The decision to commence a law suit has always involved legal, moral and financial considerations. Starting this Summer, the implementation of a few new Rules of Civil Procedure for Minnesota District Courts will cause us all to consider further.
The first of the new rules we will discuss is Rule 1of the Minnesota Rules of Civil Procedure (this seems appropriate!). Here is the text of the new rule:
“It is the responsibility of the court and the parties to examine each civil action to assure that the process and the costs are proportionate to the amount in controversy and the complexity and importance of the issues. The factors to be considered by the court in making a proportionality assessment include, without limitation: needs of the case, amount in controversy, parties’ resources, and complexity and importance of the issues at stake in the litigation.”
We have always told our clients that even though their contract and/or the mechanic’s lien statute provide for the award of attorneys fees and costs, one must still substantially prevail on the merits and the courts can and do review demands for attorney’s fees with an eye toward their reasonableness. In case there was any doubt, the new rule puts this concept right out there in front of everyone. We suppose that the new rule was inserted to give the courts wide latitude to formally exercise their equitable power to prevent legal and financial abuses, which many judges were sometimes doing anyhow.
We also suppose the good news is that our clients, who have lived through or feared the burden of being sued by those with unlimited litigation budgets with which to “bury” the other side under a mountain of discovery and motions, may have to at least pause to think about the new rule. However, we must also keep in mind that this same concept will apply to our clients. Some extra thought will have to go into determining the most efficient and cost effective litigation tactics in each case, consistent with achieving the desired outcome.
One particular part of new Rule 1 will be very interesting to follow for its affect on future lawsuits. You will notice that the court may consider the “parties resources” when considering the costs of a law suit. It is too early to determine if this will result in a “means testing” situation. Consider a situation where a larger contractor spends a lot on a case because the legal issues are complex and engineer and experts were needed. Its customer may have even unnecessarily caused these expenses by taking unreasonable positions in the law suit. Nevertheless, the court will now have the opportunity to compare the “parties resources” when it considers an award of fees and costs. The contractor will really need to be prepared to argue about the validity of and need for the costs it seeks to recover. The lawyers will need to do the arguing and they cost money. This means spending more money to argue about money (for both sides), but if this rule turns into a “means test”, the side with greater financial resources may face a diminishing returns conundrum. The affect of this new rule will be interesting to follow.
Thankfully there are no new Rules numbered 2, 3, or 4. We can go right to new Rule 5. The language we need to look at here is:
“Any action that is not filed with the court within one year of commencement against any party is deemed dismissed with prejudice against all parties unless the parties within that year sign a stipulation to extend the filing period.”
In the past, it was common to serve a complaint to get someone’s attention, not incur the costs of filing, and avoid the commencement of the court’s supervision of the case. (This has never been the case in mechanic’s lien litigation – there one has to file the case before serving the complaint). This served litigants well when the primary object was to get settlement discussions jump started. Under new Rule 5 we can still do this, but there is a real risk in doing so because if someone forgets to file with the court within one year (or the parties don’t cooperate in extending the unfiled case) it will be dismissed WITH PREJUDICE. This means the claims will be gone forever – no do-overs. Therefore, one needs to get to a resolution, extension, or file the case within one year, or else.
In the Federal system, and in some states, all suits must be filed with the court before the complaint can be served. We don’t know why Minnesota didn’t just go this route. It may be because the court administrators don’t actually want to see the thousands of cases that never get filed. We are pretty sure however, that there will be some nashing of teeth and a few malpractice actions commenced until everyone gets used to the new Rule 5.
If you have any questions about any of this, please feel free to call or email. We always welcome hearing from you.