Small Business "Equal Access to Justice" Bills Would Level Playing Field

Date: March 03, 2020

State agencies should pay court costs when they lose

NFIB’s State Director testified in favor of legislation that would help level the playing field for small business owners faced with a lawsuit. Right now, state agencies have an unfair advantage when it comes to regulatory disputes, often times telling small business owners to “take it to court” if they don’t like their ruling. Most small business owners don’t have the resources or time to fight the state in court. 

NFIB State Director in Michigan, Charlie Owens, testified in favor of Senate Bills 245 and 245 at a recent Senate Oversight Hearing. The bills would require a state agency to pay the legal costs of the prevailing party when that state agency loses a lawsuit involving a regulatory issue.  

The bills 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 they can “take it to court”. 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.

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 prohibits 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 more than 250 employees to be awarded court costs if they prevail against the state.

While it may seem to some 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.

Senate Bills 245 and 246 would encourage state agencies and departments to work with permit applicants, property owners, taxpayers and business owners to resolve issues rather than give department staff the power to hand out an ultimatum to do what the department wants or take their case to court and incur steep costs – even if they prevail.

It is worth noting that similar legislation was introduced by then Representative Debbie Stabenow in 1983 (HB 4348 and 4349), and by Representative Ken Sikkema in 1995 (HB 4433), and former Senators Tom Casperson and Dave Robertson (SB 189 and 190) in 2015 and again in 2017 (SB 100 and 101). NFIB has supported these past efforts as well.

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