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The American Rule in litigation

For those that have not been a lawsuit or have been lucky in their past litigation experiences, they can be a little insensitive to the risks of going to the mattresses in the American legal system. A common assumption that many make when ignoring the risks of litigation is that if you win the lawsuit, not only do you get money for damages, but all costs, including your attorney’s fees, of the law suit. This is how it is in most common law countries in the world; however, in the United States, we have something called the American rule when it comes to attorneys fees.

Each party pays their own way whether win or lose, unless specified by statute or contract. The argument in favor of the American rule is that a party with less resources would not be discouraged from going against a party with a lot of resources in fear of having to pay both their own legal fees and the legal fees of a party that has a deep pocket to hire an expensive legal team. I’m sure there are better thought out arguments of support, but their is little doubt that without the American rule, there would be less litigation.  Most importantly, this adds an additional assessment as to the fact that even if you have a just and winning case, the attorneys fees may out weigh the benefits of winning, which is why attorneys always love those clients that are willing to fight for the principle of the matter instead of using a dry cost-benefit analysis.

Nasir Pasha, Esq.

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Managing attorney and co-host of podcast Legally Sound | Smart Business

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