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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

by grellas 16y ago

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 16y ago
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 16y ago
  "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 16y ago
    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 16y ago
      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.
- sgift 16y ago
  > 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.
  - Calamitous 16y ago
    > Loser-Pay makes it easier for companies to screw people over. And this is not the case now?
deleted 16y ago
[deleted]
CamperBob 16y ago
It sounds like the problem wasn't related in the slightest to a loser-pays system, but to the insane rule requiring the posting of a bond before access to the appeals process was granted. IANAL; is this common?
Silhouette 16y ago
> 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.
- deleted 16y ago
  [deleted]
- jbooth 16y ago
  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.
  - Silhouette 16y ago
    > 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.
IgorPartola 16y ago
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.
- grellas 16y ago
  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.
WalterBright 16y ago
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.
rudin 16y ago
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.

by grellas 16y ago

SoftwareMaven 16y ago

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 16y ago
"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 16y ago
  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 16y ago
    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.
sgift 16y ago
> 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.
- Calamitous 16y ago
  > Loser-Pay makes it easier for companies to screw people over. And this is not the case now?

deleted 16y ago

[deleted]

CamperBob 16y ago

It sounds like the problem wasn't related in the slightest to a loser-pays system, but to the insane rule requiring the posting of a bond before access to the appeals process was granted. IANAL; is this common?

Silhouette 16y ago

> 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.

deleted 16y ago
[deleted]
jbooth 16y ago
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.
- Silhouette 16y ago
  > 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.

IgorPartola 16y ago

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.

grellas 16y ago
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.

WalterBright 16y ago

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.

rudin 16y ago

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.