American rule

In the field of law and economics, the American rule (capitalized as American Rule in some jurisdictions) is a rule controlling assessment of attorneys' fees arising out of litigation. The American rule provides that each party is responsible for paying its own attorney's fees,^[1] unless specific authority granted by statute or contract allows the assessment of those fees against the other party. Under the American rule every party — even the party prevailing — must pay its own attorneys' fees. The American rule contrasts with the English rule, under which the losing party pays the prevailing party's attorneys' fees.

Exceptions

The American rule is merely a default rule, not the blanket rule in the United States. Numerous statutes at both the federal and state levels allow the winner to recover reasonable attorney's fees, and there are two major exceptions in federal case law as well.^[2]

Many states also have exceptions to the American rule in both statutes and case law. For example, in California, the Consumer Legal Remedies Act allows plaintiffs to recover attorney's fees,^[3] and in insurance bad faith cases, a policyholder may be able to recover attorney's fees as a separate component of damages.^[4]

Rationale

The rationale for the American rule is that people should not be discouraged from seeking redress for perceived wrongs in court or from trying to extend coverage of the law. The rationale continues that society would suffer if a person was unwilling to pursue a meritorious claim merely because that person would have to pay the defendant's expenses if they lost. However, if society suffers when meritorious claims are thwarted, the American Rule can work against this goal simply by the sheer cost involved in seeking redress through the courts, regardless of the merits of the petition.

References

1. ^ Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240 (1975).
2. ^ Henry Cohen, "Awards of Attorneys' Fees by Federal Courts and Federal Agencies," in Awards of Attorneys Fees by Federal Courts, Federal Agencies and Selected Foreign Findings, ed. Mary V. Capisio, 1-134 (Hauppauge, NY: Nova Science Publishers, 2003), 1-3.
3. ^ See California Civil Code Section 1780(e).
4. ^ Brandt v. Superior Court, 37 Cal. 3d 813 (1985).

External links

• Walter Olson, "Loser Pays"
• LectLaw Definition

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