charge, multiplied by the hours reasonably devoted to pursuing the claim.
December 3rd, 2008 at 6:41 pm
One thing that everyone is missing: nearly 99% of all lawsuits are settled before they even go to trial. Thus, the net effect we’re talking about isn’t as great as that “study” would have you believe.
Costs of litigation are already factored into settlement. I’d bet over 25% of the settlements I’ve been involved in were some variation of “settle for the costs of litigation” because I face small hazards, but a lengthy litigation process.
That dynamic changes when it’s now double or nothing on those costs. It’s a lot harder to even bring those cases. Typical slip and fall case, with a battle of the experts, is usually a longshot. So now you’ve got a %25 chance of winning, plus caps, plus a chance of paying fees and costs? No one’s going to take that case.
December 3rd, 2008 at 6:47 pm
I agree with the other comments criticizing Matt on this one. I really recommend that you read Stephanie Mencimer’s Blocking the Courthouse Door.
The book is very good, easy to read, very detailed and imformative look at Republican and Corporations work to limit our ability to sue.
From wikipedia, this is the Manhattan Institute’s mission, “develop and disseminate new ideas that foster greater economic choice and individual responsibility.” Sounds like they have an agenda, pro-corporate and probably highly libertarian. I always thinks it is good to look at who is putting the info out there, it should give you an idea of their core agenda.
December 3rd, 2008 at 6:53 pm
Well the whole purpose of a corporation is to exempt it’s principals and shareholders from accountability. So naturally, whenever a corporation is held accountable in court, it must be lawsuit abuse.
December 3rd, 2008 at 6:56 pm
Joining in on the echo-chamber, a loser pays system would be a grant of blanket immunity to corporations. Besides, I work in a large defense firm and the most expensive lawsuits are those between large corporations. For example, take a look at the Broadcom v. Qualcomm case in California (I was not involved, but heard about it at a CLE). A sanctions hearing found that the offending attorneys (they acquisced in their clients’ destruction or hiding of documents) should be responsible for approximately $8.5 million in attorneys’ fees. And I think that was just the amount related to the discovery abuse issue, and not involving trial.
On the flip side, even the most involved and complicated products, personal injury or medical malpractice cases can be litigated and tried for less than $1 million total for both plaintiff and defendant (including experts). The rest can get done for less than $100 K. There may be some outliers, but not many (also this does not include class actions).
Truth is, most of the high litigations costs are associated with electronic discovery.
December 3rd, 2008 at 7:04 pm
England also funds attorneys for just about everyone in civil cases.
A loser pays system is more practicable in business arrangements, but you can already do that in arbitration clauses.
A much simpler way to handle all of this would be social insurance. But, yeah right.
December 3rd, 2008 at 7:09 pm
One more thing, Judith Miller is an adjunct fellow of the Manhattan Institute and Peggy Noonan and George Will think very highly of its quarterly publication, City Journal.
Granted that same page, with Will and Noonan, has Bill Moyers saying this, “Even when I disagree with City Journal, I dare not ignore it.” I don’t know if that is technically praise, or more a keep a wary eye on what they are saying. But my overall point is, think about the source of report.
December 3rd, 2008 at 7:21 pm
Is it my imagination, or is Matt coming closer to right-wing economics every day? He’s had a lot of libertarian sympathies, but with the end of teacher tenure, he’s proposed two items on that agenda in half a day.
Others have explained the problem here and why the proposal defends the corporate agenda. Can I just mention another point that might make this more dangerous here than in England, with its greater access to attorneys for ordinary people? Britain and western Europe don’t rely as much on civil damages to rein in corporations, because they actually have so much more of a social safety net and regulation in the first place.
This is a country already dominated by the corporate world, and often civil action is all we have left. That may fit uncomfortably into the individualist paradigm, where even Erin Brokovich is the lone heroine in a good old sports fan way. But it’s what we have.
December 3rd, 2008 at 7:23 pm
Re Matthew’s comment “They[Europe] rely more on things like prophylactic regulation ”
———-
I don’t understand how restricting the supply of condoms keeps lawyers from screwing people but I’d like to hear more.
December 3rd, 2008 at 7:24 pm
That’s not the truth. That is a concern isolated to glass-tower law firms and their clients. High litigation costs are related to discovery, period.
And just to add fuel to the fire: they are created by stupid clients, too. I can’t tell you how many clients come in wanting to go scorched earth, wiling to pay the up-front retainer, talking about their day in court, and then, when they get the first bill after the retainer is gone (assuming I set it at the right level) they shrei gevalt and want to settle.
Defense clients have never done anything wrong, and can’t believe you’re recommending against the expense of a summary judgment motion. Plaintiffs are always the victim of the century are like house sellers and usually have outsized expectations of their recovery.
A simple solution would be this: every civil case goes to ADR right off the bat, to mediation. The mediation makes a recommendation. Whoever doesn’t beat that recommendation has to pay costs and experts, just like a Rule 68 offer.
But loser pays the fees? Nah.
December 3rd, 2008 at 7:25 pm
Think tank guys always toy around with ideas, and think that the other side’s ideas are made in good faith and flirt with those ideas. People on the ground know they’re full of shit in the first place.
December 3rd, 2008 at 7:31 pm
A lot of this has already been said above, but it’s important to remember that the American legal system is about the clunkiest thing that could possibly be devised by man. We’ve, among other things, purposely hired substantially fewer judges than are needed to hear and deal with cases, effectively forcing 99% of cases to settle instead of go to trial. We’ve also designed a pleading system with the express goal of preventing cases from going to trial. Yet, each layer of motions to dismiss or motions for summary judgment that we add (which are allegedly means for defendants to get out of frivolous lawsuits) typically adds huge sums to total legal bills. In this environment, there is simply no way that a loser pays system would work. You would have to streamline the entire legal system so that cases could be heard in a matter of months, not years, and so that the vast majority of cases had the expectation of going before a judge. That is, you would probably have to replace the common law with the civil law.
December 3rd, 2008 at 7:32 pm
I actually practice in an area where, as a result of contractual and statutory provisions, there is a de facto loser pays rule. I always represent the little guy [usually middle-class families] in these cases. I can tell you that, without doubt, lots of regular, middle-class folks decline to pursue meritorious claims because the risk of having to pay the legal fees of the deep-pocketed other side is too great. Even if the risk of loss is only 10%, that is often too much for a middle-class family. A 10% risk of being liable for tens of thousands of dollars in legal fees, in addition to losing the case, is too much for many people. To impose this rule on the tort system where the random victims are often totally unable to pay legal fees is too much.
December 3rd, 2008 at 7:40 pm
Michael Bolton: That’s the worst idea I’ve ever heard in my life.
Samir Nagheenanajar: Yes, this is horrible, this idea.
December 3rd, 2008 at 7:43 pm
That’s already happened thanks to Bush’s Supreme Court picks. See Riegel v. Medtronic. Patient died from defective product; court ruled that FDA approval of the product as safe could not be preempted by a state’s finding otherwise.
December 3rd, 2008 at 7:52 pm
I remain amused that flacks subsidized by the “Manhattan Institute” can say the “Institute” part without laughing, sort of how the “Tobacco Institute” did.
December 3rd, 2008 at 7:52 pm
What’s more important, truth and justice or new cars?
December 3rd, 2008 at 7:58 pm
Matt’s worst post of 2008.
December 3rd, 2008 at 8:09 pm
Loser pays does not even work well in places like UK – spawns satellite litigation.
And in the US the number of published cases that focus on who is to get what amount of fees clearly shows the American rule (pay your own fees) is hard to beat.
Matt is not noticing that garden variety litigation is way down, and declining, as more and more judges are brought in who are defense oriented.
Fly speck the stats on so called “tort” litigation and one will find lots of patent and IP litigation, antitrust cases, etc. that is B2B stuff in large part as opposed to consumer vs. business claims of the MacDonalds/coffee variety.
Our jury-based system is pretty terrible, except compared to all the alternative systems.
December 3rd, 2008 at 8:09 pm
And this is why non-lawyers should not opine on topics involving civil procedure without significant background research. Loser pays is a brutally bad idea for the US civil court system, and it takes but perhaps 5 seconds of thought to understand why.
December 3rd, 2008 at 8:25 pm
Corporations would always win as they can make litigation so costly that no lawyer or plaintiff would take a chance at suing. This is the opposite of a good idea.
December 3rd, 2008 at 8:28 pm
When we weren’t looking, a pod person from the WSJ editorial page took Matt away and subbed itself in his place.
At least that’s where I’ve read and heard the most about an epidemic of tort litigation and the evils of the tort bar.
Or maybe MY meant to save this for April 1 and posted it by mistake.
Please!
December 3rd, 2008 at 8:34 pm
December 3rd, 2008 at 8:36 pm
“You better take this piddling nuisance settlement offer, plaintiff. Your lawyer will tell you that nothing is a guarantee in court, and if you lose, we’re coming for your house. You will die in bankruptcy. The choice is yours.”
Every business would kill for loser pays. Kill for it.
December 3rd, 2008 at 8:40 pm
You know what else costs businesses a lot of money? People reporting on problems with products or illegal activities.
They oughtta make a rule that if you do a report or broadcast which loses a company a bunch of money just ’cause like there’s poison in the dog food or something, you gotta pay for all the lost earnings.
That’d help.
December 3rd, 2008 at 8:48 pm
I’d like to see some universal government health insurance first, and see how many torts go away all by themselves.
December 3rd, 2008 at 8:48 pm
Remember that there’s already a disincentive for a plaintiff’s attorney to file a frivolous lawsuit: unless he wins, he won’t be compensated for the time he spent preparing it. This also discourages meritorious lawsuits by poor plaintiffs in states with caps on noneconomic damages, since an award for lost wages wouldn’t be worth an attorney’s time (which I am forced to suspect you’d view as a feature.)
Agreed, worst post this year.
December 3rd, 2008 at 9:07 pm
Worst idea Matt’s had since supporting the Iraq War. Think first, post second.
December 3rd, 2008 at 9:35 pm
LOL. As yet ANOTHER attorney (who sees many problems with our current system), I came on here to tell you how very wrong you are, but I see that’s been adequately covered.
As Vince suggested, there are plenty of statutory and/or contractual provisions already existing in the U.S. that provide for fee-shifting to the winning party. In my own experience, I’ve seen little to no evidence that this reduces the incidence or duration of litigation in the U.S. & it seems really odd to me that anyone, looking empirically at the U.S. legal system, would find evidence that it does.
[ Europe is not comparable in any way, in my view. ] Indeed, you may recall that our Congress actually tried to EXPAND (not shrink) the breadth & use & availability of Title VII (federal employment discrimination act) protections to plaintiffs by, among other things, instituting prevailing-party-fee-shifting provisions. (This was meant to entice/reward plaintiff’s attorneys to take cases — and thus, you know, INCREASE litigation.) And I’ve seen cases where the attorneys’ fees are what actually is preventing settlement/pre-trial resolution — (for example, the $5K benefits claim that could, but won’t settle, because the attorney has $180K in attorneys fees he wants to recover).
The more important point, though, is who is going to make the value judgment as to when litigation is justified, and how much is too much? Too much to whom? I venture to say that we have less employment discrimination in the U.S., higher product safety standards in the U.S., etc., comparatively, in part due to our robust litigation system. That said, yes, there’s a lot of wasteful, frivolous, maddening & borderline extortionate litigation, but if reform is going to come, I think alternative dispute resolution approaches, and not turning our judicial system into a high-stakes, winner-take-all trip to Las Vegas, is what’s going to do it.
December 3rd, 2008 at 9:36 pm
Courts are pretty incredible. We need greater access to them, not less.
December 3rd, 2008 at 9:39 pm
As said above, this idea is indeed old. It has lost its popularity amongst business groups in recent years because where it has been tried it has been very disadvantageous for business.
Why? Because it only works one way. Normal plaintiffs cannot afford to cover the legal fees of a major corporation in a normal action. They are, in the terms of the trade, judgment proof. So, when the corporation wins, it is still stuck with its own fees. On the other hand, major corporations have deep pockets and are easy to find, so they always end up paying the other side’s fees.
Where was this tried that it produced such a result? Alaska, which is otherwise a completely American jurisdiction qua substantive law and procedure and thus made a much better comparative case than the systems of other countries which, as others have noted, are different from others many other ways as well.
Incidentally, loser pays is also the rule for cases sounding in contract in Texas. The idea, for why the winning party should collect, is that a party should not have to pay extra to have a contract enforced. On the other side, it is just to make the other side pay because, on the one hand, there is something ‘wrong’ or worthy of punishment about violating an agreement, and on the other hand, in more classic tort principles, parties should be made to bear or internalize the burden of the costs they impose on the system as to encourage their proper use.
On the Federal Rules, indeed, Rule 11 allows a judge to assess sanctions if a party files a claim that is frivolous, is meant to harass, cause unnecessary delay, needlessly run up costs, or otherwise does not have a reasonable basis in fact. As stated above, courts indeed don’t use their Rule 11 authority much. The reasons for this are, indeed, as said above, that many state judges are political figures and don’t like tossing out the suits of their constituents in an insulting manner.
More importantly, though, first, most studies have found that the number of frivolous suits is actually quite small – we hear about them on the news and then extrapolate that what we hear about must be common, but when you get down to it, a truly frivolous suit is like a pure piece of pork barrel spending with no real justification or constituency – more a creature of myth than reality. In this regard, one should keep in mind the sanctity that most legal systems attach to someone having their day in court, the other procedural devices judges have to get rid of unlikely claims efficiently (summary judgment; management of the discovery process), and what it means for a claim to be frivolous, to just have, from the outset, no plausible basis in law or fact.
Second, the courts had begun to use this power more after things were getting out of hand in the 1980’s, using it not so much for frivolous claims as abusive or harassing claims and procedure. Their effort was successful – they brought the worst of this behavior into line – but they also went too far and began assessing sanctions against parties who either actually had a good reason for making the argument they did, or who were willing to compromise and make a different argument if asked. In response, the Federal Rules were amended to make judges a bit less trigger happy, in particular by creating a ’safe harbor’ provision by which a party is spared sanctions if it voluntarily withdraws its offensive materials when challenged by the opposing party.
December 3rd, 2008 at 9:41 pm
Alas for Marie Gryphon, aside of the general embarrassment of being a right-wing hack employed in a right-wing hack nursery, she forgets an important corollary of “loser pays”, valid at least in continental Europe:
Many cases for which tort litigation is the only redress in the US fall under criminal laws in those “loser pays” countries. Corporate officers are actively prosecuted and spend time behind bars when they let their companies churn dangerous products or condone malpractice.
There are no damage/prevention cost trade-offs when the cost of a lost lawsuit is jail time for the CEO. It works much better.
There is also another aspect: when a consumer suffers from a product, his/her healthcare bills are picked by universal coverage, the income loss by social insurances, etc. There’s less necessity to go through tort litigation to recover from the loss. You know, socialism…
December 3rd, 2008 at 10:04 pm
We have “loser pays” here in Canada. I’m a criminal lawyer, and done murder cases, but I’ve never been more nervous about an outcome than one of the first cases I ever did – a civil case. I couldn’t bear the thought of my client being saddled with the costs of losing. Fortunately she won.
But it provides strange incentives. By the time most cases get to trial in Canada (the overwhelming number of civil cases settle before trial) the parties are fighting over costs. IOW, the potential costs against are higher than the potential damages. This being the case, a lot of people decide to roll the dice and litigate rather than settle.
December 3rd, 2008 at 10:19 pm
There are enough lawyers who post that I see most of the work of debunking this terrible idea is already done.
Instead, let’s count the things Matt posts about of which he has no earthly fuc*ing clue!
Hmm, finance, law, water rights, bank regulation…..
If this guy is a public intellectual — a role once reserved for Voltaire — for christ’s sake — we are in deep deep do-do!
December 3rd, 2008 at 10:35 pm
The difference, of course, is that them with the money (business, government) by and large come out on top in a litigation-heavy society simply because people of modest means are more willing to sacrifice justice than run the risk of having to pay huge legal bills.
I just went through this. I know.
December 3rd, 2008 at 11:07 pm
The real problem is that lawyers paid by the hour provide time, not resolution. Pick up any state Supreme Court Report and right now you’ll see some case opinion with facts like, “The decedent died in 2000 as a result of the accident. In 2005 the case went to trial and the plaintiff was awarded $1,000,000. We now decide…” In the meantime decedents dependents, or the injured person, has suffered eight years or so of the loss of income and the resultant hardships. Yet nobody seems to be offended by this delay and hence true denial of justice.
Joe5348
December 3rd, 2008 at 11:08 pm
McKingford makes a very good point. For a lot of cases not involving huge amounts of money, a loser-pays system would transform them into fights primarily about fees. I’ve seen it many times in my practice. The underlying dispute gets, or is capable of getting, resolved, but the case can’t settle because the losing side is unwilling or unable to pay the fees. Suddenly, the parties are not fighting about what brought them to court but about a court-created secondary dispute. I’m not sure how that is a good thing.
December 3rd, 2008 at 11:08 pm
Yet another way of increasing the power of the wealthy and decreasing the power of the rest of us.
December 3rd, 2008 at 11:25 pm
A more reasonable approach would involve a rebuttable presumption that the loser pays in certain tort cases. In such a system, a Judge would need to enter findings as to why a loser should not pay, with “loser pays” being the default presumption that must be overcome by the losing party. The ball would then be in the losing party’s court to persuade the judge that fee shifting is not appropriate given the relative merits of their claim.
The important point is to avoid any kind of automatic fee shifting rule just for the sake of “reducing America’s legal costs.” In theory, I have no problem tweaking the rules to encourage judges to use fee shifting to address “nuisance suits” that fall somewhat short of being “frivolous,” since Rule 11 is rarely invoked in borderline cases. But the application of such measures must be designed to improve the delivery of justice – not discourage litigation in general simply by making it riskier.
In probate and family courts, judges have considerable latitude when it comes to fee shifting, and in my experience, the authority is often most effective when used on the micro level: by assessing fees for specific motions and discovery delays that happen during the pendency of the case, in real time, rather than assessing fees after judgment has entered.
I have seen many divorce cases where a judge corrects bad behavior in discovery by assessing fees for a motion that had to be brought to correct the problem. This is especially effective in cases where the richer party tries to leverage their financial resources to squeeze the poorer party. Of course, this is largely a function of probate and family court judges having nearly limitless discretion – which is the exact opposite of what an automatic (or near automatic) “loser pays” system would create. Ironically, there is no “winner” or “loser” in a divorce case, yet fee shifting may be more common in divorce than in any other cases.
December 3rd, 2008 at 11:27 pm
Jesus, Matt, once again you credulously buy into right wing thinking and display incredible ignorance about the subject in question. (Just like licensing plumbers.)
First, as others point out, this is a blatant attempt to further stack the deck on behalf of the rich and powerful.
Second, and more importantly, the various class action cases that probably constitute the bulk of the legal tab you cite, are taken on contingency. The firms that handle these matters don’t get paid unless they prevail — they lose their time plus expenses when pursuing these matters. It is in their economic interest not to take on frivolous litigation — it’s a lousy way to make money. I would think you market worshipers would get that.
Third, we need more avenues for legal redress for people not fewer. Right now we live in a society where employers routinely steal from their employees and flout the law by not paying overtime, taxes, etc. through the use of phony subcontracting to illegal aliens. If there was a private right of action to pursue such violations on behalf of the government for lost FICA/FUTA, income tax, etc. it would be a boon to the treasury and would eventually deter these abhorrent practices.
The US legal system is actually a huge plus for business. It is not corrupt, fairly efficient, and highly transparent. Many other countries would love to have such an asset in their economy.
Finally, you might ask yourself — which side am I on, because you seem confused.
December 4th, 2008 at 12:09 am
I think it should be called the Robert’s rule, since it’s based upon the foundation of Robert’s jurisprudence.
The corporation always wins.
December 4th, 2008 at 12:34 am
The lawyerettes have nice legs. Matt’s post isn’t a total fail.
December 4th, 2008 at 12:53 am
I am sad to say that I may have to remove Matt’s blog from my rotation. I have been really shocked lately how he does not seem to do any homework before making blanket statements about important topics. I know he is expressing his opinion, but I guess I came to expect a bit more in the way of intellectual vigor. Very disappointing.
December 4th, 2008 at 6:55 am
Our group, The Americans for Drug and Device Accountability, who are against preemption, have provided a site that has compiled a number of published opinions about the subject. This group is a bi-partisan coalition of health-care professionals, patient advocates, business people, and concerned citizens. The site is at – http://pharmaccountability.org
There you can see what organizations listed below have to say about the adverse effect that preemption will have on our safety and our civil rights. If you are inclined to contact your Congress person there is also a helpful page for doing so.
1. The Journal of American Medical Association
2. The New England Journal of Medicine
3. The FDA itself
4. The New York Times
5. The Boston Globe
6. The United States House of Representatives
Committee on Oversight and Reform
7. Past Commissioner of the FDA – David A.
Kessler, M.D
8. 47 State Attorneys Generals
9. Senior Citizens League
10. AARP
11. National Conference of State Legislatures.
12. California Medical Association
13. Various others
December 4th, 2008 at 9:02 am
MY seems to be evolving into another Mickey Kaus with BS like this. One post where he links with approval to a right-wing lobbying group’s vicious attack on the interests of the middle class is excusable. All of us sometimes say stupid things when we’re out of our depth on a topic.
But as noted above this has been getting pretty consistent.
Thank God Barack Obama will soon be president and we have a Democratic majority. MY may take the Manhattan Institute seriously, but folks like Austin Goolsbee and Eric Holder don’t.
December 4th, 2008 at 9:09 am
I would also suggest that MY, if he wants to actually comment on policy, go get MPP at the Kennedy School. He can still blog. The program is very rigorous, with roughly half of it dealing with technical issues such as economics, statistics, and cost/benefit analysis.
I took a few classes at KSG when I was at Harvard Law, and the quality of the teaching was simply the best I’ve ever had.
As smart as MY clearly is, he lacks the internal BS detector that comes with a formal study of economics and statistics, leading him to endorse some of the most ridiculously regressive ideas.
He seems to most commonly be duped by libertarian propaganda. Probably because DC is so full of them, which in turn is because libertarian is so well funded by tobacco and insurance companies.
A final, and easier suggestion to MY. Go to Google Scholar and check out some of the peer reviewed studies on a topic before commenting.
December 4th, 2008 at 9:19 am
Wow.
December 4th, 2008 at 10:06 am
I agree with most or nearly everything said above to debunk this post. If you ever talk with a halfway decent plaintiff’s lawyer you will find that she or he spends a sigificant percentage of time telling would-be clients that they have no case. Any halfway decent plaintiff’s lawyer takes only a small percentage of the potential cases that come to them.
December 4th, 2008 at 10:16 am
I have been really shocked lately how he does not seem to do any homework before making blanket statements about important topics.
DUDE. It’s called “blogging.” Get a grip on your bad self.
December 4th, 2008 at 10:50 am
Back in the early 90s, my wife’s father took off for Canada while owing a *ton* of money in child support. My mother-in-law had judgments against him up the wazoo, but he took all his money with him to Canada…which meant she had to sue there, too, to enforce the judgments she had already obtained. They have a loser pays-type system, and required a very large deposit in order for my mother-in-law to actually file suit. Of course, she didn’t have any money, because her ex pretty much taken everything. So she couldn’t sue, and never saw a dime.
The end.
Yeah, loser pays is a terrible idea.
December 4th, 2008 at 11:06 am
In the federal system, under Rule 37, “loser pays” is essentially the default when parties litigate over discovery issues. Judges can and do make lawyers write checks for taking stupid positions in these disputes.
December 4th, 2008 at 11:46 am
Look, the insurance companies don’t really want “loser pays”. Why? Most cases are meritorious. I’ve done personal injury law from both sides of the docket for 26 years. Every year I get a dozen calls from people in car wrecks who only have a claim for property damage, typically in the amount of $3,000-9,000 and with clear neglgience on the other side. The insurance companies only offer 50 cents on the dollar on those cases. I tell them there is no way I can take the cases if I’m only going to get 1/3 of $1,500 to $4,500, so they end up taking the 50%. Loser pays and the insurance company is having to pay 90-100 cents on the dollar on those cases. The cost to the insurance companies would be in the billions. The same is true of small personal injury cases. Less than $3,000 in specials (medical and lost earnings) isn’t worth taking because the jury won’t award more than $5,000. With loser pays those cases would be worth handling. Again, the cost to the insurance companies would be in the billions.
December 4th, 2008 at 11:51 am
There are stipulations in California state law (as well as in other states) that allow for the winning parties of some types of lawsuits (including those against corporations) to seek reimbursement from plaintiffs for attorney fees. What it has meant in practice – among other, mostly bad outcomes – is that regular people get liens slapped on potential purchase of property which in turn wreck their credit.
A majority of civil conflicts – including those between consumers and workers and corporations – are resolved out of court. What the type of system being proposed would do is not decrease the number of lawsuits (anymore than the pernicious bankruptcy bill pushed by the incoming vice president [who received close to 200k in donations from credit card firms] has decreased the number of bankruptcies) but give companies more leverage out of court against plaintiffs (as in we’re not going to settle with you out of court [even if your case has merit] and you’re going to have to live with the risk of losing a suit against us which may well make you think twice about suing us in the first place).
December 4th, 2008 at 11:56 am
Danny at 16 – I’m pretty sure MY meant to write preemptive not preemption regulation. And it’s probably the only decent point he makes. Businesses don’t want to be held accountable for the damages caused by risky behavior, and they don’t want anyone in the government to preemptively regulate them from behaving in a risky fashion. They, of course, love regulatory preemption which prevents a federal finding from being contradicted by the courts later considering additional evidence.
The only thing I see missing from this pile on is a defense of the american people as potential litigants. People don’t like to sue. They hate paying lawyers, the system confuses and frustrates them, and the overwhelming majority of people walk away from actionable claims as not worth their time and effort. They absorb damages caused by others all the time.
Give them single payer and they’ll sue even less.
December 4th, 2008 at 12:46 pm
they also have less structural dependence on litigation to remediate harms.
This is the key part. My torts professor used to tell the conservatively inclined that you can either have a robust access to courts to redress wrongs, or you can have regulation on the front end. Conservatives don’t want either, which isn’t workable.
December 4th, 2008 at 1:15 pm
Or, in some cases, any evidence at all. If your ex-colleague golfing buddy is the head of the federal agency “regulating” your product, his seal of approval still makes you immune to state tort law. No, really, all of it.
And the present SC might *approve* that trainwreck (although, IIRC, it is a statutory construction issue, which means it can be fixed by Congress passing a new law that says “no, we meant it THIS way” and since Congress has the authority to have it whichever way they want, the SC would have to shut up at that point; also, implied preemption is *supposed* to be disfavored, but who knows if the Scalito wing will respect that.)
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