You only think it's unfortunate because you're thinking about a sympathetic defendant. Consider the opposite hypothetical: all those people suing mortgage lenders for predatory loans. A lot of those people are going to lose those cases. Should they get stuck with the mortgage lenders' legal bills?
Losing a (civil) case does not mean the plaintiff was in the wrong for having brought the case. Very often, people legitimately think they've been wronged, they submit the conflict to the courts for resolution, and the courts decide against them. That's why loser pays is the exception, not the rule. It's reserved for when people use the legal system simply to harass someone else, instead of submitting a legitimate grievance the resolution of which just happens to not come out in their favor.
What's exceptional is that the Institute for Justice http://www.ij.org took up Mr. Caswell's case pro-bono (after Caswell had spent $100k he'd borrowed to fight the case on his own). Standard legal procedure has the motel being taken possession of by the Govt., sold, and the proceeds being divided up amongst State and Federal law enforcement agencies. "Should the government win its case, it will sell off Caswell’s property and give the Tewksbury Police 80 percent of the take." http://www.wbur.org/2012/11/14/tewksbury-motel-owner-fights-...
