“Loser Pays” Is Deplorable: Star Telegram

Tort reform’s about money more than fairness

Proposals to change Texas’ civil justice system aren’t ever mainly about fairness and right. They’re about money: Who’s making it, who’s spending it and who’s giving it to which candidates.

The Legislature significantly changed the system several times in the past 25 years, and there’s no denying that sweeping “tort reform” in 2003 slashed the number of lawsuits filed for personal injuries.

That means less money for trial lawyers, who typically represent plaintiffs and tend to support Democrats. Republicans, who usually are backed by moneyed business interests, want to make sure they keep the upper hand.

Thus, Gov. Rick Perry continues promoting the fallacy that Texas runs amok in frivolous suits and unhinged juries, thereby needing emergency legislation to remain business-friendly.

Put aside for a moment the legitimate argument that the latest round of “tort reform” is a remedy in search of a problem.

On May 9, the House passed HB274, which supposedly would make the judicial system more efficient and accessible to everyone. Intentionally or not, the measure has potential for all sorts of mischief that would not improve civil justice.

During floor debate, the House added a provision enabling property owners who successfully challenge their appraisals to get their attorney fees reimbursed by the appraisal districts.

Sound like a victory for the little guy? Not so fast. Who has the resources to risk appealing a tax appraisal dispute through the courts? Most likely deep-pocketed businesses with high-dollar lawyers.

A representative of The Equity Center, which represents 690 school districts, told members of the Senate State Affairs Committee on Monday that, faced with the potential of having to pay uncapped legal fees, appraisal districts probably would undervalue corporate properties, shifting the burden to smaller businesses and residential owners. Not only that, diminished local valuations would leave school districts short on property tax funds — which are their main revenue source — and forcing the state to fill the gap.

David Thompson, a witness representing school administrators, pointed out that the Texas Tax Code already provides for attorney fees in successful appraisal challenges; there’s just a cap on the winnings. That seems a fair way to protect taxpayers and guard against windfalls. Why change it?

Other critics of the House bill have trotted out a parade of horribles, some quite plausible.

Texas law already provides for a form of “loser pays” that lets parties whose settlement offers are rejected get their costs paid when a jury awards less than was offered. But the amount the “loser” has to pay is limited by law.

But the House bill removes the caps, meaning an individual could win a suit but take a devastating financial hit. One example: A man wrongly held by a hardware store for suspected shoplifting might reject the store’s settlement offer, choose a trial to clear his name, get a much lower jury award than the settlement offer, then have to pay the company’s enormous fees and costs. Though he did nothing wrong by taking his legitimate grievance to court, he could be financially crippled. Businesses also could face this kind of perversity, critics noted.

State Affairs Chairman Robert Duncan of Lubbock and Sen. Joan Huffman, a Houston lawyer, are working on a committee substitute to correct the problems with the House bill.

The only imperative for this legislation is that Perry wants it. If its passage is inevitable, the bill should at least not make the system worse.

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