‘Loser pays’ may cost too much

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A letter to the editor expressed chagrin at the Idaho Legislature’s hesitation to implement a “loser pays” approach to attorney fees in civil lawsuits. Yes, it could discourage certain frivolous filings. Those who might sue “deep pockets” in so-called nuisance suits, betting on a fat settlement check, for example. Or those who sue, or aggressively defend a just accusation, knowing the other side can’t afford to continue.

Sounds good, doesn’t it? The U.K., Canada, and other nations have some kind of loser-pays system. Why don’t we? Is it corruption or greed, as some suggest, that keeps us from it?

When I started law school it made sense enough. But the more I experienced real-life cases as a student law-clerk, and later as a new attorney, my perspective changed. I saw meritorious claims brought in good faith who lost nonetheless. These weren’t necessarily “technicalities” or bad law. Proving a case is complex; not everything is witnessed, witnesses can be unreliable, and needed proof simply isn’t always there.

Legal experts who’ve thoroughly researched it say our rules of procedure that govern litigation, not merely who pays, would need changing to make things fair. That’s difficult without a uniform system; ours varies by applicable state and federal laws, court rules, and by type of claim. Some types of cases already allow a statutory award for attorney fees, although they can still be hard to get. Texas takes a different approach, with something like a settlement offer requirement, and a more advanced alternative dispute resolution system.

There is no easy answer, no perfectly fair solution. The arguments for a loser-pay system are obvious — that knowing the law or justice isn’t on your side would discourage you from suing. But there’s also a fairness argument against loser-pays.

Consider medical malpractice and injury suits, only because they tend to be high-stakes examples.

Say you’re a paycheck-to-paycheck working stiff who got hurt. Workers comp doesn’t apply, so your funds are low. You had an operation, and something went wrong — that’s all you needed, an ongoing medical problem on top of income loss. Hopefully you’re at least insured; the hospital sure is.

Suits involving medical issues tend to be very expensive for everyone, because they’re complex and difficult to prove as well as defend. It takes time to gather records and other evidence, and to deal with multiple layers of providers, witnesses, hospital, corporate legal departments, and malpractice insurance companies. Experts are needed to lay out professional standards of practice, to measure what happened against reasonable expectations. Those highly qualified experts don’t analyze, travel, and testify for free.

Generally, the plaintiff’s attorneys in such suits aren’t the big concern, because they work on contingency fees — pay them if you win. But other expenses rack up, costing an average $25,000 to $100,000. Even when the “wrong” seems evident, it’s still hard to prove, so even non-frivolous litigants can lose.

So say it’s a meritorious claim, but you stand a good chance practically speaking of losing anyway, in which case you’d pay not only your costs, but the other side’s costs plus their attorney fees in a loser-pays system. Tens of thousands if you’re lucky, probably six digits, especially if this dragged on for years. How would the average person afford that, let alone the poor?

A loser-pays system may (but not necessarily) discourage the frivolous, but it can also discourage the non-wealthy from risking the potential expense of a worthy claim. What we feel is right or just, and what we can prove in court don’t always fall in line. Such a system thus makes both sides risk-averse, as some experiments with it apparently indicate.

In that sense, “loser pays” is effectively unequal, a higher risk for lower incomes than for the wealthy. It also assumes the loser actually has the funds to pay a judgment; enough judgments are uncollectable now. Loser-pays doesn’t necessarily mean low litigation rates; Germany and the U.K. have two of the highest in the world (as do we).

Whatever fix we eventually find, it will have to involve a culture shift.

Some lawsuits are based on extreme, dangerous, or true-need situations. However, more than we’d care to admit, much of what remains is optional. Americans have, we must admit, a mentality that any “wrong” must be paid for in cash. Why? Beyond expense, lawsuits are extremely stressful and keep litigants rooted in anger or vengeance. Just because we can doesn’t always mean we should.

And if you blame lawyers, you should know we’re not alone in responsibility. In my limited practice experience, most attorneys I knew were happy to reduce overwhelming caseloads, even if their clients weren’t. More often than not when we encouraged a client not to sue or to settle, based upon the law and likely outcome, typically the answer was a form of outrage — “Forget it; I’m going to make him pay!”

Whatever the rules, that is something outside the system which all of us can control — ourselves, and our ethical use of it.

• • •

Sholeh Patrick, J.D. is a columnist for the Hagadone News Network. Contact her at Sholeh@cdapress.com.

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