Co-authored by Brian Gross

The Texas legislature recently enacted a major tort reform law which would make the losing party pay the opposing party’s “costs and reasonable and necessary attorney’s fees.”  In its true form, this rule, also known as the “English Rule,” requires that a losing party in litigation pay the fees and the costs of the prevailing party.  To date, this law is employed in its “pure” form only in Alaska, but it is common in much of Europe, Great Britain and Canada.  Although the final version of the Texas law differs substantially from the English Rule in that it applies only to a party who prevails on a motion to dismiss, and not to a party who prevails at summary judgment or trial, it may signal a growing trend to punish those who unnecessarily overburden limited court resources.  The current budget crises faced by courts across the country provide strong support for the English Rule, at least in some form, in an effort to streamline courts’ dockets.  And although Texas just recently statutorily adopted a form of the English Rule for all tort cases, a form of the English Rule has apparently already made its way into asbestos litigation.

New Jersey Appellate Court Makes Losing Asbestos Defendant Pay Plaintiff’s Attorney Fees

Last month, a New Jersey Appeals Court ruled that an asbestos defendant who failed to reach settlement, and subsequently lost at trial, is responsible to pay all of plaintiff’s attorney fee related to the trial and appeal.  In Buttitta v. Allied-Signal Inc., et al., No. A-6117-09T4, 2011 WL 3180455 (N.J. Super. Ct. App. Div. July 28, 2011), Susan Buttitta filed a wrongful death lawsuit against multiple defendants in which she alleged that her husband’s mesothelioma was caused by his exposure to asbestos-containing products while employed in a General Motors Corporation warehouse.  Plaintiffs sued several companies, including Asbestos Corporation Ltd. (“ACL”), a Quebec-based asbestos mining company.

Prior to trial, Buttitta settled with or dismissed all of the defendants, with the exception of ACL and Borg-Warner Corp.  Plaintiff subsequently made a settlement demand of $10 million to the two companies, which each rejected prior to trial. Ultimately, the jury returned a verdict of approximately $30 million against the two remaining defendants.

ACL unsuccessfully appealed the verdict, and plaintiff then moved for reimbursement of the costs of trial and appeal, including her attorneys fees and expenses.  The trial judge granted Buttitta’s motion, and awarded $655,000 in attorney fees and $59,000 in expenses against ACL.  ACL appealed.  On appeal, the New Jersey Appellate Court held that New Jersey state law provides for the imposition of reasonable attorneys fees against a losing party that declines to settle a case before trial, and is applicable when a final judgment is more than 120% of the amount of the settlement offer.  The Appeals Court concluded that the plain language of the law required finding ACL responsible for all of Buttitta’s reasonable costs and attorneys fees because of its refusal to accept the settlement offer.

What Should You Do?

Although the New Jersey law was not a pure “loser pays” provision, it is evident that this area of tort reform is gaining momentum across the United States.  Multiple states, including Indiana, Georgia and Florida currently have gubernatorial support for modified versions of the English Rule, and other states are considering a modified “loser pays” provision much akin to the Texas law.  With upcoming elections in 2012, the dismal state of the current U.S. economy, and the need to streamline court dockets across the nation, it is likely that this area of tort reform will continue to gain momentum and have far-reaching effects on civil litigation.  At a minimum, this growing trend will force plaintiffs to reevaluate their claims to ensure that they have a strong basis for bringing suit against a particular defendant.  Likewise, defendants will be forced to more precisely value plaintiffs’ claims and make a good faith effort to resolve cases short of trial in order to avoid the possibility of a “loser pays” penalty should plaintiff obtain a verdict in its favor.