Level the Costs of Litigation

2009 February 07
See History for brief descriptions of changes and updates. 

    This post is work in progress.  Some notes are in the continuation of this post. 

Don Nordeen
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Level the Costs of Litigation (continued)

     Individual owners/members make a major contribution through their diligent and often uphill efforts at their own expense to resolve issues with boards of directors through the courts.   The court opinions provide better governance for all.  Others should be grateful for their diligence since all members benefit to opinions of the higher courts.  

    However, the economics of litigation are stacked against the individual member who has only his/her owns resources available, or from others who may contribute to a legal action fund.  On the other side, the POA has the resources from all members.  

    Individual members need a legal process to resolve issues with his/her board of directors that is quick, certain and low cost to the member.  

    An "outside the box" possibility is to share total legal costs, after a deductible amount,  in relation to the number of property units represented.  The deductible amount is the cost of filing a complaint or responding to the complaint if filed by the POA.  The individual owner represents one unit.  The POA represents all the units.  For governance issues, all units are affected by the outcome so should share evenly in the costs.  Costs could be awarded to the prevailing party only if the complaint, or response to the complaint, is frivolous — the American standard.  

    The overall effect of such a provision in the law would be to create the incentive for both boards and the individual owner/member to seek resolution of issues without litigation.  The individual owner/member would have to take the time and effort to assemble the facts and pay the attorney fees for the complaint or response.  The board would incur major cost since the POA would pay most of the cost of any litigation.  

    Individual owners could pay a significant penalty if they pursued frivolous claims.  A purpose in having the owner/member pay for the cost of the complaint, or response to the complaint, is to ensure that the owner/member gets legal advice on the potential liability for costs.  

    The legislation should include the provision in Virginia law which gives the court major discretion on penalties for causing the other party significant costs by filing a frivolous complaint and then withdrawing the complaint.  See Va Law §8.01-271.1 at <http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-271.1>  — Signing of Pleading.  not a good-faith factual basis, etc.  Request for sanctions and a report to the bar.  Signature constitutes certification of facts etc. and law after reasonable inquiry, and not intended to harass etc.  

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Copyright 2009 © Donald L. Nordeen.  All Rights Reserved.  See Copying Posts on This Weblog.
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