The loser-pays rule can often work hardship on average people caught up in the court system.
Fee awards can be devastating to a middle-class person. I once had a case come to me after some homeowners had lost at trial in a dispute with their mortgage lender over some technical provisions of their mortgage. The amount at stake was perhaps a couple of hundred thousand dollars. However, on losing, the court awarded the lender almost $400K in fees (it did so under a contract provision providing that the prevailing party in any dispute would receive an award of such fees). It seemed pretty clear that the court had rendered some doubtful rulings in the case and that the case would likely be reversed on appeal. However, in order to get to an appeal, the losing parties needed to get a stay on execution of the judgment. To get the stay, they had to post a bond in an amount equal to no less than one and one-half times the amount of the judgment. Since this was beyond the financial means of the losing plaintiffs, they found themselves being subjected to liens, attachments, garnishments, and the like in ways that basically ruined their day-to-day lives long before they could await the outcome of any appeal. As a result, though they were probably right on the merits, all it took was the harsh acts of one judge to render them helpless in asserting their rights by being able to pursue their case to its proper outcome. They had scraped to pay their own attorneys to prosecute the case but they were overwhelmed by the attorney-fee award that crippled their case midstream.
That example involved, not poor people, but those who had homes and jobs and who felt they needed to try to undo a wrong that had been inflicted on them by a lender. The result was that they folded their case, borrowed from wherever they could to pay the lender's fees, and dropped their appeal, walking away licking some pretty heavy wounds.
Based on many such situations, I would say that a loser-pays rule could easily work hardship on average people seeking access to the courts. I will grant that such a rule sounds attractive in principle and our courts are full of abusive litigation that needs to be curbed. But I'm just not sure that this is the right approach to reforming the problems.
> I once had a case come to me after some homeowners had lost at trial in a dispute with their mortgage lender over some technical provisions of their mortgage. The amount at stake was perhaps a couple of hundred thousand dollars. However, on losing, the court awarded the lender almost $400K in fees (it did so under a contract provision providing that the prevailing party in any dispute would receive an award of such fees).
The problem here wasn't the fact that the loser wound up paying the court fees.
The real problems started with hearing the case on a planet where FOUR HUNDRED THOUSAND DOLLARS in legal fees was considered reasonable for any court case, and where apparently a contract provision stating this was considered enforceable rather than struck down as manifestly unreasonable.
This was compounded by hearing the case in a region on that planet where the appeals system comes with a price tag of several years' salary.
Costs are supposed to be just that: the cost of bringing a case to court. That means things like paying to build courthouses and paying a salary to those who run the courts (from the judges to the janitors) and, yes, even paying a reasonable rate to the lawyers. If your courts are ever awarding more than that in costs, no matter what the outcome of the case, then your legal system is broken.
Here's the thing. It wasn't the normal people who paid 400k for some lawyers. That was the bank's legal fee.
So if you have loser pays, and you're a megacorp, spending 6-figures defending every lawsuit becomes a great move. Enhances your chances of winning since you're pitting a department of lawyers against whoever the plaintiff could retain, and then assuming your department of lawyers wins, you don't even have to pay for them. Totally broken economics which incentivize overdefending with a huge team of lawyers on every single case.
> It wasn't the normal people who paid 400k for some lawyers. That was the bank's legal fee.
I realise that it's the big organisation fees we're talking about, but please understand that even here in the UK, it is not automatic that the loser pays, it is just the default result most of the time. Please see my other post.
> So if you have loser pays, and you're a megacorp, spending 6-figures defending every lawsuit becomes a great move.
Only if you permit unlimited and arbitrarily disproportionate costs. No-one says you have to do that, even if you require or default to the loser paying.
Well, we're already at a much higher level of detail of implementation than the article even thought of approaching or than most of the supporters of this policy have likely thought through.
I'd just like to note that.
Further, good luck getting any consumer protection aspects through congress. The only way this happens is as a giveaway to large corporations.
While certainly catastrophic, this is anecdotal at best, and similar anecdotes can be found for the companies with deep pockets using their lawyers to suck individuals dry. Unfortunately, these are the scare-type comments that keep any reform from happening.
If the US became a less litigious country as a result of loser-pay, then the system would be a benefit, IMO. The legal tax required to do business in the US is too high.
Considering someone did just tell the anecdote, I'd say this is anecdotal at the very least. I've read about various abuses revolving around the Texas court system requireing the bond-posting Grellas mentioned.
But I'm too tired to google-up any link, so I've leave it "anecdotal" too.
The "legal tax" in the US is high but lowering it is hard when so many parties want to spin an advantage out of said lowering.
I think it's anecdotal at best because it's a lawyer (I believe) relating it, in an issue that clearly pits lawyers against everyone else in terms of who gains and loses financially from this change. And it doesn't actually apply to loser pays, but some random contract provision within a different system.
You don't even have to assume malice, "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
This issue is very much not about pitting lawyers vs everyone else. It's about pitting people/corporations likely to be sued against people/corporations who might sue someday.
> If the US became a less litigious country as a result of loser-pay, then the system would be a benefit, IMO. The legal tax required to do business in the US is too high.
To put it the other way around: Loser-Pay makes it easier for companies to screw people over. Which is exactly what happens here in Germany, where companies can pull shady tricks without fear of getting sued - the risk of having to pay all the fees is too high for the everyman.
Loser-pay sounds good in theory, but sucks in practice.
Anecdotal at best, sure, but did you read the linked article?
"Ok so some courts in europe use this procedure. I could talk about it, explain how it's viewed and how it works in those societies, perhaps elucidate on the differences in legal systems and social contract between the US and europe... orrrrrrrrr I could note some liberal nobody's heard of supported it once and call current day liberals hypocrites even though most of them have never even put thought into this concept. Oh, and beefeaters! Good old England."
So it sounds like in this case the lender initiated the lawsuit. Can the loser pays rule be restricted to the plaintiff pays? If I frivolously sue you and the court finds that I had no reason to do that, shouldn't I pay for your defense? On the other hand if I win the case, there may have been an error and you may need to appeal. We could even have it so that only the supreme court can afford a defendant pays decision.
Edit: also as an equalizer we could say that no matter what, the loser cannot pay to the winner more than she paid to her own lawyer. That way if I bring my discout yellow pages lawyer and you hire the best firm in town, well you get to pay for the luxury.
Actually, the individuals had initiated the suit, having been (in their view) taken advantage of by the lender. When they lost the case, they got nothing on their claims for damages and then got stuck with the tab for the lender's attorneys' fees on top of that. In this sense, assuming that they were actually right on their grievance with the lender and that the case was incorrectly decided, they got what might be called "doubly screwed."
I don't think you can have a rule that potentially awards fees to one side but not the other without creating the potential for great unfairness.
This item is of course anecdotal, as noted by others, but it is typical of cases I have been involved with in a career in which (apart from my transactional work with startups) many of the litigation cases I undertook involved commercial matters where the "little guy" had been, in effect, stabbed and left for dead by others, often a larger company. These cases are incredibly difficult to prosecute, in part because the client is often left with few resources with which to fight (for example, in one such case, which went for three years before reaching trial, a founder had his company stolen by disloyal board members who granted themselves, in serial votes aimed at avoiding any formal "conflicts," large amounts of stock so as to gain control of the company, who then proceeded to terminate the founder's employment, and who then used the company's cash flow to fight his attempts to challenge the things they had personally done wrong - I took that one on hourly but wound up $400K into it before we won at trial and got the client restored). In these sorts of cases, the fight is tough enough and, if a client of this type also faces the prospect of paying the other side's fees on losing, the burden can become crushing.
All that said, I will grant that this is a difficult issue and, unlike many members of my profession, I do believe that major components of the litigation world are abusive and desperately in need of reform. My reason for highlighting a couple of examples showing the real-world impact of the loser-pay rule is not to say that it might not be a good reform but to underscore that a blanket shift away from the current rule might have unintended consequences that need to be considered carefully. After all, the ultimate goal of a court system is justice and not any ideological aim of helping anyone arbitrarily at the cost of fairness, whether it be big companies or the "little guy," institutional defendants or consumers, or any other class of claimant or defendant.
"the ultimate goal of a court system is justice and not any ideological aim of helping anyone arbitrarily at the cost of fairness, whether it be big companies or the "little guy," institutional defendants or consumers, or any other class of claimant or defendant"
That ought to be the guiding principle. Well said.
Loser pays can work when the amount the loser is liable for is the minumum of his legal fees or his opponent's legal fees. That puts the maximum he is liable for under his own control.
I am inferring from your post that you are a lawyer which would give you a vested interest in against anything reducing the number of court cases. Next your anecdote rests on the loser paying an unreasonable fee for their situation ($400k). Surely the fine would be based on someone's income and act as a deterrent rather than cause bankruptcy.
So, the strongest and most common objection against the English rule is that it would prevent the poor from suing even if they had a good case; they just couldn't afford a 10% chance of owing thousands of dollars. I am very sympathetic to this objection.
But can't this be (mostly) solved by having the lawyers take on the risk?
Already, lawyers will offer to work for free unless the plaintiff wins. ("You pay nothing unless we recover on your behalf.") That is, they risk their own time--but will do so only if they think there is a good case. This makes sense because it is the lawyers, not the plaintiffs, who are best able to assess the likelihood of winning.
So then couldn't lawyers also take on the risk of paying fees if the litigation is unsuccessful? Is this legal in the US or elsewhere? Is it done?
(Also, I think I heard somewhere about a guy who couldn't afford to sue a large company which stole his invention. Apparently, he had an IPO to offer stock in the lawsuit. He won, and both he and his investors were paid. Anyone remember this or have a link?)
> So, the strongest and most common objection against the English rule is that it would prevent the poor from suing even if they had a good case; they just couldn't afford a 10% chance of owing thousands of dollars. I am very sympathetic to this objection.
That is very unlikely. Courts are not generally required to award costs to the winner of a case here in England, it is more of a default in most cases instead of adopting "everyone pays their own costs" as in the US.
I am not a legal expert, but I doubt a court would award crippling costs to a little guy who brought a case with genuine merit against a big guy but lost, where the little guy incurred only modest costs but the big guy brought the whole legal team to bear.
Likewise, I doubt a big guy bringing a punitive law suit against a little guy and incurring lots of costs when they could have settled things in another less expensive way would get much sympathy, which is why the US seems to have certain Big Media organisings effectively extorting settlements from innocent people for thousands of dollars, while such behaviour is unheard of in this country.
> Already, lawyers will offer to work for free unless the plaintiff wins.
I guess you're referring to so-called "no win, no fee" agreements? If so, it's not quite as simple as that (the lawyers also stand to gain more if they win than they would in a regular case), but your general argument still works.
I am not a legal expert, but I doubt a court would award crippling costs to a little guy who brought a case with genuine merit against a big guy but lost, where the little guy incurred only modest costs but the big guy brought the whole legal team to bear.
That's a whole lot of conditionals. In places where the judiciary is thoroughly corrupted by electioneering (coal interests in West Virginia, for instance), relying on judges to respond non-punitively can be an unsafe assumption already. A libertarian loser-pays movement only slants that further.
Everything about a court case is a conditional. It is relatively unusual for the evidence to be so clear-cut that there is no doubt about the verdict, and often a court must make the fairest decision it can based on far less evidence than it might like.
That said, this isn't really a hypothetical issue. Our courts function in this way every day. Please understand that to those of us on this side of the Atlantic, everything you are describing just sounds weird. "Judiciary corrupted by electioneering"? Judges responding "non-punitively"? Our judiciary in the UK has a long and honourable tradition of being the standard-bearers of justice that one would hope they would be, and of resisting politicisation far more effectively than the other major branches of government (to the extent that we have them; our system doesn't treat US-style separation of powers as sacrosanct either).
Having been in a court on a couple of occasions, although never as a plaintiff or defendant, I have always been impressed by the way the officials conducted themselves. IMHO, our legal system does have its problems when it comes to handling relatively low-value cases, but those are more due to the time and effort required to figure out how the system works and complete all the paperwork than because the legal fees are prohibitive.
One injustice I have personally witnessed happened when someone was cleared of a motoring offence, on the second hearing since the first was aborted when courtroom time ran out for that day. That person lost had two days of their life attending court, and presumably also spent considerable time planning their defence (as they were not legally represented). They must also have had the stress and uncertainty from waiting nearly a year to hear the verdict, and presumably lost out on some income that would have been earned on those days they were in court, because even though they were cleared of all charges, defendants do not even seem to get the same expense refunds that witnesses do. I find the fact that someone deemed not guilty in court should still be harmed even to that extent to be unfair. I simply do not understand how any system where someone innocent might wind up paying out hundreds or thousands in a settlement because the danger of having to pay for their own defence in court would be even more could possibly be in the interests of justice.
Indeed, which suggests that in order to move towards the less acrimonious legal atmosphere of the UK or Europe, you would need to do more than adopt some of their mechanics. You'd ultimately need to de-politicize the entire branch of government.
As far as I know, in the UK and most of Europe, and definitely here in Canada, Judges are appointed by judicial commissions on the basis of strength of legal scholarship, not picked in a popular election based on who can raise the most money and pander to the right interest groups.
Beyond de-politicization, which can cut a lot of different ways, the other factor in acrimony-reduction is the European social safety net. The EU legal system doesn't have to be the tool of last resort to the same extent as in the American style.
What do you mean by the "European social safety net"?
The legal system should normally be the last resort, but you seem to be suggesting that we have some sort of universal alternative to try first. There may be other options in specific contexts, for example disputes with service providers in regulated industries where there is some sort of ombudsman scheme, but it is not the case in general.
I don't want my court case being judged by someone who has to consider what that judgement means for their chances of re-election. If they have to campaign, well, that takes money... so they'll need donors... so can they really afford to rule against LocalBigCo?
That is a very good question. One that men have asked themselves over millenias. That is why since the birth of Democracy in Greece, we have had tyrants, dictators, emperors, kings and queens, oligarchs, etc.
I would suggest however that in theory, the politicians sell their policies, rather than themselves per se, although they do sell a bit of themselves also. But the way our system works is, you have a philosophy of governance which is conservative, low taxes, traditional values, screw the poor, and the democrats, sort of distribute wealth, keep the companies in check, tax the rich higher, etc. Any one politician in this scheme is not an individual, but rather a representative of a philosophy, or even ideology. So, it is right that the public decides which they prefer at any given time.
However, it would be quite savagery for the public to decide as to who should be guilty of murder, or rape, or conspiracy, or robbery, or the thousands of cases that go through the court. It too would be idiotic for the lay public, with very limited knowledge of the law, to decide as to who should be a judge, a job which requires high intelligence, but also common sense, a sort of moral structure, so taught through law school. Same as it would be idiotic for the public to decide who should be a doctor.
Unless your court cases are all heard by the entire population, your judiciary is not a democracy anyway.
If your judges are appointed permanently by some sort of panel, drawn from some level of politicians, who are themselves elected via a system that is open to trivial interference by well-funded special interest groups, then your judiciary isn't even close to democratic.
The judges (in the UK) are appointed from senior lawyers by other judges who were themselves appointed by previous judges etc...
It does mean that it takes a few generations to get many black or women judges - but it does reduce the level of corruption and means that a lot of politically motivated prosecutions get thrown out.
It's not democratic - but neither is the process of selecting senior doctors from the ranks of junior doctors.
>Courts are not generally required to award costs to the winner of a case here in England, it is more of a default in most cases instead of adopting "everyone pays their own costs" as in the US.
Thanks, I didn't know this. I'm still not convinced that the threat of legal fees wouldn't convince a non-insignificant fraction of poor plaintiffs not to sue.
> I guess you're referring to so-called "no win, no fee" agreements? If so, it's not quite as simple as that (the lawyers also stand to gain more if they win than they would in a regular case)...
I know. In effect, the lawyer is selling insurance to the client. The client will get less in case of a win both because (a) he bought insurance, which brings his variance down (and so, his total payout in case of a win is lower) and (b) the lawyer collects a premium for absorbing the risk.
"Already, lawyers will offer to work for free unless the plaintiff wins."
In the US, yes. Not in Europe. Here in the Netherlands, it's actually prohibited by the rules of the (loosely translated) National Bar Association to take a case on a 'no cure, no pay' basis.
This article is misinformed and misleading. The legal culture is very different between the US and mainland Europe. The claims that are being made in the article are largely misrepresentations of what actually happens; for example, her in the Netherlands the amount a judge can (but doesn't have to, and often does only in part) award the loser to pay for the legal costs of the winner is based on a quotum, i.e. not on the real costs, but on a fictitious per-hour amount, which is lower than actual commercial rates (one notable exception is for IP infringements, where the full cost can be claimed).
It's getting less common now that local councils are actually fighting the claims.
Before suing a local council or the NHS was a guaranteed win, often out of court - so the lawyer couldn't lose and it was worth taking a no-win no-fee.
Now that they go to court a lot of them are demanding the client pay a hefty insurance premium up front - of course that's not a 'fee'.
Isn't the fact that you are guaranteed to pay legal fees, which the poor will always find expensive, to be the greater obstacle to suing? I think the 'English rule' would encourage many poor people to litigate if they believed their case was strong.
> Isn't the fact that you are guaranteed to pay legal fees, which the poor will always find expensive, to be the greater obstacle to suing?
With correct insurance/lawyer-agreements, the poor can set it up so that they have no chance of paying anything. In effect, they sell part of the expected value of their suit to decrease their variance to the point that they do not pay money in any circumstance.
>I think the 'English rule' would encourage many poor people to litigate if they believed their case was strong.
Well, to be precise, it would encourage many poor people to litigate if their lawyer (or their insurance company) believed their case was strong. And isn't this exactly what we want? That justice is pursued?
I have friend who cases against the police and others on a contingency basis.
Believe me, they do not have any capital to invest to indemnifying their client against a judgment. None.
The possibilities of losing a fair amount of money in case of this sort would essentially write the police a blank check to engage in whatever without threat of lawsuit.
I don't think the commenter I replied had these types of cases in mind. I think he meant "We don't get paid unless we get money for you" ambulance chaser type of lawyers.
Suppose your lawyer thinks you have a 90% chance of winning - against a neighbour who might run up a $1000 bill for legal fees, the same as you. Then it's worth the risk.
Now suppose you are up against a bank that can run up $10M in fees (or claim their in-house lawyers cost that) - now to be $1000 at risk you need a case that is 99.999% sure before the lawyer's insurance company will let them take it.
Perhaps an insurance system would develop where you pay a portion of your winnings to the insurer if the suit wins, and they pay out if it loses. In this way we can leverage market forces to help determine the validity of cases.
Exactly. I only suggested lawyers offering the insurance, but as you and someone else in this thread mentioned, it's also plausible for their to be dedicated agencies. It's not clear to me which would be more efficient.
> So, the strongest and most common objection against the English rule is that it would prevent the poor from suing even if they had a good case; they just couldn't afford a 10% chance of owing thousands of dollars.
The majority of cases where the litigant is "poor" involve contingency fees (the lawyer gets nothing unless they win), and contingency fees are considered unethical (to the point you'll get disbarred) in most European countries. I would add the issue where if contingency fees are any part of the lawyer's payment scheme, the lawyer would also be jointly and severally liable for the legal fees of the winning party.
I see three possibilities for this outcome - every case gets settled on the courthouse steps (as opposed to about half these days) or the lawyers fight everything to the bitter end (and there will be no more settling on the courthouse), and finally, much less litigation.
At the moment, the "rediculous" judgements that people complain about (one poster child is the McDonald's coffee case) are acting as a subsidy for lawyers. Without this subsidy, far less cases will be filed
I've strongly considered running with this idea as a ballot initiative in my state.
I would encourage you to look at the details of the McDonalds coffee case before using it as an example. Particularly, that the plaintif was hospitalized for 8 days and underwent skin grafts, and that McDonalds serves their coffee significantly hotter than culinary taste demands, despite hundreds of reported injuries and previous settlements.
That doesn't necessarily mean the outcome was justified, but it certainly wasn't a frivolous case.
She also didn't get millions. She initially won big but it was later overturned on the grounds that McDonalds was being singled out for being successful (i.e. having deep pockets to pay that kind of damage).
"But can't this be (mostly) solved by having the lawyers take on the risk?"
I suppose the stereotype of the trial lawyer as some deep-pocketed capitalist still prevails up to the present day. It's not so anymore. There's been a lawyer glut for some time and the lawyer who makes their living suing for the "little guy" or even the medium-sized-guy has no extra equity to invest in extra risk taking, they're mostly barely earning a living.
" That is, they risk their own time--but will do so only if they think there is a good case." Perhaps you could think about this - lawyers risk their own time because ... they have it, not necessarily having a whole lot of the business. A similar lawyer won't risk their own money because ... they have children to feed as well as offices to rent, etc...
The article fails to take into account the different role of government in Europe compares to the US when it comes to ensuring civil rights.
The US approach tends toward creating a civil cause of action for civil rights violations, and then leaving it up to the victim to enforce the law via a lawsuit.
Most of the rest of the world tends toward having the government deal with civil rights enforcement. Your employer denies you a promotion because of your race, sex, or religion? Complain to the appropriate government agency and they deal with the problem. Landlord won't rent to your kind? Take it to the bureaucrats.
Lawsuits are almost always risky, even if you have a pretty good case. If we had a loser pays system, that would greatly discourage the poor (and probably much of the middle class) from pursuing litigation when their civil rights have been violated. The potential monetary losses are just too great.
A lower pays system might work, if coupled with a rewrite of all the laws that were written to rely on private enforcement were revisited and revised appropriately to ensure that those who are not wealthy would still be protected in fact, rather than just in theory.
Or get rid of civil rights laws. "Reason" is a libertarian publication, so that would probably be their solution.
I like your main point, that if the US has used litigation to in place of government protection, then we can't replicate the benefits of loser-pays without increasing government intervention. But I have to quibble with your specifics.
>Most of the rest of the world tends toward having the government deal with civil rights enforcement. Your employer denies you a promotion because of your race, sex, or religion? Complain to the appropriate government agency and they deal with the problem
> * Any individual who believes that his or her employment rights have been violated may file a charge of discrimination with EEOC.
> * In addition, an individual, organization, or agency may file a charge on behalf of another person in order to protect the aggrieved person's identity.
> VI. How Is a Charge of Discrimination Filed?
> * A charge may be filed by mail or in person at the nearest EEOC office
This is in addition to the ability to sue the employer without penalty (unless your litigation is "abusive", which is very rare).
"Your employer denies you a promotion because of your race, sex, or religion? Complain to the appropriate government agency and they deal with the problem. Landlord won't rent to your kind? Take it to the bureaucrats."
If you're claiming that it works like this in Europe, no it doesn't (with exceptions here and there, and I only know about Dutch and a bit about Belgian law, but I can draw broad parallels to other systems, too). You still have to bring suit yourself. The government agencies can also sue and/or sanction the involved party, but in a separate procedure (well actually if the government sues, in some cases you can get 'attached' to the case as a person who has an interest in the outcome of the case, but it's a bit of a mixture between penal/administrative/civil procedures that mostly exists to make the system more efficient, and not so much to favor the party being wronged). The basic rule is that a civil party brings suit itself.
> Or get rid of civil rights laws. "Reason" is a libertarian publication, so that would probably be their solution.
I agree with the rest of your post, but this is not accurate in the slightest. You might as well write "liberals want tax cuts for people making >$200k," and "conservatives love social security."
FTA: "A common fear about loser-pays is that the side who loses a routine dispute will get handed a bill for 10,000 hours from Cravath, Swaine & Moore. But European courts are well aware of the danger that successful litigants will overinvest in their cases and gold-plate their fee requests. They carefully control the process to prevent that danger, giving the losing side a full chance to dispute a fee award, requiring that work be reasonable and necessary, providing that elite lawyer rates not be paid if a Main Street lawyer could have done the job, and so forth."
"One way Europeans have adapted to the residual risks of loser-pays has been through personal legal expense insurance, which covers a variety of legal risks including that of finding oneself a plaintiff in a lawsuit. The aggrieved party takes his case to his insurer, which, if it finds the case strong, provides a lawyer and absorbs the risk of owing the opponent a fee....If the insurer screens cases carefully, it will collect more in fees for its lawyer than it will pay to winning opponents."
I don't know if these claims are true, having no experience with European legal systems. If true, they would appear to address your criticisms.
I don't think your first quote from the article does address the danger that the poor will be prevented from suing. Suppose you are poor (or middle class) and have a good case. It's good enough that a lawyer would give it a 90% chance of success. (But there is a 10% chance that something weird happens, as can always happen even if you have a good case.) If I'm poor, I can't take on a 10% of owing $10,000 in legal fees even if the payout of, say, $100,000 makes the expected value strongly positive. In other words, it's not that I can't afford over-priced attorney fees, it's that I can't afford any attorney fees.
Now for your second point: all-purpose legal insurance doesn't seem like something that the poor are going to have bought. Even if the poor were rational and outrageously well-informed, the chance that any given person will be subject to discrimination is so low as to probably make the administrative costs of such insurance too large. However, if you could buy insurance after been discriminated against, then this could solve the problem. It's basically what I suggested in my top-level comment (http://news.ycombinator.com/item?id=1792791), only it's an outside agency rather than the plantiff's lawyer which takes on the risk. It's not clear to me which format the economic frictions will favor.
Do you know if this kind of case-specific insurance is available in countries with the loser-pays rule?
"Do you know if this kind of case-specific insurance is available in countries with the loser-pays rule?"
If I'm understanding you correctly, you're suggesting something like a fire insurance that you can buy when your house has already burnt down? If so, no I know of no companies who offer such a thing, and I would be quite surprised if they existed.
This sort of legal cost insurance works the same way as other insurances. The one I took out a few years ago stipulated that it didn't cover any existing disputes, not disputes that would arise in the (I think) 3 first months of the insurance; just like some insurances don't cover existing problems.
This sort of insurance is also not as common as the article makes it appear, and it was even quite rare when the article was written (1995). In 2008, under 50% of Dutch households had a legal assistance insurance of some form (I think this number includes the optional parts of car insurances where you are insured against claims arising from accidents, but I'm not sure on this; I suspect the majority of insurances to be in this area, and thus the amount of insurances against civil cases to be lower). The last 10 years there have been double-digit increases in the amount of people who have such insurances, so it's really something of the last decade.
You're suggesting something like a fire insurance that you can buy when your house has already burnt down?>
No, it would be like buying fire insurance during a small fire that would only payout if your house burned down completely. The insurance guy would arrive, examine the fire, and determine that it had a 90% of being stopped with most of the house intact, and a 10% chance of destroying everything. Then, he would calculated how much you would need to replace your house in the case of complete destruction, and model the premiums accordingly.
>The last 10 years there have been double-digit increases in the amount of people who have such insurances, so it's really something of the last decade.
But the poor are going to be the last people to get such insurance.
In the first event you describe, it sounds as if the lawyer has a good incentive to take the case on 40% contingency and eat the fees in the unlikely event he loses:
0.9 x 40% x $110,000 + 0.1 x (-$10,000 - $10,000 (his own opportunity cost)) = +$37,600 expected gain
In fact, the "lower pays" rule works in favor of the poor person (and their lawyer) in this example.
Of course, if the case were a lot weaker, it wouldn't help. As for your question regarding insurance, I know nothing about the European legal system besides what I learned from this article.
I don't think your first quote from the article does address the danger that the poor will be prevented from suing
Are you saying that this is worse than the existing system or worse than a theoretical system in which poor people can somehow initiate a suit with no money?
Look at the recent case of Simon Singh, a science writer who said homeopathy is junk.
He was sued for libel by the quacks and ran up $200,000 in fees defending himself before the other side withdrew the case.
And since it never went to trial they can of course sue him again and cost him (or anyone else) the same amount next time he writes anything.
The libel laws are to the British legal system the same as the lack of a "loser pays" rule is to the US system: a dangerous quirk that needs to be reformed.
Here in Sweden a simple legal expense insurance is part of any home insurance you get, which means that almost everyone has at least some protection if they're being sued, and some opportunity for suing if you need to drag a dispute that far.
But the biggest difference is that our society simply isn't litigious and I don't know which is the cause and which is the effect.
This seems like the potential downsides are almost as bad as the potential wins.
The obvious problem with our system is that the party with the deepest pockets can drag a case out until the opposing party cries uncle and gives up.
There's a simple solution that seems fair; both sides pay into a pool for legal representation and the pool is divided equally. So if Megacorp wants to sue Joe's Startup, Joe can afford the same representation that Megacorp can.
I'm sure there are downsides to that system that I'm not thinking about, but it seems like it would be pretty fair.
This isn't a bad idea at all, though some ability to alter the allocation of the pool at the discretion of the judge would be helpful
(mainly to stop the potential for self-representing entities to launch frivolous suits purely to earn an equivalent amount to the legal fees BigCorp spends on defending themselves)
Right, that's a potential downside. Makes me think the personal injury attorneys would be more likely sue big fish in an attempt to win the legal lottery.
Of course, the smart company has a defense against this tactic: only use the funds provided by the opponent. This would eventually bankrupt the frivolous lawsuit trolls, since it would cost them real money to continue the case at the risk of losing it all while costing the defendant nothing.
The more I think about it, the more this seems like a system that provides an incentive to only sue when you have a legitimate claim. Anything else wouldn't be worth the risk for either side.
But if I'm a troll representing myself I don't spend any money (only time, which I don't bill for if I'm a non-practising entity) in filing lawsuits claiming $10million in damages
On the other hand BigCorp which stands to lose a claimed $10m in the unlikely event of losing the suit needs to retain the services of a lawyer, which will probably not be a cheap one as they have a lot more at stake.
So BigCorp will certainly need to put enough money into the pot to cover their own expenses, and the troll will pocket half of that even if the case gets thrown out.
I can't speak for England or Europe but here in Australia it's typical for judges to 'award costs' to the winning party. In other words, the judge determines whether or not it's appropriate for the losing party to pay the legal costs of the winning party. It is not mandatory for judges to award costs but it is so common as to be expected.
In principle, awarding costs is 'fair': if Party A has caused Party B to incur legal costs in enforcing their legal rights then it's only fair for Party A to compensate Party B for their legal costs. A positive consequence of 'loser pays' is that there is far less litigation - and certainly less spurious litigation - in Australia than there might otherwise be.
On the other hand, while the practice seems fair in principle it can be very unfair - and financially crippling - in practice. You can imagine a situation where Party A is actually in the right, tries to appeal the judge's decision, but can't do so because they are financially in the hole because of having costs awarded against them!
So, while I still favour the idea of awarding costs, other mechanisms are needed to account for situations where parties are appealing decisions and the like.
...read read read... ...read read read... ..."a million marks or francs"...
Wait, what?
Oh, it's from 1995. I guess I should have seen it in the URL if I'd parsed it out, but isn't there a convention around here to post the year in the HN title for older articles like this?
EDIT: Um, or the subhed right up at the top of the article. Sheesh. I claim... banner blindness?
I am all for tort reform, but this can get a little extreme and stop several types of legitimate suits. Just because you lose doesn't mean the suit was totally without merit.
One of the simplest reforms would be to limit lawyer's cut of lawsuit rewards to keep them actually about the damaged parties. Look at the recent case where the school spied on the students. The lawyers got well in excess of their clients. Making it less attractive to take a chance on suing is good, but the focus should be on what will keep companies from screwing people and what will keep costs to innocent / small mistake companies down.
People (or their lawyers) who have a pattern of frivolous suits should pay the costs of dealing with a frivolous suit.
People can bring great stress and costs using the legal system. Its not just a tool for justice, whether it is used by the rich or by the poor.
Everybody that uses the legal system should think twice about whether their suit is truly warranted.
Of course, there should be standards by which this is judged.
And damages should not ruin those bringing suits. Its not even necessary to me that all costs be covered, but that some real cost be felt by those bringing the suit. 5 or 10% of one's annual income seems not unreasonable.
Doesn't this have downsides? Say I want to sue the government for some legitimate reason (denying my FOIA request, etc.). They rack up their legal bills on the taxpayer's dime, and then I lose. Then I owe the government eleventy billion dollars. This possibility means that it's not worth the risk to sue the government, even when I don't want its money. And if you can't sue the government, it can do anything it wants to. Everyone loses.
s/the government/a big corporation/ and it's the same thing. Really, it's bad both ways. Legitimate lawsuits should be free.
The ABA are the last people to listen to on this subject. Their mortgage payments are inextricably linked to the status quo and thus cannot be expected to enjoy an objective perspective.
Or how about a day-long hearing, early into the process, where a judge looks at the balance of evidence and decides who's going to be paying for the next phase of the trial?
I too feel that the Loser-pays scenario is much better. This leads to all parties trying to amicably solving the issue before going to court. Here in Germany, the person suing needs to send a minimum number of warnings before taking the case to court. This provides the defendant with a chance to pay off if he in the wrong, instead of having to go to court and paying the additional lawyer fees for both parties.
Well, this attacks one of the problems with the US justice system. The other problem is the fact that someone like O.J. Simpson can murder two people and then hire a team of expensive lawyers to get him off the hook. Now imagine if the government even ended up being the one who had to pay those guys!
Yes, it makes sense that whoever has the most money to pay lawyers to drag the case through appeals until the other side is bankrupt should also then be able to pin the bill for the whole thing on the peasant they have defeated. For too long have the disenfranchised had equal access to the court system.
It's kind of ironic that the GOP is pushing for changes to make our legal system closer to Europe's, but they are quick to vilify similar attempts regarding health care.
What a complete bullshit. Making the case for something based on it having a long tradition. Great. We can stop any debate then. Let's just do what the Romans did or the Greeks or ...
Apart from that, as a European, I know how I and the people I know think. It's simple. Never sue a financially stronger opponent and when you're sued, give up immediately unless you have insurance. The risks are very uneven. One side risks their entire existence. For the other side it's just a blip in their legal budget.
Civil law in Europe is a farce. It's an exclusive playground for the rich and for large corporations.
Fee awards can be devastating to a middle-class person. I once had a case come to me after some homeowners had lost at trial in a dispute with their mortgage lender over some technical provisions of their mortgage. The amount at stake was perhaps a couple of hundred thousand dollars. However, on losing, the court awarded the lender almost $400K in fees (it did so under a contract provision providing that the prevailing party in any dispute would receive an award of such fees). It seemed pretty clear that the court had rendered some doubtful rulings in the case and that the case would likely be reversed on appeal. However, in order to get to an appeal, the losing parties needed to get a stay on execution of the judgment. To get the stay, they had to post a bond in an amount equal to no less than one and one-half times the amount of the judgment. Since this was beyond the financial means of the losing plaintiffs, they found themselves being subjected to liens, attachments, garnishments, and the like in ways that basically ruined their day-to-day lives long before they could await the outcome of any appeal. As a result, though they were probably right on the merits, all it took was the harsh acts of one judge to render them helpless in asserting their rights by being able to pursue their case to its proper outcome. They had scraped to pay their own attorneys to prosecute the case but they were overwhelmed by the attorney-fee award that crippled their case midstream.
That example involved, not poor people, but those who had homes and jobs and who felt they needed to try to undo a wrong that had been inflicted on them by a lender. The result was that they folded their case, borrowed from wherever they could to pay the lender's fees, and dropped their appeal, walking away licking some pretty heavy wounds.
Based on many such situations, I would say that a loser-pays rule could easily work hardship on average people seeking access to the courts. I will grant that such a rule sounds attractive in principle and our courts are full of abusive litigation that needs to be curbed. But I'm just not sure that this is the right approach to reforming the problems.