"Loser Pays" Tort reform Legislation Making its Way Through Texas Legislature

On March 10, 2011, Rep. Brandon Creighton (R-Conroe) introduced House Bill 274 (HB 274) in the Texas Legislature. The proposed legislation is widely-touted as a "tort reform" or "loser pays" initiative. A watered-down version of the bill passed the Texas House of Representatives on May 9, 2011 by a vote of 96 Yeas, 49 Nays, and 3 Present, not voting. It is now pending in the Texas Senate.

The original, introduced version of the bill contained the following policy statement:

It is the policy of this state that all civil actions be disposed of fairly, promptly, and with the least possible expense to the litigants and to the state.

Although that express statement was removed from the bill as it worked its way through the Texas House of Representatives, such an underlying intent is still readily apparent. Only now, the initiative is touted as one proposing "certain reforms to make the civil justice system more efficient, less costly, and more accessible." Without a doubt, the bill is designed to change the landscape of fee and cost shifting related to lawsuits filed in Texas.

Among other provisions, the measure would "reform" the procedures under which parties may recover costs and attorneys' fees, and would also make available new procedures whereunder lawsuits may be dismissed on an expedited basis with fees and costs awarded against the party filing the dismissed suit.

The following highlights from the Bill Analysis of HB 274, as revised by the House Judiciary & Civil Jurisprudence Committee reflect the major features of the bill (C.S. = Committee Substitute, which is the version of the legislation that was approved by the full texas House):

Early Dismissal of Actions

C.S.H.B. 274 amends the Government Code to require the supreme court to adopt rules to provide for the dismissal of certain causes of action that the supreme court determines should be disposed of as a matter of law on motion and without evidence.

C.S.H.B. 274 amends the Texas Civil Practice and Remedies Code to authorize a court, in a civil proceeding, on a trial court's granting or denial, in whole or in part, of a motion to dismiss filed under the rules adopted by the Texas supreme court Section 22.004(g), Government Code, to award costs and reasonable and necessary attorney's fees to the prevailing party that the court determines are equitable and just.

Expedited Civil Actions

C.S.H.B. 274 amends the Texas Government Code to require the supreme court to adopt rules to promote the prompt, efficient, and cost-effective resolution of civil actions in which the amount in controversy, inclusive of all claims for damages of any kind, whether actual or exemplary, a penalty, attorney's fees, expenses, costs, interest, or any other type of damage of any kind, is more than $10,000 but does not exceed $100,000. The bill requires the rules to address the need for lowering discovery costs in these actions and the procedure for ensuring that these actions will be expedited in the civil justice system. The bill prohibits the supreme court from adopting rules that conflict with the Family Code, the Property Code, the Tax Code or Chapter 74 of the Civil Practice and Remedies Code.

Appeal of Controlling Question of Law

C.S.H.B. 274 amends the Texas Civil Practice and Remedies Code to authorize a trial court in a civil action, on a party's motion or on its own initiative and by written order, to permit an appeal from an order that is not otherwise appealable if the order involves a controlling question of law as to which there is a substantial ground for disagreement, and an immediate appeal may materially advance the termination of the litigation.

Recovery of Attorney's Fees

C.S.H.B. 274 amends the Civil Practice and Remedies Code to establish that the prevailing party, rather than only the claimant, may recover reasonable attorney's fees from an individual, corporation, or other legal entity if a claim is for breach of an oral or written contract. The bill makes conforming changes and specifies that the bill's provisions relating to the recovery of attorney's fees are effective September 1, 2011.

Allocation of Litigation Costs

C.S.H.B. 274 amends the Civil Practice and Remedies Code to redefine "litigation costs" to include reasonable deposition costs and to redefine "settlement offer." The bill specifies that provisions of law relating to offers of settlement do not apply to an action filed in a small claims court. The bill specifies that an offer to settle or compromise a claim that does not comply with provisions of law relating to making a settlement offer does not entitle any party, rather than only the offering party, to recover litigation costs.

C.S.H.B. 274 authorizes a defendant filing a declaration under provisions of law relating to making a settlement offer and any party with a claim against that defendant to make a settlement offer to settle all claims in the action between the parties. The bill specifies that the parties are not required to file a settlement offer with the court. The bill specifies that the litigation costs that may be recovered by the offering party are limited to those litigation costs incurred by the offering party after the date the rejecting party rejected the earliest settlement offer that entitles the party to an award of litigation costs. The bill repeals provisions of law relating to a limitation on recovery of litigation costs and to the awarding of litigation costs as an offset.

Should Texas Judges Be Elected or Appointed?

Senator Jeff Wentworth has, once again, proposed legislation that would change the way Texas judges take office. The proposed legislation would require Texas state court judges to be appointed by the Governor and confirmed by the Texas Senate.

Under the current system, Texas joins only six other states that select judges in partisan political elections, where the judicial candidates routinely accept campaign contributions from lawyers and businesses that appear in their courts. This system, undoubtedly, has many convinced that the influence of campaign money destroys "blind justice" and corrupts the judges who administer it.

The debate about the manner of judicial selection is well-developed, and hotly-contested. There have been many past attempts to restructure the Texas judicial election system.

Critics of the current system argue that lawyers often face a "contribute or suffer the consequences" mentality from elected judges, and the jurists, themselves, are frequently uncomfortable soliciting campaign funds from the very people whose disputes must be decided in an impartial, unprejudiced fashion. Another criticism is that the people elected to the bench are often the most popular lawyers in a community, as opposed to the brightest or those possessing the best judicial temperments.

As a lawyer practicing in San Antonio, Bexar County, I have witnessed great judges being tossed out (and replaced with far less-qualified individuals) because of party line line voting. This occurred with the 2008 Democratic wave that was brought about by frustration with the GW Bush Republican administration, and last year's "shellac" of the Democrats reflecting backlash against the Obama administration. In both elections the best candidate often lost because they were affiliated with the "wrong" party.

The flip-side of the argument has merit, too. Texas is a staunchly Republican state. Democrats wince at the idea of allowing Texas' Republican (and pro-business) governors so many judicial appointments. Further, gubernatorial appointment has long been chided as a "good ol' boy" spoils system benefitting wealthy contributors and the politically-connected.

There could be a compromise, though. Past ideas have included a proposal to appoint judges, and then require them to stand for retention election periodically so voters can decide whether they deserve to keep the robe. No party affiliation would appear on the retention ballot, and judges who lose election would be replaced by appointment. But this system has holes, too, including the fact that retention elections will require fundraising.

I expect that there is little chance that the system will change any time soon. Too much doubt about reform generally promotes business as usual at the Texas Legislature.

Changing the way Texans elect judges would require a constitutional amendment approved by two-thirds of the Senate and the House, and then approved by a majority of Texas voters.