This Independence Day: The American Rule vs. The English Rule

In July, we proudly celebrate all things America! Few American traditions are as important – and often unknown – to our clients as the American Rule (for attorney’s fees). In contrast with the English Rule, which provides that the losing party in litigation pays the prevailing party’s attorney’s fees, the American Rule says that each party in a lawsuit is responsible for paying its own attorney’s fees.

Why did our winner-takes-all culture come to adopt the American Rule? The concern was that people would refrain from pursuing meritorious claims for fear of having to pay the other party’s attorney’s fees if for some unforeseen reason they lost in court. Therefore, making each party responsible for their own attorney’s fees reduces exposure and makes people more willing to go to court – and nothing is more American than that, right? (On the other hand, some argue that the American Rule allows plaintiffs to threaten other parties with expensive lawsuits in order to force a favorable settlement.)

As with all things legal, there are exceptions to the American Rule: among other things, a provision in a contract or a statute may allow the prevailing party in a lawsuit to recover its attorney’s fees against the other party. Understanding each provision in your documents is imperative to properly analyze your rights and remedies as well as the potential consequences of taking legal action.

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