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On the heels of Governor Perry's announcement that he supports a loser-pays litigation law, Texas legislators have introduced two bills to make that switch happen.
The bills, which focus solely on plaintiffs, have the plaintiff's bar up in arms. While attorneys are decrying loser-pays as an unfair barrier for economically disadvantaged plaintiffs, proponents claim that it will stop frivolous lawsuits before they are even filed.
Both of these are interesting arguments with valid points, but they focus solely on the impact to the client. What does loser-pays mean for attorneys?
First off, you shouldn't be filing frivolous lawsuits in the first place. Rule 11 of the Federal Rules of Civil Procedure, along with corresponding state laws, requires that attorneys sign off on any filed document. That signature is an affirmation that you have properly investigated the case and have found merit in the facts. If you get caught lying, you may get sanctioned.
Notwithstanding basic rules of ethics and procedure, loser-pays laws might actually impact how you advise your client.
Attorney's fees are always part of the cost-benefit analysis when advising a client to settle or go to trial. A loser-pays law would suddenly require you to include an opponent's fees in that analysis, which is not so easy to do. How are you supposed to find out how much money has already been expended? Or hourly rates and projections?
Such a law might also cause you to take more cases to trial. If a client has a strong case, why not take it to court for the sole purpose of attorney's fees? The client will recover more money because he can keep the normally deducted contingency fees. The attorney will be paid by the opponent.
Whether or not you support loser-pays, it's definitely going to change the way you practice law.