I’ve written about the Anglo-Canadian “Loser Pays” Rule for costs indemnification here and here.
The American Rule is considered by Maureen Cosgrove at Jurist-Paper Chase who reports on “Supreme Court rules party must pay fees for frivolous claims alone“ discussing today’s decision in Fox v. Vice , 563 U. S. ____ (2011) (U.S.S.C.).
Fox claimed that he was the victim of dirty tricks during his successful campaign to become the police chief of Vinton, La., and filed a state-court suit against Vice, the incumbent chief, and the town. Fox’s suit asserted both state-law claims, including defamation, and federal civil rights claims under 42 U. S. C.§1983, including interference with Fox’s right to seek public office. Vice removed the case to federal court based on the §1983 claims. Following discovery, Vice moved for summary judgment on the federal claims, which Fox conceded were invalid.
The District Court dismissed the frivolous claims with prejudice and remanded the remaining claims to state court, noting that Vice’s attorneys’ work could be useful in the state-court proceedings. Vice then asked the federal court for attorney’s fees under §1988, submitting attorney billing records (dockets) estimating time spent on the entire suit, without distinguishing time spent between the dismissed federal claims and the remnant state claims. The court granted the motion on the ground that Fox’s federal claims were frivolous, awarding Fox all of his attorneys’ fees in the suit. Although the state-law allegations had not been found frivolous, the court did not require Vice to parse out the work the attorneys had done on both sets of claims and declined to reduce the fee award to account for the remaining state-law claims, noting that both sides had focused on the deemed frivolous §1983 claims.
The Fifth Circuit affirmed, rejecting Fox’s argument that each individual claim in a suit must be held to be frivolous for the defendant to recover any fees, and agreeing with the District Court that the litigation had focused on the frivolous federal claims.
Writing for the unanimous Court, Kagan, J. notes,
Our legal system generally requires each party to bearhis own litigation expenses, including attorney’s fees, re-gardless whether he wins or loses. Indeed, this principle is so firmly entrenched that it is known as the “American Rule.” See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 247 (1975). But Congress hasauthorized courts to deviate from this background rule incertain types of cases by shifting fees from one party toanother. See Burlington v. Dague, 505 U. S. 557, 562 (1992) (listing federal fee-shifting provisions). (at 5)
Justice Kagan adds,
” But the presence of these unsuccessful claims does not immunize a defendant against paying for the attorney’s fees that the plaintiff reasonably incurred in remedying a breach of his civil rights.
Analogous principles indicate that a defendant may deserve fees even if not all the plaintiff’s claims were frivolous. In this context, §1988 serves to relieve a defendant of expenses attributable to frivolous charges. The plaintiff acted wrongly in leveling such allegations, and the court may shift to him the reasonable costs that thoseclaims imposed on his adversary. See Christiansburg, 434 U. S., at 420–421. That remains true when the plaintiff’s suit also includes non-frivolous claims. The defendant, of course, is not entitled to any fees arising from these non-frivolous charges. See ibid. But the presence of reasonable allegations in a suit does not immunize the plaintiff against paying for the fees that his frivolous claims imposed. (at 7)
The District Court and Fifth Circuit decisions were reversed and remanded to the District court to apply the “but for” rule for fee-shifting.
Speaking of frivolous lawsuits, (albeit only involving state-law defamation, intentional infliction of emotional harm and intentional interference with contractual relations claims), Eric Turkewitz in his Affidavit in the Rakofsky v. The Internet litigation has deposed that: