Columnist

American lawyers want to adopt UK's “loser pays” rule

Many American attorneys and politicians claim that the U.S. court system is clogged with frivolous lawsuits. They suggest adopting the U.K.‘s “Loser Pays” rule as a way of discouraging people from suing. However, there’s little evidence to suggest that a significant number of U.S. lawsuits are without merit. In fact, implementing Loser Pays could actually increase the number of lawsuits and keep Americans from exercising their Sixth Amendment rights.

No Evidence of a Problem

In the U.K., which has a no-win no-fee tort system, personal injury solicitors like those at Claims Direct serve as gatekeepers, keeping frivolous lawsuits out of court. When they can’t recover a fee unless they win, attorneys that accept contingency fees are unlikely to take non-meritorious cases. Contingency-fee attorneys already play this role in America. In fact, studies show that in the U.S., contingency-fee lawyers decline over half of the cases that are brought to them.

Most American Loser-Pays advocates base their desire to bring Loser Pays to the U.S. on the idea that frivolous lawsuits run rampant throughout American courts. Overall, it’s hard to find reliable numbers about the percentage of non-meritorious lawsuits in the U.S., and many business-backed organizations and politicians release misleading numbers about frivolous lawsuits.

For example, in 2007, the U.S. Chamber Institute for Legal Reform released an ad in the Wall Street Journal, Washington Post, and Chicago Tribune claiming that frivolous lawsuits cost American families $3,520 per year. However, the group behind the statistic, Towers Watson, told Wall Street Journal reporters that the Chamber Institute had misrepresented their numbers. Specifically, the Institute had gotten the $3,520 figure by dividing up the cost of the entire U.S. tort system, not the cost of frivolous lawsuits, among U.S. families.

Increased Litigation in the Short Term

Instead of decreasing the number of lawsuits, Loser Pays could actually increase America’s litigation burden, at least in the short-term. If Congress tried to implement a Loser-Pays system, court challenges would arise over several important questions:

How much can attorneys charge? If litigants who lose have to pay attorney fees, what constitutes a reasonable fee that an attorney could charge? How would attorneys calculate rates for work by support staff, including paralegals and legal assistants? Can rates vary? Should rates change based on the attorney’s experience or on the type of litigation? How many hours can attorneys bill? How do lawmakers decide how much time an attorney should reasonably spend on different types of cases? What if lawyers start doing work that a paralegal would normally do as a way to rack up fees? What happens if the loser can’t pay? If the losing litigant can’t pay the opponent’s legal fees, is the person eligible for bankruptcy protection? What happens to the attorney if the client files for bankruptcy and the attorney can’t collect a fee?

Limited Access to Courts

In the U.K., claimants can obtain assistance for paying their opponents’ legal fees if they lose a lawsuit. For claimants under a certain income level, depending on the type of case, the U.K. offers legal aid. Other claimants can depend on their trade unions for assistance because their trade unions purchase litigation insurance. Citizens can also purchase litigation insurance that will pay opponents’ legal fees if they lose.

In the U.S., Americans have no legal aid options or insurance products to cover court costs. As a result, Loser Pays would discourage not only frivolous lawsuits but also many lawsuits that have merit. If the cost of losing becomes extraordinarily high, and they had to bear the cost, many Americans would be afraid even to bring meritorious claims against deep-pocketed opponents. Attorneys would have little incentive to accept cases in which they couldn’t predict the results.

Unconstitutional

In Israel, judges have the authority to decide which party pays court costs in a legal battle. Even in that court system, when low-income clients lose, judges only require them to pay court costs 52 percent of the time because they simply can’t bear the burden. Although Loser Pays wouldn’t directly prohibit Americans from obtaining lawsuits, it would put significant roadblocks in the way of the Sixth Amendment right to legal representation, particularly for America’s poor. Ultimately, Loser Pays isn’t a Band-Aid to solve the American legal system’s frivolous lawsuit problem — if the problem actually exists.

This was posted in Bdaily's Members' News section by Megan Andrews .