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Guest Column: Why "Loser Pays" is a Loser

The Governor, with the help of the Legislature, seems driven to dilute one of our most enduring constitutional bulwarks: the ability of Texas residents to get a fair shake in court.

By Tom Melsheimer and Craig Smith
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Texans hate the idea of an unfair fight. Remember the Alamo?

Perhaps that’s why it’s so surprising that Gov. Rick Perry — a guy who brands himself as a fierce protector of our core constitutional rights — seems driven to further dilute one of our most enduring constitutional bulwarks: the ability of Texas residents to go to the court and get a fair shake from 12 Texas residents and an impartial judge.

Indeed, the failure of the Mexican government to protect the right to a jury trial was one of the reasons Texas revolutionaries fought in the Alamo in the first place. This history is lost on our governor and the special interests that have his ear.

Backed by the governor’s misguided rhetoric, lawmakers are now pushing another wave of assorted tort reform proposals that would bring the hammer down on everyday Texans who turn to the courts to resolve a range of business and civil disputes. If made law, many plaintiffs — particularly individuals and small-business owners — considering filing a lawsuit will have to balance the very real possibility of financial ruin as the downside to attempting to right a wrong by walking into a courtroom.

We are concerned about the sentiment in the House and Senate concerning the right to a jury trial. With shockingly little debate, the House has broadened the so-called “loser pays” statutes, requiring plaintiffs to pay the legal tab for the teams of defense lawyers that corporate interests often bring to a court fight.

With this as the law of the land in Texas, a small-business operator stiffed in a contract dispute with a large corporation will have to think seriously about turning to the legal system to address such an injustice. Meanwhile, a losing plaintiff in any type of case could be handed the opposing side’s legal bill in situations where a case is dismissed early. There's even a scenario in which a victorious plaintiff would be assessed a losing side's fees if it turns out that the plaintiff had rejected a settlement offer higher than the jury's subsequent verdict.

A big concern right off the bat is that this “reform” doesn’t cut both ways because the power to invoke “loser pays” rests with defendants. What about the defense lawyers who are inclined to drag out and confuse a court fight with frivolous defenses in the hope of outspending individual plaintiffs? They face no such threat should the plaintiff prevail. The irony is that few frivolous lawsuits ever even make it to the trial stage in the first place, and there’s already a mechanism for parties in a range of cases to recover attorney fees and sanctions for bogus lawsuits.

The funny thing about tort reform in 2011 is that Texans aren’t storming the steps of the Capitol asking to curtail their abilities to achieve justice in our courts. Even the largest association of defense lawyers in Texas — The Texas Association of Defense Counsel — is actively speaking out against these proposals. We applaud their integrity on this issue. This whole "reform" effort reminds us of the origins of Prohibition laws in the 1920s, when the only folks asking for the law were a relatively small and vocal group of zealots. We all know how that turned out: with the passage of an ill-advised law that just about everyone immediately regretted.

Texas courts are an easy target for misguided political rhetoric because they lack a built-in constituency who watch over and protect the institution. There is no lobbying group for jury service. Our judicial system is something that most folks would rather not think about, but they sure expect it to be there if they need it. Our own highly regarded attorney general was himself a plaintiff in a personal injury lawsuit nearly 30 years ago.

The typical Texan is not following the rhetoric in Austin and the procedural screws turning inside committee rooms and House and Senate chambers, but these ideas under consideration by our state lawmakers stand to fundamentally change our civil justice system. Few, if anyone, wants to file a lawsuit, but sometimes there’s simply no other choice to correct unfair business practices breach of fiduciary duty, investment fraud, breach of contract and corporate negligence.

Make no mistake — these proposals would provide a form of immunity to big businesses in this state. Rather than streamline the courts as proponents would have you believe, these proposals would clog dockets on multiple levels. Under the plan approved by the House, defendants would be able to seek an immediate do-over in the event that they fail to get a lawsuit thrown out early by filing a summary judgment motion. The House bill would make it easier for defendants to immediately appeal so-called interlocutory rulings to a higher court. Not only is this unfair, but it will delay litigation, increase court costs and clog up the already busy appellate courts.

The special interests bankrolling the effort — one is Texans for Lawsuit Reform — are emboldened by past tort reform successes in Texas in 1995 and 2003, and they’re looking for a reason to justify their continued existence and hefty donations. The result is that they’re funneling significant campaign funds to virtually every member of the House and Senate committees considering these proposals. Partisan gamesmanship has won out so far, as Republicans in the House used their numbers to muzzle debate and steamroll this bill through.

What can we expect if this version of tort reform becomes the law of the land in Texas? The little guys in Texas will simply lose access to the civil justice system. The cost of litigation will become an enormous barrier for many. Threat of financial ruin will loom over citizens courageous enough to come to court. Deterrents to corporate misconduct will be further eroded. Under "loser pays" tort reform, nearly everyone loses.

Tom Melsheimer is the managing principal at the Fish & Richardson law firm in Dallas. Craig Smith is judge of the 192nd Civil District Court in Dallas County,

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