The Right to Be Fee

“Well can’t we at least get them to pay my attorneys’ fees?”

This question — asked by so many people who have found themselves embroiled in a lawsuit not of their own making — is usually the saddest one a commercial litigator has to answer because in the US the answer is almost always no. And while the US Supreme Court has just agreed to take up the question of when in certain kinds of cases exceptions to the so-called “American Rule” on attorney fees may be justified that answer is not likely to change for most litigants.

The American legal system bears more resemblances to its ancestral British forbear than it does to any other. But mostUSjurisdictions rejected the rule in British law requiring the losing party in litigation to pay the legal expenses of the winner. Under the American Rule each party bears the burden of his own legal fees — win lose or more commonly settle.

Scholars debate whether the American Rule or the “English Rule” is better policy. Intuitively it would seem that fewer frivolous lawsuits would be filed if the loser had to pay the winner’s legal costs and that the result would be more just. But this is not necessarily the case.

One reason is that lawsuits are not always won by the parties that should win them. Many things can get in the way of a successful litigation outcome: a judge who doesn’t see things the way the one or both parties’ lawyer expected him to; a jury that doesn’t like the look of a certain witness; a witness who suddenly disappears from sight instead of appearing as promised in the witness box; a lawyer whose “dog ate his homework”; or Divine intervention that results in inexplicable but very real disappointment.

In fact the harsh truth is that most though not all lawsuits are won by the side with the bigger and better lawyers — usually the bigger and economically “better” litigant. Under the American Rule plaintiffs (and under the contingency fee system their lawyers) may take their chances tilting at such windmills in the courts without fear of out-of-pocket losses. And of course the process can unfortunately be abused. But advocates of the American Rule say that under the English Rule very few Davids — such as personal injury victims — can even dream of confronting Goliaths — such as corporations institutions or professionals — in court. The price of failure is simply too daunting.

There are exceptions to the American Rule. Some laws which are known as “remedial” are designed to empower small plaintiffs such as employees consumers or victims of discrimination. One way they do so is by mandating that attorneys’ fees always be paid to a successful plaintiff never requiring an unsuccessful one to pay. More complex is the issue the Supreme Court is currently taking up on appeal under the Patent Act which provides that attorneys’ fees may be awarded to a prevailing party in “exceptional cases.” Similar language is also found in the statute governing trademark and copyright. The problem is that no one really knows what “exceptional” means and the results are predictably unpredictable.

In contrast the most common method businesses have to protect themselves from the attorneys’ fees bite of meritless lawsuits is to agree by contract that if there is a dispute between the parties related to the contract the losing party will pay both sides’ attorneys’ fees after the litigation. Not surprisingly the presence of terms such as these typically results in early settlements when disputes do arise. Even though neither side usually ends up paying these fees the mere threat of having them imposed provides an incentive to settle sooner rather than later.

In most cases though there is no legal fees pot of gold at the end of the litigation “rainbow” for anyone but the lawyers involved. And that’s why for the majority of would-be litigants the best fee is usually the one not spent in the first place.


Oops! We could not locate your form.