Texas Senate Approves Three Major Changes in Texas Litigation Law

The Texas Senate has approved a new version of House Bill 274, known as the “Loser Pays” bill. The new version of the bill will now go before a joint House and Senate Committee for final approval. Despite its moniker, the bill does not mandate that the loser of a lawsuit automatically pay the winner’s attorneys’ fees (as has been the misconception of the bill since the beginning). If passed, the Loser Pays bill will make four major changes in Texas civil litigation.

Motion to Dismiss

The largest, and most controversial, change covers early dismissal of so-called meritless suits. The current version of the bill will allow defendants to file a motion to dismiss a suit that “has no basis in law or fact.” This language is somewhat similar to Rule 12(b)(6) motions in federal court. Once filed, the court must hear a defendant’s motion to dismiss within 45 days. If the defendant is successful, and the court dismisses the suit, the court must award the defendant his or her costs and attorneys’ fees. The bill requires the Texas Supreme Court to adopt rules that will govern the motion to dismiss procedure.

Importantly, the motion to dismiss practice does not include claims under the Texas Family Code, Texas Property Code, Texas Tax Codes, or Medical Malpractice actions governed by Chapter 74 of the Texas Civil Practice and Remedies Code.

Offer of Settlement

The Loser Pays bill also changes the current offer of settlement procedure in the Civil Practice and Remedies Code and Rules of Civil Procedure. Currently, once the offer of settlement procedure is invoked by a defendant, either party may make an “official” offer of settlement. If the offer is rejected, the offering party can recover his or her attorneys’ fees if the jury verdict is “significantly less favorable” to the rejecting party. A judgment is “significantly less favorable” to a plaintiff if he or she recovers less than 80% of the defendant’s offer; it is “significantly less favorable” to a defendant if a plaintiff recovers more than 120% of plaintiff’s offer. If the defendant is successful under the offer of settlement procedure, the defendant’s attorneys’ fees are currently limited to 50% of economic damages, 100% of noneconomic damages, and 100% of exemplary damages.

The Loser Pays bill changes the amount of money that a defendant can recover in attorneys’ fees. It abolishes the 50% economic damage limitation and allows the defendant to recover up to 100% of the amounts awarded to the plaintiff at trial. This is a change from the House version, which allowed unlimited attorneys’ fees for a defendant. The Texas Trial Lawyers Association lobbied for the removal of the unlimited fees.

Third Party Practice

Section 33.004 of the Texas Civil Practice and Remedies Code allows a defendant to designate another person or entity as a “responsible third party” without adding that person or entity as a party to the suit. The responsible third party’s wrongful conduct could then be found by the trier of fact to be a proximate cause of the plaintiff’s injuries without the third party ever appearing in court. Subsection (e) currently allows a plaintiff to add a responsible third party to the lawsuit after the statute of limitations has expired as long as the third party is added within 60 days after he or she is designated.

The Loser Pays bill eliminates Subsection (e) altogether. A plaintiff will no longer be allowed to add a responsible third party to an action after limitations has run (technically the party can be added but will have a limitations defense). In order to make the law more equitable for plaintiffs, the Senate version of the Loser Pays bill also limits a defendant’s ability to add someone as a responsible third party after limitations has run. A defendant will only be allowed to add someone as a responsible third party after limitations if the defendant was not aware of the existence of the third party prior to the running of the statute of limitations.

Discovery in Cases of Less Than $100,000

The final change in the bill orders the Texas Supreme Court to adopt new rules for all cases in district courts, county courts at law, and statutory probate courts in which the amount in controversy (including all claims for damages, attorneys’ fees, costs, and interest) does not exceed $100,000. The new rules are ordered to reduce discovery costs and expedite such cases. As with the motion to dismiss section, the new discovery rules will not include claims under the Texas Family Code, Texas Property Code, Texas Tax Codes, or Medical Malpractice actions governed by Chapter 74 of the Texas Civil Practice and Remedies Code. The Loser Pays bill does not provide the Supreme Court with any guidance or mandates, other than to “promote the prompt, efficient, and cost-effective resolution of civil actions.”

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.

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