Today’s guest post is by J. Matthew Kroplin, a fellow attorney at Stites & Harbison PLLC. Matthew is a member of the Business Litigation and Creditors’ Rights & Bankruptcy Service Groups. He represents and advises clients in the areas of business and commercial litigation, bankruptcy and financial restructuring, and construction law. Matthew has represented a number of contractors in construction claims, business litigation, and employment matters.
During this session of the Tennessee General Assembly, which ended about a month ago, state legislators approved the so-called “Loser Pays” rule, with the stated intention of discouraging frivolous claims in Tennessee courts.
This rule essentially requires that a judge assess litigation costs to a party who successfully seeks dismissal of a claim that does not have a basis in fact or law. These recoverable costs include reasonable and necessary attorney fees and are capped at $10,000. Governor Haslam has since signed the legislation into law as Public Chapter 1046 (pdf). The “Loser Pays” rule will not apply to:
- any claims filed before July 1, 2012;
- claims by or against the government;
- any claim that is dismissed by the granting of a motion that was filed more than 60 days after service on the moving party of the latest pleading containing that claim;
- any claim that is withdrawn or amended to state a claim upon which relief may be granted, as long as notice of such is given by the earlier of the response deadline or at least 3 days prior to the hearing on the motion;
- actions by pro se litigants, except where the court finds that the pro se party acted unreasonably;
- claims seeking to extend, modify, reverse, or challenge the constitutionality of existing law, or claims of first impression, as long as one of those reasons is specially plead; and
- claims that stated relief that could be granted when filed but subsequent law removed the right to relief.
As you might expect, much of the legislative discussion focused on possible unintended consequences, such as whether the new rule will inhibit judges from granting a motion to dismiss whenever possible or whether this law will effectively impede access to the courts for individual citizens and small business owners. On the other side of the issue, though, proponents argued that the new rule will reduce pointless lawsuits and will increase judicial efficiency. Either way, it will certainly be interesting to see how this plays out in future lawsuits.