Iowans Lose with Senate "Loser Pays" Bill

Bill Brauch, the former director of the Consumer Protection Division in the Iowa Attorney General's Office, warns about a "little sleeper of a bill" that would be "a nuclear weapon against judicial fairness." -promoted by desmoinesdem

Iowa Senate Republicans have hit the ground running this session, and their agenda is replete with extreme proposals. One of them hasn’t gotten much notice yet but, if enacted, would represent the most radical change to Iowa’s judicial system since its inception.

Senate Study Bill 1008 would impose the “loser pays” standard in all civil actions in Iowa courts. This means that if you lose a civil lawsuit you not only have to pay your own attorney fees, you have to pay the other side’s attorney fees as well. Another term for this would be “instant bankruptcy!”

Imagine you are injured in a car accident and sue the other driver to seek recovery for your injuries. If the case is hard-fought both sides might run up tens of thousands of dollars in attorney fees. Say the case is a close one and you lose by a whisker – the jury thought you had a good case but your proof fell just short. Under SSB 1008, you’ll not only have to pay your own attorney fees, you’ll have to pay the other side’s as well!

From our nation’s founding, our courts have applied the “American Rule,” by which parties to civil actions are responsible for their own attorney fees, win or lose. In the 20th century, state legislatures and Congress deviated from the American Rule in a way that benefitted average folks in certain kinds of cases by passing laws making the defendant pay the plaintiff’s attorney fees if the plaintiff’s side prevailed. Examples include civil rights laws, consumer protection laws, antitrust statutes, labor law, and several others. The idea is to foster compliance through the added deterrence of having to pay the plaintiff’s attorney fees if those subject to the law violate it and are sued. This key change enables average citizens to be on a more even playing field with businesses that are much better able to afford their own attorney fees.

"Loser pays” takes that concept and turns it on its head. Known in legal circles as “the British Rule” for its long use in the U.K., “loser pays” slams the courthouse door to anyone thinking about suing a person or entity that has plenty of money to hire expensive lawyers.

Here’s a great example of an Iowa law this legislation would in effect kill. In 2009 Iowa became the 50th and last state to enact a private statutory remedy for consumer fraud. Most states added private consumer fraud remedies in the 1960s and 1970s. When Arkansas became the 49th state to enact a private remedy in 1999, Iowa was all alone in denying this right to its consumers. At that time, only the Attorney General of Iowa could enforce Iowa’s consumer fraud law.

While Attorney General Tom Miller has been perhaps the greatest attorney general in our nation’s history when it comes to enforcing state consumer fraud laws, no state attorney general has sufficient staff to file all the good cases that come his or her way. To be effective, state attorneys general have to focus on the big cases involving the most victims. They can’t generally file lawsuits based on individual incidents. But there are plenty of such cases.

I should know. I was the head Assistant Attorney General (the Director) of Miller’s Consumer Protection Division from March 1995 through July 2015, and served for eight years in the Division before that as a staff attorney. Proposing new consumer protection laws, amendments to current laws, and attempting to stop bills that hurt consumers was a big part of my job. It was frustrating to see many consumers go without adequate remedies. The need for a new law was clear.

In 2001, Attorney General Miller and I agreed to make enacting a private remedy for consumer fraud a top priority. We tried hard, but the business lobby was able to foil our efforts year after year. However, in 2009 with a Democratic governor and Democratic majorities in both houses of the legislature, we finally broke through. Even then, we had to compromise on certain provisions to get it through a small but significant block of moderate House Democrats. But through the leadership of Senator Keith Kreiman and Representatives Kurt Swaim and Eric Palmer, the support of House and Senate leadership and Governor Chet Culver, and the efforts of Attorney General Miller, we got it done. The Private Right of Action for Consumer Frauds Act became law July 1, 2009.

Since then, consumers have used the law to sue car dealers who ripped them off in used car scams, home improvement contractors who took money but didn’t do the job, landlords who ripped off tenants, and a host of other cases. The class action provisions in the law have been used, for example, to sue companies that owned senior citizen housing complexes infested with bedbugs that didn’t take action to stop or cure the infestations. Like the attorney general’s consumer protection efforts, most private cases settle well before a lawsuit is filed. So, the law has not represented any sort of burden on Iowa’s courts. The law is fair, efficient, and effective. It works!

But make no mistake about it, Senate Study Bill 1008 would in effect kill Iowa’s private consumer fraud law, and just about eliminate any other type of legal action by an individual against a defendant with money.

If this bill becomes law, Iowa will be alone with this draconian provision. It seems Alaska is the only state that has adopted a general “loser pays” provision such as in this bill. But, even the Alaska law limits fees and has numerous exemptions. There is a reason that no states have enacted the broad “loser pays” provision in SSB 1008 - it is unjust and it is unfair. It represents a “get out of jail free” card for companies or individuals who would abuse consumers, employees, or other individuals.

Supporters of “loser pays” laws say they will deter frivolous lawsuits. However, both federal and Iowa law already deter frivolous suits by empowering judges to dismiss frivolous claims. In addition, attorney ethics rules subject attorneys to discipline for filing baseless lawsuits. There is no need for Iowa to adopt SSB 1008’s radical approach.

This is a really big deal. For all intents and purposes this bill bars an entire branch of Iowa’s government from being available to average folks, except as defendants! The bill has been assigned to Senators Charles Schneider (R), Jeff Edler (R), and Tony Bisignano (D). This little sleeper of a bill is a nuclear weapon against judicial fairness. If you agree, please let those three senators, your state senator, and the Senate Judiciary Committee Chair Brad Zaun, who proposed this bill, know of your concerns.

Bill Brauch is a Des Moines private attorney. He served for 28 years as an assistant Iowa attorney general, the last 20 years as Consumer Protection Division Director, before retiring from that position in 2015. He has served on the Iowa Democratic Party's State Central Committee since 2006 and has been the IDP's Third District Central Committee Chair since 2010.
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  • The 'sleeper' bills are always the most dangerous ones.

    Thank you, Bill, for the alert and for the excellent piece of background and rationale on this. Again...the big money interests are well represented at the Iowa Statehouse and the Governor's office. I will call the Judiciary committee members. Thanks for the information...this does help me feel much more informed and able to answer any question or objection with substance.

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