
Loser-Pays makes lawsuits fairer in Europe. It could work in US, too - mhb
http://reason.com/archives/1995/06/01/civil-suits
======
grellas
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.

~~~
SoftwareMaven
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.

~~~
joe_the_user
"this is anecdotal _at best_ "

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.

~~~
ZeroGravitas
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!"_

~~~
jbooth
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.

------
jessriedel
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?)

~~~
Silhouette
> 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.

~~~
irons
_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.

~~~
msbarnett
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.

~~~
bokonist
_You'd ultimately need to de-politicize the entire branch of government._

You mean de-democratize the entire branch of government?

~~~
kemayo
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?

~~~
bokonist
I'm not disagreeing with the argument of OP, just the language.

Isn't your comment a general indictment of American democracy in general? Why
have an elected congress making policies then?

~~~
Andrew_Quentin
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.

------
tzs
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.

~~~
yummyfajitas
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.

~~~
jessriedel
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?

~~~
mhb
_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?

~~~
jessriedel
I was saying existing system.

------
drblast
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.

~~~
notahacker
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)

~~~
drblast
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.

~~~
notahacker
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.

~~~
drblast
That would necessitate some sort of minimum wage law for people doing legal
work.

A solvable problem, I think. If I have to pay myself $50 an hour to represent
my cause, it only hurts me if my cause isn't legitimate.

Or maybe set some threshold for legal expenses; the system could work as it
does now up to a maximum, then a pay pool is implemented.

------
annajohnson
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.

------
blahedo
...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?

------
protomyth
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.

------
stretchwithme
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.

------
jrockway
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.

~~~
koenigdavidmj
The government, being sovereign, cannot be sued except by its own consent.

------
redwoods
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.

------
shasta
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?

------
mayutana
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.

------
tsotha
Oh, of course it could work in the US. But it will never happen - national and
state bar associations have far too much political clout.

------
loewenskind
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!

------
bugsy
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.

------
nimblegorilla
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.

------
fauigerzigerk
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.

------
shib71
Doesn't the US already have a form of this, in that losers are sometimes
required to pay their opponents' litigation fees?

~~~
gte910h
Only if it can be shown to be an abusive case.

~~~
Groxx
Any chance this might be considered one?

(I don't know the specifics of what an "abusive case" is)

------
Uchikoma
Funny. Europeans talking about the US system they only know from TV. Americans
talking about the European system they only know from TV - if even.

------
jpr
And here I had always thought that loser-pays was a universal rule. This
explains almost everything that is crazy about US.

