“Loser Pays” and Offers of Judgment in South Carolina

South Carolina technically does have a “loser pays” system, although the insurance industry, defense lawyers, and corporate-friendly politicians pretend that we do not.

In South Carolina, under Rule 11 of the SC Rules of Civil Procedure, the “loser pays” if they file a frivolous lawsuit, or if they file a frivolous motion without attempting to resolve it before going to court.

There is an ongoing push by the insurance industry and business associations, however, to implement the “loser pays,” or “English system,” which would require every losing litigant to pay the other side’s litigation costs.

Why?

Because it discourages people from filing lawsuits and protects corporate interests.

In this article, we will discuss the “American system,” where litigants are not punished for attempting to enforce their rights against big businesses, including:

• What a “loser pays” system means,
• Which states have a “loser pays” system, and
• How the Offer of Judgment rules work in South Carolina.

What is a “Loser Pays” System?

The “English Rule,” generally not followed in the U.S. but there are some exceptions like Alaska, requires the losing party to pay the litigation costs of the prevailing party.

For example, if I sue Ford Motor Company for their negligence in putting faulty tires on my vehicle that resulted in a roll-over crash killing my first-born child, and a small army of insurance defense attorneys with practically unlimited resources wins their case on a summary judgment motion, the court would then order me to pay Ford Motor Company’s attorney fees, court costs, and other litigation expenses.

When Does the Losing Side Pay the Other Side’s Attorney Fees in SC?

South Carolina technically does not have a loser pays system. Like most of the country, we follow the “American Rule,” where each party is responsible for paying their own litigation costs with a few exceptions defined by statute like insurance bad faith claims and some family court cases.

What’s to Stop Frivolous Lawsuits? Rule 11 of the SC Rules of Civil Procedure.

The “flood of frivolous lawsuits” that threatens to destroy our country’s court system is a myth.

Well into the previous century, businesses, insurance companies, the lawyers that defend them, and the politicians that take their money have been repeating this same refrain with the goal of implementing laws and court rules that will prevent injured plaintiffs from suing the corporations that hurt them.

That doesn’t mean there are no frivolous lawsuits.

Rule 11 of the Rules of Civil Procedure is designed to stop frivolous lawsuits – not to shut down legitimate lawsuits by intimidating potential plaintiffs.

Rule 11 requires the plaintiff or their attorney, if they are represented, to sign every pleading in a case, including the Complaint that contains the allegations. The signature “constitutes a certificate by him that he has read the pleading, motion of other paper, that to the best of his knowledge, information and belief there is good ground to support it, and that it is not interposed for delay.”

What prevents a flood of frivolous lawsuits?

Rule 11 provides that the “loser pays” if the lawsuit is frivolous:

If a pleading, motion, or other paper is signed in violation of this Rule, the court, upon motion or upon its own initiative, may impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion or other paper, including a reasonable attorney’s fee.

Offers of Judgment/ Offers of Settlement May or May Not Mean Loser Pays

Another form of loser pays that is found in South Carolina and other states is the “offer of judgment” or “offer of settlement” depending on the state.

In Georgia, the rules for offers of settlement create what is practically a loser pays, or English system. In South Carolina, the rules for an offer of judgment can create a substantial benefit for the prevailing party but fall far short of the English system rules.

Offers of Settlement Rules in Georgia

In Georgia, under Ga Code § 9-11-68, if the defendant makes an offer of settlement that is rejected by the plaintiff, and if the defendant prevails in the action by obtaining a final judgment that is less than 75% of the offered amount, the plaintiff must pay the defendant’s attorney fees and court costs from the date of the rejected offer through the judgment.

If the plaintiff makes an offer of settlement that is rejected by the defendant, and the plaintiff receives a judgment that is greater than 125% of the offer, the defendant pays the plaintiff’s litigation costs.

Offers of Judgment Rules in SC

Section 15-35-400 authorizes a party to make an “offer of judgment” to the other side. If the offer is not accepted within 20 days (or 10 days prior to trial, whichever is earlier), it is considered rejected.

If the offering party later gets a judgment that is “at least as favorable as the rejected offer,” the rejecting party must pay:

• Courts costs, and
• Eight percent interest from the date of the offer.

The rejecting party does not have to pay attorney fees unless there is another statutory or contractual provision that authorizes attorney fees.

So – in cases where there is a legitimate dispute that must be decided by the court, each side bears their own litigation costs.

But, in the rare case where a plaintiff or plaintiff’s attorney files a truly frivolous lawsuit, the court has the authority to order them to pay the other side’s costs as a sanction (as well as referring the attorney for disciplinary action if the attorney knowingly filed a frivolous lawsuit).

Got Axelrod?

If you have been injured due to someone else’s negligence, your Myrtle Beach personal injury lawyer at Axelrod and Associates will help you to determine whether you have a valid claim, who is liable, and how to make them pay.

Schedule a free consultation with your Myrtle Beach car crash attorneys on the Axelrod team today. Call us at 843-353-3449 or fill out our contact form to set up a free initial consultation about your case.