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Report: Loser-pay rule would curb frivolous lawsuits

By Chris Rizo | Dec 2, 2008

Marie Gryphon

NEW YORK (Legal Newsline)-Forcing losers in lawsuits to pay the winner would help stem the tide of frivolous lawsuits flooding many U.S. jurisdictions, a report released Tuesday said.

The report by the conservative Manhattan Institute -- "Greater Justice, Lower Cost: How a 'Loser Pays' Rule Would Improve the American Legal System" -- says making lawsuit losers pay the winner's legal expenses would add some equality to the U.S. legal landscape.

A so-called loser-pays system would reduce the number of low-merit lawsuits, encourage potential defendants to comply with the law and would deter "ordinary low-merit suits," the report said.

Although the number of low-merit lawsuits would likely slide under a loser-pay scheme, low-merit class action filings would not likely fall because the risk of enormous losses is the primary source of pressure on defendants to settle, the report said.

"A loser pays system could be an important part of a larger effort to reduce litigation cost, discourage meritless lawsuits, and better align tort law with its goal of deterring socially harmful conduct. The rest of the world uses the loser pays or 'English rule' system," the report said. "It's time the United States adopts one as well."

The report -- written by Marie Gryphon, a senior fellow at the Manhattan Institute's Center for Legal Policy -- found that the costs of tort litigation reached $247 billion in 2006, which represents $825 per person in the United States, and that U.S. tort costs are double the costs in Germany and more than three times the cost in France or Britain.

"Thoughtful reforms in state and federal law can bring our civil justice system into sync with the rest of the world by replacing the American rule for attorneys' fees with a loser-pays system," the report said.

Alaska is the only state that has a loser-pays rule, which is credited for keeping tort claims in the state to just 5 percent of litigation there, or half the national average.

Florida, between 1980 and 1985, had a loser-pays rule that applied exclusively to medical-malpractice cases. That law was ultimately jettisoned amid criticism.

"The integrity of our legal system is under assault. Establishing loser-pays rules and other tort reforms can help restore citizens' faith in the bedrock of society - justice, fairness and the rule of law," former New York Mayor Rudy Giuliani wrote in the report's forward.

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