New Loser Pays Law Will Take Effect on September 1, 2011

If you are thinking about filing a lawsuit in Texas on a horse case, or if you think someone is planning on suing you in Texas, the following bullet summary contains some facts to consider about the new “loser pays” law that recently passed the Texas Legislature. 

These new rules are widely viewed as being friendly to defendants in civil cases. However, it remains to be seen how these new procedural rules will, in practice, affect plaintiffs’ ability to recover monetary damages in Texas. 

As I discussed in a previous post, civil lawsuits are first and foremost about money. Potential plaintiffs should definitely take these new rules and their potential financial impact into consideration before deciding to file suit on a horse case in Texas. 

  • Basic Info. The “loser pays” law is contained in HB 274. The full text of the bill can be found here. The law was signed by Governor Perry on May 30, 2011, and it takes effect on September 1, 2011. It will only apply to civil lawsuits filed in Texas on or after September 1, 2011. The passage of the bill comes after months of intense legislative debate and publicity. The bill originally proposed in the House contained a number of “loser pays” provisions, but the version that was ultimately adopted contains only one true fee-shifting provision and instead implements several other procedural reforms.
  • New Motion to Dismiss Procedure and Related Fee-Shift. The bill creates a “motion to dismiss” practice that was not previously available in Texas. What this means: A defendant can file a motion to dismiss a cause of action that “has no basis in law or fact” without submitting or offering any evidence along with the motion. The prevailing party on the motion to dismiss (which includes a plaintiff who successfully avoids dismissal) will be awarded its attorneys’ fees and costs.
  • Expansion of Fees/Costs Offset if Settlement Offer Rejected. Texas already has a “settlement offer” statute that permits a party to make a written settlement offer that, if rejected, entitles the offering party to offset its attorneys’ fees and certain litigation costs against the judgment if the final judgment rendered is significantly less favorable to the party that rejected the settlement offer.  Before HB 274, defense fees and costs that could offset a plaintiff's judgment were capped at 50 percent of economic damages and 100 percent of non-economic damages and exemplary damages. HB 274 expands the amount of recoverable attorneys’ fees and costs to the total amount that the plaintiff recovers. This means that plaintiffs now risk having their entire judgment offset if they reject a settlement offer made under the statute. 

There are two other changes to Texas civil trial procedure found in HB 274: one permitting more interlocutory appeals of controlling questions of law, and the other having to do with a defendant's ability to designate a responsible third party after the applicable statute of limitations has passed. 

For more information, see the related post on the Texas Employment Law Update and this downloadable Client Alert.

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