Should Prevailing Parties in Litigation Recover Attorney's Fees?

 Parties who prevail in litigation throughout the US are generally not entitled to recover costs and attorneys fees, unless provided by contract or statute. The prohibition against the recovery of costs and attorneys fees by the prevailing party is commonly known as the “American Rule”.  The rationale behind the American Rule  being parties would be prohibited from filing valid lawsuits, if faced with the threat of paying the other sides fees. The American Rule is consistently and historically championed by the Plaintiff's bar who seek shelter for asserting tort claims. 

In stark contrast, most every other country applying the western rules of law entitle the prevailing party to recover all reasonable costs and attorneys fees.  The recovery of costs and attorneys fees by the prevailing party outside of the United States is commonly known as the "English Rule" .  The rationale behind the “English Rule” is to persuade parties from asserting bogus claims and filing frivolous lawsuits that clog the Courts.  [See, “Can Anyone can Sue Anyone for Anything in the United States?" posted 3/13/24]. Like everything else nowadays, there are numerous arguments both for and against the application of either Rule.   

Advocates supporting the “English Rule” have offered a variety of justifications for its adoption. 

First, the “English Rule” deters frivolous lawsuits, unless the invalid claims are asserted by a party who is judgment-proof.  Second, the “English Rule” incentivizes both sides to minimize fees and expenses, since either could be responsible for all costs and fees for both.  Third, the “English Rule” focuses both sides upon the early negotiation and settlement of disputes.  Fourth, the “English Rule” encourages parties to pursue valid claims through litigation, since they will recover their fees.   

Advocates of the “American Rule”, namely plaintiff's attorneys, frequently offer criticisms of the “English Rule” as opposed to justifications of their own selection.  First,  the “English Rule” would deter valid claims, because most plaintiff's are risk adverse.  Second, the “English Rule” would cause an increase in costs and legal fees because litigants would fear the costs of losing a lawsuit.  Third, the “English Rule” prevents early negotiation and settlement, because plaintiff's are overly optimistic as  to the validity of their positions.  It should be noted that the biggest proponent of the “American Rule” are Plaintiff's attorneys who take tort cases on a contingency.

Regardless of which rule is advocated, one thing is very clear - litigants are concerned over the costs and attorneys fees associated with litigation.  Statistically speaking, most parties negotiating contracts performed within the US,  (± 60%) seek to alter the "American Rule" using fee shifting clause in their contracts.  This suggests a general disapproval of the “American Rule”.   Most parties opting out of the “American Rule” adopt the “English Rule”, while a minority adopt rules falling somewhere between the two.  However, such disapproval does not appear to extend to reliance upon the judicial system.  Very few contracting parties select arbitration over litigation (±10%).  And those selecting litigation, seldom exclude trial by jury  (±20%).  

Parties negotiating contracts have the ability to do nothing with respect to the recovery of costs and attorneys fees, in which case the  “American Rule” would apply.  Or, parties can select the “English Rule” or some variation thereof, by specifying terms governing the recovery of costs and attorneys fees.  Of course, this option is available to contracting parties who negotiate the terms of their relationship.  The problem is that the vast majority of lawsuits flooding our courts are based upon tort claims asserted between individuals or entities whom have no form of contractual relationship.  Consequently, the debate of whether the prevailing party is entitled to recover its attorneys fees will continue to rage on!