Assessing the Effects of a 'Loser Pays' Rule on the American Legal System

Abstract

The purpose of this paper is to explore the possibility of reducing the incidence of abusive litigation in the United States through the adoption of a loser-pays rule. Part I of this paper reviews evidence of the high cost of the current system; summarizes the state of the debate between proponents and opponents of loser pays; and proposes standards for the evaluation of legal procedural reforms. Part II describes the current state of the legal marketplace and how some of its participants profit from abusing it. Part III summarizes the best theoretical research into what kinds of effects one could expect loser pays to have on litigation. Part IV builds on the hypotheses developed in Part III by examining evidence from overseas as well as from two important loser-pays experiments here in America. Part V explores the possibility of preserving access to justice for plaintiffs with strong lawsuits through a system of litigation insurance. Part VI offers a loser-pays reform proposal and guidelines for its implementation. Part VII concludes.