Small Business Supports "Loser Pays" Reforms In Rule Disputes

Date: October 22, 2015

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Small Business Supports "Loser Pays" Reforms In Rule Disputes

October 22, 2015 (Lansing) –
The state’s leading small business organization, the National Federation
of Independent Business (NFIB), urged
the Senate Committee on Elections and Government Reform to support
legislation that would end the unfair advantage that state agencies have when
dealing with small business owners in regulatory disputes.

Senate bills 189 and 190,
sponsored by Senators Tom Casperson (38th District) and David Robertson (14th
District), would require a state agency to pay the legal costs of the
prevailing party when that state agency loses a lawsuit involving a regulatory

“This change would curb the
current approach by state departments and agencies of telling a citizen or
business owner that if they don’t like the ‘deal’ a state agency proposes to
resolve an issue they can ‘take it to court’,” said NFIB State Director Charlie
Owens. “Agencies use this tactic in place of good faith negotiation because
they know that taxpayers and business owners will have to settle because they
do not have the financial ability to fight the state (who has an almost
unlimited supply of taxpayer dollars to spend on litigation) in court.”

Owens said that, while
existing law does require a state agency to pay the court costs of a prevailing
party in a lawsuit, the way the current language is written limits this
provision to cases that are considered “frivolous” by the presiding
officer in the hearing. In most cases the “presiding officer” is an
employee of the state. In addition, current law does not allow anyone with a
net worth of more than $500,000, or an owner of a business with a net worth
exceeding $3,000,000 or with more than 250 employees to be awarded court costs
if they prevail against the state.

“While it may seem to the
general public that business owners with this kind of net worth should be
able to pay their own court costs, every business owner knows that ‘net worth’
does not translate into cash in the bank for fighting an unfair rule dispute
with a state agency that has unlimited legal resources,” said Owens. “The
change in the law made by Senate Bills 189 and 190 would encourage state
agencies and departments to work with permit applicants, property owners,
taxpayers and business owners to resolve issues rather than
have department staff present constituents with an ultimatum – to do what
the department wants or else take their case to court and incur steep costs – even
if they prevail.”

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