A pair of Tennessee bills currently in committee in the state legislature would make a big change in how businesses in Tennessee deal with litigation if they eventually make their way out of committee and into law.
Under the tandem bills of Senate Bill 2586 and House Bill 2942, a party to a lawsuit would be able to make a settlement offer to the other party, and if the settlement was rejected with the trial result being at a certain level, the party who rejected the settlement offer would be required to pay certain litigation costs.
The change in law would not apply to all lawsuits. Excluded from its coverage would be class actions, shareholder derivative suits, suits by or against governmental bodies, domestic relation suits, worker’s compensation suits, or suits in which the plaintiff’s lawyer has been engaged pursuant to a contingency fee arrangement.
As currently worded, the bills would require a plaintiff who receives a judgment less than 80% of an offered settlement amount to pay certain litigation costs, including the defendant’s reasonable attorney’s fees incurred after the settlement offer was made.
Similarly, the bills would require a defendant who has a judgment rendered against it of more than 120% of an offered settlement amount to pay certain litigation costs, including the plaintiff’s reasonable attorney’s fees incurred after the settlement offer was made.
Other litigation costs, besides attorney’s fees, are included in the litigation costs that would have to be borne by the party who failed to settle, such as court costs, reasonable deposition costs incurred after the settlement offer, fees for 2 expert witnesses, court reporter fees, and pre-judgment interest.
Opinion is mixed as to whether these bills would be an improvement to Tennessee law. Some opponents of the bills say that the proposed change would benefit those companies, including insurance companies, with greater financial resources and that could take the chance of refusing to settle a case more so than a small business or individual who would be seriously impacted if it or he/she were forced to pay a hefty chunk of the opponent’s litigation expenses.
For the time being, these bills remain in committee. However, since the impact of such a big change in Tennessee law would be huge, it merits keeping an eye on SB 2586 and HB 2942.