side note: On Sept. 1, a series of tort reforms—signed into law in May—intended to expedite the resolution of lawsuits and discourage plaintiffs from filing non-meritorious actions went into effect. These new reforms are in addition to the already stringent reforms enacted in 2003. Following is a closer look at the new regulations concerning lawsuits in Texas.
Since the 2003 passage of House Bill 4 (HB 4), Texas has stood at the forefront of the medical liability tort reform movement. The bill addressed issues such as limits on non-economic damages, punitive damages as well as joint and several liability. The state’s voters also approved a constitutional amendment, Proposition 12, which eliminates potential court challenges to the law that limits non-economic damages to $750,000.
In May, Texas Gov. Rick Perry strengthened the 2003 tort reforms by signing into law House Bill 274 (HB 274), a series of reforms intended to expedite the resolution of lawsuits and discourage plaintiffs from filing non-meritorious actions [see Medical Liability Monitor June 2011—ed.]. The new law went into effect Sept. 1, 2011, and applies to all lawsuits filed after that date. Following is a closer look at the Texas reforms that went into effect this month.
Pre-Discovery Motion to Dismiss
Similar to the practices of other states and the federal courts, Texas has adopted rules allowing a defendant to move for dismissal of a case before discovery is underway. While the rules governing such dismissal have yet to be written (the law tasks the Texas Supreme Court with developing them), the legislature has provided some guidance.
The dismissal must be in response to a motion filed by a party, and in contrast to earlier rules requiring a defendant to allow “adequate time for discovery” before filing a no-evidence motion for summary judgment, now no evidence is needed for a motion to dismiss. Dismissal is warranted for cases “without basis in law or fact,” and the trial court must rule on the motion within 45 days.
Loser Pays Provision
The decision on whether to file a pre-discovery motion to dismiss will be affected by provisions allowing the prevailing party in such a motion to recover costs and reasonable attorney fees from the losing party. Thus, if a plaintiff files a lawsuit without basis in law or fact, and the defendant obtains dismissal, the plaintiff must pay the defendant’s costs and reasonable attorney fees. While this provision is designed to deter frivolous lawsuits, it also aims at deterring frivolous motions to dismiss; a defendant who loses the motion to dismiss will not only have the case proceed, but that defendant will also be liable for paying the plaintiff’s accrued costs and attorney fees.
Easier Interlocutory Appeal
HB 274 removes several impediments to obtaining interlocutory appeal by allowing an immediate appeal of a “controlling question of law” where such an appeal “may materially advance the ultimate termination of the litigation.”
A party may request such an appeal no later than the fifteenth day after the trial court signs the order to be appealed, or the trial court may permit one on its own initiative. Additionally, the parties no longer have to agree to the order seeking interlocutory review, or that the issue involves a controlling question of law. Instead the trial and appellate court will decide whether such an appeal should proceed. If it is permitted, the appellate rules governing accelerated appeals will apply. Finally, the provision allows either the trial or appellate court to stay proceedings pending appeal, even without the consent of the parties.
Encouraging Settlement of Cases
HB 274 includes a number of provisions aimed at encouraging settlement. The provision attracting the most attention is the “loser pays” provision applying to offers of settlement made pursuant to Section 42.003 of the Texas Civil Practice & Remedies Code. HB 274 simplifies and clarifies the current calculus for determining what the loser pays if a settlement offer is rejected. First, “reasonable deposition costs” are added to the definition of “litigation costs” and thus become recoverable, along with court costs, reasonable fees for not more than two testifying experts and reasonable attorney’s fees.
Second, the cap on recoverable litigation costs is raised. Previously, a plaintiff who rejected a settlement offer only to obtain an award that was substantially less favorable could be liable for an amount equal to 100 percent of non-economic and exemplary damages, plus 50 percent of economic damages. Now, the plaintiff could have to pay its entire award to the defendant as litigation costs. Likewise, a defendant who rejects a settlement offer and obtains a ruling less favorable would be liable for litigation costs in the amount of the plaintiff’s award.
The law’s intent is that if the stakes are higher for both sides, parties will think more carefully before making or rejecting a settlement offer pursuant to Civ. Prac. & Rem. Code § 42.003. Whereas before, a plaintiff who rejected a reasonable settlement offer could still walk away with half of its economic damages after paying the defendant’s costs, now a plaintiff who prevails at trial could still end up with nothing but a bill for its own attorney fees.
Development of an Expedited Resolution Process for Cases Under $100,000
The Texas Supreme Court is also tasked with developing new rules to promote the “prompt, efficient and cost-effective resolution of civil actions” where the amount in controversy is less than $100,000. There is little guidance offered for such rules, except that they “shall 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.”
Limiting Defendants’ Ability to Delay Designating Responsible Third Parties
Finally, HB 247 aims to further expedite resolution of suits by eliminating an existing provision that allows defendants to identify—and plaintiffs to join—a responsible third party after the statute of limitations has run. Now, if limitations have run and the defendant has failed to comply with its obligations, if any, to timely disclose a responsible third party, the defendant loses that option. This provision is clearly aimed at encouraging defendants to timely designate responsible third parties.
HB 274 is another example of why Texas continues to be the state to watch when it comes to tort reform. Although only time will tell whether it results in swifter adjudication of meritorious claims and swifter dismissal of non-meritorious claims, the bill demonstrates the state’s commitment to developing innovative provisions designed to expedite the resolution of civil disputes.