'Loser pays' next step for successful lawsuit reform in Texas

The SE Texas Record Mar. 8, 2011, 9:26am


By State Reps. Warren Chisum (R-Pampa), Tom Craddick (R-Midland), Brandon Creighton (R-Conroe), Kelly Hancock (R-Fort Worth), Linda Harper-Brown (R-Irving), Phil King (R-Weatherford) and Larry Taylor (R-Friendswood)

Lawsuit reform works. Nothing underscores this point more clearly than the success of the medical liability reforms enacted by Gov. Rick Perry and the Legislature in 2003 and then ratified by voters later that year.

As a result of these common-sense limits to non-economic damages in medical malpractice cases, the number of doctors applying to practice in Texas has increased by 60 percent.

In addition, at least 20 underserved counties now have an emergency room physician and 12 counties have an obstetrician for the first time in their history. A leader in the Citizens Against Lawsuit Abuse (CALA) movement noted that since the reforms "even in areas that have been underserved for years, such as the Valley and rural Texas, we're seeing medical professionals return to high-risk specialties."

This is the right time to take the next step toward clamping-down on frivolous lawsuits by introducing a "loser pays" provision into state civil justice statutes, along the lines of what Gov. Perry proposed in his State of the State address. Ensuring a fair and balanced civil litigation system is in fact one of the cornerstones of a prosperous and vibrant economy.

Texas currently has one of the lowest unemployment rates in the nation, a strong business climate and is in a tie for being home to the most Fortune 500 companies in the nation. Ensuring that large and small businesses as well as doctors and other medical professionals are protected from the cost of defending themselves against junk or questionable lawsuits will further strengthen Texas' economy.

Of course, Texans should be able to bring civil lawsuits against businesses or individuals when the plaintiff has been injured or suffered damages. That right, however, must be balanced against the responsibility of bringing only reasonably defensible legal action.

Allowing frivolous lawsuits to be brought with impunity undermines our courts by allowing for a gaming of the system and unnecessary costs for defendants, which ultimately drives up the cost of doing business and the price we all pay for goods and services.

In his State of the State address, the governor said, "Texas needs a 'loser pays' component in our legal system, in which those who sue and lose are required to pay the court costs and legal expenses of those they sued."

We agree. 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. This will provide a necessary and meaningful protection against baseless lawsuits.

Evidence from other states confirms that a "loser pays" requirement can have a significant impact on frivolous lawsuits. Alaska has one of the nation's longest-standing "loser pays" provisions, and tort suits constitute only 5 percent of all civil legal matters in the state, which is about half the national average.

Research published in December 2008 by the Manhattan Institute found that "almost every economist who has studied loser pays predicts that it would, if adopted, reduce the number of low-merit lawsuits."

The Manhattan Institute also points out that "a loser pays rule would encourage business owners and other potential defendants to try harder to comply with the law. Doing so should produce fewer injuries."

This is an important point: A "loser pays" provision would rebalance the legal system so potential plaintiffs are dissuaded from filing frivolous suits, while potential defendants are more likely to take steps to avoid reasonable civil actions with the knowledge that junk suits are far less likely to occur.

While Texas has never had a "loser pays" system, it is worth pointing out that "loser pays" is not an untested legal standard.

As the Reason Foundation notes: "Loser pays is the standard in England, so it is sometimes known as the 'English Rule.' ... It has prevailed for millennia in Europe, developing early in Roman law and spreading from there to the civil law systems that evolved all over the continent."

And the result of this continent-wide "loser pays" system? Liability insurance costs significantly less (by a factor of 2 1/2 or even 3-to-1) compared with the United States. This additional benefit of "loser pays" would make Texas an even more attractive place to do business and would bolster the state's position as one of the chief drivers of the nation's economy.

At its core, "loser pays" is a simple matter of fairness. Blameless individuals or employers should not be forced to bear the cost of defending themselves against suits that have been determined to be frivolous or groundless by either a court or a jury. Enacting a "loser pays" statute is the next logical step on Texas' lawsuit reform agenda that has proven so successful.

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