In the two months since vice-presidential hopeful Sarah Palin first appeared on the national scene, journalists and voters alike have become curious about Alaska. Palin family activities like moose hunting and competitive snowmachine racing hint at a culture of rugged individualism that big-city dwellers may find quaint. But Alaska’s state motto — “Alaska to the Future” — reflects a polity that revels in its own vision of progress. Alaska’s unique system of civil justice, for instance, demonstrates that the Last Frontier’s common-sense traditions sometimes yield better policies than can be found elsewhere in the United States.
Alone among the states, Alaska embraces a traditional “loser pays” rule for legal fees in most civil lawsuits. If you prevail in a lawsuit in Alaska, you’re entitled to recover your reasonable attorney’s fees from your defeated adversary. The rule discourages weak lawsuits and better compensates plaintiffs with strong claims. It makes intuitive sense to Americans who strongly value personal responsibility. After all, why should one citizen have the power to impose a huge financial burden on another despite being in the wrong? Legal accusation should be a serious matter, and loser pays punishes frivolous tort prospecting.
In fact, loser pays seems so intuitively fair that many Americans are surprised to discover that the rest of the nation follows a very different rule. The so-called “American rule” — that each side in a dispute must pay its own lawyers, regardless of the outcome — prevails everywhere else in the country, with unfortunate results for justice. As John Stossel observes: “When you win, you lose under our system. I win, I defeat your claim. But it has cost me tens, hundreds of thousands, sometimes millions of dollars. I have a victory that has brought me to the poorhouse.”
It’s deeply ironic that most of America has adopted a rule so inimical to individual responsibility. Every welfare state in Europe holds its litigants responsible for the costs they impose on their fellow citizens, as does Canada, Australia, and the vast majority of other countries in the world. In this respect, at least, these nations better exemplify our cherished frontier values than we do. Alaska alone has enshrined individual responsibility in its litigation system.
Alaska’s unique rule is a product of its history. When the United States purchased Alaska from Russia in 1867, the icy wilderness had so few inhabitants that the U.S. neglected to establish immediately any civil law there at all. Congress instituted a civil legal system for Alaska in 1884 through an Act that borrowed from Oregon’s civil code and applied it to the new territory virtually wholesale. At that time, an Oregon statute allowed the prevailing party in a civil suit to recover attorney’s fees from the loser. While Oregon unwisely dumped its loser-pays rule eventually, Alaska embraced loser pays and stuck with it.
Loser pays has helped Alaska resist the excesses of personal-injury litigation that have clogged so many American courts. Tort lawsuits comprise only 5 percent of Alaska’s litigation docket, while they make up nearly 10 percent in the rest of the U.S. By contrast, Alaskan domestic disputes and probate matters, to which loser pays does not apply, form a relatively larger part of the state’s cases. The Alaska Judicial Council conducted a review of Alaska’s loser-pays rule in 1989 and found that, while the law could not deter filings by irrational plaintiffs, it did reduce the number of low-merit lawsuits in Alaskan courts. The Council also found that a majority of Alaskan attorneys liked the system and believed that it functioned well.
Of course, the rule is not perfect. For one thing, it provides only partial reimbursement. Prevailing plaintiffs receive roughly two-thirds of their actual legal expenses and prevailing defendants recover only 20 to 30 percent of their bills — too little to serve fully the interests of either justice or judicial efficiency. Alaska also has not explicitly legalized litigation insurance, which permits plaintiffs with modest means but strong legal cases to protect themselves against the possibility of a fee award. Such insurance is common in England and in other loser-pays countries, and it plays an important role in preserving access to justice in a loser-pays system.
Still, Alaska’s rule puts the state head-and-shoulders above the “lower 48.” Perhaps U.S. state lawmakers whose attention has been captured by Governor Palin’s sudden celebrity will embrace an Alaskan export other than fossil fuels or King crab: loser-pays principles could help to make court systems faster and cheaper — and outcomes more just — from coast to coast.
– Marie Gryphon is a senior fellow at the Manhattan Institute.