American Rule

The American Rule states that in a lawsuit, each party pays his own attorney's fees, no matter who wins. A drawback of this rule is that it encourages a form of extortion in which a litigant says, for example, "Settle for $25,000 or pay $250,000 to successfully defend against this lawsuit." The American Rule was originally enacted to protect debtors; a creditor would only sue if the debt were so large as to justify the legal fees required to obtain a judgment. Very few other countries have enacted the American Rule. Most use the English Rule, under which the losing side in a lawsuit pays the attorney fees of both sides.