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Michigan lawyers specializing in civil litigation
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Monday, March 17, 2003
 

Best tag line

Chris Parillo's weblog, winner of the Best Computers or Technology category of the Bloggies (beating out both boing boing and Slashdot), is subtitled "Getting Screwed While Everybody Else is Getting Laid".


11:35:10 PM    

"Loser pays"

Many commentators decry the contingent fee system in personal injury litigation and urge a version of the British "loser pays" system, under which the party which loses a case is required to reimburse the attorney fees incurred by the winning side.  Those who advocate for a loser pays system argue that the contingency fee encourages those who have a grievance to pursue litigation without any risk of financial loss if they lose.  (See, for example, "The Case for Loser Pays" at the Overlawyered site.)

We have had a modified version of "loser pays" in Michigan for over 25 years, and it has done nothing to curb the litigative impulse.  Michigan has a mandatory pretrial evaluation procedure, previously called "mediation" and now called "case evaluation", under which a case which has been pending for some time and has gone through most of the discovery process is submitted to a panel of three attorneys whose charge is to arrive at a recommended settlement value. The result is not binding, but if it is accepted by both sides, the case is settled for that figure. 

The figure does have some "teeth", in the form of case evaluation sanctions.  If a party rejects the evaluation figure and the result after trial is not more than 10% better than the evaluation figure, the rejecting party may be assessed the "actual costs of litigation", including the attorney fees incurred by his opponent from and after the date of the rejection.  Thus, under the system, the following results would apply:

  • A plaintiff who rejects a $50,000 evaluation and loses at trial or wins but recovers less than $45,000 (after all taxed costs and prejudgment interest are added) will be responsible to pay the defense costs incurred after the rejection.
  • A defendant who rejects a $50,000 evaluation and incurs a verdict which exceeds $55,000 (after  the same enhancements) will be required to pay the costs and attorneys fees of the plaintiff after the rejection.

Our experience after 25 years of practice under this system is that the "loser pays" sanctions under the case evaluation rule are pretty much a one-way penalty.  They are typically meaningless to plaintiffs, because the majority of plaintiffs who bring lawsuits do not have the financial means to pay the costs and attorneys fees incurred by the defense. By contrast, corporate defendants usually do have the resources necessary to pay these amounts, and the sanctions are added to the policy limit of individual defendants who are covered by homeowners or auto liability policies and therefore are covered and paid by the insurer. 

The case evaluation sanctions as a form of "loser pays" have failed to make any dent in the incidence of lawsuits filed in this state.  The tort reform provisions enacted in 1986, 1993, and 1995, primarily the limits on product liability claims, the caps on non-economic damages, and the limits on the admissibility of expert testimony, have been much more effective in doing so.


10:42:16 PM    


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