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Arguments For/Against Loser-Pays

Justinian Lane, a frequent writer in opposition to tort reform, wrote an extended column opposing the loser-pays rule here. I responded on my own site, and the debate has since exploded on the comments pages of Lane's other site.

The heart of Lane's original argument was that enacting a civil loser-pays rule would require the simultaneous adoption of a criminal loser-pays rule. Lane's proposed criminal rule would require the state to reimburse the attorneys' fees of a vindicated criminal defendant.

That argument, I believe, mis-reads not only the intention of loser-pays advocates but also conflates several factual and theoretical points that support the civil loser-pays rule.

In particular:

Rule 68 of the Federal Rules of Civil Procedure contemplates the shifting of "costs" (defined to include filing fees, court reporter fees, copying charges and similar administrative expenses -- but not attorneys' fees) in situations where a litigant refuses an offered judgment and subsequently obtains less at trial. This "slimmed down" version of the offer-of-judgment rule has existed for decades without any similar corollary in criminal procedure and without anyone ever complaining of its "fairness."

Several states have "modified" offer-of-judgment rules that allow a plaintiff to recover pre-judgment interest if a defendant declines an offer of judgment and if the plaintiff subsequently recovers more than the offer. (While these kind of early offer rules shift costs unilaterally to plaintiffs and never to defendants, they adopt some of the theoretical rationales for the generic loser-pays rule).

A handful of states, including Alaska, Florida, Texas, Oklahoma and Georgia have some variety of a loser-pays in the form of an offer-of-judgment rule. (Georgia's 2005 S.B. 3 is the best and most recent example). These variants allow a prevailing party to collect its attorneys' fees if the losing party declined an offered judgment for less than the amount ultimately obtained by the prevailing party. In none of the debates preceding enactment of these rules was the absence of a criminal corollary rule proposed as a reason to oppose the measure.

Alaska also has a pure loser-pays rule in civil cases built into its state constitution (although the Alaska loser-pays rule has been eroded by statute so that succesful defendants can recover at most only a small fraction of their defense costs).



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.