The estimated cost of litigation is a substantial determining factor in whether a lawsuit will be pursued. If the amount of legal costs surpasses what would potentially be awarded in a case, the lawsuit would not be worth it. Commonly, a defendant will agree to pay the plaintiff an agreed-upon amount, known as a settlement, if that amount is less than what the estimated cost would be to defend against the plaintiff’s claims.
The list of litigation costs is long, and can be any number of necessities for trial prep, and the trial itself. For instance, it may be necessary to hire expert witnesses and pay the salaries of paralegals and other staff, as well as the fees of consultants, specialists, and private investigators. Other examples of litigation costs include but are not limited to:
- Attorney fees;
- Court fees;
- Copy fees;
- Deposition fees;
- Costs related to obtaining medical, government, and school records;
- Accident reconstruction fees; and/or
- Court reporter fees.
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Court costs may be awarded to either party. In the United States, the “American Rule,” says each party is responsible for their own costs. However, judges can order the losing side to pay for the prevailing party’s legal expenses. In England, the loser pays fees and costs.
In some jurisdictions, the prevailing party, meaning the winning side, will be awarded costs (separate from attorney’s fees) of the lawsuit for certain types of lawsuits. However, this amount may be capped, which means the prevailing party may have to cover a significant percentage of actual costs, driving down the amount of their net award.
Attorney’s fees are a large component of litigation costs, but are typically viewed separately from the costs that may be recovered by the prevailing party. In certain lawsuits, many states will allow recovery of attorney’s fees, or the court may grant a motion by the prevailing party for reimbursement of these fees. Otherwise, each side is usually responsible for their own attorney’s fees.
There are numerous specific exceptions to the American Rule that may be broken down into a few categories:
- Contracts: A contract specifies that the losing party pays litigation costs.
- Common Fund Doctrine: A legal principle commonly used in class-action lawsuits, which says attorney’s fees will be paid from a common fund, not directly from the plaintiff’s pockets.
- Statutes: Some states have enacted fee-shifting provisions that will award litigation costs to the prevailing party.
- Bad Faith Litigation: This applies to frivolous lawsuits.
- Compensatory Contempt: Applies when one party asks the judge to hold the other party in contempt.
Litigation costs vary, as do state laws. An experienced civil litigation attorney can provide further guidance on the specific legalities of litigation costs.