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Guest Column: Why "Loser Pays" is a Winner

Forget the hyperbolic editorial rhetoric. The Governor’s proposals for improving our civil justice system will help make lawsuits less expensive and less time consuming.

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As often happens with measures working their way through the political cauldron of the Texas Legislature, the hyperbolic editorial rhetoric targeted at HB 274, the Governor’s proposals for improving our civil justice system, has managed to completely divorce itself from the reality of what the proposals actually do.

No, the proposals do not grant “immunity” to big corporations. No, the proposals do not hurt the “little guy.” And no, the proposals do not harm anyone’s right to seek redress in our courts or their right to a jury trial. They do, however, offer six very specific improvements to our civil justice system that will help make lawsuits less expensive and less time-consuming. Here is what the Governor’s proposals actually do.

1. HB 274 instructs the Texas Supreme Court to write new procedural rules modernizing our legal procedure for evaluating whether lawsuits have any legal basis early in the life of a lawsuit. Such a procedure is commonly called a “motion to dismiss” procedure. Federal courts and 42 states utilize such a procedure and have for decades. It is not new, it is well-tested, and it works just fine all across the country. It allows courts to dismiss cases early on that should not have been filed, and lets courts assess fees and costs as they think equitable and just against any party that misuses the procedure. Tell lawyers from other states that we don’t have a motion to dismiss procedure and they look at you like you just said you get around in a horse and buggy. “You don’t?” they’ll ask in disbelief. Well, we should.

2. HB 274 also instructs the Texas Supreme Court to write new procedural rules to expedite cases in which the amount in dispute is $100,000 or less. Our civil justice system is the finest in the world, but it can be expensive. When you have a relatively small claim — and in our civil justice system, a $75,000 claim is relatively small — it can sometimes be prohibitively expensive and time consuming to actually litigate the case through a trial. There are legitimate disputes and legitimate lawsuits that need to be able to take advantage of a fair and balanced civil justice process. We need ways to have our civil justice system work for smaller cases just as fairly and as well as it works for big cases. HB 274 takes a step in this regard by asking the Supreme Court to write new procedural rules that will address the expense and length of time that are imposed on smaller cases under our current rules.

3. HB 274 proposes that Texas adopt a common-sense rule that courts should not read a statute as creating a new cause of action unless the statute actually says it is creating a cause of action. This is sometimes called not “implying” a cause of action in a statute, which means courts should not “find” a cause of action in a statute unless the cause of action is really there. This is no more controversial than it sounds. It assures that the Legislature, the body writing the statute, has control over whether a law creates new causes of action. It is a recognized rule of statutory construction around the country and is endorsed by the American Legislative Exchange Council.

4. HB 274 proposes that Texas adopt a procedure for getting answers to certain types of difficult legal questions that will determine the outcome in a case without the need for or the expense of a trial. These types of legal questions are called controlling questions of law. They don’t come up in most cases, but when they do, it can save everyone including taxpayers a lot of money if the appellate courts can address the controlling question of law without the need for a trial. This kind of appeal won’t happen often because both the trial judge and the appellate court judges have to agree that it should be used. But, when it is appropriate, it will save time and money. Such a procedure has been available in federal courts for a long time and works just fine. We can use it in Texas.

5. HB 274 makes the current Texas law on recovering attorneys’ fees in contract cases work for both plaintiffs and defendants. Texas has for years allowed plaintiffs to recover attorneys’ fees when they win in a lawsuit that involves a contract. The problem has been that the defendant has not been able to recover attorneys’ fees if the defendant wins. When you are fighting over what a contract means and who breached it, there is no reason to just let the plaintiff get fees if the plaintiff is right. If the parties are arguing over a contract, whoever wins that argument ought to be able to recover their fees. This proposal in no way affects the parties’ right to contract however they want as to how and when fees can be recovered. It only applies when there is no contract provision that deals with fees and costs.

6. HB 274 also amends our current law on offer of settlement. The offer of settlement law is designed to encourage parties in a lawsuit to make reasonable settlement offers earlier in cases rather than later. Most cases, in fact, settle. If we can encourage this to happen earlier, it will save everyone time and money. The idea behind the offer of settlement law is that if you turn down a reasonable offer to settle a lawsuit you might have to pay the other side’s litigation costs after the offer because it is your fault that the lawsuit kept going and kept costing time and money. If a person is unreasonable in keeping a lawsuit going when it should have stopped, that person ought to have to pay for imposing those costs on the other side. Our current offer of settlement law does not get used very often because it does not impose equal risk on the parties. HB 274 corrects this and makes the risk of paying litigation costs for both sides equal.

If you don’t see the sky falling here or some great injustice being done to the “little guy,” you’re looking at it correctly. Each proposal is a common-sense step forward in improving our civil justice system, which, while very good, is not perfect. HB 274 offers straightforward improvements that will help reduce the cost of lawsuits and the time spent resolving them.

Trial lawyers are not looking to make our civil justice system less expensive and less time consuming. If you are a trial lawyer, it’s bad for business. If you are anybody else, it’s good for you and good for business.

Leo Linbeck, Jr., is senior chairman of Texans for Lawsuit Reform.

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