‘Loser-pays Has Yet to Be Properly Tried in America’

If you missed it, The Economist has a useful contribution on the renewed interest among many Americans in adopting the loser-pays principle in civil litigation, which most countries around the world have long embraced in light of its fairness and practicality. I’ve been writing in favor of the idea since my first book, The Litigation Explosion (more links here) and Cato has spotlighted Marie Gryphon’s important recent work on the topic. Mississippi governor-elect Phil Bryant “has already expressed support” for the concept, according to this recent report in the Jackson Clarion-Ledger.

Despite strong interest in liability reform over the past two decades, no state has joined Alaska (which has had the principle since territorial days) in adopting an across-the-board loser-pays principle. Why is that? The opposition of some plaintiff’s lawyers and legal academics is hardly a full explanation. The fact is that loser-pays reform remains perpetually sidelined because much of organized big business quietly or not-so-quietly opposes it. In fact, some D.C.-based business lobbyists even roam the country attempting to squelch outbursts of enthusiasm for loser-pays among state legislators and others close to the grass roots.

Why are these businesses opposed? Some fear that any new set of rules will be interpreted to their disfavor, or prefer not to rock the boat for fear of unpredictable consequences; others delegate the issue to outside lawyers who may see the issue through the lens of their own professional biases; and yet other businesses recognize and (as perennial defendants) fear the tendency of loser-pays systems to vindicate many strong small plaintiff’s claims better than does our current system. With an open public debate and careful drafting of reform proposals, I think most of these fears would be assuaged: for example, most big American firms also operate in Canada, Europe, and other countries where loser-pays is accepted as a normal feature of the legal landscape. In the mean time, I wish someone would organize a group called “Business Leaders for Loser-Pays.”