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The American rule has two major common law exceptions, mostly affecting federal court litigation: the common benefit doctrine and the bad faith doctrine. The common benefit exception generally applies in cases where a particular plaintiff or number of plaintiffs have born the legal expenses for the benefit of a larger group of potential plaintiffs, as in shareholders’ derivative suits or class actions. In these matters, district courts may equitably order that attorney fees for the plaintiffs be reimbursed from the total amount of the judgment.

The bad faith exception may be invoked under circumstances in which either an attorney or a party has acted in bad faith when filing or pursuing litigation, often evidenced by the frivolous nature of the particular claim. In this set of exceptions, the underlying rationale behind the award of attorney fees is not that of fee-shifting per se, but rather punitive in nature. [See, for example, Hall v. Cole, 412 U.S. 1,5 (1973)].

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