Stoner Law Reform: Fee-Shifting

Cross-posted from PrawfsBlawg

This week, I’m going to post some stoner law-reform proposals. Sometimes, you need to remove your own common sense to imagine how the world might be different. And what better way to do that than stoner logic?

First up, consider fee-shifting. Critics complain, and rightly so, that the American rule of each side bearing its own costs is bad for plaintiffs with good claims. They may find it too expensive to vindicate their rights. But while we’ve picked up a variety of fee-shifting statutes here and there, we’ve stubbornly resisted the English rule, in which the losing party must pay for the winning party’s lawyers. Critics complain, and rightly so, that the English rule encourages overspending and can put unbearable pressure on parties facing a well-financed opponent.

I asked my inner stoner, and he said, “What if the loser pays its own fees to the winner?” In essence, this rule means that the loser ends up paying double its attorneys fees: once to its own lawyers, and once to the winner. The English rule tries to make the plaintiff whole. But that’s really hard to get right and it creates weird incentives. A stoner would rather just charge the loser what it paid, call it close enough, and order some pizza.

I think he might have a point. Where the parties are equally matched and spending evenly, loser-pays-double rule is ex post equivalent to the English rule. But ex ante, it dials up the incentive to get the lawsuit done cheaply. Where the parties are mismatched, loser-pays-double looks even better. A pro se party up against a behemoth faces no risk of a crushing fee award. Its wealthy opponent knows that every dollar spent on intimidation only increases the little guy’s potential payday. Loser-pays-double also answers the criticism that the English rule can result in wholly disproportionate fee awards: a party’s potential fee payout is never more again than it has already spent.

Crazy, or so crazy it might just work?

Loser pays his own fees is a fantastic idea. Perfect in my opinion. The devil is in the details, and practicality asks a question. This would also create an incentive for double accounting books, meaning, say, unspoken understandings between one well-heeled party and his lawyer. Retainer bonuses, annual incentive bonus payments, call it anything else but lawyers’ fees. But smart minds might be able to apply this well… Make it triple fines if you’re caught fudging..