Academic journal article Vanderbilt Law Review

Fee Shifting and the Free Market

Academic journal article Vanderbilt Law Review

Fee Shifting and the Free Market

Article excerpt

I. INTRODUCTION

It is uncontroversial that litigation is too expensive. Controversy abounds, however, over who is to blame and what is to be done about the problem. Plaintiffs and defendants each accuse the other of pursuing weak or meritless litigation positions that inflict needless expense. This Article suggests that regardless of who is correct-and who is more often at fault-the same set of solutions may be available to assuage the problem. The Article embraces a combination of procedural reforms and market mechanisms designed to improve matters for both sides and to make it less likely that a party with a meritorious litigation position will fall victim to an adversary's sharp tactics. Specifically, I embrace an English-style approach, one which combines a loser-pays, fee-shifting regime with a market-based, riskallocation mechanism designed to counterbalance the evils of fee shifting and to protect risk-averse litigants against losing a meritorious case and being forced to bear their opponents' legal fees as well as their own.

Although I suggest a single set of reforms to address the problems identified by plaintiffs and defendants alike, it is important to acknowledge at the outset that different constituencies view the problem from very different perspectives and tend to favor very different solutions. First, consider the perspective of corporate defendants. Corporate America is perhaps the most vocal critic of litigation expense-understandably so, given that large, deep-pocketed businesses so often are targeted as defendants and bear a disproportionate share of litigation's burdens. Corporate defendants blame plaintiffs for litigation's inordinate expense, observing that it is plaintiffs who choose to initiate litigation, imposing significant burdens on American businesses. Corporate America's prescription is to make it more difficult for plaintiffs to pursue those suits. Defendants seek to erect additional hurdles to the filing of new lawsuits-embracing heightened pleading standards, greater use of motions to dismiss and summary judgment, and fee shifting for weak or meritless cases. Corporate defendants' goal is, at bottom, to reduce the number of lawsuits they face and to make litigation more difficult for plaintiffs to initiate.

But plaintiffs-and not just individuals, but also small companies in business disputes-place the blame elsewhere. If litigation is too expensive, they argue, it is because corporate defendants purposely make it expensive in order to render litigation prohibitively burdensome for cash-strapped plaintiffs. Imbalances in litigant resources can dramatically affect the litigation process, enabling the stronger party to obtain a better outcome than the merits warrant and depriving the weaker party of a fair and just result. Defendants can exploit these imbalances to force plaintiffs to settle for too little or to give up a case. Given that defendants already impose significant burdens on plaintiffs-by doing everything they can to escalate expense and delay justice-any effort to erect new, additional hurdles against the filing of lawsuits would only aggravate the problem from plaintiffs' perspective. Plaintiffs thus embrace reforms that would level the playing field, streamline their path to recovery, and make it easier, not harder, to pursue their claims. Plaintiffs support fee shifting, provided it is one-way fee shifting in favor of prevailing plaintiffs, as is found in civil rights and antitrust actions.

Finally, courts blame plaintiffs and defendants alike for excessive litigation. It may sometimes be the plaintiffs' fault for filing suits or the defendants' fault for escalating them, but either way, courts bear part of the burden. From a court's perspective, plaintiffs should file fewer suits, defendants should defend suits less vigorously, and parties should resolve their disputes peacefully in a manner that conserves judicial resources. Although defendants would like courts to punish plaintiffs for pursuing weak claims, and plaintiffs would like courts to punish defendants for resisting strong claims, courts lack the resources to do either effectively. …

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