House Judiciary Committee Part 3
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Bills discussed (1)
| Bill | Title | Sponsor | Status |
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HB2057
· 2 mentions in chapter, transcript
Matched: “HB2057”
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Pre-2017 bill |
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Representative Darrin Williams
Unverified
0:00
Applause Members, we're at House
Bill 2057. An amendment has been passed out. This is Mr. Stubberfield's amendment to his own bill.
Let's see if we can't get this on the bill and then we can talk about it. They have a motion. Mr. Wright makes a motion to amend House Bill 2057. All in favor, aye. Aye. Opposed, no. Mr. Stubblefield, you are recognized to present House Bill 2057 as amended.
Representative Gary Stubblefield
Unverified
0:41
Thank you, Mr. Chairman, and thank you, Committee, for taking the time to listen to this non-controversial bill. Let me just start out by saying that the Arkansas Bar Association has taken a no stand on this bill. And let me also start out by saying that a poll was taken not too long ago that said 83% of all Americans agreed that we have a strong problem with frivolous lawsuits.
Has everybody got the amendment? It's been passed out. Okay. I just want you to understand that the reforms that I'm proposing in this bill, they're really simple. They're really not that complicated. They encourage litigants to settle. If the litigants don't make a reasonable settlement offer, you could end up paying some portion of the opposing party's lawsuit fees and lawsuit costs. But if you make a reasonable offer, you won't pay any cost on the other side. You might even be able to get the whole business settled and finished out of court.
This mechanism in this bill, and I'm sure you've heard of this, the offer of settlement, is a legal device. It's a common feature that encourages settlement that is found in many places in our state and our federal legal system. I have with me today two guests. I would like to introduce Marie Griffith here on my right. She is an attorney, and she's also working on her Ph.D. at Harvard. And I also have former State Representative Dan Greenberg, an attorney here in Little Rock,
and they will be helping me present this bill today. now let me let me just say one thing before we start you know when i when i started this i want you to understand that i do believe in my heart that it's everyone's right to be heard in court everyone has that right and it's everyone's right to ask for compensation in court if they've been harmed but there are aspects of our current litigation system that are i think we would agree that are wasteful that are expensive and sometimes dangerous and i think we need reforms that
encourages plaintiffs who have cases that are unlikely to win to avoid suing or pursue some settlement out of court. And similarly, we need reforms that encourage defendants who have cases that they are likely to lose to pursue some settlement during the time they are sued or even before they are sued. So that is the premise on which this bill was brought to you today. Thank you, Mr. Stubblefield. So
Representative Darrin Williams
Unverified
3:22
would your guests like to say something like that just here to answer questions?
Marie Griffin
Unverified
3:27
Please state your name and let us know who you're with. Good morning, Mr. Chair. My name
Speaker 10
3:34
is Marie Griffin, and I'm an adjunct fellow with the Manhattan Institute Center for Legal Policy. I want to thank you all for having me here today. This is actually an issue that's been close to my heart for a while. As Representative Stubblefield pointed out, the Arkansas civil justice system, like most of those in the United States, is unnecessarily costly because it encourages lawyers to file lawsuits that have little legal merit for their settlement value.
In addition, the system is unfair to two different groups of individual citizens. One group, innocent defendants, and the other group is plaintiffs with strong claims. As Representative Stubblefield was saying, a blameless defendant loses even if she wins because fighting a low-merit lawsuit can cost thousands of dollars, even sometimes tens of thousands of dollars, which a blameless defendant cannot recover. I'm sorry, let me stop you for one minute.
Representative Darrin Williams
Unverified
4:23
Is it Professor Griffin? Did I get the name? Oh,
Speaker 10
4:26
I'm not a professor. I'm sorry.
Marie Griffin. I'm an attorney. I'm an adjunct scholar with the Manhattan Institute, and I am a Ph.D. student
Representative Darrin Williams
Unverified
4:35
at Harvard University. I apologize for cutting you off. I can't see well, but is that a PDA or some type of electronic device that you have there? It is, yes. Unfortunately, the rules of the House will not allow you to testify from such a device, even if it's your own words. That's the issue we had earlier today when I had to print a copy for another gentleman. So hopefully you've got a printed copy.
Speaker 15
5:00
Actually, my colleague here is going to save the day. He has
Representative Darrin Williams
Unverified
5:03
a printout. Thank you. Thank you. I appreciate that. Sorry,
Speaker 16
5:07
that's House rules. No, that's all right. I understand. I should have
Representative Darrin Williams
Unverified
5:13
thought of that, actually. Mr. Greenberg is well-versed in our rules. He knows that.
Dan Greenberg
Unverified
5:20
Yes, sir, you may. Well, maybe I used to be well-versed in the rules. I didn't realize you had this new one. All I've got is I've got a copy of the
Representative Darrin Williams
Unverified
5:28
bill up on the PDA. Am I allowed
to look at that? Unfortunately, the rules won't allow testimony from any type of electronic device.
We can give you a copy of it if
Marie Griffin
Unverified
5:43
you need it. Okay. All right. Go right
Speaker 10
5:45
ahead. I apologize. That's quite all right. As Representative Stubblefield was saying, a blameless defendant loses even if she wins because she incurs thousands, maybe tens of thousands of dollars in attorney's fees that she has no way of recovering, despite being innocent of legal wrongdoing. But our system is also unfair to another group of people whom we hear less about, plaintiffs who have been injured by someone else's negligence and who deserve compensation.
Plaintiffs with strong cases are terribly penalized by our current system because they must pay 30, even 40 percent of their recoveries, which are supposed to be compensation for their injuries, to their lawyers. The bill before you today will make the civil justice system fairer for these individuals and less expensive for Arkansas taxpayers by making losers of civil suits for monetary damages liable to the winner's attorney's fees. Almost every other country in the world has a so-called loser-pays rule along the lines of one proposed in this bill.
In a loser-pays system, no one has an incentive to file a very low-merit lawsuit because defendants will no longer feel that they have to pay good money to settle bad claims. This is something that pretty much every economist who studied the issue agrees on. Loser-pays lowers the number of very low-quality lawsuits in the system, saving taxpayers' money and freeing up state courts to speed meritorious cases through the system more quickly. The bill before you today will also promote settlement by limiting each party's liability for attorney's fees
to the extent that they make a reasonable pretrial settlement offer. The more reasonable each party is willing to be at the settlement stage of a lawsuit, the lower their exposure to a possible award of attorney's fees under the new rule, because the fee award can never be larger than the difference between the actual judgment amount and the unsuccessful party's last settlement offer. This limit will also prevent parties from spending more on legal fees than they should, just on the idea that the other party may wind up with the bill.
Now I want to touch on a very important question that people always ask me about loser pays. What about access to justice? If we have a loser-paid system, won't regular middle-class people be afraid to file even a very strong lawsuit on the possibility that they might lose and be hit with a ruinous fee award. I want to tell you something right now, which is if that's how loser pays actually works and all of these other places that have loser pays, I would oppose it. That's a terrible system.
I don't think anyone in this room wants to live in a world where an ordinary person who has suffered an injury to another person's negligence is afraid to seek justice. The reason I'm interested in and support this bill is because that's not how Loser Pays actually works in all of these other places, from England to Italy to Canada to New Zealand. In all of these countries, ordinary people have access to the court system because they or their lawyers purchase legal expenses insurance,
which covers the cost of any fee award in the event that a decent case proceeds to trial and is lost. There are two kinds of legal expenses insurance out there. One is the kind you're probably thinking of. It's called traditional legal expenses insurance. And that kind is often bundled with homeowners insurance or auto policies. So basically there's a premium every month, and it indemnifies the insured person against any award of attorney's fees if he or she files a lawsuit.
Now you may be thinking, well, that kind of insurance may solve this problem. for, you know, stable, middle-class, responsible people that already have these other kinds of insurance, you know, already have homeowners insurance. But what about people who aren't doing that well? What about the less fortunate folks who are barely scraping by, you know, who maybe don't own a home and can't afford more than the minimum auto insurance policy required by law? How are we going to preserve access for them? And fortunately, there is an answer to this question
because the other kind of litigation expenses insurance that you can get in loser pays jurisdictions is called after-the-event insurance. And it is basically a policy. You can buy in England, it costs 100 to 200 pounds, which is basically $150 to, you know, $300, depending on the exchange rate, at the same time that you file the lawsuit. And it insures the plaintiff against any fee award, any judgment against them if they go to trial
and lose on attorney's fees. Now, plaintiffs' lawyers in England actually routinely advance these premiums, these one- to 200-pound premiums, on behalf of their clients. So this is the same thing that happens in the United States with respect to filing fees and court reporter fees. Here in the U.S., a plaintiff's contingent fee attorney will typically advance court reporter fees, Xeroxing fees, filing fees on behalf of the client.
And then if the lawyer is unsuccessful in getting the client to recovery, they don't pursue for those expenses. This is exactly how after-the-event litigation insurance premiums work in England. The plaintiff's lawyer will advance the 1- to 200-pound premium and will not recover it unless the plaintiff actually receives a verdict at trial or settlement. So legal expenses insurance makes possible a system that changes the rules of the road in such a way that plaintiffs with good cases are more fully and justly compensated,
as they deserve to be, and very low merit cases are discouraged, as they are not adequately discouraged in our current system. This can work in Arkansas. We need to create a market for this kind
Representative John W. Walker
Unverified
11:38
of insurance by adopting a sensible rule of the road. Point of order, Mr. Chairman. Let's see your point. I don't see anything in the bill to promote insurance payments or anything like that. And we are now being persuaded or at least asked to consider approving a system whereby
legal fees are insured like those are in some other country. I don't think that that goes to the bill at all. And I ask that the sponsor of the bill and the speaker for the bill address the bill rather than what could
Representative Darrin Williams
Unverified
12:16
France. Representative Walker, legal expenses. Mr. Walker, I appreciate your point of order. I'm going to ask the folks presenting to limit
your discussion to the bill. We'll give you some range of latitude to make the explanation for that.
But he's correct. we need to limit to that. Yes, any question? Yes.
Representative Gary Stubblefield
Unverified
12:35
Representative Williams, Mr. Chairman, could we get a copy of the amendment? Sure. We can get you
Representative Darrin Williams
Unverified
12:41
a copy of the amendment because that's pretty much the bill. You want the amendment? Sure. I'm sorry. We'll get you copies. Ms.
Speaker 10
12:53
Griffin, you may proceed. Okay. Well, when I get a copy of the bill, I'll point out that my remarks on insurance are about a provision in the bill. Thank you.
Speaker 40
13:03
Here it is. How do you call this? Where's the insurance? Right here. Okay, if
Speaker 10
13:16
the bill, you will see the provision that pertains specifically to litigation insurance. What we are doing there is it says that the provision of litigation insurance under other applicable laws shall not be deemed maintenance or champerty, which I know most folks on this committee probably have legal background
and will know that these are traditional legal ethics prohibitions on outsiders taking interest in cases. We want to ensure that legal expenses insurance is not deemed to violate legal ethics rules, which is why that provision is included. Thank you, Ms. Griffin. Are you complete with your testimony? I was wrapping up. Thank you so much. I look forward to
Representative Darrin Williams
Unverified
13:52
your questions. Thank you. Mr. Greenberg, would you like to have additional testimony? In the interest of time, I'm
Dan Greenberg
Unverified
14:00
going to try to be brief. My name is Dan Greenberg. I'm an attorney here, and my practice is always to begin by saying I speak for myself.
I work for two different nonprofits, but today I'm just speaking on my own. Let me begin by saying just a few words about the way this bill was drafted. When Representative Stubblefield first brought this to me, my primary concern was to make sure that it was constitutional. And as a consequence of that, I and several other drafters have gone over it to make sure that it complies with Supreme Court opinions, particularly those opinions on Amendment 80. And I do want to reassure you that it's carefully drafted to meet any constitutional concerns and does not intrude on the courts or the judiciary's
proper province under Amendment 80. Let me say just a few words
about a friend of mine who practices law who came to me a year or two ago, and he said, you know, I'm about to quit practicing law and find another career because
I'm involved with the most difficult and unpleasant case I've ever been involved with. And I kind of wondered, what was it? Is it some case that involves complex issues that no one can understand or complex issues that no one can even stay awake while studying them. He said, no, it's a simple divorce case, but the problem is that both my client and the client's spouse have gotten so angry at each other that there's no way to get anything resolved.
And the goal of any case really ought to be resolution, not to make people feel like everybody's been heard and they've been treated fairly. But this case is different because both the husband and wife have lost sight that the goal is resolution, and their goal in both cases is to make each other as miserable as possible. And in fact, both of them are achieving incredible success with that goal and nearly perfect success, and it's beginning to spread not only to the clients but to the attorneys. And of course, when you have this situation where parties would rather prolong litigation to make the other party unhappy or to make
the other party's legal bills bigger, litigation requires a life of its own that's very difficult to stop. And that's very similar to the situation we have today in the civil justice system because when you have a system that encourages litigation, when it should encourage settlement, you're going to have a big problem. That is a problem that we face today. It's a problem that this bill is designed to solve. Its relevance is to cases involving damages where parties have a rough idea of what's going to happen. There are a lot of cases where everybody knows the plaintiff is quite likely to win. There are a lot of cases where everybody knows the defendant is quite likely to win.
And those are the cases that our system should encourage settlement. I just want to explain very briefly how this is going to work. Let's say somebody has destroyed my computer, which I know I'm not allowed to look at it, but I hope I can use it as a visual aid here. Let's say somebody has destroyed my computer, and I think it's worth $1,000, and my attorney tells me because of weaknesses in my case, I've only got a 25% chance roughly to win. That means my case is only worth about $250, not $1,000. And under our current system, I've got an incentive to keep litigating and not to settle,
because I can threaten my opponent with a terrible prospect that the meter for everyone's lawyer is going to continue to run as long as I keep litigating. Now, under our current system, the meter is going to keep on running. We're going to spend a lot of money litigating. Under this system, I've got a very strong incentive to offer $250, not $1,000, to settle. And the other person has just the same incentive. If one of us makes the same offer and the other person refuses and there's a verdict to $250, then the person who refuses the offer is going to foot the bill for additional expenses of litigation, either attorney's fees
or the difference between the offer and the judgment, whichever is less. Again, if you assume a different world where the suit is actually worth, say, $950 or $1,000, then if the defendant offers $500 but the verdict is $950, then the defendant is going to end up on the hook for additional costs, either $450 or attorney's fees, whichever is less. Again, the system we have now encourages wasteful and expensive and pointless litigation, makes it very expensive to recover damages, even in cases where everybody knows what the appropriate and likely outcome is,
because contingency fees reduce the recovery of the plaintiff. That's another issue which I don't want to get into too much. But the system I think we want, which this bill creates, encourages settlement of cases when everybody involved has a rough idea what the value of the case is. It doesn't really encourage settlement when people disagree about the value of the case. That's exactly the kind of case that should be litigated when it's not clear. I don't know if everybody knows this, but Ms. Griffin, in her own way, is something of a celebrity. She's one of the nation's leading experts on tort reform. She's regularly on TV. She's invited to discuss reviews on tort reform. The last time I saw her on TV, she was debating Mark Lanier, who I think everybody would agree
is one of the nation's leading and most powerful and most successful trial lawyers. And you know how these TV shows with dueling experts work. You know, both of the experts make their points and they start arguing that the other expert is immoral or stupid or something like that. And so I was very surprised to see what happened in the debate between Mr. Lanier and Ms. Griffin. Ms. Griffin started by explaining how requiring the losing party to pay some of the costs of litigation, right now they're borne by the winning party, is a very good idea. And Mr. Lanier said, you know, I've read Ms. Griffin's paper on this. It's very good, and I support loser pays.
And that's what the trial lawyer said. And the host was surprised. The TV audience didn't see much of a debate, but it was very educational, even if it wasn't all that exciting to watch, because there really is reason to think that all sorts of people with all sorts of different interests and political views think shifting of fees and costs can be a good idea. It leads to good consequences. I think it's good public policy, and the experience of many states and many nations suggests it's good public policy, and apparently even some very successful trial lawyers, when they think about it, realize that it's good public policy. I understand this is a complex issue, but
Speaker 19
19:25
I hope the three of us have already addressed some of the committee's questions, and I imagine that if we
Representative Darrin Williams
Unverified
19:32
haven't, we're ready to take questions now. Thank you, Mr. Greenberg. Thank you for your testimony. Unfortunately, this trial lawyer doesn't agree with Ms. Lanier right now. Maybe you'll convince me before we get done. We've got several questions. Mr. Gillum, you're recognized for a
Representative Jeremy Gillam
Unverified
19:49
question. Mr. Chair, my question wasn't answered in some of their talks, so I'm no longer needed. Thank you.
Thank you. Mr. Wilkins, you're recognized for a question.
Speaker 50
19:58
Thank you, Mr. Chairman. Two brief questions. One to Ms. Griffin. And would you tell us a little bit about your organization, the Manhattan – what is it? The Manhattan Institute
Speaker 10
20:11
for Public Policy is a think tank, and it's based in New York, although I'm not based in New York. I actually live in Boston. But they have a workshop, I guess, or a center within the think tank called the Center for
Legal Policy, for which I've been fortunate to work for about four years.
Speaker 50
20:29
All right. And my other question is for Mr. Greenberg. At one point in your testimony, you said that there are cases that everybody knows the defendant should win and there are cases that everybody knows the plaintiff should win and those are the types of cases that we should encourage. Is that what you intended to say? Excuse me. What I should have
Speaker 19
20:50
said and what I certainly meant to say was where everybody has a pretty good understanding of what's going to happen,
those are the cases that we should encourage settlement of. We should encourage settlement and not litigation. When it's harder to see what the outcome will be, those are the cases that probably ought to be litigated.
Representative John W. Walker
Unverified
21:16
Thank you. Mr. Walker, you recognize for a question? I have several, Mr. Chairman, if you don't mind. Go right ahead. Does the American system of civil justice require that parties compromise their disputes
or must, as we live in a capitalistic society, people be afforded to proceed in
a capitalistic way where you have a winner and a loser. Just very briefly, I would
Speaker 19
21:45
say that if you look at the American system generally, there are certain parts of it that encourage settlement by penalizing people who don't settle. And that, of course, is reflected in Arkansas Rule 68 and Federal Rule 68 to some extent.
And, of course, whole books have been written about that sort of thing. So there are parts of it that do place fines or I don't know if
Dan Greenberg
Unverified
22:07
fine is the right word. There are parts of it that encourage or discourage certain types
Representative John W. Walker
Unverified
22:12
of settlement or non-settlement behavior. Well, we're talking about Rule 11 in the Federal Court. And
I think the state rule, there's a corollary state rule, isn't there, Mr. Greenberg? What is that rule? Rule 11. State level 2. And that prohibits frivolous lawsuits, doesn't it? In fact, it says if you pursue a frivolous lawsuit, that's a court rule.
If you pursue a frivolous lawsuit unreasonably, then you can be sanctioned by the court. And the sanctioning will require, in addition to costs, other punishments as well, including fees. Isn't that correct? Yes. All right. Now, since the system already has a mechanism for addressing frivolous lawsuits, is there some compelling evidence on which one can base the conclusion that Rule 11 is inadequate?
Speaker 10
23:13
Representative Walker, may I take a stab at answering your question? You may. Thank you. Rule 11 is different, both in its intention and in its effect, from a lose-or-pays system. And so they're really a comparison of apples and oranges. A Rule 11 sanction is intended only for truly egregious extreme cases, and it is intended to be a punishment. It is intended to punish the lawyer for what is essentially professional misconduct.
A lose-your-pays system doesn't strive to do merely this, or even especially this. Rather, a lose-your-pays system is just about fairly allocating the transaction costs of justice. So the rationale of a lose-your-pays system is if you are legally right, if you have done nothing legally wrong, then the burden of justice, the transaction costs of justice, shouldn't be borne by you because you have done nothing wrong.
If there's another party who turns out to be legally, you know, in the wrong, you know, who did take the incorrect view of the law, then the transaction costs of justice should be borne by that person rather than the legally innocent person. This is basically the notion. Now, I think that this would be a problem if it were not possible to spread the risk of an arguable lawsuit, because we want arguable lawsuits to be able to have their day in court. And so that's why we need to spread the risk.
But we don't want to get confused between loser pays and Rule 11, because they are
Representative John W. Walker
Unverified
24:51
two different things. Now, is there a state in this nation that has adopted a loser pay system? Yes,
Speaker 10
25:01
there is. Just a moment. Which are they? Alaska has a loser pay system. aside from alaska uh... florida briefly uh... with respect to
Representative John W. Walker
Unverified
25:07
medical malpractice cases only don't want to lose a pay systems alaska is the only one
Speaker 64
25:13
for it for general civil suits that is correct
Representative John W. Walker
Unverified
25:15
so you're asking us to follow alaska
Speaker 10
25:19
uh... in some respects we have structured
Representative John W. Walker
Unverified
25:22
it differently and it means that i'm trying to deal with this because we're going to
Representative Gary Deffenbaugh
Unverified
25:31
have to be out of here in a minute and some
Representative John W. Walker
Unverified
25:36
other people have some questions Sorry, but this may be a point of order, but I can't
even hear the answer before he gets another question out. Oh, I apologize. I'll be a little bit slower. Do you agree that loser pay will disadvantage lower income group, middle income people who will wage earners and who have low means in comparison to large corporations who may offend the rights of the people involved?
Speaker 10
26:13
I do disagree. Because there are mechanisms available to spread risk, lose-your-pay system will reduce advantages of anyone on the losing side of a lawsuit, regardless of whether they are big or small, and will advantage anyone who has the legally meritorious side of a lawsuit, whether they are large or small. Do you
Representative John W. Walker
Unverified
26:37
know any insurance companies in Arkansas who write lose-or-pay insurance? Because there is
Speaker 10
26:43
no loser pays rule, there is not currently a market for this.
Representative John W. Walker
Unverified
26:47
So if you were to enact
this now, you would have no way for having an insurance plan in place that ordinary citizens could buy in order to shift the risk to the insurance company whether then to themselves in the situation that
Mr. Greenberg hypothesizes? Well, I think
Dan Greenberg
Unverified
27:14
actually, Ms. Griffin and I spoke about that before,
and this bill anticipates two different types of protection for litigants. First, as she mentioned, I believe it's fairly common practice for lawyers to actually absorb the cost themselves as litigants, but ultimately I think it's quite likely that under a loser pay system you would develop
an insurance market. But either of those systems has worked out and works out pretty well in
this context, and both of those protect litigants themselves
Speaker 12
27:52
from bearing the cost. I have been privy
Speaker 10
27:57
to some e-mails from some individuals in the insurance commissioner's office. Is that right? And they basically looked at this and they said they were not certain whether this would be a miscellaneous casualty line of insurance or whether it would be regulated as a surety, but they didn't raise any legal barriers to offering this product. I also should say just relatedly, because I know that you're understandably concerned
about sort of how quickly this market could rev up, that it revved up quite quickly in England in response to what was essentially the privatization of personal injury litigation there in 1998. Of course, we all know that England has always had loser pays, but what is less commonly known is that until quite recently, until about 1998, most people in England qualified for public legal services representation for their personal injury claims.
So there wasn't a giant market of private sector contingent fee personal injury attorneys in England until relatively recently, and contingent fees were not legal until recently. There was a package of reforms in 1998, which basically eliminated public legal aid lawyers for personal injury claims, and instead legalized contingent fee agreements. They call them conditional fee agreements there, but they're very similar. And the response was a giant sort of flowering of the market for after-the-event legal expenses
insurance in the subsequent year or two. So we know from that experience of reforms there that this market can go from being very small to very large quite quickly. And actually, you know, within a small number of years, I can't remember, like a couple or three years, 75 percent of all personal injury suits in England were filed with after the event legal insurance policies in place. So this went from niche products to something overwhelming majorities took advantage of in quite a short period of time.
Representative John W. Walker
Unverified
29:59
I have one more question, and then I promise to be finished. You recognize, Mr. Walker. Thank you. Much of my work is in the area of not only defending lower-income people, but other people who are disadvantaged. And to that extent, Congress passed a law, and the Arkansas legislature also passed a law, to allow fees to the prevailing party. and whether a fee was awarded
depended on the judge's discretion and a set of circumstances how would you in making a judgment that a case ought to be settled how would you deal with a sexual harassment claim where a person has claimed that she has been horribly offended not touched but horribly offended by the conduct of a man in the office and the office tolerated it
and she wants a damage award she values her case in a million dollars you all say well it didn't happen but we'll give you a thousand dollars now how do you get in this situation how do you resolve or address that situation two questions one do you get insurance will somebody insure that plaintiff, and two, isn't that a kind of judgment that only a jury can make under our kind of justice system that we have?
Speaker 10
31:34
Representative Walker, thanks for the question. I actually think it's an interesting question, and it sort of goes to how we should look at lawsuits which are maybe aimed at social change. That is, they're not very meritorious under current law, you know, but maybe there are people out there who think the law should be very different with respect to something. At least I think that's what you're saying. You know, just because of the size of the damage award, it reminds me of, say, a civil rights lawsuit filed against a restaurant in 1960
where, you know, maybe the restaurant had the, you know, legal right to discriminate, you know, but perhaps they shouldn't, and the lawsuit was being filed in the interest of
Representative John W. Walker
Unverified
32:19
social change. Is that the kind of lawsuit that you're thinking of? Well, there's a whole body of social change litigation, and damages and injunctive relief and other
remedies are provided by statute. Yes, I'm addressing that. Okay, great.
Speaker 16
32:34
Thanks. I just wanted to know that.
Well, first of all, I want to
Speaker 10
32:39
reassure you that lawsuits against state actors are already exempt from this legislation in the proposed bill. And the reason they are exempt is because when it comes to constitutional claims or claims about individual rights against the state, we may in fact want to be a little over-inclusive because sometimes, you know, you do need to push a constitutional lawsuit with a low probability of success in order to affect social change.
So we did that with social change litigation in mind because that can be very, very important. Now, when you're suing a private party, you know, sort of getting closer to your employment law example, if you are legally likely to succeed or even have a legally sort of arguable case, you know, 40% chance of success, you should be able to get that risk insured. If, on the other hand, you're filing a case with very little chance of success, so you think that what the employer did should be against the law,
but a jury is very, very unlikely to agree with you about that. Then the question becomes, well, who should bear the costs of, you know, filing a lawsuit against an individual private defendant, not the state, you know, that has very little legal merit? And I think the answer should be not the individual defendant. Because the individual defendant is doing what they are almost certainly legally entitled to do. And so although social change litigation is costly,
and I don't think that it should be thrown out of court for being social change litigation, I also don't think individual private sector defendants who are just unlucky enough to be on the wrong end of a lawsuit like that should have to bear all the burden. Rather, the organizations that are advancing these lawsuits should be prepared to cover those expenses. And of course, they already are in terms of hiring plaintiff's lawyers. Members, I want you
Representative Darrin Williams
Unverified
34:31
to be aware that we have to be in session at 1 o'clock. I'd like to get this one done so we don't have to come back.
So your answers on your questions, please try to keep
Dan Greenberg
Unverified
34:42
that in mind. Just very briefly, as Ms.
Griffin pointed out, in areas where there's already fee shifting, this doesn't apply, and that's in the bill. In areas where there are state actors, this doesn't apply. That's in the bill. But as to your question about whether one party thinks a suit's worth $1,000 and the other party thinks it's worth $1 million. The idea behind this is let's say that the verdict is ultimately $250,000. The procedure here is that if $250,000 is offered, there's
not going to be any shifting of fees. The procedure is if $240,000 is offered, then somebody might be liable either for attorney's fees or the difference between that, which would be $10,000. So the idea is that there's a strong incentive to offer and to really through an offer what the appropriate
settlement is. It's going to force reasonable offers and force reasonable settlements. That's the way the rule works.
Representative Darrin Williams
Unverified
35:36
Thank you. Just to follow up on one question you said about social change litigation
and state actors not being exempt. You're familiar with cases like Ollie's Barbecue, for example, that involved industry commerce that did not involve state action at all, but yet I would call that a social change litigation. Yes. So in a case like that, you wouldn't have the protection from the state exemptions you're provided for here. Is that not correct? That is correct, yes. And that social change litigation has allowed for people of color to eat at restaurants, for example.
Speaker 16
36:06
Oh, hell yeah. I mean, obviously that was really important litigation. And so I think that
Speaker 10
36:11
there's a place for that kind of litigation. And I think that there are organizations now, you know, from the ACLU to the Electronic Freedom Foundation to the Institute for Justice in Washington, D.C., where I was once a legal intern, who are advancing lawsuits that have, you know, relatively low probability of success but for a worthwhile overarching policy goal. I think that those lawsuits should have their day in court. The question is who pays the price, the transaction price of litigating those suits.
Because it is for a broad social goal, I think it either needs to be the public at large or it needs to be the parties who are advancing the mission. So donors to the ACLU, donors to the A.P.A. Would you not agree that? I'm sorry, I didn't mean to cut you off. So the point is that the costs of social change lawsuits should not be borne by individuals who just happen to be unlucky enough to be sued for that purpose, despite the fact that what they're doing is clearly legal under current law.
Representative Darrin Williams
Unverified
37:14
So based on that, if there's no organization already in place dealing with that social change, change, that one would just go unresolved into an organization's form to actually bring that lawsuit so that individual who
is wronged would have to wait until an organization's form, not an attorney
who believes that to be a wrong and not to take that on as himself.
To change that, that wouldn't be enough. Is that what you would
Speaker 10
37:48
suggest? You can still file the lawsuit. So if you're an individual and there's no organization that wants to take your cause on and you have a small probability of success but, you know, you think history is on your side and you really want to file that suit anyway, you can do it and you can get a lawyer to represent you and that lawyer can indemnify you for a fee award in the event of a loss if that lawyer is committed, if that is that lawyer's work. Or you can take the risk yourself of that judgment, of that loss.
Representative Darrin Williams
Unverified
38:17
So you replaced the burden for, under your theory, I think I still
couldn't eat at certain restaurants around the country because I would suggest that the attorney who took that case on had a very low probability of winning. And if they thought they'd have to pay a, lose your pay system, they sure wouldn't want to take that case on. I'm a continuous fee lawyer, and I take very, very large cases, and I pay the cost up front, recognizing that.
and sometimes that's significant when I lose
in a case, a constitutional case like Ollie's Barbecue those
type cases have been lost for tons of times before that was brought so that would really have a chilling effect on social change litigation where it would never be brought because it just wouldn't make sense financially so I'm going to take that on would you agree Mr. Greenberg? I see
Speaker 46
39:05
you want to answer that really bad yes it's terrible respectfully I don't see
Speaker 19
39:11
how loser pays is really relevant to that debate at all Because you seem to be pointing to a problem with juries and judges generally.
And the social change litigation, which is obviously a relatively small part of everyone's docket, the difficulty in the situation you point out is with judges and juries generally. And it's certainly true that sometimes social change litigation doesn't have much of a chance to win, but it's pretty small against the large context of all litigation. But certainly, there's no way to address that problem with anything unless we can address human nature.
I mean, you know, sometimes you're just not going
Representative Darrin Williams
Unverified
39:52
to win groundbreaking cases. Okay. So since you already have a very extreme unlikelihood of winning a social change case, now you put on the back of the attorney the possibility of having to
pay for his loss, don't you think that has an
Speaker 12
40:07
even greater chilling effect on it? It's
Speaker 10
40:10
worth pointing out that the legislation in question only applies to the applies to suits exclusively for monetary damages. So it actually wouldn't apply in the Olive Barbecue case because what they wanted was injunctive relief. It might apply
to an employment case if there were damages, but then they were not seeking, for example, reinstatement. So this is a piece of legislation which is intended to apply and by its terms only applies exclusively to monetary damages. So that actually would rule out quite a lot of private-party, private-party civil rights. But it could apply in a hostile work environment case,
Speaker 81
40:42
for example. If you did not want inductive
Speaker 10
40:45
relief, it could. But if you lost your job,
Representative Darrin Williams
Unverified
40:48
you probably want to be paid for your money back. So it would be more than injunctive relief. You'd be seeking in an employment situation.
Wouldn't that be correct? If you wanted injunctive – I'm sorry, say that. I said if it was an employment situation, employment discrimination, hostile work environment, sexual harassment, and you've lost your job, you're retaliated against, for example. So since you now no longer have a job, you'd probably like to be paid. So you'd probably be seeking monetary damage, not just in
Speaker 10
41:14
juncture relief. Is that correct? MS. True. But for blended cases, this legislation does not apply. It applies only when you're exclusively seeking a monetary remedy.
Speaker 84
41:20
MR. Okay. Let me quickly get to Mr. Gillum. MR. Thank you, Mr. Chair.
Representative Jeremy Gillam
Unverified
41:27
I never thought I'd have to ask a question, really, along with some
of these lines, because it's one of those things that business owner, a lot of times you in principle are for something. now that we're getting in the meat of this and looking at things, everybody keeps talking about individuals and this kind of stuff. How would this apply for a business situation? I've unfortunately been in situations where I had a breach of contract issues and things with other businesses, and I had to bring a lawsuit against those businesses. How does that fit into the equation of this bill?
Speaker 88
42:02
Did you understand the question? Yeah. Is that excluded? I mean, like
Representative Jeremy Gillam
Unverified
42:10
from a business to a business lawsuit, is that not a part of this at all completely? I'm just – was that
Speaker 19
42:26
a bad question? Well, the general – again, I'll just repeat what I said before. Or the general idea is that if there's some dispute, then let's say you're a business
Speaker 89
42:35
owner and you get sued. Is that the idea? No. If you have companies, they have to sue other companies for
Dan Greenberg
Unverified
42:44
breach of contract. I mean, how does that fit into the equation here? Then you look at damages, and if there's a difference of agreement over damages
that's too large to make an offer, it really wouldn't have any effect. But if people start making offers, right, if people start making offers and they have reasonable ideas and they kind of come together, then settlements are going to meet each other or there's going to be an incentive to make reasonable offers. And you may have
Representative Jeremy Gillam
Unverified
43:02
covered some of that earlier, and I had to step out, and I apologize.
I just am trying to – it just seems like the focus has been explicitly on an individual bringing against a company. Any party. And I just wondered how, you know, company versus company lawsuits and things would fit into this. As long as you're a private party, you qualify. Okay. Now, would – I guess the same line of questioning that's going on to individuals, though, Would this disenfranchise or potentially create a disincentive for companies to file
Speaker 10
43:36
these breach of contract issues? I mean, like any other type of civil dispute in this, it will disincentify people from bringing legally weak claims.
Speaker 36
43:46
And it will actually increase the bargaining power of people who have legally strong claims. I guess,
Representative Jeremy Gillam
Unverified
43:52
you know, I apologize, like I said, if you all have already covered some of this ground. It's been my experience, unfortunately, in the legal system that a lot of times my opinion and the legal system's opinion on these matters differ, because I've been on the flip side of this to where I've been the one that would have lacked something to miss in place, but if I had to go both ways, I don't know that you've got a good – I mean, I don't know that sometimes you're going to be able to reach these conclusions in a settlement issue
because of the differences in opinion, but appreciate – thank you. Are
Speaker 30
44:23
you talking about the difficulty sort of assessing in advance what the chances are that a case is going to succeed?
Speaker 10
44:32
Yes. I mean, this is already a fundamental part, you know, and you probably know this, you have legal background too, a fundamental part of the way lawyers settle all disputes now. You know, 90, 92 percent of cases settle right now, and the way they settle is the lawyers have to figure out what they think the case is worth. In order to figure out what you think a dispute is worth,
you've got to decide roughly what you think the chances are that if you go all the way to trial, the defendant will be liable. And that's how we settle the case. So this system doesn't ask lawyers to do anything they're not already doing in terms of assessing the probability that the case is winnable. What it does do is it aligns incentives in such a way that legally meritorious cases are more likely to be pressed and are more fully compensated, and legally not very meritorious cases are less well compensated
Representative Darrin Williams
Unverified
45:24
and are less likely to be filed. Thank you for the answer. Members, we have just a few minutes. It's your pleasure. I think we've heard a lot. I don't know if there
are any new questions. We don't have a motion before us, but if you'd like to go ahead and consider this now, we can do that. If not, we can come back. I see a couple of people saying they'd like to immediately consider this. So that being said, we have to have a motion before us. Let me give Mr. Stubberthor an opportunity to close for his bill real quickly. There's no one signed up to speak for or against the bill, by the way.
Representative Gary Stubblefield
Unverified
45:56
That's why I'm skipping public testimony. Thank you, Mr. Chairman. I would like to say to each member here that last year, small businesses paid out $105 billion in liability tort cases. Since small businesses make up 70% of this country's hiring ability, that makes a huge difference in how many people they can hire and pay wages to. And, you know, a low-merit lawsuit is not going to break a company like Walmart,
but a low-merit lawsuit can easily break a middle-class or low-income class family. And that's what I have to say. That's what this bill is about. Thank you very much, Mr. Chairman. Thank you, Mr. Stubbeffill. Thank you, Mr.
Representative Darrin Williams
Unverified
46:44
Stubbeffill. Mr. Wilkins, recognize for a motion? Do pass. So proper motion.
Any question or discussion? Seeing none, all in favor of passing House Bill 2057 as amended.
Indicate by saying aye. Aye. Opposed, no. No. No is have it. Mr. Stubbeffill, your bill fails. Members, we've got five minutes to get to the chamber.
Agenda
Call to Order
HB2057
Documents
No documents posted.
Speakers
Representative Darrin Williams
Unverified
Representative Gary Stubblefield
Unverified
Marie Griffin
Unverified
Speaker 10
Speaker 15
Speaker 16
Dan Greenberg
Unverified
Representative John W. Walker
Unverified
Speaker 34
Speaker 40
Speaker 42
Speaker 19
Representative Jeremy Gillam
Unverified
Speaker 50
Speaker 64
Representative Gary Deffenbaugh
Unverified
Speaker 12
Speaker 46
Speaker 81
Speaker 84
Speaker 88
Speaker 89
Speaker 36
Speaker 30