A Legal, Empirical, and Economic Analysis
New Horizons in Law and Economics series
Edited by Mark Tuil and Louis Visscher
Chapter 8: Financing Civil Litigation: The US Perspective
Deborah R. Hensler INTRODUCTION 1. Virtually every aspect of financing civil litigation in the United States differs from the European model, at least with regard to formal rules. In the US, in most civil litigation, each party is responsible for its own legal fees and expenses, without regard to the outcome of the litigation. Consistent with this principle, in most instances how the lawyer’s fee is calculated is a matter of private contract between lawyer and client. Attorneys may represent clients on a contingency fee basis, on a flat fee basis, on an hourly rate plus expenses basis, or on any other basis that the lawyer and client contract for. Normally, in tort claims for money damages and in contract and other claims where there is a potential for tort-like damages, plaintiffs are represented by lawyers on a contingency fee basis. There are exceptions to these rules: in some categories of private civil litigation statutes specify fee arrangements, and in class actions and some other forms of group litigation judges decide the amount of fees to be awarded to attorneys who represent the class or group. The origin of the American fee rule is unclear (Leubsdorf 1984). Notwithstanding the general rule, there are circumstances in which courts impose the winner’s costs on the loser, commonly termed ‘fee shifting’. A survey of state law conducted in the mid-1980s found almost 2000 state statutes mandating or authorizing one-way fee-shifting when plaintiffs prevail (Note 1984). According to the Federal Judicial Center, by the...
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