The American Rule and General Categories for its Exceptions

“The American Rule” is the common name given for the principle that, in America, each party is generally responsible for paying its own attorney fees regardless of whether it wins or loses. There are typically mechanisms for assessing the more minor litigation costs, such as the court’s filing fees, to the losing party. The burden of each party’s attorney fees (and other professional fees such as expert witnesses and non-testifying experts), however, typically stay with each party. Exceptions to the American Rule whereby the losing party is made to pay the litigation expenses of the winning party are called “fee shifting” mechanisms. Fee shifting mechanisms are typically either contractual provisions or provisions embedded in statutes.


One other mechanism that offers relief, and which will be discussed in this blog, is punitive damages. Punitive damages are not technically “fee shifting” because they are not driven by the amount of fees the winning party incurred. Rather, they are assessed to punish the losing party for especially bad behavior and to discourage others from engaging in similar behavior. Sometimes punitive damages are part of a common law tradition for certain causes of action; sometimes they are provided for expressly by statute. They could be open ended (whatever the jury or court wants to give—within limits) or very specific (e.g. three times actual damages). Either way, if considerable, they can mitigate or wipe out the winning side’s cost of litigation.

Aside from fee shifting mechanisms and punitive damages, the problem of litigation costs can be addressed through contingency fee arrangements. The next blog entry will address some of the advantages and limitations of those arrangements.


The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.