Texas' Next Tort Reform Battle: "Loser Pays"

Loser pays; everyone wins.

It is the perfect sound bite in what could be the next tort reform battle in Texas: a push to require the losing parties in litigation to pay their opponents’ legal fees.

Also known as the English Rule, because of its prevalence in Britain, the loser-pays approach, advocates say, is the cure for courts choked with the costs of “junk” lawsuits. But opponents say it obstructs all litigation — without regard to merit — and keeps those with plausible legal claims from seeking justice.

In his February State of the State address, Gov. Rick Perry praised a loser-pays approach that would require “those who sue” to pay lawyers’ fees. The prospect of a one-way system has put the state’s plaintiff bar on high alert.

A Republican legislative staffer who has seen a draft bill and asked not to be named in order to protect his dealings with the governor said Perry’s office had been shopping one-way loser-pays legislation to lawmakers. Catherine Frazier, the governor’s spokeswoman, said Perry was working closely with state Rep. Brandon Creighton, R-Conroe, and state Sen. Joan Huffman, R-Southside Place, to develop tort reform legislation.

Which version of loser-pays will ultimately make it into the legislation is unclear. Jenni Sellers, Creighton’s chief of staff, said that the legislation had yet to be completed and that it would include a provision for the early dismissal of frivolous lawsuits. She said Creighton thinks any loser-pays proposal should be fair to both sides. He believes “it’s a two-way street,” Sellers said. “Not just plaintiffs pays, but whoever the loser is ends up paying.”

But in an op-ed article published Monday in the Midland Reporter-Telegram, Creighton, along with six of his House colleagues, used language that suggested a focus on plaintiffs: “A plaintiff should be required to pay the defendant’s legal fees in cases where a court determines that a lawsuit is groundless or where a jury determines a suit is frivolous.”

Any type of loser-pays proposal would receive a tepid response from the legal community across the ideological spectrum, said Thomas M. Melsheimer, a business and white-collar criminal defense litigator in Dallas with the firm Fish & Richardson. “It’s really hard to imagine there being much grass-roots support for it once people understand that it could make the ordinary citizen suing Wal-Mart pay for Wal-Mart’s legal fees if they lose,” Melsheimer said.

Mark Lanier, a plaintiffs’ lawyer in Houston, said he did not have a problem with a loser-pays system, “as long as it’s fair.” But Lanier said a one-way approach focused on plaintiffs was “blatantly anti-Texan” because of the barrier it would create for those who cannot afford the risk of having to pay a defendant’s legal fees.

Legal scholars also question whether frivolous litigation is even a significant problem, said Charles Silver, a professor at the University of Texas School of Law. No serious academic study outside of the context of securities class actions has found it to be an issue in the United States, Silver said.

And in Texas, since the enactment of the Legislature’s 2003 tort reform package, which included a $250,000 cap on compensation for noneconomic damages in medical malpractice cases, the idea that plaintiffs are now filing suits that are not overwhelmingly meritorious is “just ridiculous,” he said.

State Rep. Will Hartnett, R-Dallas, who sits on the Judiciary and Civil Jurisprudence Committee, said it is unlikely that loser-pays legislation will gain traction this session.

“I know there are a lot of Texans interested in some form of loser-pay legislation,” Hartnett said. “But I think it will have an uphill battle this session, given all the other pressing items that the Legislature has to deal with."