Sunday, January 23, 2011

Virginia house to vote on modified loser pays rule

UPDATE:  This bill was recommended for no action by the relevant subcommittee. 1/19/11

Our legal system is like our democracy. Our legal system is the most unfair legal system, except for all the other legal systems out there.

Clients unfamiliar with the American system of civil justice are sometimes shocked to find that the winner of a lawsuit, in most instances, has to pay their own attorneys’ fees. This sometimes means that when someone has been wronged, they must suffer the extra expense of paying an attorney to obtain any measure of justice. In many other western nations the loser of a lawsuit must pay the winning side’s attorneys’ fees, but not here in the United States. This rule is strongly applied with only a few specific exceptions ( for example, if there is a specific law allowing attorneys’ fees in your type of case, or if attorneys’ fees are allowed under a contract between the parties).

Del. John O’Bannon (R - Richmond) has introduced HB1640 in an attempt to benefit defendants (the parties being sued) with a loser pays rule that provides no benefit to plaintiffs (the parties that brings the lawsuit seeking damages against the defendant(s)). This bill is a completely lopsided bill that will wreak havoc on the civil justice system in Virginia if passed in its current form.

In its shortest simplest form: HB1640, as written gives a power to defendants. This power begins with an offer made by a defendant to a plaintiff to have judgment entered against the defendant for a specified amount of money. If the plaintiff then rejects that offer, goes to trial, and loses (or wins a judgment for less than the offer from the defendant), the plaintiff must then pay all of the defendants “costs.” The statute specifies costs as including expert witness fees, court reporting fees, and attorneys’ fees almost all of which would normally not be compensable.

A plaintiff who makes an offer of any kind that is rejected by a defendant, and then goes to trial, has no additional special right to attorney’s fees, expert witness costs, or court reporter costs.
This is not a traditional loser pays rule. This is not an incentive for defendants to settle. This is nothing more than an attempt to force personal injury plaintiffs to settle for less money or risk suffering (further) financial ruin.

The only way I can think of to describe the system is to give a hypothetical example:
Jane is in an auto accident with driver John. John appears to be liable for the accident. Jane claims her neck was inured in the accident and sues John. Jane had a previous accident with neck injuries eight years previous. A reasonable jury, with good presentation of evidence might determine this new accident caused all the current neck injuries, some of them, or none of them.
The case progresses and as trial approaches the plaintiff offers to settle the case for $100,000.00. John’s attorney and insurance company believes that the jury will either grant $0.00 damages or damages of about $75,000.00. John’s attorney waits until exactly 10 days before trial and extends an offer to settle the case for entry of judgment of $1.00. $1.00 is of course insulting, and not worth the time and hassle (in most instances). If Jane refuses, goes to trial and does not win, then Jane must then pay the other side’s attorneys fees. It does not matter why Jane lost. This is a loser pays rule for the benefit of the John only. Only one side gambles on having to pay attorneys’ fees.

Now the insurance company, on some level, does not want to go to trial. In the above scenario a hypothetical settlement might occur between $15,000.00 and $60,000.00 based on the advice of counsel without HB1640. With HB1640 that range will be shifted downward, as the Plaintiff always has to fear a worse scenario than getting $0.00, but instead having to pay out of her own pocket tens of thousands of dollars.

Provided the bill is not abandoned in the next two weeks, I will write additional posts on: the winners and losers under the bill, the unintended consequences, why the bill can not be fixed, and the additions necessary to make the bill accomplish its original goal even if the original goal is not laudable.

Prediction: If it is not clear, I do not support the bill. The House Courts of Justice Committee will generally weed out bills affecting the civil justice system with too many flaws. This bill does not make it out of committee.

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