One of the issues that arise as I discuss issues with business owners across the district is legal reform. Our businesses need relief from lawsuits that are driving up the cost of doing business and hampering their ability to grow and expand. And I understand what they are saying. Lately, it seems that businesses here in Missouri are being sued for anything and everything.
For this reason, we made improving the legal environment for Missouri businesses a key component of the job creation pillar in our Blueprint for Missouri plan. This week, we took a step toward reducing legal fees on all of our businesses by passing HB 1342, our version of loser pays.
Lawsuits are very expensive, and out-of-control litigation costs are a burden that can bankrupt a small business. The worst example of these cases is nuisance suits which are filed just to get a business to settle out of court. Under the current system, filing these frivolous cases makes sense because plaintiffs don’t have anything to lose and everything to gain by suing.
Settling nuisance claims can sometimes make sense to a business because defending them can be more costly than settling. This is a lose/lose situation for the business because they will have to pay either way. This shouldn’t be the case. I don’t think we should reward out-of-control trial attorneys who file these claims simply to shake down a business. HB 1342 will reduce the number of these claims because it shifts some of the risk of filing a suit onto the plaintiff.
HB 1342 has two key provisions that will reduce the number of frivolous lawsuits. First, it awards attorney’s fees if a case is denied by the court for the failure to state a claim under the law. These cases are the most frivolous cases in the court system today. And when these cases are filed, it only cost the business being sued. By allowing a company to recover their litigation costs, we can reduce the number of these cases and reduce the cost of doing business in the state.
Next, HB 1342 encourages opposing parties in legitimate lawsuits to settle their differences out of court. It does this by awarding attorney’s fees to the party making a settlement offer if the case goes to court, and the award is less favorable to the rejecting party. An award is less favorable if the rejecting party is a plaintiff and the award is less than 50 percent of the final offer, or, if the rejecting party is a defendant, and the award is more than 150 percent of the final offer.
For example, a business is being sued and offers the plaintiff $100,000 to settle the claim. The plaintiff rejects the offer and decides to take the court to trial. The judge awards the plaintiff $40,000 which is less than 50 percent of the final offer from the business. The business could then be awarded their attorney’s fees.
This provision will encourage attorneys to work toward a settlement rather than hastily taking the case to court, and it will keep more cases from going to trial because neither party will want to be on the hook for the cost of the other party’s attorney. After all, trials are costly and run up the costs for both parties. By keeping cases out of court businesses will save the cost of going through an expensive trial.
We are working hard to improve the legal environment for Missouri businesses. Attorney’s fees racked up due to frivolous lawsuits are too costly and are a burden to all of our businesses. HB 1342 will lower the number of frivolous suits and cut the litigation costs that businesses have to pay. That money can then be used to hire new employees or expand their business.
This report is filed at the end of each week during the legislative session. This report was filed at the close of business last week.