Vail Daily column: Statutory offers of settlement
September 2, 2014
Law is like a toolbox. Some lawyers have enormous toolboxes. Others are just little bitty things. While a good craftsman does not blame his tools, it doesn’t hurt to have the toolbox well equipped either.
One little-used appliance in the lawyer’s Dewalt box is what’s known as a statutory offer of settlement. It goes like this …
Say you are embroiled in a lawsuit. Say too you are the defendant in the lawsuit. Your woe factor is high. Maybe you did something just a little wrong — or maybe not — but you certainly don’t deserve this. How is a body to find a way out?
Well, one way may be via a statutory offer.
A little background first …
At law — in this regard anyway — there are two ways of looking at the world: what is known in the vernacular as the “American Rule” as opposed to the “British Rule.” In the British System — which manner commentators laud — the loser to a legal contest pays for legal fees (and here’s the kicker) on both sides. If, say, you sue me and in return, I hand you your derriere, you would enjoy the privilege of reimbursing me what I have invested to defend myself. With the American Rule, not so much. Instead, as a general rule (which may be altered under some defined circumstances), if you sue me and I prevail, then both you and I sadly bear our own legal costs. There are exceptions to be sure — for example, if you sue me for an alleged breach of contract and the contract contains a “prevailing parties” clause — but, absent an exception, then we both lick our wounds and pay our respective lawyers out of our own pockets.
Well, then, statutory offers of settlement to the rescue. While it does not solve every problem, through some clever sorcery, a statutory offer of settlement can transfigure the American Rule into the British Rule. And to do so, you don’t even have to adopt a Geordie accent.
Colorado Revised Statute Section 13-17-202, entitled, “Attorney Fees in Civil Actions in General,” essentially regurgitates the American Rule — that is, generally at least, each litigant shall bear his or her our own legal freight. But there’s a hidden gem. Subsections (a) (I) and (II) provide that if a party to the suit serves the other party an offer of settlement in writing at any time more than 14 days before the commencement of the trial that is rejected (or simply not accepted in writing within the 14 days) and when the shootin’ match of litigation is concluded, the offering party recovers a final judgment in excess of the amount offered, and then the offeror shall be awarded actual costs accruing after the offer of settlement to be paid by the one who scorned the offer.
While at first blush, this might not seem like much (you may be hunching your shoulders while uttering “so what?”), let’s, by “real life” example, give this gem a little weight and heft.
Let’s say two parties are involved in a bloody legal imbroglio. Let’s for both the sake of convenience and accuracy refer to the legal pugilists as the plaintiff and the defendant. Let’s further imagine that the plaintiff has sued the defendant for $5 million and, owing to the nature of the dispute, each party — win or lose — is looking at bearing his/her own attorney fees and costs.
For those of you who may be blissfully uninitiated in the ways of lawsuits, I can assure you that a $5 million lawsuit likely involves complex and disputed issues. And where there is complexity and dispute, there are likely experts. Crossing one more stepping stone over this particular River Styx, where there are experts, the associated costs can be like a moonshot; in short, both legal fees and costs escalate like a Titan rocket slipping the surly bonds of earth if not exactly to (as the Gipper once intoned) to “touch the face of God,” then at least to cause financial heartburn. In short, legal warfare — especially of the “complex and disputed” ilk, can be expensive.
So say one attorney or the other (in pick ’em fashion, let’s just say the defendant’s lawyer), cogitates on the matter laid out like a minefield before them. They think and plot and then plot and think some more. And in some enlightened moment, they come to the conclusion that their client’s “worst day” if he/she goes to trial is to lose half a million dollars. No small sum to be sure but a sight better than the $5 mil that’s at stake.
Screwing up their courage, they get together with the client and lay out something like this, “Client, I’ve thought and I’ve cogitated and I’ve cogitated and I’ve thought. Considering all of it from up and down, from sideways and inside out, if we go to trial, I think you are reasonably at risk to lose half a million dollars.”
A gasp follows, at which time he goes on by firmly stating, “ … but not more.” And then he frankly offers, “From now until the end of trial — including legal fees, expert fees and other costs — my best guess is you’re going to spend at least half that sum. And win or lose, you’re going to have to eat that sum.”
“So,” a shaky voice retorts, “I could lose $500,000 and spend another $250,000 for the privilege?”
“Exactly.” After a dramatic pause, the lawyer then says, “But if we make a statutory offer of settlement — for, say half a million dollars — and the other side does not win more than that, then the burden of attorney fees and costs shifts and the bad guys will have to reimburse your attorney fees and costs.”
“So if I lose, say, $499,999.99, I get my attorney fees and costs repaid?”
Pulling out his whetstone, the attorney says something appropriate like, “Bingo!”
And that is how the legal tool of statutory offers of settlement may be tactically deployed.
Rohn K. Robbins is an attorney licensed before the bars of Colorado and California who practices in the Vail Valley with the law firm of Stevens, Littman, Biddision, Tharp and Weinberg LLC. His practice areas include business and commercial transactions, real estate and development, family law, custody, divorce and civil litigation. Robbins may be reached at 970-926-4461 or at either of his email addresses, email@example.com or firstname.lastname@example.org.