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The American rule in law means each party is responsible for their own attorneys’ fees, unlike the English rule where the losing party pays. Some exceptions exist, but the American rule is controversial. Opponents argue it encourages frivolous lawsuits, while proponents say it prevents intimidation of plaintiffs with limited assets. Both sides agree that defendants may still weigh the costs of defending a case against the likelihood of success.
American Rule is a concept in American law that requires that in most civil cases, each party is responsible for its own attorneys’ fees. The American rule is a controversial issue, and the nature of the controversy is best understood by understanding the rule it replaced: the English, or loser pays, rule. In any case brought under English rule, the prevailing party has legal costs paid by the losing party. This has been seen as stacking the deck against a poor plaintiff, who may have a good enough case, but may not be willing to bet on a win in court. If a plaintiff is afraid to sue due to limited assets that would be destroyed in the event of a loss, justice has effectively been denied.
The American rule is a predefined standard, canceled in some cases by law. One such exception is that insurance companies that lose “bad faith” lawsuits brought against them by policyholders may be required to pay the policyholder’s attorneys’ fees as a component of the premium. Additionally, some California plaintiffs who prevail in lawsuits brought in some areas of consumer law may be able to recover attorneys’ fees. In most cases at the national level, however, each litigant pays its own legal costs.
There are many who oppose the American rule, arguing that it encourages people to bring frivolous lawsuits, secure in the knowledge that the only costs they will have to pay are those over which they have complete control. A defendant, however, must defend himself even from the most frivolous causes, incurring expenses that can never be recovered. Certain claims can also be very expensive to defend, and are often said to be legal attempts to coerce defendants into offering generous settlements just to keep a case out of court. Any lawsuit with a potentially large award, such as product liability, medical malpractice, or civil rights violations, could be so expensive to defend that a defendant might consider paying a settlement to have the case dismissed even if they have no merit.
Proponents of the American rule say that if plaintiffs have to consider the financial consequences of a possible loss to a defendant for which cost is not the object, they could be intimidated into avoiding even the most meritorious of cases for fear of potentially crippling costs. thus defeating the cause of justice. They argue that a large corporation, for example, faced with a lawsuit that it has a 50/50 chance of winning, could help the odds by threatening to incur legal fees so high that the plaintiff would be financially ruined if the defendant wins the case. Furthermore, they point out that no matter which rule is followed, there will always be defendants who weigh the likelihood of success in court against the costs incurred, and may “buy” a plaintiff to save on court costs even if the chances of winning are good.
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