Things You Need to Know: House Bill 274 (Loser Pays)

I am not an extremely political person but I feel inclined to comment on House Bill 274 (Loser Pays) that was passed in the Texas House of Representatives yesterday. The Texas House of Representatives has just passed one of the most un-consumer friendly pieces of legislation in Texas history. The fight now moves to the Senate and I urge you to drop a line to your State Senator and voice any concerns. I would be more than happy to explain how this bill works to anyone and why it is NOT good for families, small businesses, or consumers.

I am a practicing attorney, and I represent consumers, small business owners, and people who have been harmed by the wrongful actions of others. I have read House Bill 274 in its entirety and am still of the opinion that the biggest check on “frivolous” lawsuits is the contingent fee system and the fact that the Plaintiff’s attorney risks his/her OWN money to file suit, hire experts, etc. before he/she ever gets paid any attorney fees; these expenses often cost thousands or even hundreds of thousands of dollars. Contingent fees exist because the “little guy” cannot afford a lawyer and they allow someone who normally could not afford a lawyer to hire a real good one. I do not personally know any lawyers who (nor do I myself) file frivolous lawsuits when one’s own money is at risk. In other words, I’m not filing a lawsuit if I think there is a chance I might not recover money for my client.

These are my thoughts on HB 274: 1) it doesn’t open the court house for the “little guy” as promised – it closes the doors by deterring them from suing in the first place and bullies them into taking low settlement offers for fear of paying the other side’s attorney fees; 2) it only applies to Defendants, NOT Plaintiffs i.e. the Defendant is the ONLY party who can invoke the loser pays provision (so each time a Plaintiff wins the Defendant does NOT pay the Plaintiff’s attorney fees); and 3) Victim Pays is a more appropriate title.

This legislation does not just affect slip and fall cases; it also affects libel, slander, disputes between businesses (including mom and pop shops), and consumers. I couldn’t agree more that “loser pays” sounds great in theory (and I would be 100% in favor of a true loser pays system), but look at any civil court’s docket and you will see that personal injury cases take up less than 10% of the trial courts’ dockets. The majority of civil court dockets are divorces and debt collection efforts.

Here’s an example of how House Bill 274 would play out in real-life (this is a case that went to trial a couple years ago but would end with a different result under the proposed Loser Pays):

An associate pastor/deacon was accused of shoplifting by a store, for which he was innocent. Because of this accusation he could no longer collect the offering trays at church (he also lost other privileges at his church), and it had completely ruined his reputation within his community. He had no choice but turn to the civil justice system to restore his reputation, so he filed suit for false imprisonment. It was not just about the money for him, it was about clearing his name. The parties went to mediation and the store offered $80k to settle the lawsuit but also required a confidentiality agreement and would not admit they were wrong (meaning his reputation in the community wouldn’t be restored). The Plaintiff won at trial and the jury awarded him $79k in damages, clearing his name and reputation. Under the proposed Loser Pays, he would have to turn around and pay the store’s attorney fees because the verdict was LESS than what was offered at mediation. How is that fair? I guess it’s Loser Pays and sometimes the winner pays, too.

A generalization for sure, but those who favor tort reform have no problem with a jury sentencing a human being to the death penalty. Put that same jury in a civil trial against BP or Toyota and let them award millions in damages, and they claim the jury was guided by prejudice, sympathy, and some slick trial lawyer. How can one trust a jury to sentence a HUMAN BEING to DEATH, but not to assess damages against a NEGLIGENT corporation in a civil trial? God forbid that a jury make a decision based on actual evidence presented to them in a civil case that does not fit neatly within the realm of their ideal of justice.

Standing up for the rule of law (which includes the civil justice system) and personal responsibility are the very heart of pure, ideological conservatism. One-party rule leads to the widespread use of government to protect narrow interests from their own failures and mistakes and the destruction of individual rights, because of the lack of accountability. Nothing epitomizes that more than Loser Pays. As Mark Twain put it, “Whenever you find yourself on the majority, it is time to reform (or pause and reflect).” I hope that at some point common sense, fairness, and a concern about what is best for the citizens of the State of Texas should matter.

Frankly, I dread the day I have to explain to a potential client that if they lose they might be on the hook for the insurance company’s lawyer fees.

When the Romans finally tracked down and defeated Hannibal, they sowed salt in the fields of Carthage so nothing would grow for 1,000 years. It’s sort of in the nature of ethnic cleansing – the strategy and approach are about the same.

Here is a link to the Bill:

—Parker Polan


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