Summary of Texas Tort Reform - 1995 to 2011
Recently I was asked to put together a report regarding whether the Texas Legislature should consider additional “tort reform” legislation in 2013. “Tort reform” refers to changes in the common law civil justice system, with the desired result of reducing tort litigation or damages. While putting the report together I reviewed Texans for Lawsuit Reform’s summary of tort reform legislation enacted between 1995 and 2003. I have copied it below. It is interesting to see just how many suit-limiting provisions the legislature has passed in the last 17 years.
TORT REFORM LEGISLATION: 1995 TO 2005
1. Class Action
-Texas Supreme Court given interlocutory jurisdiction in appeals from trial court certification orders, and trial court proceedings are stayed pending appeal.
-Class actions within the jurisdiction of a state agency must be addressed by that agency before proceeding in court.
-Class action contingency fees abolished in favor of hourly rates with possible multipliers.
-When class actions are settled using coupons, the lawyers must also be paid in coupons in the same proportion as the class.
-The Texas Supreme Court through case law had already imposed strict standards on certification of classes, similar to the limits used in federal practice.
2. Punitive Damages
-1995 reforms limit punitive damages to the greater of: (i) $200,000 or (ii) two times economic damages plus an amount not to exceed $750,000 for non-economic damages.
-1995 reforms also permit award only upon a showing of “clear and convincing evidence” rather than a mere “preponderance of the evidence.”
-Combination of 1995 and 2003 reforms establishes a rigorous gross negligence standard conceptually similar to a stringent reckless disregard standard.
-2003 reform requires unanimous 12-0 jury verdict for the award of punitive damages rather than the 10-2 verdict required in other cases.
3. Full Proportionate Responsibility
-A defendant is liable for only its own percentage of fault unless it is more than 50 percent responsible. Similarly, plaintiffs found more than 50 percent responsible are barred from any recovery.
-Factfinder must assign percentages of fault to all potentially responsible persons, whether actually before the court as a party or not.
-Fault assignments are not limited by the status of the person. Therefore persons such as those who have settled; bankrupts; fugitive criminals; private and governmental entities entitled to immunity or limited liability; employers covered by workers’ compensation; and persons beyond the court’s jurisdiction may all be assigned percentages of fault. Fugitive “John Doe” criminals can be named even if they cannot be identified by name.
-Fault assignments determine what percentage of a judgment the named parties must pay, but fault assignments as to nonparties have no legal effect on them.
-Proportionate responsibility rules apply to cases of all kinds, including economic and business torts in addition to personal injury, death, and other personal tort claims.
-The proportionate responsibility allocation rules permit factfinders to mix negligence, product liability, fraud, or any other kind of fault in a single allocation array.
4. Asbestos and Silica Litigation
-Stops the flood of claims by persons not actually impaired by asbestos or silica exposure by imposing strict medical criteria on both pending and future cases.
-Dismisses future unimpaired claims; pending unimpaired cases are transferred to a multidistrict court and do not proceed unless and until medical criteria are met.
-Stops abusive “bundling” of hundreds of cases by allowing only one unrelated plaintiff per trial.
-Limits use of diagnostic materials obtained through abuses such as mass x-ray mobile van screenings sponsored by lawyers.
-Extends statute of limitations, permitting lawsuits to be filed within two years after diagnosis of actual impairment.
5. Health Providers’ Liability
-Comprehensive reform in this statutory area.
-Caps on non-economic damages, such as pain and suffering, imposed in all medical cases. $250,000 per-claimant cap applies to doctors and nurses.
-A separate $250,000 cap applies to each health care institution on a per-defendant basis, subject to a $500,000 aggregate non-economic damages cap in favor of all health care institutions in the case.
-Limitation on personal liability of government employees extended to other health care professionals in government hospitals as well as nonprofit operators of city or hospital district hospitals.
-Provides additional limits under defined circumstances to nonprofit hospitals or systems that provide charity care and community benefits in an amount equal to at least 8 percent of the net patient revenue of the hospital or system, and that provides at least 40 percent of the charity care provided in the county in which the hospital or system is located.
-1995 reforms abolish highly permissive venue rules as to corporations, which had fostered the development of abusive plaintiff-oriented venues in certain areas of Texas.
-2003 further reforms remedied a judicially created loophole in the 1995 statute, which as originally enacted required all plaintiffs to establish venue independently, by allowing an immediate appeal of a trial court’s decision allowing multiple plaintiffs to join a case.
7. Interstate Forum Shopping
-To discourage out of state and foreign forum shopping into Texas, state forum non conveniens rules are modified to give Texas trial judges broad discretion to dismiss cases that should more appropriately be pursued in some other state or country. Texas rules now are consistent with federal forum non conveniens practice.
8. Offer of Settlement
-Parties who make reasonable pretrial settlement offers can be entitled to attorneys’ fees and other litigation-related costs when the opponent turns the offer down and recovers significantly less in the trial.
-Process may be initiated only on defendant initiative in order to prevent the rule from becoming a one-way “defendant pay” rule because plaintiffs normally are unable to pay—particularly in personal injury cases.
9. Product Liability
-In pharmaceutical cases, a rebuttable presumption is established in favor of manufacturers, distributors, or prescribers of pharmaceutical products in cases alleging failure to provide adequate warning about the product’s risk, if the defendant provided the government-approved warnings with the product.
-In other product cases, a rebuttable presumption is established in favor of manufacturers who comply with federal standards or regulatory requirements applicable to a product provided the government standard was (1) mandatory, (2) applicable to the aspect of the product that allegedly caused the harm, and (3) adequate to protect the public from risk.
-Sellers of products are not liable for a product defect if the seller does nothing more than acquire the product from the manufacturer and sell it to the customer in cases where the manufacturer is a domestic company.
-Fifteen-year statute of repose for most product liability claims.
10. Repeal of Abusive Components of “DTPA” Consumer Protection Act
-In 1995 reform, the Texas Deceptive Trade Practices-Consumer Protection Act, which had become a vehicle for litigation abuse, is extensively amended to eliminate claims involving matters with a total value of more than $500,000, or more than $100,000 for claims based on a written contract if plaintiff had received independent legal advice prior to signing the contract.
-The DTPA can be used against professionals only when the claim involves misrepresentation, unconscionable conduct, or breach of warranty.
-Generally, DTPA actions are now allowed only for economic damages and are subject to the proportionate responsibility statute.
-Comprehensive detailed changes remove a broad range of one-sided pro-plaintiff provisions.
11. Appeal Bonds
-No appeal bond can exceed the lesser of $25 million, one-half of defendant’s net worth, or the total compensatory (not punitive) damages awarded to the plaintiff.
-Savings provision for circumstances where 50 percent of net worth or the total compensatory damages would still produce a bond that could not be paid.
12. Limits on Attorney General Contingent Fee Contracting
-Outlaws award of contingent legal fees for representing the state based on a percentage of the recovery. Only hourly “lodestar” fees are permitted, which if subject to contingency may include a premium multiple of up to four times the reasonable hourly rate.
-Attorney General may not award even an hourly-based contingency fee contract without concurrence of either the Legislature or a special committee that includes the lieutenant governor and the speaker of the house when the legislature is not in session.
-Extensive protective provisions incorporated to prevent abuses exemplified by the $3.3 billion Texas tobacco legal fee deal.
13. Multidistrict Litigation Panel
-Modeled on federal MDL procedure, a Judicial Panel on Multidistrict Litigation is now authorized under Supreme Court jurisdiction, including power to transfer factually related cases pending in multiple counties to a single court for consolidated or coordinated pre-trial proceedings.
-Remedies former practice, which contained no similar provision.
14. Seat Belt Evidence Admissible
-Allows the factfinder to know whether a plaintiff was wearing a seat belt at the time of an accident for the purpose of determining the cause of damages and allocating fault if relevant and otherwise admissible.
15. Actual Damages
-Limits recovery of health care expenses to expenses actually incurred by the plaintiff. -Allows the factfinder to consider a plaintiff’s income taxes when awarding lost future income—most importantly allowing the disclosure that personal injury awards are not taxable. -Prohibits the assessment of pre-judgment interest on an award of future damages, correcting an anomaly of prior law. -Lowers prejudgment and post-judgment interest rates to market rates, between 5 and 15 percent, eliminating windfalls. 16. Schoolteacher Liability -Provides protection for teachers against non-meritorious litigation related to actions taken by the teacher at school. 17. Successor Liability in Asbestos Cases -For acquisitions prior to May 13, 1968, successor corporation’s liability in asbestos-related litigation limited to the asset value of the acquired company. 18. Volunteer Immunity -1995 reform law expands immunity coverage of prior law to state and local elected and appointed officials, volunteers, employees, and board and commission members. -1999 reform extends protection to doctors and other health care providers who donate time and skill to treat persons unable to afford medical care. -2003 reform provides additional protection from lawsuits for volunteers of charitable organizations and volunteer firefighters. 19. Limitation on Claims Against Design Professionals -In a suit against a registered architect or licensed professional engineer, requires the plaintiff, at the time suit is filed, to provide an affidavit by a third-party registered architect or licensed professional engineer, setting forth the specific acts of negligence allegedly committed by the defendant. 20. Air Migration of Particles “Trespass” Claims -Narrows a loophole being promoted by plaintiffs in environmental and toxic tort cases in which defendant’s molecules are supposedly “trespassing” and therefore creating liability without fault. Limits trespass actions for migration or transport of an air contaminant (other than odors) only on a showing of actual and substantial damage to the plaintiff. 21. Judicial Campaign Finance Limitations -1995 reforms impose disclosure requirements on the process of judicial fundraising and impose limits on the amount of funds that any individual or any law firm may make to a judicial candidate. All judges in Texas are elected by popular ballot. –SB 94 (Reform Judicial Fund-Raising) TORT REFORM LEGISLATION: 2011 Multiple minor tort reform measures were considered in the years following the 2003 legislation. But the Legislature’s next major package of suit-limiting provisions was passed in 2011. Highlights included the following: 1. Motions to Dismiss Frivolous Suits and Award Attorneys Fees (Loser Pays) -The Legislature directed the Texas Supreme Court to adopt new rules that will allow defendants to seek early dismissal of frivolous cases (i.e., claims which have “no basis in law of fact”) based on the pleadings. An example would a case in which the party’s suit papers claim an accident date, which was two years prior to the filing of the suit, and thus barred by the two-year statute of limitations. The law also requires a court to award attorneys’ fees to prevailing parties (either plaintiff or defendant) after ruling on those motions to dismiss. 2. Expediting of Smaller Cases -The Legislature directed the Texas Supreme Court to adopt rules to expedite cases involving damages of less than $100,000. The goal is to reduce the costs of litigation in such smaller cases. 3. Interlocutory Appeals -The Legislature expanded the potential for interlocutory appeals (appeals before final judgment) when the appeal could materially advance the ultimate termination of the litigation and involves a controlling question of law as to which there is a substantial ground for difference of opinion. Although this new legislation may permit an appeal by the defendant of an order denying a summary judgment, this appellate opportunity will only apply in rare circumstances, and we think it will be rarely used due to the additional expense of these types of appeals. 4. Responsible Third Party -Plaintiffs will no longer be able to revive claims that are otherwise barred by the statute of limitations by waiting until a defendant designates a responsible third party. 5. Strengthening of Offer of Settlement Procedure -Changes the rules for designating a responsible third party. Section 5.01 of the new law prohibits a defendant from designating a responsible third party after the statute of limitations has expired, unless the defendant previously identified that third party in its discovery disclosures.