What Is The American Rule?

What Is The American Rule?

4 Min.

The American Rule states that in court cases, both the plaintiff and defendant must cover their legal expenses, regardless of who wins the case. This rule was implemented to prevent people from being deterred from filing a legitimate case due to the fear of having to pay for both sides' legal fees. In contrast, English common law dictates that the losing party must pay the legal fees of the winning party. However, a judge can deviate from the American Rule if both parties have previously agreed in a contract that the rule will not apply to their case.

Basics

In the United States justice system, the American Rule dictates that each party involved in a legal dispute is responsible for their attorney fees, irrespective of the case's outcome. This principle aims to ensure that plaintiffs are not discouraged from pursuing legal action due to high costs.

Conversely, a divergent approach prevails within jurisdictions adhering to English common law. According to this rule, the party that loses the case is obliged to cover the attorney fees of the prevailing party.

What Is The American Rule?

The American Rule serves as a protective measure to encourage individuals with valid lawsuits to pursue their claims without fear of financial burdens associated with legal fees. This approach is often seen as more favorable to plaintiffs than the English standard law system. While subject to some criticism, the underlying intention of the American Rule was to promote societal well-being.

The underlying rationale was that individuals should not be deprived of their right to seek justice merely due to economic disadvantages or concerns about the potential costs of an unsuccessful litigation process. Despite some opposition, there have been several unsuccessful attempts to replace the American Rule with the principle of English common law, wherein the losing party assumes responsibility for all court expenses incurred by both sides.

Exceptions to the American Rule: Flexibility in Legal Fees

The rigidity of the American Rule is tempered by various exceptions that vary depending on the state and the nature of the legal case. Several states, including California and Nevada, allow specific circumstances where deviations from the American Rule are permitted.

One such exception arises when a judge determines that the losing party has exhibited a lack of seriousness towards the law or legal proceedings. In such instances, the judge may order the losing side to bear the legal fees of the prevailing party. Examples of such behavior include initiating frivolous lawsuits, unnecessarily prolonging lost cases through the appeals process, or conducting a trial unprofessionally.

There are significant exceptions at the federal court level as well. In general, if a pre-existing contract between the parties mandates the payment of legal fees by one party to the other in the event of a dispute, the American Rule does not need to be enforced. Additionally, certain states permit the reimbursement of legal fees for cases involving government entities, anti-discrimination laws, consumer protection, or cases addressing matters of public interest. These exceptions recognize the financial limitations faced by plaintiffs in such cases and acknowledge the broader societal implications they often carry.

When a legal case is dismissed, the availability of seeking reimbursement for legal fees varies. A recent ruling by the Federal Circuit held that if both parties mutually move to dismiss a case with prejudice, one can still request attorney's fees. However, in cases where a single party voluntarily dismisses a complaint with prejudice, legal fees cannot be collected. In this context, "with prejudice" signifies that the plaintiff is barred from re-filing the same claim in that particular court.

Conclusion

The American Rule in the United States justice system ensures that both the plaintiff and defendant bear their own legal expenses, regardless of the case's outcome. Its purpose is to prevent individuals from being discouraged by the prospect of paying for both sides' legal fees and to facilitate access to justice. While the American Rule is generally regarded as more favorable to plaintiffs compared to English common law, it does have exceptions that provide flexibility in specific circumstances. These exceptions, varying from state to state, allow judges to deviate from the American Rule. Overall, the American Rule, while subject to criticism, strikes a balance between providing access to justice and avoiding unfair financial burdens on parties involved in legal disputes.

Common Law
American Rule
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