The Truth about Tort Reform in Texas

Trial lawyer Austin Texas

Mar 22, 2011 — by Jeff Mundy
Tags: News

Reprinted with permission from the March 21, 2011, edition of the Texas Lawyer. All rights reserved. Further duplication without permission is prohibited.

There was a time when civil-defense lawyers in Texas advocated for tort reform because of the benefit to their clients. But as the Texas Legislature considers once again altering the civil justice system, many are changing their minds about the need for more reform.

On March 14, bills were introduced in the state House of Representatives and the state Senate that propose so-called "loser pays" provisions for most civil litigation. Two of those bills want to make the losing party and, in one bill, the losing lawyers responsible for paying the prevailing party's attorneys' fees and litigation costs, but in completely different ways.

S.B. 13 sponsored by state Sen. Joan Huffman, R-Houston, a former criminal court judge allows a "prevailing party" to recover attorneys' fees for a variety of civil causes of action.

The bill also proposes a requirement that a winning plaintiff pay litigation costs to a defendant who offers to settle if 1. the plaintiff refuses the settlement offer; 2. the court signs a judgment on the claim; 3. the amount of monetary relief awarded to the plaintiff in the judgment "is more favorable to the defendant who made the settlement offer than the settlement offer"; and 4. the difference between the settlement offer and the judgment is "equal to or greater than 10 percent of the amount of the settlement offer."

H.B. 274 is sponsored by state Rep. Brandon Creighton, R-Conroe, a real estate attorney. The bill proposes making a lawyer liable for litigation costs if a judge finds he has a financial interest in a case and a jury finds that he has filed a suit that is an "abuse of the civil justice process."

Huffman and Creighton each did not return a telephone call seeking comment.

While there are other bills that touch on the same topics, Gov. Rick Perry, who has made tort reform part of his legislative agenda, supports these two bills, which cover the most ground and likely will garner the most legislative debate on loser pays.

"The costs associated with frivolous lawsuits can grind almost any business to a halt, as owners are forced to deal with mounting legal fees and court costs even if they've done nothing wrong," Perry says in a March 14 statement praising S.B. 13 and H.B. 274. "Implementing loser pays lawsuit reforms will expedite legitimate legal claims, crack down on junk lawsuits and stimulate Texas jobs and economic opportunity relieving Texans of the burdens created by frivolous and drawn-out lawsuits."

Lawmakers and Perry may soon hear from the Texas Association of Defense Counsel (TADC), which is reviewing both bills. TADC president Keith O'Connell says it's time to stop altering civil laws so they favor one party in a suit. He notes that his group will not support bills that continue to stack the deck against plaintiffs.

While TADC has seen plaintiffs lawyers and tort reform advocates battle this issue for years, O'Connell says his organization just wants to protect the integrity of the civil justice system. "We've got to get back to being moderate and fair and balanced. You can't just keep swinging left, right, left, right, left, right. It's not good," he says.

"Let's just say this: There comes a time where tort reform becomes so Draconian that it's not fair or good for anybody. . . . No matter who you are, I don't care if you're president of TADC, president of TTLA [Texas Trial Lawyers Association], whoever you are, you've got to do something, because it's the flat right thing to do," O'Connell says.

"This whole notion of a system that's one sided it's not fair, and it's not going to work, and it will collapse on itself," O'Connell says. "What may look good for somebody in the short term pick your plaintiff, pick your defendant . . . is not good for someone in the long term."

O'Connell notes that Florida passed a loser-pays provision, but its state Legislature repealed the law. O'Connell says the only state he is aware of that has such legislation is Alaska.

The TTLA has fought tort reform legislation for decades, with consumer groups as its main ally in its lobbying efforts. The TTLA welcomes help from their colleagues in the defense bar, says president Steve Mostyn.

"This is the first time we've heard them come out and take a position like that. I've heard them say that privately. But I have never heard them come out in public like that," says Mostyn, of Houston's Mostyn Law Firm.

"It always helps when the entire bar steps forward. This isn't the trial lawyers trying to make money. This is the whole bar saying, 'This system doesn't work,' " Mostyn says.
Change Over Time

The Texas defense bar's opinions on tort reform have evolved over the years, says longtime Dallas defense lawyer Jim Cowles.

In 1995, the defense bar embraced caps on punitive damages that limited such awards to $200,000 or two times the amount of economic damages plus an amount not to exceed $750,000, says Cowles, a partner in Cowles & Thompson. The caps were intended to control runaway jury awards, he adds.

But most defense lawyers stayed on the sidelines in 2003 when the Legislature passed H.B. 4, an omnibus tort reform bill that capped non-economic damages in medical malpractice cases to $250,000 per claimant, among other things, he says.

"You have to understand: The defense bar has defense clients. And the clients were generally clamoring for some pretty extreme tort reform. And the defense bar, no matter their own feelings, are not going to stand up in the face of their clients and say 'stop this.' It doesn't make sense," Cowles says. "However, too much of a good thing can be a bad thing. And I kind of believe that the defense bar is at that point. There is some fairness in the system. And you can take it too far, and then it becomes unfair."

Hugh Rice Kelly, general counsel for Texans for Lawsuit Reform, says more tort reform is needed in the state; business owners shouldn't be forced to pay lawyers to defend meritless cases.

"The basic reason for some kind of loser-pays provision is to take care of the party who tries and wins his case," Kelly says. "If you talk to a number of businessmen, they'll tell you their best bet against frivolous lawsuits is loser pays."

Mark Werbner, a partner in Dallas' Sayles Werbner who represents plaintiffs and defendants, says Texas laws already allow prevailing parties to recover litigation costs in some cases. Those laws should not be expanded to other types of litigation, he says.

"There are already laws that would entitle a defendant to attorneys' fees," Werbner says. "To expand it beyond that would change our system and close the courtroom to many legitimate claims."

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