The Cost of Litigation

dollars1a.jpgThe NY Times has an interesting article about defamation law involving a lawsuit by a judge against a newspaper for libel. The article noted some interesting facts about the nature and cost of defamation litigation:

The [Medial Law Resource Center] said judges win at trial at about the same rate — 60 percent — as anyone else who takes a news organization to court. But of those that are appealed involving public officials, the media win about 68 percent of the time.

The reason, experts said, is that appellate courts tend to be less susceptible to emotional arguments than juries and more attuned to the legal standard of malice as it applies to public officials, including judges.

Still, during the last several years, the center said, the media have appealed a smaller percentage of cases. In the 1980s, news organizations appealed about 87 percent of the verdicts against them; since 2000, they have appealed 76 percent.

“The media tend to win, but it can be expensive to litigate because you aren’t vindicated until appeal,” Mr. Dodell said. He said that 60 percent to 80 percent of the dollars his company paid out went to defense expenses, not awards.

I am one who believes that the media should be responsible when it defames people or invades their privacy, but the last paragraph in the excerpt above is quite alarming. One of the primary problems with our legal system is its extravagent cost, and the problem is only getting worse. The problem is caused in large part by lawyers, who command extremely high hourly rates. Litigating a case is increasingly a big production, almost like producing a small movie.

One possible solution is eliminating the so-called “American rule” for litigation costs, which holds generally that each side bears its own costs. In other countries, the loser pays. Proponents of a loser pays rule argue that it will weed out frivolous lawsuits brought solely to intimidate defendants to settle rather than expend massive litigation costs. Critics of shifting to loser pays argue that such a rule would seriously deter many legitimate tort cases, as large organizations can run up litigation costs and make the risk-to-reward likelihood in a case too unfavorable for anybody to litigate. In other words, a loser pays rule might result in too few worthy cases being brought. In contrast, the American rule doesn’t overly discourage litigation, and it forces the parties to try to resolve the case themselves. But the incentive is to settle quickly regardless of who’s in the right because of the enormous potential litigation costs. Changing the American rule to loser pays still will not address the problem that we have an extremely overpriced dispute resolution system.

The great value of our legal system is that it allows people the opportunity to present their side of the story and to be heard. But that takes time and often a lot of attorney labor, which is why it is so expensive. I believe that at some point, our legal system must evolve to address the problem of cost, as the litigation process itself is becoming worse than losing the case. Is there a viable solution?

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6 Responses

  1. Bruce Boyden says:

    “One of the primary problems with our legal system is its extravagent cost, and the problem is only getting worse. The problem is caused in large part by lawyers, who command extremely high hourly rates.”

    I agree entirely with the first sentence, but not the second sentence. How is the problem caused by lawyers? If anything, the problem is that there are too *few* qualified lawyers; if there were more, the price would come down.

  2. Eric Goldman says:

    I wonder how anti-SLAPP laws change the discussion? Perhaps now there are enough of them that some empirical comparisons between anti-SLAPP states and others could be made. In any case, anti-SLAPP offers a nice compromise–some loser-pays aspects without changing the attorneys fee rule across-the-board. Eric.

  3. Howard Wasserman says:

    I would be curious if there is a difference between trial-court success in state court (where the large majority of cases are brought) and federal court (where cases are brought should diversity exist). Are federal juries less susceptible to emotion and more attuned to the concept of malice than state juries? Do defendants prevail more in federal than in state court?

    If so, one of the culprits in the high cost borne by media defendants is the “Well-Pleaded Complaint Rule,” under which state-law libel cases remain in state court, even though the media has a strong First Amendment defense.

  4. conrad erb says:

    If we wish to reduce the costs of seeking justice in the courts, could I suggest that we examine the current system of legal training? I’m not a lawyer, but my impression speaking to lawyers is that for most, the process of becoming a lawyer has little to do with acquiring the practical skills of lawyering.

    I am told that the LSAT has little to do with practice. The law classes themselves are mostly focused on the academic aspects of the law, and often not so applicable to the day-in and day-out of being a lawyer.

    I am told that the bar exam is similar to practicing a whole week of law with multiple clients across multiple issues, without ever cracking open a book to make sure that you understanding of the law is correct (something that most attorneys wouldn’t do until they are much more experienced – if at all).

    Finally, I have heard some lawyers complain that

    the real education of the young lawyer comes during their first few years on the job – and guess what? It is their clients that foot the bill and subsidize the hands-on training that the lawyers receive.

    I’m all for affordable justice, however, it seems to me that lawyers’ high hourly fees are the symptom of a greater problem, which is a training process that does not encourage people who wish to master the practical skills of being a lawyer.

  5. ray fuller says:

    Anti-SLAPP statutes, especially in the California courts, are horribly abused by large corporate defendants to protect themselves from tortious misconduct. In the name of protecting the corporation’s right to petition for redress of grievances, the intent of the statute to protect the little guy is turned upside down to totally deprive him of any right to petition for redress of grievances via lawsuit. Before discovery can even be commenced, without benefit of any trial, the lawsuit is thrown out for infringing upon the constitutional rights of corporate wrongdoers. Insult is added to injury by awarding costs and attorney fees to miscreant corporations, whose litigation expenses are funded by their insurance companies (and who employ expensive big law firm counsel). Everyone should be entitled to his day in court. Anti-SLAPP statutes are abused in California courts shamefully, and strategically.

  6. Ned Ulbricht says:

    So what exactly was the problem with settling affairs of honor by personal duels?

    Or is it just that ink-stained newspaper-scribbling wretches are not gentlemen?