Posts Tagged ‘loser pays’

Making Clean Water Act legal fees two-way

The Clean Water Act, like many federal statutes, currently contains a nominally neutral attorneys’-fee award provision which is commonly read to call for an award of attorneys’ fees to plaintiffs who prevail, but not to defendants who prevail. H.R. 1179, introduced by Rep. Tom Rice (R-S.C.) with 59 co-sponsors, would move to full two-way loser-pays by prescribing that fees ordinarily be paid. One possible impact would be to help clear infrastructure legal logjams [Charmaine Little, Legal Newsline, thanks for quote]

Advancing toward a loser-pays rule in Idaho

The so-called English Rule on legal fees, better termed the rest-of-the-world rule, requires the losing party in a lawsuit to compensate the prevailing party for some of the costs it has laid out having to prove that it was in the legal right. Over centuries around the globe the rule has shown itself consistent with the interests of justice (since it helps to make whole parties whose actions and legal claims were vindicated) and has generally improved incentives in litigation by discouraging speculative claims and defenses, narrowing issues, and promoting settlement.

The organized lawyers of one nation, however, have remained stubbornly resistant to loser-pays: those in the United States. There are, to be sure, some notable exceptions: Alaska has practiced a form of the rule since its days as a territory, and “offer of settlement” variants, invoked after litigants turn down an offer and then do less well at trial, have made some headway lately. Since legislators in several states, especially out West, have shown an interest in promoting the loser-pays principle, you’d think there would be faster progress. Yet such legislative declarations are often foiled when court systems interpret guidance language narrowly or unsympathetically so as to restrict fee shifts to a relatively few outrageous or abusive cases.

That was the situation in Idaho until this fall. Since 1979 the Idaho Supreme Court had followed a rule directing courts to deny fee awards except in cases that were “brought, pursued or defended frivolously, unreasonably or without foundation.” Eight years later, in a 1987 enactment, the state’s legislature declared its intent that “winners in civil cases have ‘the right to be made whole for attorney’s fees and costs when justice so requires,” on the face of it a broader standard. A lot of good that did: for nearly 30 years, the high court in Boise refused to take the hint and stuck with its old standard.

Until now. On September 28, in the case of Hoffer v. Shappard, the Idaho Supreme Court announced that it would at last yield to “the clear intention of the legislature” and adopt, for cases pending as of next March 1, a more generous fee standard. It will recognize that “prevailing parties in civil litigation have the right to be made whole for attorney fees they have incurred ‘when justice so requires’?” and will accord “broad authority to judges overseeing civil actions to award reasonable attorney fees.”

Critics, as well as dissenters in the 3-2 ruling, are predicting the worst. Their concerns are summed up in Betsy Russell’s report in the Spokane Spokesman-Review (which also generously quotes me). As I note, there are genuine risks ahead: experience suggests that courts in a fee-shift system must be on guard to check lawyers’ temptation to gold-plate fee requests, and the high court or legislature should step in to cabin discretion if lower court judges head off in such different directions that fee outcomes start to vary arbitrarily from one courtroom to the next. Loser-pays systems typically develop mechanisms to handle cases of split or partial victories, and Idaho should be prepared to do so as well.

Those important points aside, I’m rooting for the Court’s new approach to succeed, and hoping that Idaho legislators, trial judges, and lawyers will cooperate in coming months to help make that happen.

[cross-posted from Cato at Liberty]

English Court of Appeal: litigation funders on hook for fee shift

Casting aside traditional prohibitions on champerty and maintenance, the United Kingdom has of late thrown open its doors to “litigation finance” enterprises that fund legal actions as an investment in exchange for a share of the proceeds. But now a very important constraint may be developing as a corollary: backers of legal action may find themselves on the hook for the fee shifts that are payable to successful opponents under the country’s loser-pays (“costs follow the event”) rules. “Litigation funders will be liable for indemnity costs where these are awarded against their funded client, even if the funder itself has been guilty of ‘no discreditable conduct’, the Court of Appeal ruled today in Excalibur Ventures v Texas Keystone and others [2016] EWCA Civ 1144.” [Law Gazette]

Podcast: “Changing the rules of discovery”

From the Federalist Society podcast series, Litigation Practice Group, in August:

A “requester pays” amendment to the Federal Rules of Civil Procedure (FRCP) would require that those seeking discovery pay for its costs, moving federal civil litigation away from the current “American rule” that requires all parties to bear their own litigation expenses, including the costs of responding to discovery requests. Supporters of “requester pays” argue that discovery requests can be so broad and costs can be so high that they become a disincentive to defend. Opponents claim that the amendment would make legal proceedings even more expensive for individual litigants, who would be unable to pay for the discovery necessary to make a case against larger and more powerful defendants. Here to discuss this idea are Alex Dahl of Brownstein Hyatt Farber Schreck LLP and Professor Benjamin Spencer of UVA School of Law.

Why most American businesses pay their vendors, even without loser-pays

As has often been noted, the so-called American Rule on fees in litigation (prevailing party has no right to recover fees from loser) creates an incentive for businesses to refuse to pay the full sums they owe suppliers, since it would appear rational for a vendor to accept, say, 70 cents on the dollar rather than embark on the substantial cost of litigating over nonpayment. And yet deliberate vendor-stiffing (“selling out your good will”) remains uncommon in our system, rather than being the rule. Roger Parloff at Fortune, drawing on the work of the late contracts scholar Arthur Leff, explains why.

Fear of Thiel and the case for litigation reform

“Angry about Peter Thiel’s pursuit of Gawker? Tort reform is the best solution.” Sonny Bunch of the Free Beacon is kind enough to quote me at length (and quote my debut book, The Litigation Explosion, at length too) in this Washington Post opinion piece.

…members of the media are finally starting to realize something that conservatives have been arguing for quite some time with regard to our litigious culture, namely that the process itself is the punishment….

One of the causes that Olson argued most strenuously for in his book [The Litigation Explosion] was a more aggressive regime of fee shifting — that is, crafting and enforcing “loser-pays” laws common in other countries. Given that he literally wrote the book on the topic, I emailed him and asked how news outlets could work to avoid ruin at the hands of the vengeful wealthy….

If you wonder how loser-pays might have helped Gawker even though Hulk Hogan’s case was a winner, you need to read the link. More: Andrew Kloster and Jessica Higa, Daily Signal.

Sweden: image vs. reality

Please update your mental image of Scandinavian policy: “Being more like modern Sweden actually means deregulation, free trade, a national school voucher system, partially privatized pensions, no property tax, no inheritance tax, and much lower corporate taxes. Sorry to burst your bubble, Bernie.” [Johan Norberg, Reason; Daniel Mitchell, Cato]

While we’re at it, Sweden has fewer than one-sixth as many lawyers per capita as the U.S., in part because its rules of civil procedure are drawn so to discourage needless legal combat.

Post-trial maneuvering in a discrimination verdict

In March a San Francisco jury returned a defense verdict in Ellen Pao’s widely publicized sex discrimination suit against Kleiner Perkins. As so often when a lawsuit story sounds over, however, that’s been just the prelude to further wrangling over a possible settlement: Kleiner says Pao has demanded $2.7 million in exchange for not pursuing an appeal, while Kleiner, citing a spurned pre-trial offer that it says triggers the operation of California’s offer-of-settlement law, has asked a court to order Pao to pay nearly $1 million in expert witness fees and other costs. Davey Alba at Wired reports and quotes me on several aspects.

Last week CBS radio quoted me on another high-profile discrimination suit, EEOC v. Abercrombie & Fitch Stores LLC, the headscarf accommodation case: