Toward an “English Rule” on Costs and Disbursements

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Toward an “English Rule” on Costs and Disbursements

By Thomas P. Malone and Bradley A. Kletscher

The political climate regarding litigation is changing. Everywhere attacks are being made on the “litigation explosion”. Huge efforts are being made to curtail the 30-year trend of expanded litigation; witness the “tort reform” and fee shifting statutes throughout the United States.

One method used by legislatures and courts is charging the loser with paying the winners “costs”.

“Costs” have always been assessed against the loser in civil litigation. The present difference is the expanding definition of the term “costs”. Year ago, “costs” included, for the most part, only filing fees and service of process expenses. That is no longer the case.

Statutes enacted since 1983, as well as court cases construing those statutes, have dramatically expanded the definition of litigation “costs”. Parties are now fairly wide open to an award of the actual costs incurred by the winning side.

For example, deposition expenses are now available irrespective of whether the depositions were used by the prevailing party. Until recently, the prevailing rule was that the court would award only those deposition expenses that were taken by the prevailing party and used by that party at trial. That is no longer the case. Now, courts are awarding expenses of depositions that were taken by either party, even if the depositions were not actually used at trial.

With respect to experts, the situation can be similar. Courts have awarded costs to the winner for expenses incurred, including preparation by the expert witness, as well as time spent actually testifying. These costs can be substantial.

There is no hard and fast rule with regard to what costs will be awarded. There is even ambiguity as to who is a “prevailing party” under the statutory scheme awarding costs. Usually, the decision to award more than nominal costs will rest with the trial court’s discretion, and that discretion in turn rests upon an analysis of whether the cost was “reasonable and necessary” to success in the litigation.

This is a complex and changing area and each case is unique as to whether costs to any great extent are to be awarded. There are a myriad of factors which courts will consider in deciding the question of an award of costs: what settlement discussions were had; what were the demands and offers of each party; were Offers of Judgment pursuant to Rule 68 (a rule of civil court procedure) made by a prevailing defendant? The answers to each of these and other questions, such as the reasonableness of the costs, will greatly determine the amount to be awarded.

The important point to consider, especially by plaintiffs who may feel they have “nothing to lose” by going forward with litigation, is that substantial sums of money may be awarded to the winner. No longer is the playing field without consequence.

Written by the team of Thomas P. Malone and Bradley A. Kletscher, both attorneys in the commercial litigation focus group at Barna, Guzy & Steffen. Contact either Tom or Brad with any questions regarding costs and disbursements by calling (763) 780-8500.

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