TEXAS TORT REFORM 2011 – REAL OR IMAGINED?

Texas recently passed new tort reform legislation affecting civil litigation. Although touted as “significant” by Governor Perry and various tort reform advocate groups, our analysis indicates that it will have little effect on tort litigation. Here are the highlights-

1. Motions to Dismiss Frivolous Lawsuits and Expedited Civil Actions:

The Legislature directed the Texas Supreme Court to adopt new rules that will allow defendants to seek early dismissal of frivolous cases based on the pleadings. This new procedure is patterned after a similar Federal procedure, but the Texas version contains a provision that requires the loser of such a motion to pay the other side’s attorney’s fees. Because defendants cannot predict how courts will react to these motions, this potential penalty will probably have a chilling effect on a defendant’s decision to seek dismissal except in the most clear cut cases. We doubt that this motion will be widely used by defendants.

The Legislature also directed the Texas Supreme Court to adopt new rules to expedite cases involving damages less than $100,000. The new rules are intended to reduce discovery costs and lead to a faster resolution of these low damage cases. However, the effect of this new expedited procedure will essentially benefit plaintiffs rather than defendants because it is usually the defense that has a tendency to run up discovery costs in these smaller cases.

2. Loser Pays:

The Legislature amended an already existing statute that allows a party to recover certain litigation costs if a reasonable settlement offer is rejected by the other side. The new reform increases the amount and the types of recoverable costs, but makes no other significant changes to the existing law. This law was rarely used bu defendants in tort cases because its successful application required the defendant to predict the eventual verdict to within 20% of the offer (a difficult thing to do in most cases). We do not think this reform will increase its use significantly.

3. Interlocutory Appeals:

The Legislature expanded the potential for interlocutory appeals (appeals before final judgment) when the appeal could materially advance the ultimate termination of the litigation and involves a controlling question of law as to which there is a substantial ground for difference of opinion. Although this new legislation may permit an appeal by the defendant of an order denying a summary judgment, this appellate opportunity will only apply in rare circumstances, and we think it will be rarely used due to the additional expense of these types of appeals.

4. Responsibile Third Party:

We believe this change will have the most impact.

Plaintiffs will no longer be able to revive claims that are otherwise barred by the statute of limitations by waiting until a defendant designates a responsible third party. Time-barred claims remain time-barred even if the defendant identifies other potentially responsible persons after limitations has run for those persons. However, defendants may not “lay behind the log” and wait to designate responsible third parties until the limitations period expires. If the defendant intentionally delays in revealing a potentially responsible third party in disclosures, then the defendant may be prevented from even designating the responsible third party.

The net result, we believe, will be that plaintiffs will file suit much earlier (earlier in the two-year limitations period) and will sue everyone that might have contributed to the accident, and will then wait to weed them out as discovery progresses. This may have the unintended effect of actually increasing the cost of litigation for many.

In summary, although these new “tort reform” provisions may somewhat change how defendants and carriers evaluate and handle cases, it is our opinion that the provisions will not significantly affect civil litigation and its costs – tort reform that is much more “imagined” than “real”.

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