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Justinian Lane

Some Reasons To Oppose “Loser Pays” – Part One

For some time now, I’ve been meaning to post about why “loser pays” is a bad idea. Loser pays is a legal concept in which the loser of a lawsuit is forced to pay the legal costs of the winner. Advocates of “loser pays” claim that enacting it would dramatically cut down on the mythical frivolous lawsuits that supposedly clog our court system. I don’t doubt that “loser pays” will cut down on frivolous lawsuits. The problem is that “loser pays” will also dramatically decrease the number of serious and meritorious lawsuits, especially those filed by individuals against corporations. Here’s the first reason I oppose “loser pays.”

Criminal Law

To be fair, we’d have to apply it to criminal law, too. Let’s imagine that I’ve been out drinking one night and decide to drive home. I’m not drunk. I’m going through an intersection on a green light, and fail to notice someone else running the red. I t-bone the red-light-runner’s car and the police come. The police give me a blood alcohol test that puts me right at the legal limit. I’m arrested for driving under the influence, and the other driver is not cited for running the red light. I’m given another blood alcohol test at the police station, and it shows me well under the limit. Despite the relatively weak case, the district attorney charges me with DWI, or DUI, or whatever the acronym in the particular jurisdiction is. I hire a competent attorney, and after a jury trial, I’m acquitted. The trial cost me $2,500 – which is a pretty cheap attorney’s fee for a jury trial. Now imagine that the driver who ran the red light sued me for his injuries. I hire another attorney to defend me in the civil case, and pay him another $2,500 dollars. During the trial, I’m able to introduce video evidence from a traffic camera that the other driver ran the red light. The jury finds in my favor. If “loser pays” were enacted, the plaintiff in the civil case would be forced to reimburse me the $2,500 my attorney cost. If that’s fair, then why shouldn’t the state have to reimburse me, too? If I “didn’t do it,” it makes no difference whether my hard-earned dollars are going to a criminal defense attorney or a civil defense attorney; in both instances I was wrongfully prosecuted, and if I’m entitled to be refunded my legal fees in one instance, I must also be refunded my legal fees in the other. Anything less isn’t justice.

Trying to convince citizens to enact a “loser pays” system in criminal cases would be a pretty tough sell. The first argument against doing so would probably be something along the lines of, “What about O.J. Simpson?” Regardless of whether or not he really did “get away with murder” he was in fact found innocent and is still a free man. I’m sure he’d welcome a refund of the millions of dollars he spent on his legal defense team. It is commonly believed that O.J. was able to beat the charges not because he was innocent, but because he was able to dramatically outspend the prosecuting attorneys. Civil defendants, particularly large corporations, also have been known to spend millions of dollars to defend themselves. And despite the myth of “rich trial lawyers,” no plaintiff’s firm in the country could outspend Merck, Ford, or Boeing on any given case. So if you believe that O.J. was in fact guilty, you must be open to the possibility that at least one corporate defendant “got off” by outspending the opposition.

The real danger in enacting “loser pays” in the criminal world isn’t the anomaly of a guilty defendant being refunded millions of dollars. It’s the fact that if “loser pays” were to apply to criminal law, prosecutors would be less likely to prosecute cases that weren’t “slam dunks,” such as those with DNA evidence or witnesses. Prosecuting attorneys would end up making weaker plea bargain agreements than they would prefer in order to avoid the risk of paying the attorney’s fees of the defendant if they were to lose at trial. The concomitant decline in prosecutions and of harsh plea bargain agreements would embolden criminals to commit crimes. And the net result would be that citizens everywhere would lose a measure of safety.

The same results would occur in civil cases. Plaintiff’s attorneys would be less likely to prosecute cases that weren’t “slam dunks,” such as those with drunk drivers or witnesses. Plaintiffs would end up making lower settlement offers than they would prefer in order to avoid the risk of paying the attorney’s fees of the defendant if they were to lose at trial. The concomitant decline in lawyers willing to take complicated cases and the rise in plaintiffs eager to accept confidential settlement offers would embolden unethical manufacturers to release products of questionable safety. And the net result would be that citizens everywhere would lose a measure of safety.

We accept the risk that we may be wrongfully accused of a crime, and if we are, we’re responsible for our own legal fees. We accept that because of the benefits our law enforcement system bestows upon us: The best police force in the world, a nationwide 911 system, a fair jury system in which everyone – even the obviously guilty – have a right to a trial, and a prison system that keeps dangerous citizens away from defenseless citizens.

So too should those behind the “loser pays” movement accept that they may be wrongfully sued, and if they are, that they’re responsible for their own legal fees. They should accept that because of the benefits the civil justice system bestows upon them: The ability to write and enforce even the most complicated of contracts (and to usually recover attorney’s fees in those cases); the best intellectual property system in the world (and to usually recover attorney’s fees in those cases); laws that prevent competitors from poaching key employees; law enforcement personnel that will, at no cost, assist in apprehending corporate spies, software pirates, and music thieves; and a justice system that prevents crooked officials from forcing companies to pay bribes to operate.

Or am I wrong and the state of California should write a big fat check to O.J. Simpson?

Justinian Lane: Author Bio | Other Posts
Posted at 7:33 PM, Nov 22, 2006 in Civil Justice
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Comments

First, it's not really clear to me why we would "have to" apply loser pays to criminal law too, just because we apply it to civil law. We apply 'preponderance of the evidence' to civil law, but not to criminal law. We apply the protection against self-incrimination to criminal law, but not to civil law. In short, the two systems are different, with different substantive and procedural rules.

Second, "What about OJ?" isn't a convincing argument. Of course it seems like an injustice for OJ to get reimbursed. But isn't it equally an injustice for an innocent person to (say) be forced to mortgage his house to defend himself, to demonstrate his innocence at trial, and then walk away with only debt to show for it?

Third, your substantive argument is essentially, "Fewer weak cases would be brought." It's not clear why you think this is a bug, rather than a feature, of loser pays. That's the point of loser pays. Weak cases -- that is, cases where the evidence is lacking -- shouldn't be brought.

It's bad to be out $10,000 because a greedy corporation engaged in shady business practices. It's equally bad to be out $10,000 because a greedy plaintiff filed a shady lawsuit.

Fourth, the claim that this will make us less safe from criminals and the unscrupulous corporations (that exist primarily in the trial lawyers' fantasy world) is not very convincing. "Loser pays" is the rule almost everywhere in the world other than the U.S. Do we see worse crime in, say, Canada? Do we see more consumers being injured by products or cheated by shady business practices there?

Fifth, as usual, you ignore the benefits of reducing litigation costs. Leaving aside the lower costs to innocent defendants because weak cases aren't brought, "loser pays" also provides an incentive for liable defendants to settle quicker and get legitimate plaintiffs their money faster. Under the current system, if you have a strong case against "Ford, Merck, or Boeing," they have an incentive to drag out the case as long as possible -- maybe they can force you to run up such high legal bills that you're forced to drop the case. But under loser pays, the longer they drag it out, the worse it is for them; if they think you're going to win, they want to settle as fast as possible.

And no longer do injured plaintiffs have to give away 1/3 of their recovery to their lawyers; they get the full amount. A benefit to legitimate plaintiffs.

Posted by: David Nieporent | November 23, 2006 5:53 AM

Here's another Tort Deform post on this issue.

"Loser Pays" Doesn't: When lawsuit losers are forced to pay the legal fees of winners, the cost of litigation for everyone goes up....

http://www.tortdeform.com/archives/2006/10/loser_pays_doesnt.html

Posted by: Cyrus Dugger | November 27, 2006 9:57 AM

David, thanks for your insightful comments.

As to your first question as to why we would have to apply it to criminal law? My assumption is that the reason we'd apply it to civil law is the notion that it's unfair for a person who did nothing wrong to incur costs in defending himself. If that's the case, why shouldn't criminal defendants be entitled to those protections? You used the example of an individual having to mortgage a home to pay for a civil trial, and then be left with debt. Why is that wrong, but it would be OK if it was a civil trial? If anything, it's even worse, because the individual's wrongful prosecution was funded at least in part by that individual's taxes!

I didn't say fewer "weaker cases" would be brought. I said cases that weren't "slam dunks" would be reduced. Literally and figuratively, the jury is still out on Vioxx. If a plaintiff had to repay Merck's defense, I suspect very few additional cases would be brought over the drug. Any lawsuit that's the first of its kind, or the first over a certain product is very difficult to win. That's not to say they aren't meritorious - just that they're tough.

"It's bad to be out $10,000 because a greedy corporation engaged in shady business practices. It's equally bad to be out $10,000 because a greedy plaintiff filed a shady lawsuit." Agreed entirely. So why not join us in protecting the civil justice system which acts as a deterrent against shady business practices?

I'm not going to go into great detail as to why your "What about Canada?" argument is flawed. Perhaps "What about China?" or "What about India?" is a good rebuttal. Workers and consumers have few protections against unscrupulous employers and manufacturers.

I'm intrigued about your comment regarding plaintiffs receiving full compensation? How would you have this work? Would you have plaintiff's attorneys reimbursed at an hourly rate, or would you increase the jury award by 33%, or?

Posted by: Justinian Lane | November 27, 2006 6:57 PM

To demonstrate the unfairness of loser pays, one need only go to Buffalo and observe the Canadians scrambling across the border screaming to the tops of their lungs, "we want to migrate to America because we have loser pays and it is a fundamental violation of our civil rights." Do not get in the way of this horde. It may be dangerous to your health.

Posted by: Carus Pastorus | November 28, 2006 6:48 PM