In the field of law and economics

Law and economics

The economic analysis of law is an analysis of law applying methods of economics. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated.-Relationship to other disciplines and...

, the American rule (capitalized as American Rule in some jurisdictions) is a rule controlling assessment of attorneys' fees arising out of litigation. The American rule provides that each party is responsible for paying its own attorney's fees, unless specific authority granted by statute

Statute

A statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...

 or contract

Contract

A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 allows the assessment of those fees against the other party. Under the American rule every party — even the party prevailing — must pay its own attorneys' fees. The American rule contrasts with the English rule, under which the losing party pays the prevailing party's attorneys' fees.

Exceptions

The American rule is merely a default rule, not the blanket rule in the United States. Numerous statutes at both the federal and state levels allow the winner to recover reasonable attorney's fees, and there are two major exceptions in federal case law as well.

Many states also have exceptions to the American rule in both statutes and case law. For example, in California

California

California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

, the Consumers Legal Remedies Act allows plaintiffs to recover attorney's fees, and in insurance bad faith

Insurance bad faith

Insurance bad faith is a legal term of art that describes a tort claim that an insured person may have against an insurance company for its bad acts. Under the law of most jurisdictions in the United States, insurance companies owe a duty of good faith and fair dealing to the persons they insure...

 cases, a policyholder may be able to recover attorney's fees as a separate component of damages. Nevada Rule of Civil Procedure 68 is unique in that a party who declines an pretrial offer of judgment (essentially a settlement offer) and fails to obtain a better result at trial is liable for all reasonable attorney's fees and costs incurred by the offeror after the time the offer was given.

Rationale

The rationale for the American rule is that people should not be discouraged from seeking redress for perceived wrongs in court or from trying to extend coverage of the law. The rationale continues that society would suffer if a person was unwilling to pursue a meritorious claim merely because that person would have to pay the defendant

Defendant

A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...

's expenses if they lost.

External links

• Walter Olson
  Walter Olson
  Walter K. Olson is an author and blogger who writes mostly about tort reform. Olson is a senior fellow of the Cato Institute, a libertarian think tank in Washington DC. Formerly Olson was associated with the Manhattan Institute in New York City...
  
  , "Loser Pays"
• LectLaw Definition