A Word About Costs

"Costs".  This is one of the most misunderstood terms in the legal world.  Many people are under the mistaken impression that if you win a lawsuit, the loser has to pay "costs".  These same people also tend to think that "costs" means that the loser has to pay all of your legal bills.  Nothing could be further from the truth.

Costs are always in the discretion of the judge.  That means that, no matter what the rules of court or precedent cases say, the judge has the final word on how much "costs" the loser should pay to you.

Sometimes, a judge will award no costs.  That means that the winner pays its own legal bill and the loser pays its own legal bill.  This may happen in a case where the law was unclear and it was reasonable for both sides to fight the case.  It may also happen where the winner, despite winning the case, doesn't deserve any costs because his conduct was inappropriate.

Rarely, the winner may even have to pay costs to the loser!

What is most common is that the loser has to pay the winner some amount of money to help toward their legal costs.  Lawyers have various tools and procedures available that can be used during the course of the litigation.  The hope is that, when you win your case, you can use these tools to try to persuade the judge to give you a larger costs award.

It will be extremely rare that the loser has to pay absolutely all of the winner's costs.  This means one thing: litigation will cost you money.  Even if you win, you'll still be paying your lawyer.

So, if you have been sued by somebody, you are now losing money.  Even if you win, you'll end up with a net loss.  On the other hand, if you are suing somebody, you'll likely never get everything that you are asking for, because, even if you win, your legal bills will be more than the costs you are awarded.

This is an important reason for considering settling a case.  Why spend $5,000 in legal fees to fight a $10,000 case if the other side is willing to pay you $7,000 right now?  If you win 2 years from now, you might get $2,000 in costs and spend $5,000 in legal fees, giving you a net recovery of $7,000.  You just had to wait 2 years to get the same amount of money, not to mention 2 years of hassle and stress.

You may get legal advice that encourages you to settle for less than you think is fair.  Before you ignore that advice, think of the costs repercussions of NOT settling.  That settlement offer may look a lot better in that new light.