America wins when “loser pays”

Another of our favorite organizations, the Manhattan Institute, has released a new report entitled Greater Justice, Lower Cost: How a “Loser Pays” Rule Would Improve the American Legal System.  The paper focuses “on the high cost of ‘abusive litigation’: litigation filed by a plaintiffs’ attorney who has good reason to believe that he is legally in the wrong but who sues anyway in order to exact revenge or coerce a settlement from the lawsuit’s target.”

We recognize that this proposal is important for all aspects of our legal system, but believe it important to note how the action described here so often applies to Involuntary Redistribution of Assets (IRA) cases – that is, cases in which probate venues and/or probate instruments such as wills, trusts or guardianships are used to distribute assets in a manner contrary to the asset owner’s wishes.  While family law or probate cases may contain issues that cause some (estate lawyers perhaps?) to advocate the exclusion of such civil cases from a loser-pays system, EstateofDenial.com contends that many Americans who are unwittingly and/or unwillingly drawn into probate disputes would benefit from an opportunity for legal equity with the implementation of loser-pays reform measures.

The report discusses how the cost prohibitive nature of today’s American legal system functionally encourages frivolous civil lawsuits while discourages the pursuit of high-merit cases.  In stating how “the current American system distorts the legal landscape to the benefit of predatory lawyers but to the detriment of defendants and truly aggrieved plaintiffs alike,” a familiar scenario emerges.

Expense associated with the legal system influences the disposition of probate cases on a regular basis.  It can play out in several ways.  Parties who control an estate may be viewed as violating terms set forth in estate planning documents.  Heirs, beneficiaries or other interested parties must finance any claim or legal action made against estate administrators.  Meanwhile, those in control of the estate can use estate funds to defend their actions.  Therefore, rightful beneficiaries/heirs can end up paying for both sides of the litigation.  And as the Greater Justice, Lower Cost report notes, sometimes there’s just not enough money involved to justify an expensive lawsuit.  Not only do we agree with this, but from our observations, we think some modest estates are often desirable to predators for exactly that reason – it can be enough money to go after, but not so much as to necessarily induce a legal battle.  The position of trustee or executor has certain protections, but as IRA cases become increasingly evident, we support new measures to ensure accountability with regard to protecting beneficial interests and assuming legal liabilities (i.e., loser-pays).

But then there’s another side.  At EstateofDenial.com, a regular theme is the increasingly speculative nature with which IRA actions are approached.  A passage from Marshall v. Marshall: fantasy claims spawn nightmare litigation said, “We’ve always reported on the speculative nature of Involuntary Redistribution of Assets (IRA) efforts.   Nothing ventured, nothing gained?   Lawyers or people associated with an estate see an opportunity for a claim and go for it.  Under the right circumstances, finding a legal accomplice isn’t too difficult.  The veracity of the claim is irrelevant.  Just making the claim could be cash generating.”  Being “right” isn’t enough.  Legitimate heirs and responsible administrators can be targeted and have to defend unsubstantiated and unsubstantiable claims.  Again, you can win your case, but at what cost?  In this instance, the loser-pays reform could also be beneficial as a deterrent to frivolous claims.

So much more can be said about this report, but we encourage you to read it for yourself as well as to view related articles posted in the EoD News Archive.  This is an important concept which could have broadreaching implications.  It may not be so helpful to asset looters and other IRA perpetrators in our society, but it could provide a new measure protecting average Americans from abusive litigation – a trend that, without stringent reforms, will only continue to grow.

In the foreward of this report, Rudy Giuliani writes “Only 16 percent of Americans say they trust our civil justice system ‘to defend them’ if someone should bring a baseless lawsuit against them.*  This is evidence of a broken system that needs to be fixed.”  Some states, like Texas, have had success with regard to tort reform.  More work, however, can be done.

Probate abuse or other estate cases are an area where people increasingly feel betrayed and abandoned by the civil justice system.  And with the criminal system rarely responsive, where do you go?

Thank you to the Manhattan Institute, Marie Gryphon and team for your efforts regarding this important issue.

*Harris Interactive, “Public Trust of Civil Justice,” June 20, 2005.

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