Fall 2012 #2. Civil Costs: Adrift And Untethered From Common Law.

Author:By Matthew Caton

Maine Bar Journal


Fall 2012 #2.

Civil Costs: Adrift And Untethered From Common Law

Maine Bar JournalVOLUME 27 , NUMBER 4, Fall 2012Civil Costs: Adrift And Untethered From Common LawBy Matthew CatonForeword

It is rare when a legal project on a topic as basic as legal costs begins with material from 13th century England. In the first phase of my legal career when I was a trial lawyer (1965-1978), costs were so inconsequential that I do not recall collecting or paying any on behalf of my clients. In short, costs were more trouble than they were worth and the American Rule reigned supreme on the question of counsel fees. Later as a trial and appellate judge, costs were a minor detail that was handled by the Clerk of Courts office. Given the mounting costs of litigation and the complicated legal history, a thorough reexamina-tion of the subject is in order. Drawing on his legal experience in England, Matthew Caton has plowed through centuries of legal development and has unearthed the possibility that we in the Colonies went astray in transplanting the right to costs including counsel fees on our shores. This article should cause trial lawyers to take a more critical look at one of our long-standing practices.

Honorable Daniel E. Wathen

Former Chief Justice, Maine Supreme Judicial Court

Maine courts have long recognized a prevailing party's right to costs as a fundamental and enduring principle of civil justice.(fn1) Unfortunately, the expense of modern-day litigation typically far exceeds an award for costs notwithstanding the fact that attorneys' fees represent the largest expense and are excluded as a matter of practice. Is the current costs regime broken? This article contends that it is, and that six principled grounds(fn2) illustrate why the current costs regime does not have to be this way.

First, the current costs regime is inconsistent with, and apparently uninformed by, guiding principles established by the Supreme Judicial Court (SJC) in 1868, speaking through Chief Justice Appleton.(fn3)

Second, certain parts of the current costs regime are contrary to the separation of powers doctrine(fn4) and in conflict with the constitutional mandates of establishing complete justice(fn5) and the right to the assistance of counsel.(fn6)

Third, the increasing complexity of the civil procedure rules is akin to an unfunded mandate for civil justice: a prevailing party incurs the expense of litigation that is disproportionate to an award of limited costs.

Fourth, in the context of attorneys' fees, there is special justification to depart from stare decisis and re-examine Maine's adoption of the American Rule.(fn7)

Fifth, Maine's acceptance of common law(fn8) may provide a parallel and broader right to recovery of litigation expenses than the right to costs created by 14 M.R.S.A. §§1501 and 1510.

Finally, trial courts ought to have a discretionary power to award a fuller measure of litigation costs to (i) ensure access to justice,(fn9) (ii) guarantee just and equitable relief, and (iii) increase the attractiveness of Maine as a forum to adjudicate business and consumer disputes. This discretionary power could be based on Alaska's Rule 82,(fn10) the Civil Procedure Rules of England(fn11) and Wales, or that in arbitration(fn12) or divorce proceedings.(fn13)

For each of these reasons, this article argues that the current costs regime can and should be changed. The general rule should be that an award of costs "should more nearly cover the necessary and reasonable expenses of a suit, and a reasonable counsel fee" incurred to prosecute or defend a civil action.(fn14) There may be exceptions or qualifications to the general rule, but they cannot be identified and rationalized without a full and frank discussion about the principles and the law of costs under Maine law.

Costs Regime: Not Fit for Purpose?

The right to costs (as opposed to the financial amount allowed for each cost) originates from 13th century England.(fn15) As a profession, "[w]e are so much bound down to precedent and authority that we often forget the principle that underlies them .. ."(fn16) and the historical dimension of costs means that some matters well-known to the bench and bar over the years are less well known today.(fn17) A fresh look at the right to costs addresses some of these issues and also highlights the disparity between an award of costs and the true cost of civil litigation. The overarching goal here is to return to first-principles and find out 'what is the law.'(fn18) Three questions get to the heart of the matter: (i) is there a distinction between the "right to costs" and "costs"; (ii) what is the authority or jurisdiction(fn19) that governs and regulates costs; and (iii) are there guiding principles for the exercise of that authority or jurisdiction?

In addressing these questions, it is important to be clear here to avoid misapprehension of the issues and conclusions discussed: the general right to costs is a creature of statute, but the Judicial Branch has an exclusive constitutional power to govern and regulate costs. The Judicial Branch can promulgate court rules that include or exclude any expense and regulate the amount of those allowed, provided that such power is exercised in a manner conducive to discharging its constitutionally assigned function.(fn20) Consequently, the other branches of government are constitutionally prohibited from enacting any statute that goes beyond the creation of a general right to costs.(fn21)

In sum, the law of costs has drifted, untethered from common law principles as espoused by Chief Justice Appleton in 1868. Historical revisions to the costs regime and corresponding course of practice may have been reasonable at the time, but the cumulative effect together with steep inflation in legal services have resulted in a costs regime that is (i) unsuitable for the compensatory purpose, (ii) unfair or inequitable to the prevailing party, (iii) contributing to an increasing surge of pro se litigants, and, more importantly, (iv) contrary to the separation of powers doctrine and conflicts with constitutional mandates. A judicially sponsored review should be undertaken to evaluate costs principles and the rules of civil procedure with a view to modernize those rules to promote a trinity of policy objectives: fairness and equity between the parties; access to justice at proportionate cost; and the use of court resources proportionate to the issue in dispute.

Right to Costs: An Intangible Property Right

The statutory right to costs is two-sided: entitlement to receive and liability to pay. For the prevailing party, that right is simply an intangible property right in the nature of a chosen action(fn22) created by law in general terms. It instantaneously vests to the prevailing party by judicial action at the time of judgment, which explains why the right to costs is subject to the statute and rules of court in force when the right accrues and not at any other time.(fn23)

For the adverse party, that right creates a liability to pay costs incurred by the prevailing party to prosecute or defend the civil action "because the party so made liable has furnished the occasion for incurring these costs."(fn24) The type(fn25) and amount of costs(fn26) may differ from case to case, but costs are the constant object(fn27) in all civil cases notwithstanding the cause of action or relief sought. Strictly construing the right to costs appears to hedge the adverse party's risk of an unreasonable liability for costs.(fn28)

If a party is adjudged to be the prevailing party, then it is entitled to the right to costs. These "costs" were historically considered as expensae litis, i.e., litigation expenses. These were "incurred either in the prosecution or defen[s]e of an action, or in any other proceeding at law, or in equity; consisting of the fees of attorneys, solicitors and other officers of court, and such disbursements as are allowed by law."(fn29) Maine case law, however, distinguished attorneys' fees from costs.(fn30) This appears to be wrong in principle from the prevailing party's point of view. There simply is no meaningful difference between costs, disbursements, fees, court costs, or other expenses.(fn31) They all represent a party's financial payment or liability to either prosecute or defend a civil action. Separate matters are the reasonableness of incurring costs and the likely influence of that payment or liability will have on litigation and settlement behavior.

Costs at Common Law: Damages then Property Right

Some legal commentators(fn32) and courts(fn33) maintain that costs were not awarded at common law, but such a statement without qualification provides an inaccurate and misleading overview of costs.(fn34) First, an award for damages often included the costs of the suit. A practice developed under English law prior to 1278 whereby the judge or jury included a monetary amount for costs in the award for damages.(fn35) That practice changed in 1278 when the Parliament of England enacted the Statute of Gloucester,(fn36) which included a provision that allowed costs in all cases where the prevailing plaintiff (but not the defendant) obtained damages in any amount.(fn37) A prevailing defendant eventually obtained that same right by 1607.(fn38)

Second, the intangible property right to costs did not exist at common law until it was established by statute in 1278. As a general rule, there can "be no...

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