"Loser Pays" To Become Law In Texas?

Once again it seems Texas is leading the way.

The Texas legislature passed a “loser pays” bill that, if signed by Governor Rick Perry, will change the nature of lawsuits within the Lone Star State. (Yes, I know I'm a few days behind the news on this one, but I've been busy, OK?)

Essentially, if you bring a lawsuit in Texas and the jury finds against you, you pay the other side’s costs (and attorney’s fees I assume). If you bring a law suit and win, the defense pays your costs. The goal is to end frivolous lawsuits, and encourage more people to settle short of trial. Both are excellent goals IMO.

Many may argue that this kind of tort reform will do nothing but hurt the little guy. But far too often the little guy gets screwed even if he wins because it is his lawyer who will reap a large payoff. (Many tort lawyers take on clients on a contingency basis, meaning they get a percentage of any money the court awards the complainant, usually a large percentage.)

While “Loser Pays” will likely reduce the number of frivolous lawsuits, it will also see the “shotgun” approach to lawsuits disappear as well. A shotgun suit lists everyone even remotely connected to the case as a respondent based on the idea that some will settle out of court rather spend the money to defend themselves even though they have no real liability. An example: A consumer is injured by a defective product made by the ABC Company. The injured party sues ABC Company and anyone even remotely having anything to do with ABC Company, including XYZ Freight Trucking Inc. All XYZ did was haul ABC Company's product from a warehouse to a number of retail establishments. XYZ didn't design the product. XYZ didn't make the product. XYZ neither sold or marketed the product. All they did was what they were contracted to do – pick up boxes of the product at a warehouse and deliver it to stores someplace else. Yet somehow the complainant's lawyer figures they have as much culpability as ABC Company, so names them as a co-respondent in the injury suit.

As ludicrous as that scenario sounds, it has actually happened and a trucking company was found to be liable for some of the damages even though all they were hired to do was deliver the goods. They had no way of knowing those goods would hurt anyone, nor should they have had to know. But with Loser Pays, such shotgun approaches will be too risky because even if the complainant wins against one respondent, they could lose against the others and have to pay their legal fees, possibly wiping out any awards made by the court.

That works for me.