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.