I have long been a critic of state and federal rules imposing costs on losing parties or those who turn down settlement offers, particularly when courts have little or no authority to waive costs. We previously discussed how a federal court ordering the family of a fallen soldier to pay $16,000 to the Westboro Baptist Church, an extremist organization that pickets the funerals of soldiers and Marines.  Now the victims of the massacre at the Century Aurora 16 multiplex theater have been hit with a $700,000 bill to pay the defendant’s costs after losing their lawsuit.  It is a variation of the “English Rule” where loser pays and something that I believe deters lawsuits against corporations and powerful individuals.

The problem arose when District Judge R. Brooke Jackson told the parties that he was prepared to rule for the theater during a conference call and urged the plaintiffs to settle with Cinemark within the next 24 hours.  I do not disagree with the judge on the question of liability.  There is only so much that a theater can do when faced with a madman bent on shooting people.  James Holmes killed 12 people and injured 70 others in a 10-minute rampage at a screening of “The Dark Knight Rises.”

The theater offered $150,000 for all of the parties — clearly a low amount to be divided among dozens of victims and their families.  However, the threat was that, if they did not settle, they could be hit with costs as a losing party.  Colorado law imposes the costs on the losers.  A deal was drafted for the three most seriously wounded to receive $30,000 each while the remaining 38 would split $60,000.  However, one plaintiff balked and said that the settlement was insulting and too little. Plaintiffs scrambled to leave the case before the final order to avoid sanctions.  Some 37 withdrew but 4 did not.  That left them with a massive bill for costs.

Once again, I have always questioned the liability against the theater, but few people will sue such large corporations if they could be saddled with such crushing costs.  We have Rule 11 to sanction frivolous or vexatious filings. This was not a frivolous case, even though I agree with the theater on the merits.  Imposing prohibitive costs in cases of this kind can have a chilling effect on litigants in pursuing valid claims in my view.  I would prefer a more balanced approach that gives greater authority to the courts.  I am not against imposing costs in some cases but the blanket rules in cases like this one are too draconian in my view.

What do you think?