Do advocates of more “loser pays” rules offer a solution in search of a problem?

Are people unaware of the “loser pays” sanctions that are already part of Georgia law?

As discussed in previous posts, Georgia already has five statutory “loser pays” rules, four of which passed in tort reform legislation during the time I have been practicing law, and one we have had since the Civil War. Georgia needs a sixth “loser pays” about as much as it needs a sixth law school at a time when graduates of the existing law schools have a really hard time finding jobs.

Georgia’s five “loser pays” rules are:

1. Offer of judgment / offer of settlement. O.C.G.A. § 9-11-68, passed as part of the 2005 tort reform legislation, provides for an award of attorney fees and expenses against a party that refuses to accept a settlement  offer and at trial does not improve upon the rejected offer by at least 25%.
2. Post-verdict jury award due to frivolous claim or defense. O.C.G.A. § 9-11-68(e), also part of the 2005 tort reform legislation, provides a remedy to recover “reasonable and necessary attorney’s fees and expenses of litigation.” Upon motion of the prevailing party when a verdict or judgment is rendered, in a bifurcated proceeding the finder of fact may determine whether the opposing party had presented a frivolous claim or defense, and then award damages against the party presenting the frivolous claim or defense.
3. Motion for fees and expenses where claim or defense was without substantial justification. O.C.G.A. § 9-15-14, enacted in 1986 tort reform legislation, provides for a motion for award of fees and expenses against a party that had asserted a claim or defense “that lacked substantial justification or that the action, or any part thereof, was interposed for delay or  harassment, or if it finds that an attorney or party unnecessarily expanded the proceeding by other improper conduct, including, but not limited to, abuses of discovery procedures.”
4. Abusive litigation tort claim.  O.C.G.A. §§ 51-7-80 et seq., enacted in 1989 tort reform legislation, created a statutory tort of abusive litigation giving rise to liability against “any person who takes an active part in the initiation, continuation, or procurement of civil proceedings against another . . . if such person acts [w]ith malice; and [w]ithout substantial justification.” The claim for abusive litigation is initiated by a notice, with statutory proof of delivery, giving the other party an opportunity to voluntarily drop the allegedly abusive claim,defense, motion or position.
5. Code of 1863 – claim for fees and expenses due to bad faith, stubborn litigiousness, unneccessary trouble and expense. OCGA § 9-6-11, which has been in Georgia law since its enactment with the Code of 1863, provides for an award of attorney fees and expenses of litigation against a party who has acted in bad faith, has been stubbornly litigious, or has caused unnecessary trouble and expense.

I’ve always heard that if it ain’t broke, don’t fix it. Five “loser pays” rules is enough. Short of automatically taking the home and first-born child of anyone who loses in court, what more can anyone ask in the way of “loser pays” rules?

Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy). In addition, he is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle).  In the American Association Justice, he is secretary of the Motor Vehicle, Highway & Premises Liability Section and a board member of the Trucking Litigation Group.

The oldest of the five “loser pays” rules in existing Georgia law has been in effect for nearly 150 years, having first appeared in the Code of 1863.

That Code was largely the work product of Thomas R. R. Cobb, son-in-law of Chief Justice Lumpkin and a foremost Georgia legal scholar of his day. He was a Confederate brigadier general who died at the Battle of  Fredericksburg only a couple of weeks before the Code for which he was largely responsible went into effect. His home in Athens is now operated as a museum.

Thomas Cobb’s “loser pays” rule, now recodified at O.C.G.A. Section 13-6-11, provides for an award of attorney fees and expenses of litigation against a party who has acted in bad faith, has been stubbornly litigious, or has caused unnecessary trouble and expense.

The “bad faith” prong requires bad faith in the transaction from which the lawsuit arises. Bad faith requires more than bad judgment or negligence. Rather, the statute requires a dishonest purpose or some “moral obliquity” and implies “conscious doing of wrong” and a “breach of known duty through some motive of interest of ill will.”

The “stubbornly litigious” and “unnecessary trouble and expense” prongs of the statute require more than mere refusal to pay a just debt. If there is a bona fide controversy about liability or the amount of damages, fees and expenses cannot be recovered under these prongs.

Whether or not a bona fide controversy exists, for purposes of determining whether a plaintiff is entitled to award of attorney fees on grounds that opposing party has been stubbornly litigious or has caused the plaintiff unnecessary trouble and expense, is normally matter for jury to decide. It is for the jury to determine whether there was a bona fide controversy unless the facts preclude such a finding as a matter of law.

I do not suggest adding yet another “loser pays” provision to the five already included in Georgia law. My opinion, based on 35 years experience practicing law in Georgia for both plaintiffs and defendants, is that our five existing “loser pays” rules are enough.  We need a sixth “loser pays” rule about as much as we need a sixth law school in Georgia. However, if it were deemed necessary to do so for purely political reasons, perhaps one approach could be to make OCGA 9-11-68 available to defendants as well as plaintiffs. If that were done, both plaintiffs and defendants could be held accountable for bad faith in the underlying transaction, stubborn litigiousness, and causing the other party undue trouble and expense.

See summary post, “Does Georgia need more than five ‘loser pays’ rules?”

Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy). In addition, he is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle).  In the American Association Justice, he is secretary of the Motor Vehicle, Highway & Premises Liability Section and a board member of the Trucking Litigation Group.

Before rushing into legislation to create yet another “loser pays” rule in Georgia law, it is useful to examine the five forms of “loser pays” rules we already have. I wrote earlier about OCGA 9-11-68 (offer of judgment / offer of settlement rule and frivolous claims and defenses rule) and OCGA 9-11-14 (no justiciable issue, delay, harassment).

The 1989 wave of tort reform legislation included O.C.G.A. §§ 51-7-80 et seq., which created a statutory tort of abusive litigation giving rise to liability against “any person who takes an active part in the initiation, continuation, or procurement of civil proceedings against another . . . if such person acts [w]ith malice; and [w]ithout substantial justification.”

The claim for abusive litigation is initiated by a notice, with statutory proof of delivery, giving the other party an opportunity to voluntarily drop the allegedly abusive claim,defense, motion or position.

It is a complete defense to the tort of abusive litigation if the allegedly abusive position is dropped within thirty days from receipt of that notice. Other defenses are that the position was asserted in good faith, though that is an affirmative defense in which the burden of proof is on the party that had asserted the position, and that the party against whom the abusive litigation claim is asserted was substantially successful in the underlying litigation. The “reasonable inquiry” requirement of is an objective good faith requirement which imposes a duty on attorneys to conduct a reasonable inquiry into the facts and law prior to initiating, continuing, or procuring a claim on behalf of a client, so the standard is what would be objectively reasonable for a competent attorney under the circumstances.

Where the allegedly abusive claim or defense survives a motion for summary judgment, or involves a question of first impression, the abusive litigation claim fails. Bacon v. Volvo Service Center, Inc., 288 Ga. App. 399, 654 S.E.2d 225 (2007) (survived summary judgment); Land v. Boone, 265 Ga. App. 551, 594 S.E.2d 741 (2004) (first impression); Owens v. Generali-U.S. Branch, 224 Ga. App. 290, 480 S.E.2d 863 (1997) (lack of binding authority at time claim asserted).

While seldom invoked in practice, this provision is available and appropriate in responding to truly frivolous lawsuits.

See summary post, “Does Georgia need more than five ‘loser pays’ rules?”

Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy). In addition, he is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle). In the American Association Justice, he is secretary of the Motor Vehicle, Highway & Premises Liability Section and a board member of the Trucking Litigation Group.

O.C.G.A. § 9-15-14, enacted in 1986, provides for a motion for award of fees and expenses against a party that had asserted a claim or defense “that lacked substantial justification or that the action, or any part thereof, was interposed for delay or harassment, or if it finds that an attorney or party unnecessarily expanded the proceeding by other improper conduct, including, but not limited to, abuses of discovery procedures.”

This covers any “claim, defense, or other position with respect to which there existed such a complete absence of any justiciable issue of law or fact that it could not be reasonably believed that a court would accept the asserted claim, defense, or other position.”

However, this does not apply if the court determines the claim or defense was asserted in a good faith attempt to establish a new theory of law in Georgia if the new theory is based on recognized precedential or persuasive authority.

A motion under this statute may be filed at any time up until 45 days after final disposition of the action.

While the person against whom this claim is made must be given notice of the right and opportunity to confront and challenge the value and the need for the legal services claimed, no actual hearing is required if no response is submitted. Tavakolian v. Agio Corp., 304 Ga. App. 660, 697 S.E.2d 233 (2010).

The procedure does not apply in magistrate courts, but does apply in appeals from magistrate courts.

See summary post, “Does Georgia need more than five ‘loser pays’ rules?”

Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy). In addition, he is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle). In the American Association Justice, he is secretary of the Motor Vehicle, Highway & Premises Liability Section and a board member of the Trucking Litigation Group.

“Loser pays” is a popular theme among advocates of “tort reform,” many of whom may not understand what the popular political calls for “loser pays” or “tort reform” really mean in any detail. Perhaps some people who say they are for it do not understand that Georgia already has five “loser pays” rules that have been enacted in legislation over the years.

Yesterday I posted a summary of one of our “loser pays” rules, the offer of judgment under OCGA 9-11-68, which applies when a party rejects an offer of judgment or settlement and does not do at least 25% better at trial.

A second “loser pays” provision in Georgia law strikes more directly at the concept of frivolous lawsuits, which all tort reform advocates deplore. (I have no idea how any lawyer could survive economically by filing frivolous lawsuits which are almost always doomed to fail, but that is another topic.)

O.C.G.A. § 9-11-68(e), which was enacted as part of the 2005 tort reform legislation, provides a remedy to recover “reasonable and necessary attorney’s fees and expenses of litigation.” Upon motion of the prevailing party when a verdict or judgment is rendered, in a bifurcated proceeding the finder of fact may determine whether the opposing party had presented a frivolous claim or defense, and then award damages against the party presenting the frivolous claim or defense.

A frivolous claim or defense includes, but is not limited to:

“(A) A claim, defense, or other position that lacks substantial justification or that is not made in good faith or that is made with malice or a wrongful purpose,” as defined in O.C.G.A. § 51-7-80;

(B) A claim, defense, or other position with respect to which there existed such a complete absence of any justiciable issue of law or fact that it could not be reasonably believed that a court would accept the asserted claim, defense, or other position; and

(C) A claim, defense, or other position that was interposed for delay or harassment.”

A party may elect to pursue either the procedure specified in this subsection or the procedure provided in O.C.G.A. § 9-15-14 (an older “loser pays” rule which I will discuss in another post), but not both.

This procedure applies equally to both frivolous claims by plaintiffs and frivolous defenses by defendants.  One cannot help but wonder whether those who are not satisfied with sanctions that go both ways want to put a well-funded thumb on the scale of justice favoring the defense only.
See summary post, “Does Georgia need more than five ‘loser pays’ rules?”

 Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. In the American Association Justice, he is secretary of the Motor Vehicle, Highway & Premises Liability Section and a board member of the Trucking Litigation Group. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy). In addition, he is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle).

One of the five forms of “loser pays” rules in Georgia is in O.C.G.A. § 9-11-68. Passed as part of the 2005 tort reform legislation, it provides for an award of attorney fees and expenses against a party that refuses to accept a settlement  offer and at trial does not improve upon the rejected offer by at least 25%. See Smith v. Baptiste, 287 Ga. 23, 694 S.E.2d 83 (2010).

Soon after this law was passed, I began hearing insurance adjusters and defense lawyers express the idea that it could backfire. They were right, as the largest fee “loser pays” awards have been against defendants and insurers that refused opportunities to settle for far less than the ultimate value of claims. Perhaps that realization explains why in the past seven years, I have received offers of judgment under this statute only a couple of times.

However, I hear anecdotal accounts that it is used more often against lawyers in high volume settlement practices who are reluctant to take cases to trial.

This tort reform statute provides that at any time more than thirty days after the service of the lawsuit and at least thirty days before trial (or twenty days if it is a counter-offer), either party may serve upon the other party a written offer with a caption referring to the Code section, to settle a tort claim for the amount of money specified in the offer, with either dismissal or entry of judgment accordingly.

Such an offer must be in writing, refer to the Code section, identify the parties and claims involved, state with particularity any conditions, the total amount of the proposal, whether it includes attorney fees and expenses, and be accompanied by a certificate of service showing service by certified mail or statutory overnight delivery.

If the plaintiff rejects an offer of settlement made by a defendant, the defendant is entitled to recover reasonable attorney’s fees and expenses of litigation incurred from the date of the rejection of the offer through the entry of judgment “if the final judgment is one of no liability or the nal judgment obtained by the plaintiff is less than 75 percent of such offer of settlement.”

If a defendant rejects an offer of settlement from a plaintiff, and the plaintiff recovers a final judgment more than 125% of the amount of the offer, the plaintiff is entitled to recover reasonable attorney’s fees and expenses of litigation incurred from the date of the rejection of the offer of settlement through the entry of judgment. An offer under this provision remains open for thirty days unless withdrawn in writing prior to acceptance in writing.

A counteroffer is a rejection, but may be couched as an offer in compliance with the statute. Either acceptance or rejection of such an offer must be in writing and served upon the offeror. An offer that is neither withdrawn nor accepted within 30 days is deemed rejected. There may be multiple successive offers.

If the conditions for award of fees and expenses apply, and the underlying judgment is appealed, the trial court can award the fees and expenses only if the judgment is affirmed.

Moreover, if the trial court determines that an offer under this statute was “not made in good faith in an order setting forth the basis for such a determination,” it may disallow any such award. In at least one case, the Court of Appeals upheld a trial judge’s decision to deny an award of attorneys’ fees and costs under this provision based on the offer having not been made in good faith. Great West Cas. Co. v. Bloomfield, 303 Ga.App. 26, 31(5), 693 S.E.2d 99 (2010).

The court’s opinion provides substantial analysis that could be helpful in arguing that an offer of settlement does not justify attorneys’ fees. In that case, for example, the court noted that a defense verdict, while relevant to consideration of a defendant’s good faith, was not dispositive, and that other evidence, such as the defendant’s subsequent offer that was many times higher than the § 9-11-68 offer, could provide a basis for denial of fees under an abuse of discretion standard.

A double-edged sword, this tort reform provision is used much less than was expected when it became law. It may be used when one side makes an offer for a realistic valuation of the case at least a month before trial. For example, if the value of the case exceeds policy limits, the plaintiff may join an offer under O.C.G.A. § 9-11-68 with a time-limit settlement offer to induce a reasonable settlement. Similarly, the defendant may utilize this section to induce settlement by making an offer keyed to a completely realistic case valuation.

See summary post, “Does Georgia need more than five ‘loser pays’ rules?”

Ken Shigley is immediate past president of the State Bar of Georgia and current chair of the board of the Institute for Continuing Legal Education in Georgia. Lead author of Georgia Law of Torts: Trial Preparation & Practice (West, 2010-12), he has an AV Preeminent rating in Martindale-Hubbell Law Directory and Bar Register of Preeminent Lawyers, double board certification in Civil Trial Advocacy and Civil Pretrial Advocacy from the National Board of Legal Specialty Certification (formerly National Board of Trial Advocacy), and is listed in Super Lawyers (Atlanta Magazine), Legal Elite (Georgia Trend) and Who’s Who in Law (Atlanta Business Chronicle). In the American Association Justice, he is a board member of the Trucking Litigation Group and secretary of the Motor Vehicle, Highway & Premises Liability Section.

It will take a few years, but I predict that the problems with the bill will be largely repaired.  A cap on noneconomic damages in medical malpractice cases will likely remain, as the political support for it in the medical community is mighty strong.  However, as in California after it adopted such a cap in the 1970’s, we may see a requirement for financial disclosure by insurance companies to support premium rate increases.

Likewise, the replacement of “joint and several liability” with “proportional liability” will be politically difficult to change.  However, if the problems with the new rule are explained to legislators, perhaps there could be some modification.

The Daubert rule on expert testimony is here to stay, but the version of it in the State Bar’s proposed new Georgia Evidence Code makes more sense, both procedurally and substantively, than the self-contradictory scissors and paste job in S.B. 3.

The offer of judgment rule in S.B. 3 is such a miscarriage that I hardly ever hear of anyone actually using it.  I know that most of the insurance companies are afraid to use it in significant cases out of concern that it will be they rather than the plaintiffs who it will hurt.  It may take a couple of years, but I expect that a more sensible and workable version of the offer of judgment rule will be passed.

A lot of the other stuff that was included in S.B. 3 will bite the dust over the next couple of years.

The Shigley Law Firm  represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks.

The Shigley Law Firm represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks).

The Shigley Law Firm represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks).

The Shigley Law Firm represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks).

Ken Shigley represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “Super Lawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is President-Elect of the State Bar of Georgia (2011-12), a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks). He and Sally have been married since 1983, and are the proud parnts of two young adults, Anne Shigley and Ken Shigley, Jr.

The Shigley Law Firm represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “SuperLawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks).

Ken Shigley represents plaintiffs in wrongful death and catastrophic injury cases statewide in Georgia, and in other states subject to the multijurisdictional practice and pro hac vice rules in each state. Ken Shigley was designated as a “Super Lawyer” in Atlanta Magazine and one of the “Legal Elite” in Georgia Trend Magazine. He is President-Elect of the State Bar of Georgia (2011-12), a Certified Civil Trial Advocate of the National Board of Trial Advocacy, Chair of the Southeastern Motor Carrier Liability Institute and former chair of the Georgia Insurance Law Institute. He particularly focuses on cases arising from truck wrecks and accidents (tractor trailers truck wrecks, semi truck wrecks,18 wheeler truck wrecks, big rig truck wrecks, log truck wrecks, dump truck wrecks). He and Sally have been married since 1983, and are the proud parnts of two young adults, Anne Shigley and Ken Shigley, Jr.