Loser-Pays Principle in Lawsuits

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In most cases each side pays its own attorney fees and costs; however in a few cases, the loser pays the wining side’s attorney fees. These exceptions are provided by statute or by agreement. The rationale of this is that people, who might become liable for the other side’s attorney fees, less frequently would abuse the system by bringing frivolous lawsuits.

What Does One-Way and Two-Way Loser-Pays Mean?

A one-way system means that only the plaintiff can be liable for the defendant’s costs. A two-way system means that the one that loses is liable for the other’s costs.

What Is an “Offer-of Settlement” System?

Some states have enacted an offer-of settlement system. This type of system means that some costs are paid by the opposing party if they have turned down an offered settlement and then does worse at trial.

What Does the Loser-Pays Principle Mean?

If there is a good chance the client will win and it is possible by a statute, the attorney might agree to take the case on an attorney fee award basis. This means that the lawyer charges an hourly fee but does not collect it from the client. Instead the court orders the losing side to pay the winning sides attorney fees. If the client doesn’t win, he/she pays no lawyer fees or costs.

Do Some Lawyers Charge an Hourly Fee Anyway?

Sometimes the lawyer modifies this all or nothing approach by having the client pay a small hourly fee and litigation costs along the way.

Does the Judge Have a Say in How Large the Attorney Award is?

Even though some statutes include a provision for an award of attorney fees, judges can refuse to award them or significantly reduce them.

What are the Situations when the Losing Side Pays?

There are three cases where the losing side generally may be required to pay the winner’s legal fees. This depends on the state if it’s not a federal issue:

  • Family law matters, challenges to a will or trust or certain real estate disputes. These are certain types of cases where some state law requires the loser to pay the winner’s attorney’s fees.
  • If a contract specifically states that the losing side pays the winning side’s legal fees in a breach of contract suit.
  • Cases that involves violations of state or federal laws, where the law itself requires the loser to pay the other side’s legal fees. These cases are lawsuits against a government entity or a business or organization for violation of privacy, safety or anti-discrimination laws. This is the case in certain civil rights laws and environmental protection laws.

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