Tort Law
A ‘Loser Pays’ Legal System Will Cut Frivolous Lawsuits, Report Says
Posted Dec 2, 2008, 05:34 pm CST
By Rachel M. Zahorsky
The Manhattan Institute for Policy Research released a report today advocating for a "loser pays" rule to help staunch the exorbitant litigation costs that arise from nuisance lawsuits in the U.S.
“Greater Justice, Lower Cost: How a 'Loser Pays' Rule Would Improve the American Legal System,” reports that Americans spend more on tort litigation every year, which is often unfair and inefficient, than on new cars. A loser-pays rule, which is already in place in the rest of the developed world, “would discourage meritless lawsuits,” while ensuring “plaintiffs of modest means but strong legal cases access to justice,” the study says.
The report comes on the heels of a federal judge’s order granting sanctions to Walt Disney Co.’s mobile phone division, LG Electronics and Pantech & Curitel Communications Inc. for a “frivolous” patent infringement suit brought by Triune Star Inc.
U.S. District Judge Michael M. Mihm of the U.S. District Court for the Central District of Illinois granted the defendants' motions for summary judgment as well as “reasonable costs and attorneys fees,” on Nov. 25, reports Law 360 (sub. req.).
Judge Mihm noted in his order (PDF) that a reasonable investigation would have revealed that none of the accused devices contain a miniature infrared camera, as required by Triune's claims, and as a matter of law, could not have infringed the patent in question. The judge ordered the sanctions to be paid by Triune and its counsel, Rockey Depke & Lyons for the “baseless action.”
This issue is something Brian Rupp of Drinker Biddle & Reath, who represents Pantech and LG, said he thinks about a lot in regards to so-called patent trolls: individuals and companies that amass patent portfolios—often with no intention to manufacture or market the product—and file infringement suits against other businesses.
“Why aren’t there trolls in Germany and Japan?” Rupp asked. “They are all in the U.S. because of this exact rule,” Rupp said in an ABA Journal interview, “using the enormous costs of patent litigation as leverage to extract a settlement they would not otherwise be entitled to.”
In Triune Star Inc. v. The Walt Disney Co. et al., Rupp says attorney fees and litigation costs totaled "hundreds of thousands of dollars" over the course of a year.
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Comments
Posted by Was there - 1 month, 4 days, 3 hours, 18 minutes ago
The MI report doesn’t use the word “frivolous.”
Posted by B. McLeod - 1 month, 4 days, 51 minutes ago
True, and that is where the article is a little confusing. As the referenced sanction ruling shows, the existing rules already allow court-imposed sanctions if a case is found by the court to have been frivolous. The fact that a litigant lost a case does not alone mean or establish that the losing position was “frivolous.”
Posted by Shawn - 1 month, 3 days, 23 hours, 11 minutes ago
The focus should be on encouraging the courts to enforce the existing rules by awarding sanctions for frivolous filings. Not all unsuccessful claims are frivolous.
Posted by Loser Pay is Bad Idea - 1 month, 3 days, 12 hours, 56 minutes ago
This is an absurd idea. This is just Big Law’s attempt to get more money since they can’t justify paying their first year lawyer $165,000 a year to look at documents in a warehouse anymore.
Posted by Michael - 1 month, 3 days, 10 hours, 4 minutes ago
We have loser-pays rules in Florida and they’re seldom helpful. I was just involved in one case that involved a declaratory judgment based on poorly written documents for an HOA: the judge ruled the documents “so hopelessly vague that nobody could reasonably be expected to understand them” (and added some salty language directed towards the attorney who drafted the documents) then ruled based on equity. Both parties were prohibited from negotiating a settlement or using ADR because of statutory and contractual constraints. The “loser”—the defendant, in this case—had to pay the legal costs under Florida’s loser pays laws despite that the only way to resolve the complaint was through litigation. If they’re trying to reduce tort litigation this is also usually ineffective: I don’t litigate torts but most named plaintiffs are either judgment proof or close enough that there’s little incentive to shy away from court. A better way to slow down bad filings is to strengthen sanction laws against attorney’s who file bogus claims or offer ridiculous defenses and automatic treble damages for wrongfully denied insurance claims: somehow I doubt this solution is what the authors had in mind though.
Posted by Joshua Tropper - 1 month, 3 days, 7 hours, 52 minutes ago
Tougher sanctions on truly frivolous or malicious litigation (claims OR defenses) would help a lot, although the federal courts backed away from Rule 11 because it was creating more “ancillary” litigation than they wanted to handle. Much better, and far easier to enforce, would be putting some teeth into Rule 69, and making it mutual: any party that did not do better than a written settlement offer should not collect any costs or fees after rejection of the offer and should pay the costs and fees (including experts) of the other side after rejection of the offer.