But surely this can have the opposite effect as well. Take the case of the UK Doctor who was alleged to have joined ISIS by the Daily Mail and subsequently had his house repeatedly vandalised, had to move house for his own safety and was unable to sell his previous house for its full market value because of the ongoing vandalism incidents. The main financial damage to him was the drop in the value of his house[0] and this was less than the cost of pursuing an action for defamation which went all the way to the high court, so in the American system he would be out of pocket in taking this to court even if he won. Further, despite the high cost of a complicated legal action, he was not discouraged from taking out the action in the British system because he knew the newspaper had no evidence as he knew he was not a member of ISIS.
Note also, that in the UK the court asseses the costs to be paid by the loser, you don't just get hit with the defendants lawyers invoice, an estimate has to be submitted before the trial begins, they cannot be disproportionate to the damages being claimed and there are lots of exceptions for things like small claims court costs which are limited.[1]
[0] There was probably some emotional harm and lost earnings in there too, but the house was the big one.
The legal costs are a real damage that he can claim for. It's just that it isn't automatically a given that he would be awarded them. In a case like this, I would expect that he would prevail in such a claim. You can also be awarded punitive damages far in excess of the financial damages.
Edit: I would expect the main claim to be reputational damage with some absurdly high made up dollar value, and if the facts of the case are as you have presented them, the plaintiff would probably win a smaller, but still very high award.
Ahh, so we don’t have punitive damages. IANAL but as I understand it, it has to be a reasonable estimate of the financial loss caused. So if he was off sick from work with stress I’m guessing it would be the difference between sick pay and full pay for the period he was off. Reputation damage would need to show you lost your job or lost clients, since he probably worked for the NHS and I’m guessing he didn’t get fired or suspended this would not be a major amount of money.
You can’t even put punitive damages in a contract, so for example if you hire a builder and write that the house must be finished by date X, or they have to pay Y per week. You can’t select any figure for Y it has to be a reasonable estimate of how much it would cost to deal with the situation i.e rent another house temporarily, pay removals company twice etc. If it’s too high you run the risk of having the term struck out as punitive and therefore getting nothing.
When you say "out of pocket" you're only semi-correct as to the situation on the ground. If you don't have access to funds for a variety of reasons but are pursuing a lawsuit that a firm thinks is highly likely to succeed, then that firm may eat the costs of the trial and negotiate with you to divide proceeds. Additionally that particular case would probably be a great source of PR for the law firm representing the doctor - sometimes big banner cases, especially representing small fish against large corporations, can be worth more to the firm in the long run as a way to attract wealthy clients.
Note also, that in the UK the court asseses the costs to be paid by the loser, you don't just get hit with the defendants lawyers invoice, an estimate has to be submitted before the trial begins, they cannot be disproportionate to the damages being claimed and there are lots of exceptions for things like small claims court costs which are limited.[1]
[0] There was probably some emotional harm and lost earnings in there too, but the house was the big one.
[1] https://en.wikipedia.org/wiki/Costs_in_English_law