"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.