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Tort and retort: should we make litigants pay for the court cases they lose?

In a response to a proposal to reform the legal system published in a recent issue of this magazine, Anthony Lewis lays out the argument against forcing losing parties to pay winners' legal fees in civil cases. Charles Peters' reply follows.

Critics of our civil justice system argue that the American economy is burdened by frivolous lawsuits and inflated damage awards. They say they have a cure for the disease: Make the losing party in any civil case pay the winner's legal fees. The British do it that way, they argue, and look at how much less litigious a society theirs is.

The fee-shifting idea, as it is called, has won much support in recent years. It was at the heart of Dan Quayle's proposals for "tort reform." Charles Peters, editor in chief of this magazine, put it at the top of his list of "eighteen cost-free steps to a better America" (see "No Dollars, Common Sense," December 1992). If faced with the prospect of paying both sides' lawyers' bills, Peters said, plaintiffs would not bring frivolous suits and defendants would not use delaying tactics to prolong cases they know they will eventually lose.

It seems such a simple solution. But the consequences would not be as advertised--not in the real world. Consider a real case: the litigation between Robert Manning, writer and former editor of The Atlantic, and Mortimer B. Zuckerman, the real estate and publishing tycoon. Manning describes the case in his recent autobiography, The Swamp Root Chronicle.

Zuckerman bought The Atlantic in 1980 for $3.6 million, to be paid in four annual installments. He gave Manning a contract binding him to remain editor for up to five years and promising him pension payments. But shortly after the deal was made, Zuckerman removed Manning as editor and announced that he would make no more payments to Manning and the others who had sold their shares in the magazine to him. He said he was refusing to pay because the true financial state of The Atlantic had been concealed from him. The others, including the principal former owner, Marion Campbell, sued Zuckerman in federal court for the money owed. Manning could not, because he, like Zuckerman, was a citizen of Massachusetts at that time. He sued in a state court.

Five years passed--years of frustration for Manning. Zuckerman's lawyers used every conceivable tactic to delay the case. Manning could not possibly pay for the legal work needed to keep up with them, although he stayed in the game with financial help from Campbell. Then Manning turned 65. Under Massachusetts law, he was entitied to a speedy trial. The trial was set for Nov. 13, 1986, but on Nov. 12, Zuckerman's lawyers settled the case, agreeing to pay Manning every cent owed him for his Atlantic shares, plus five years of withheld extra pension payments and interest.

Now suppose the British rule, which shifts the fee to the loser, had been in effect. Supporters of the British rule would no doubt argue that Zuckerman would have calculated the possibility of having to pay Manning's legal bills as well as his own, and would therefore have called off his lawyers and settled the case much sooner. That, however, is nonsense. Zuckerman had very deep pockets, and he could deduct all his legal bills. The amount of money at stake in the dispute with Manning was peanuts to him. For whatever reason, he had decided to stick it to Manning. The notion that he would have given up for fear of having to pay Manning's legal bills is laughable.

But if you look at it from Manning's side, fear would have been overwhelming. He was already vastly outgunned in the finances of the litigation and was able to keep fighting only by virtue of Campbell's generosity. Would that--could that--have continued if there had been a risk of having to pay the undoubtedly enormous fees of Zuckerman's lawyers? And there always is a risk. After all, no one can be absolutely certain how a jury will react.

The lesson is clear: A plaintiff of modest income would face far worse odds against a rich defendant under the British rule. And the same is true for defendants of modest means, as is shown by the case of Immuno A.G.v. Moor-Jankowski.

Immuno, a multinational company based in Austria, planned to conduct hepatitis research using chimpanzees captured in Sierra Leone. Dr. Shirley McGreal, chairwoman of the International Primate Protection League, wrote a letter of protest to the editor of the Journal of Medical Primatology, a specialist publication with a circulation of 300. She argued, among other things, that the plan might decimate the wild chimpanzee population because methods of capturing chimpanzees involved killing their mothers, and that any captured animals returned to the wild might spread hepatitis to other chimpanzees. In 1983, after the letter was published, Immuno brought a libel action against eight defendants, including McGreal and the editor of the journal, Dr. Jan Moor-Jankowski, who was also a professor at the New York University Medical School.

Over the next several years, Immuno conducted discovery proceedings that were burdensome and costly to the defendants. Eventually all of them except Moor-Jankowski settled with Immuno because of the prohibitive cost of litigating against a rich plaintiff. McGreal, confident that she had done nothing wrong, did not want to settle, but her insurance company, having already spent $250,000 on legal fees, agreed to pay Immuno $100,000 on her behalf. That left Moor-Jankowski alone, facing an Immuno charge for $4 million in damages. He, too, was covered by an insurance company, which agreed to carry on while he asked the New York courts where the suit was brought to dismiss it on summary judgment.

The twists and tums of the Immuno case are too numerous to relate here. It finally ended in 1991, when New York's highest court, the Court of Appeals, held that McGreal's letter to the editor was an expression of opinion protected by both the First Amendment and the Constitution of New York. So Moor-Jankowski won. But he wrote a letter to the editor of The New York Times commenting bitterly on his "victory:"

I am a full-time research professor at the New York University School of Medicine and the unpaid editor of the small, international Journal of Medical Primatology. For the last seven years (10 percent of the life expectancy of an American male), I have been sued. So far, my legal expenses exceed $1 million. I underwent 14 days of depositions over a year and a half in this country and was ordered by the lower court to participate in extremely costly depositions in Austria and Sierra Leone. The seven years of proceedings consumed most of my time, curtailing my scientific activities.

Suppose the British rule had been in effect for Moor-Jankowski. Can one imagine that he and his insurance company would have carried on for seven years against that deep-pocketed plaintiff if they had had to consider the risk of paying Immuno's legal bills as well as their own?

In short, the fee-shifting system would make it harder for ordinary people, middle-class Americans, to stand up to the powerful in the courts as plaintiffs or defendants. Losing could mean bankruptcy. And, in fact, that is just the experience in Britain. Libel law there heavily favors plaintiffs--those offended, for example, by something said about them in a newspaper. But even with that legal lilt in their favor, few people of modest means dare bring libel suits. The reason was pithily stated by a New York libel lawyer, Eugene L. Girden, in The Wall Street Journal: "Up until now it's been almost impossible for a private person to seek redress under the English system because if you lose it's your head."

Those who would bring the fee-shifting system to American law, when tasked with the possible consequences to people of modest income up against rich plaintiffs or defendants, say that courts could establish ways to keep the rich from piling up huge legal fees to intimidate their opponents. We could, for example, install what the British call "taxing masters" to decide in each case the reasonable fee a loser would pay. But therein lies more complexity, more litigation, more burden. One can see the volumes of law reports filled with cases on what fees should be shifted.

Underlying the campaign for adoption of the British rule is the larger assertion that fanciful tort claims and exaggerated damages are hurting America's ability to compete in the world economy. On that question I am a skeptic. There have been some ludicrous lawsuits, reflecting the belief that we must have someone to blame for any mischance in life, and juries have awarded some outlandish damages. But the latest studies of medical malpractice--a field in which there are particularly strong assertions of outrageous legal decisions--have found that unjustified awards are rare, that most winning plaintiffs really have received grossly inadequate medical care.

Perhaps the United States does need to take some steps to curb the excesses of an occasional civil jury. But we should surely not rush to adopt a British system that may deny many Americans what we prize so greatly: the chance to seek justice in the courts.

Charles Peters replies:

My point is that "loser pays" means fewer phony lawsuits and fewer phony defenses. Tony Lewis seems to be arguing that there will still be some of both because there will always be angry plaintiffs or defendants who, like Zuckerman or Immuno, are also wealthy enough to pay the other side's legal fees when they lose. He is right. But there will still be less litigation because reasonable men will not risk filing trumpedup claims that, if unsuccessful, are certain to leave them stuck with legal fees that are not now a factor in deciding whether to sue. Today, a plaintiff will file a phony suit when he thinks the defendant will pay that claim off to avoid the expense of paying his own lawyer. Thus, an insurance company might pay a $20,000 settlement to settle an unjust auto accident claim rather than incur a $50,000 fee from its lawyer for defending the case.

But if we adopted loser pays, the reasonable plaintiff would not even file the phony suit because he would know that he would have to pay the insurance company that $50,000 when he lost. Nor would a reasonable defendant prolong a suit with delaying tactics designed to run up the plaintiff's legal bills if the defendant knew he would have to pay that bill.

Lewis thinks some poor people with good cases will be discouraged by loser pays because they can't risk an unfair verdict or judgment against them, no matter how unlikely. This is certainly possible. But more plaintiffs and defendants with just causes will be encouraged because they know that the other side will have to pay their lawyers when they win, which they are likely to do when they have good cases.

Often legitimate claims are not made because there isn't enough money involved to pay a claimant's attorney a reasonable fee. If we adopted a loser pays system, defendants in the wrong would not only pay up, but they would pay up quickly in order to avoid incurring legal expenses of their own. The result would be more justice with less litigation.

Less litigation will mean speedier trials for legitimate causes--and remember, the Massachusetts speedy trial statute was the real basis for justice in the Manning case. Fewer suits would also achieve my major aim: reducing the need for lawyers in our national life. England, which has loser pays, has one-third the number of lawyers per capita that we do. We now have a total of 826,130 lawyers with 129,580 law students waiting to join them. I have called them the Typhoid Marys of the chronic paranoia that has become our national affliction. Lawyers foment this sense of victimhood--of "it's me against him"--and the terrible social fragmentation that accompanies it. Consider the antagonism they engender or exacerbate just in divorce cases.

I do not deny that there are some lawyers who are devoted to defending the innocent, prosecuting criminals, protecting precious constitutional rights, and advocating the cause of the Davids who take on corporate Goliaths up to no good. But they, I can assure you, number 100,000 at most. As for the rest, let's get them into such socially desirable occupations as teaching, entrepreneurship, and working in government. Better teachers in better schools could give deprived youth a fair chance in life. Better educators and more talented businessmen would make us more competitive in the global economy. And better government would help us deal sensibly and humanely with such pressing problems as the environment and health care.

I should emphasize that I do not support loser pays for one of the reasons cited by conservatives like Dan Quayle. They want to protect the corporate Goliaths from having to pay punitive damages for their misdeeds. In this regard, I follow West Virginia Justice Richard Neely, who said that punitive damages are needed "where the defendant is not just stupid but really mean."
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Title Annotation:includes reply article
Author:Peters, Charles
Publication:Washington Monthly
Date:May 1, 1993
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