Comments (19)

• Brent Railey

  "The only just system is a voluntary, private justice system where customers of competing justice agencies agree voluntarily ahead of time to some rule--in this case, any of the fee-payment schemes is libertarian since it is agreed to by all sides."

  Mr. Kinsella, could you explain what you mean by this to those of us who might be new to a concept of a "private justice system"?

  What is a role of a "justice agency"? What do you mean by "ahead of time?" Do you mean before the arbitration or before doing business with one another? If the latter, how would that work in your example of battery? If the former, then what "rules" are you talking about and how would you get a perpetrator to agree to them? The idea of a private justice system seems very intruiging, and I have never heard of this idea. Especially in criminal cases...

  Published: October 21, 2008 3:29 PM

• Bruno

  Kinsella's claims are completely absurd. The "loser-pay" rule would apply even if we were in a private justice system, simply because...well, it is fairer, it is required by justice itself.

  It has nothing to do with libertarianism or statism. The case for the "loser-pay" rule is this: the compensation that the perpetrator will be required to pay, by the court, to the victim, is a way to make them return to the status quo ante. So you can not charge the victim legal fees. The perpetrator must pay just enough to restore the status quo ante, which has been unfairly changed by his unlawful action.

  Published: October 21, 2008 3:41 PM

• Bruno

  Kinsella's claims are completely absurd. The "loser-pay" rule would apply even if we were in a private justice system, simply because...well, it is fairer, it is required by justice itself.

  It has nothing to do with libertarianism or statism. The case for the "loser-pay" rule is this: the compensation that the perpetrator will be required to pay, by the court, to the victim, is a way to make them return to the status quo ante. So you can not charge the victim legal fees. The perpetrator must pay just enough to restore the status quo ante, which has been unfairly changed by his unlawful action.

  Published: October 21, 2008 3:42 PM

• jon

  "The 'loser-pay' rule would apply even if we were in a private justice system, simply because...well, it is fairer, it is required by justice itself."

  would it? and who is going to make (read: force) it to be "fair" for these courts? you seem to know what justice is for court cases you're not involved in -- care to justify that as a libertarian stance?

  once you decide your rule is so brilliant it will always apply to the courts regardless of the parties involved in trial and their wishes and desires for tangible justice in the case in question, it suddenly has everything to do with libertarianism: you are threatening aggression.

  Published: October 21, 2008 3:51 PM

• Stephan Kinsella

  Brent: there is plenty of literature on this. See Hoppe's works (available here on on his site), The Market for Liberty by the Tannehills, and so on.

  "Bruno":

  "Kinsella's claims are completely absurd. The "loser-pay" rule would apply even if we were in a private justice system, simply because...well, it is fairer, it is required by justice itself.

  "It has nothing to do with libertarianism or statism. The case for the "loser-pay" rule is this: the compensation that the perpetrator will be required to pay, by the court, to the victim, is a way to make them return to the status quo ante. So you can not charge the victim legal fees. The perpetrator must pay just enough to restore the status quo ante, which has been unfairly changed by his unlawful action.

  I gave a clear example of how the rule results in injustice: if the party in the "right" from a libertarian perspective loses (because the state courts have an inaccurate factual finding; or because they apply an unjust law that is in the bad guy's favor) and then has to pay the bad guy's fees due to a loser pays rule, this is not justice.

  I've long become skeptical of the "tort reform" movement--it's an attempt to put lipstick on a pig, to use a colorful metaphor. The state "justice" system is anything but that. Focusing on small fixes like this misses the ball. I've even become skeptical of the libertarian opposition to contingency fee limits. Who is to say that a private court system would not set rules on the ethics of lawyers that appear before it?

  Published: October 21, 2008 4:28 PM

• Stephan Kinsella

  To elaborate, since some people don't seem to follow this:

  In a state system, there are two cases where the loser-pays rule is unjust; and two where the winner-pays rule is just:

  1. A sues B and wins (and should win). Loser pays: just. Winner pays: unjust.
  2. A sues B and loses (and should win). Loser pays: UNjust. Winner pays: just.
  3. A sues B and wins (and should NOT win). Loser pays: UNjust. Winner pays: just.
  4. A sues B and loses (and should NOT win). Loser pays: just. Winner pays: unjust.

  The loser pays rule gives unjust results in cases 2 and 3. The winner pays rule is unjust in cases 1 and 4. Neither rule is clearly more just than the other.

  Published: October 21, 2008 4:38 PM

• J

  I think that you're adding something separate when you say "and should NOT win". Should not according to what? You're mixing two issues and causing confusion, I think. If the system is broke and results in a party winning when it should not--that is completely unrelated to a discussion of lower/winner pays. If the wrong party won, then justice was NOT served no matter who pays.

  "Attempting to solve this problem by shifting legal fees is addressing the symptom, not the cause."

  Exactly--shifting legal fees is not going to address inaccuracy in court rulings. And I think that supports the argument that they are two orthogonal topics.

  Published: October 21, 2008 4:51 PM

• N. Joseph Potts

  I never thought of the "English rule," as it is called, as bearing on libertarian considerations. I very much prefer the English rule (I'm not a lawyer, nor a frequent defendant or plaintiff, but I DID serve on juries a lot until I was the foreman on case in which we denied award - now I suspect I'm banned from the [rigged] jury pool). I live in the United States, however.

  The poster's examples suggest to me that the rule would magnify both justices and injustices, which I concede. I consider that a wash in terms of its effect on justice. It might reduce tort actions, which I (as a juror) consider to be mostly fraudulent or frivolous. That much, I like. It might reduce insurance costs, too. And jury duty, which is ANOTHER subject.

  I certainly grant the poster's points about a state-mandated "justice" system.

  Published: October 21, 2008 5:18 PM

• Vake

  How do you get a rapist, thief, or murderer to agree to show up to a private legal system? Or even to not flee? Don't you need some sort of investigation, incarceration, and justice system enforced by the rule of law?

  Published: October 21, 2008 9:19 PM

• craig

  Stephan Kinsella -

  People tend to sue others to try and collect money, hence they will sue a number of people to try and collect big on one. I believe under your system, it may have the opposite effect in some situations; as long as the person as a decent number of people involved. A may turn about and do this:

  A sues B
  A sues C
  A sues D
  A sues E
  A sues F
  A sues G

  A may loses all of the cases, but if he sues G and collects big time on G he may pay off all of his expense from B-F, and leave him with money left behind. My understanding of Tort law is that often times the big settlements are quite big to send a message to the losing party.

  Also, if B settles with A due to circumstances of not wanting to go to trial due to not think he may have a fair chance at a Jury trial, A still may win enough to cover expenses even if the expenses are minimum. For example, B was a patient to A. B dies not following instructions of As. A clearly tells B what NOT to do, and what he can do. B's family sues, and A may settle for a minor amount due to not wanting to tie up the justice system. B's family still makes out with some money, maybe enough to cover lawyer expenses when it's done, and a little bit left over to cover for the lose of B.

  Feel free to correct me if I am wrong. I am not a lawyer, I am taking an undergrad Business law class. My knowledge of torts is limited to one chapter of reading, rather than the semester of tort's my sister and yourself have had in school.

  Published: October 21, 2008 10:16 PM

• Alex Peak

  Mr. Kinsilla,

  Let us assume the state is gone, and that we have a free-market justice system.

  What happens if the rapist insists upon winner-pays and the rape victim insists upon loser-pays?

  I, of course, agree that if both parties agree contractually prior to arbitration to go with (A) winner-pays, (B) each-side-pays-his-own-fees, or (C) loser-pays, then their agreement is binding. But, in the event that there is no agreement prior to the hearing, one of these three alternatives must be used. Which would be most in line with natural law, if there is no agreement?

  I lean toward C.

  Above, Mr. J writes, "I think that you're adding something separate when you say and should NOT win.' Should not according to what? You're mixing two issues and causing confusion, I think. If the system is broke and results in a party winning when it should not--that is completely unrelated to a discussion of lower/winner pays. If the wrong party won, then justice was NOT served no matter who pays."

  This seems rational to me. Further, if dispute still exists, there's always the option of appealing the case to another court.

  Keeping Mr. J's position in mind, I would argue that C is always for just than A or B (except for those instances where the parties have agreed to adopting either A or B), and for the same reason as the Tannehills.

  In short, I am respectfully disinclined to say that you have thrown a kink into the idea of a loser-pays arbitration system.

  But, I believe I possibly can throw such a kink in there. So, to play devil's advocate, let me present this argument that questions the loser-pays arbitration system:

  If the loser is always destined to pay, how can arbitration prices arise?

  Let's say that neither you nor I can agree on which arbitor to go to. If we can't agree, one of us will have to make the decision for the other--preferably the one issuing the suit or the one making the appeal.

  So, I choose arbitration firm X, which is known to charge $10,000 for each case decided, far more money than any other arbitration firm. Let's say you lose: that would mean you must pay not only the small sum of money you owe me, but also the $10,000 charged by the firm.

  You can appeal, and win the appeal, causing me, rather than you, to owe the $10,000 to firm X (plus whatever firm Y charged, plus damages to you). Will this risk of losing in appeal alone discourage me from choosing this exorbitant firm (X)?

  Hmm.

  Come to think of it, it probably would. And so I guess this doesn't throw a kink into loser-pays arbitration, either.

  I guess I'd only go with firm X if I know with absolute positivity that I will win. I guess firm X will only charge that much because it has a reputation for making very fair decisions, and given my great amount of evidence that you aggressed against me, it would be threatening its own ability to make so much money by making an obviously-unjust ruling. And, thus, a price system can indeed arise through loser-pays arbitration.

  Those cases that are far less cut-and-dry will go to cheaper arbitration firms for fear of loss (unless B has been agreed upon).

  Hmm. But here I see a possible kink. Those cases that are less cut-and-dry require diligence in the decision-making. It requires a fair mind. It requires the arbitration of the firms that are naturally inclined to charge more. So, maybe this does throw a kink in C after all.

  Still, despite this kink, I nevertheless find myself preferring C, again for the same reason as the Tannehills.

  In any event, I think we can all reject A (except in those cases where both parties have agreed in advance to employ A).

  Hmm.

  I throw this back to you guys. Whatever flaws I may have employed in my above thought experiment, please tear them apart.

  Sincerely,
  Alex Peak

  Published: October 21, 2008 10:53 PM

• Alex Peak

  P.S. Sorry for the mispelling of Mr. Kinsella's name.

  I posed this to a few friends. One thus far has responded.

  Mr. Tennyson McCalla writes, "I believe in a 'criminal pays' system, not a 'loser' or 'winner' pays one. That is what is consistent with restitution.

  "What else is there to say?"

  Published: October 21, 2008 11:53 PM

• Arthur Newton

  Everyone here should remember that Mr. Kinsella here is speaking of "Civil Suits", so the discussion of criminals, rapists, etc does not apply. Any discussion of deciding who should come into equity, i.e. Who should receive monetary damages from another, is a very subjective and relative issue and always will vary with culture, and the age we live in.
  I agree with Mr. Kinsella's point that You just can't say that a rule set by the state as to who pays, can necessarily be fair.
  I live in Japan, and I like one aspect of the system here;
  "Consent is required to give up property to satisfy a judgement" What this means is that he who loses in a civil case, may withold from paying. The winning party cannot force confiscation of the property of the losing party, as "all property is inviolable" is an article of the National Constitution. Personally, I would think this would be all we would need.

  Published: October 22, 2008 6:17 AM

• Arthur Newton

  Everyone here should remember that Mr. Kinsella here is speaking of "Civil Suits", so the discussion of criminals, rapists, etc does not apply. Any discussion of deciding who should come into equity, i.e. Who should receive monetary damages from another, is a very subjective and relative issue and always will vary with culture, and the age we live in.
  I agree with Mr. Kinsella's point that You just can't say that a rule set by the state as to who pays, can necessarily be fair.
  I live in Japan, and I like one aspect of the system here;
  "Consent is required to give up property to satisfy a judgement" What this means is that he who loses in a civil case, may withold from paying. The winning party cannot force confiscation of the property of the losing party, as "all property is inviolable" is an article of the National Constitution. Personally, I would think this would be all we would need.

  Published: October 22, 2008 6:20 AM

• Haas

  I am a law student and I'm having trouble grappling with Kinsella's argument- so you are saying that you are against both rules in every situation since the solutions are state run and thus mandatory...this is a bit hard to swallow! So how do you get two clients of different justice agencies to agree? even if they did agree the negotiations will be run by the agencies incurring further costs and wasting more time- this means that the victim does not get closure or justice in an efficient manner- now the legal system is inefficient and slow but has rules that are reasonably consistent and certain- something that the law requires

  What you are proposing is just another form of settling matters without litigation- an option that is already available to everyone... what is the point of getting the parties to negotiate and try to decide on who pays when one is presumably more guilty than the other and knows it- the individual (that probably is more likely to be found guilty) will not agree to a loser pays rule...IF they can decide on who will pay then they will surely be also able to agree on a settlement...

  I better not fail my tort exam because of your theories; dear Sir!!! :)

  Published: October 22, 2008 6:59 AM

• pussum207

  As we are unlikely to live any time soon in an environment in which there are only competing private justice agencies and no state justice system, the more relevant/interesting question (at least to me) is whether loser pays is better in our current system.
  Notwithstanding that I would note that two things. First, although I am not a lawyer, it is my understanding that alternate forms of privately-provided dispute resolution would already be widely available in the case of many, if not all, civil disputes. Second, I am not familiar with the libertarian literature but I presume that even a libertarian society, there would need to be some sort of state-provided recourse or backstop in situations in which the parties to a dispute could not agree on which private agency should decide the case (in cases of no prior existing contract which might specify a dispute resolution mechanism) or if one party simply had nothing to gain by participating in the litigation. Third, I would have thought the justness of a rule requiring loser pays or winner pays is independent of whether the “decider” (or justice system) is as competent in coming to the right conclusion as one might hope and is further independent of whether one agrees with the laws in question.
  In a democratic system, the potential always exists for improvements in the competence of the legal system. Experience does not provide cause for optimism here but, on the other hand, the appeal process does provide discipline in the case of “rogue” deciders.
  While libertarians would of course be expected to effect change through the democratic political process, I am assuming that libertarians would otherwise wish to live their lives as free as possible from interference from either the state or other non-state actors and to safeguard their property to the maximum extent from such interference. Certainly, entrepreneurs and investors have no other option. This means that libertarians will need to comply with the law. In western legal systems, this typically involves interpreting (less than perfectly clear) legislation, subsequent court cases interpreting the legislation and any common law jurisprudence. Since not all circumstances will have been litigated, there will be certain circumstances in which the law is clear (and in which operating or acting is “safe”) and other circumstances in which the current state of the law will not be perfectly clear (and in which operating or acting carries risks). My experience in the industry in which I operate is that it is usually relatively straightforward to determine in advance, with appropriate advice, which areas are safe and which are risky.
  Individuals that choose to operate in the safe zone should be free from the threat to property of having to bear the costs of legal processes necessary to demonstrate that they are in fact operating the safe zone and as free as possible from unnecessary or frivolous legal action. These require loser-pay.
  Individuals that choose to operate in the risky zone must estimate the likelihood that, if litigated, the courts will rule in their favour. Arriving at such an estimate will require a good faith interpretation of the law and jurisprudence. Individuals choosing to operate on the basis of a good faith interpretation are entitled to an expectation that they have minimized the risks to their operations or property. This would imply a requirement for loser-pay. In addition, loser-pay provides an incentive for parties to make good-faith interpretations rather than nakedly self-serving interpretations. This presumably reduces the costs of unproductive and unnecessary litigation. In cases in which there is more than one legally valid good faith prior interpretation, the potential for loser-pay to be imposed provides an incentive (vis-a-vis equal sharing) to make use of less costly alternate dispute resolution. There is perhaps an argument for equal sharing where both parties have equally valid good faith prior interpretations but a rule requiring equal sharing would undermine the incentive to settle (am I right in thinking that judges already have the discretion to apportion costs?). In addition, it is possible to determine in advance the extent of legal risks. Individuals choosing to operate in higher risk gray areas must accept the consequences of their decision. Of course, the real villain in such situations is a lack of clarity in legislation or court decisions, not loser-pay per se. Efforts at reform are better directed at achieving clarity in legislation and court decisions, rather than moving away from loser pay.
  Bottom line: I would suggest that freedom from arbitrary interference or arbitrary taking of one’s property requires loser-pay.

  
  

  Published: October 22, 2008 10:33 AM

• Amy

  The problem with a system where each side only pays their own way is this - people can game the system in a manner that is essentially legal extortion.

  Example: person A is sue happy, and is willing to sue anyone over pretty much anything. Even though most of the cases would get thrown out in court, some of the people that A sues simply can't afford to take the risk of it even going to court, and so they settle. It's not about whether or not the cases would win... they would almost certainly not. The legal fees that cannot be recouped are the real issue, and without a loser-pays system, anyone who doesn't have enough money to handle the costs of going to court is vulnerable.

  Additionally, even in a free market court system, you can't eliminate bad rulings, and as long as a few bad rulings exist, people will try to exploit the system.

  Published: October 22, 2008 10:39 AM

• Henry Miller

  The problem with loser pays is rich people get even more incentive to hire expensive lawyers. A really expensive lawyer should (though of course I have no idea if this is true and there is no unbiased way to tell) get his clients off more often even when gulty. So loser pays means poor people dare not sue because not only do they have to come up with the costs for their own lawyer, but also the other guys lawyer.

  Some lawyers have a "you don't pay unless you win" policy. However if loser pays you won't get that because who will pay if your lawyer isn't good enough to take on the very best of the best? With a you don't pay unless you win policy a poor person can take on a rich person and know that even if justice isn't carried out (lets assume he should win, though we all know that not all cases are like that), at least he isn't out more.

  There are no good anwers.

  Published: October 22, 2008 3:11 PM

• Deidre

  Shouldn't part of this intellectual equation include the statistical likelihood of one party having a significant financial advantage over the other?

  For example, assuming that a company has more financial resources than an individual, if an individual were to sue a company for wrongdoing and the lawsuit were legitimate, loser-pays could empower the individual to move forward against the company, feeling that the risk of losing is in his favor. One engaging in a frivolous lawsuit would have a higher risk of losing and, therefore, discouraged from moving forward.

  To prevent large legal team bullying (resulting in extreme legal fees), caps on the legal fee reimbursements could be put in place.

  This article and comments have been very thought-provoking.

  Published: November 3, 2009 2:26 PM