Richard Jewell, loser pays (and government should too)

by Richard Schulman

Clinton Eastwood’s excellent film, Richard Jewell, is being panned by the mainstream press because the media do not come off well in the film. The FBI doesn’t either. This makes the movie quite timely, given the fiasco of the FBI’s Russian collusion investigation against the Trump campaign and the media’s cheer-leading despite the investigation’s improprieties and illegalities. But the fact that the wrongly accused Richard Jewell received no compensation from the government for having wrecked his life and possibly accelerated his early death suggests a more general need: to strengthen protections for the unjustly accused or harmed in both criminal and civil cases. The most useful reform to this end would be for the US to adopt the “loser pays” legal norms prevailing in the rest of the world.

Under “loser pays” – also known as the “English system” – the loser in a civil suit pays the legal expenses and reasonable attorneys’ fees of the winner. That is the system that prevailed in the US up until the mid-19th century. But by that time, as Alexis de Tocqueville noted in his famous study, Democracy in America, US lawyers had become so powerful as a class that they had turned themselves into an American aristocracy. In their own self-interest and from dominating positions in state legislatures and Congress, this new class benefited itself by throwing out centuries-old regulations governing attorneys’ fees, restrictions on suing clients for non-payment, and the absence of contingency and class-action suits. These changes brought the legal profession rich new sources of revenues and not only did away with the need for “losers pay” fees but in fact made those fees contrary to unscrupulous tort lawyers’ interests.

Whereas “losers pay” norms prevailing elsewhere discourage lawyers from accepting weak or frivolous lawsuits, once “losers pay” was abandoned in the US in favor of what is sometimes called the “American system,” the way was prepared for a vast expansion of torts and other litigation that otherwise would not have been undertaken as too risky financially in case the initiating lawyer lost. The consequence has been the creation of the most litigious and costly legal system in the world and grievous harm done to businesses small and large as well as individuals.

The Democratic Party / lawyer / legislator triangle

Litigation-loving lawyers are major contributors to Democratic politicians throughout the country, themselves lawyers only too happy to pass laws to benefit their profession. The roster of who supports vs. who opposes “losers pay” reform confirms this. The roster of organizations supporting “losers pay” reform is mostly comprised of conservatives and libertarians:

Walter Olson (of the Cato Institute), the Manhattan Institute, the Heritage Foundation, George Mason law professor David Bernstein, Ted Frank (currently of the Competitive Enterprise Institute), John Stossel, Reason magazine, the Texas Public Policy Foundation, Texans for Lawsuit Reform, former Speaker Newt Gingrich (who made it part of the Contract With America in 1995), and even some liberals, such as Michael Kinsley and Steven Brill,

according to Mark Pulliam, a contributing editor of Law and Liberty. The opponents of “losers pay” include, unsurprisingly,

the American Bar Association, ThinkProgress (recently closed), the American Association for Justice, the Washington Post, and the New York Times.

Pulliam, and even more extensively, Marie Gryphon, Senior Fellow at the Manhattan Institute for Policy Research, document why the US would benefit greatly from a well-designed reversion to “losers pay” legal norms. She writes:

In addition to being overly expensive, American litigation is all too often inefficient and unfair….Mass tort litigation, for example, over asbestos, has been exposed as rife with fraud. Small businesses are regularly besieged with nuisance suits that they must settle if they hope to avoid crippling legal costs. Last year’s $54 million lawsuit against a small Washington-area dry cleaner alleging that it had lost a pair of pants was remarkable not only for the astronomical damages claimed but also the almost $100,000 in legal fees incurred in successfully defending against it. In American law, even when a defendant wins a lawsuit, he loses….The American system facilitates nuisance lawsuits, since the high cost of defending against weak cases gives defendants a strong incentive to settle….Almost every economist who has studied loser pays predicts that it would, if adopted, reduce the number of low-merit lawsuits.

“Loser pays” should also apply to government

The arguments above can also be extended to limit the blackmail that prosecutors often employ in criminal cases. Defendants accept lesser penalties in plea bargains to avoid the risk of severe penalties should their cases go to trial and they lose. Government prosecutors have no counterbalancing disincentive against railroading defendants into plea bargains, and they have essentially unlimited resources in pursuing their cases. If the government loses a case against a defendant – civil or criminal – it too should be required to pay the defendant’s court and attorneys’ fees.

The same legal principle can and should, we believe, apply to cases where the government ruins an individual’s life and reputation through an inquiry characterized by prolonged and unnecessarily public investigations of “persons of interest,” as was the case of Richard Jewell and even more notoriously Steven Hatfill, who was falsely fingered by the FBI for being behind the deadly anthrax mailings in 2001. Hatfill was able to wrest almost $5 mn. in compensation from the government for rendering him reviled and unemployable. Jewell was not so fortunate. He was, however, able to win large settlements from CNN and NBC. Eastwood’s “Richard Jewell” includes a nice tv news clip of NBC’s Tom Brokaw commenting on the Jewell case back then. NBC, still resenting the payout to Jewell it was forced to make, does its best to put down Eastwood’s new movie on the subject.

Both the FBI and our expensive, litigation-ridden legal system need reform. Just don’t expect much support for this endeavor from the NY Times, Washington Post, CNN, or NBC — or Democratic legislators.