Texas house passes more tort reform with HB274 but “loser pays” may mean winner pays.

Today HB 274 was passed by a 96 to 49 vote in the Texas house of representatives. The bill, which has come to be known as “loser pays,” was a top priority of Texas’ governor Rick Perry and the influential lobbying group Texans for Lawsuit Reform. The issue of tort reform is such a priority for Governor Perry in fact that he declared it a legislative emergency last week, bumping HB 274 to the top of the list and allowing legislators to pass it more quickly. It is interesting that Gov. Perry considered tort reform an emergency matter at a time when Texans are facing a state budget crisis, profoundly affecting (among other things) schools’ budgets for hiring new teachers. Over the weekend the speaker of the house temporarily suspended the house rules, allowing the Republican supermajority to pass HB274 without any debate or amendment (though some debate and a number of amendments took place today before the bill was passed).

The next step for HB274 is on to the state senate. Texas has 31 senate seats, of which 19 are currently held by Republicans and 12 by Democrats. The bill makes it harder for Texans to bring civil lawsuits, and the “loser pays” provision may put a Plaintiff in a lawsuit on the hook for the Defendant’s legal costs, including attorneys’ fees…even if the Plaintiff wins the lawsuit at trial. Supporters of HB274 claim the law will cut down on frivolous lawsuits, opponents say legitimate lawsuits will be discouraged because people with a legal claim will be afraid to file suit in case they lose and are liable for the other side’s attorneys’ fees.

Under HB274, if a Plaintiff takes their lawsuit to trial and the jury awards the Plaintiff less than 80% of the amount of the Defendant’s settlement offer, the Defendant could collect from the Plaintiff their litigation costs, including attorneys’ fees, even if the amount of those attorneys’ fees are greater than the amount awarded by the jury.

Here’s an example: Paul Plaintiff is rear-ended at a stop light by Dan Defendant, a driver who had been drinking.  Paul Plaintiff has $5,000 in past medical bills and Paul’s doctor tells Paul he needs a $20,000 knee surgery to treat his injuries from the accident. Paul files a lawsuit seeking $25,000: his past medical bills and the cost of the knee surgery Paul needs. Dan Defendant’s insurance company offers Paul $15,000 hoping he will take it and give up and go away.  Paul can’t accept $15,000 because that’s not enough to pay for his knee surgery.  The case goes to trial and the jury awards Paul $11,000 because the defense attorney does a good job convincing the jury Paul’s knee problem might be from a 12-year old soccer injury. The defense attorney hired an orthopedic surgeon who routinely testifies on behalf on insurance companies to come to trial and testify and pays the hired expert $10,000 for his time. Dan Defendant’s attorney, the attorney’s junior associate and their paralegal have billed $15,000 taking the case through trial.  Because the amount the jury awarded Paul Plaintiff ($11,000) is less than 80% of the insurance company’s offer ($15,000), Paul Plaintiff now has to pay Dan Defendant’s $25,000 in legal expenses.  Paul Plaintiff gets an $11,000 credit for the amount the jury awarded, but Paul still owes Dan $14,000…for being rear-ended at a stop light by a drunk driver.

Does that mean Paul Plaintiff’s lawsuit against Dan Defendant was frivolous…or brought in bad faith? Of course not. But in terms of Paul’s liability for Dan’s litigation expenses, the justness of his claim doesn’t matter. And that’s HB274 in action folks.

If you don’t like HB274 and you don’t think it should be the law in Texas, contact your state senator while you can. Here is a link to a web site that allows you to enter your address: it will tell you who your state senator is and will allow you to send them a letter via email.