Tuesday, March 08, 2005

Offers of Judment and Loser Pays

It's been around, and now it's in Georgia.

The state of Alaska has followed a loser-pays system for decades. Tthe Alaska Rules of Civil Procedure provides a modest degree of fee-shifting.

In the mid-1990s, both Oregon and Oklahoma enacted statutes that applied loser-pays principles to significant categories of litigation in their state courts. These laws are discussed in the Olson/Bernstein Maryland Law Review article cited below.

Although no national organization has arisen to promote it, loser-pays continues to be a popular reform idea in many states. In South Carolina, 57 House colleagues joined state representative Gresham Barrett in sponsoring a loser-pays measure. Loser-pays measures have been introduced inArizona and, with respect to specialized statutory areas, such states as Colorado.

Many states have also introduced or strengthened offer-of-settlement systems in which at least some costs are available to parties when the other side turns down a proffered settlement and then does worse at trial. Frequently these laws are hampered in their effect because they exclude what are the largest categories of cost, attorneys' and expert witnesses' fees.

One particularly promising field for the extension of loser-pays principles is in the realm of statutes governing disputes between business entities.

Loser-pays is the subject of a large theoretical literature generated by economists and other model-builders who mostly have found themselves at a loss to predict from their models whether litigation will be on average better restrained in the one type of system or in the other. Professors Thomas D. Rowe, Jr. (Duke) and David A. Anderson (Centre College) ran simulations of the effect of various offer-of-settlement rules on lawyers' behavior in settling cases. ("Empirical Research on Offer of Settlement Devices", 1996; reprinted by Texas Association of Mediators, link now dead).

For further reading: Walter Olson and David Bernstein, "Loser-Pays: Where Next?", Maryland Law Review, 1996 (55 Md. L. Rev. 1161).