American Rule

legal fees

In the field of law and economics, the American rule 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 specified otherwise by statute or contract. It contrasts with the English rule, under which the losing party pays the prevailing party’s attorneys’ fees. 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’s expenses if they lost.

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, the Consumers Legal Remedies Act allows plaintiffs to recover attorney’s fees, and in insurance bad faith cases, a policyholder may be able to recover attorney’s fees as a separate component of damages.

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