Texas Reformers Try To Put New Caps on Frivolous Lawsuits
THERE used to be two places to strike it rich in Texas: in the oil patch and at the courthouse.
But just as the sun sank on $30 crude oil, it is sinking on the frivolous but costly lawsuits that force fat settlements. Tort reform has come to Texas.
The Financial Times of London once called Texas ``the world's courthouse'' because, until recently, anyone injured anywhere by a company could sue in Texas if the defendant had some business presence here. And since Texas juries hand out high-dollar awards like windshield flyers in a mall parking lot, this was the venue of choice.
``We're dealing with a subject of societal greed,'' says John Opelt, executive director of the Houston chapter of Citizens Against Lawsuit Abuse (CALA), one of nine around the state. ``If we're looking for a culprit, a single party that's responsible for lawsuit abuse, we're not going to find him. We as a society tend to want above and beyond.''
The first CALA was formed in the Rio Grande valley in 1990 after two workers sued a sugar mill for being included in seasonal layoffs and won $2.5 million. The case was settled out of court for less money; otherwise the mill, which employs 700 people, would have been bankrupted.
The case caused small businesses to realize that they face greater danger from high-dollar lawsuits than big corporations with deep pockets.
``Small businesses are probably the strongest supporters of our group,'' says Winter Prosapio, executive director of San Antonians Against Lawsuit Abuse.
``It costs all of us when someone abuses the system,'' Ms. Prosapio says. ``If you frivolously sue a grocery store, I'm going to see that price difference when I go shopping. I'm going to see that [cost] when I go to court with a legitimate concern and have to wait two years because someone with a frivolous lawsuit is tying up the courts.''
The CALA groups do not oppose high-dollar awards per se. But they object to ``excessive'' awards. For instance, a San Antonio woman, who was defrauded of $162,500 by an insurance company, won $55.7 million. The amount was later reduced to $11 million - still 67 times her loss.
``You have to have punitive damages,'' Prosapio says. But juries forget that their role is to arrive at a fair and reasonable decision. ``It sends a totally skewed message: Wow, lookit. You don't have to even lose that much to win big,'' Prosapio says.
Reform of the system began in 1987, when punitive damages in personal-injury cases were limited to the greater of $200,000, or four times actual damages. However, when the damage is deliberate, as in the insurance fraud case, the jury is free to exceed the cap on damages. That happens more often than is realized, says Brian Roberts, research director of the conservative Texas Public Policy Foundation (TPPF).
The state legislature adopted additional reforms last year. It curtailed the ability of plaintiffs to sue in Texas for injuries that occurred elsewhere. And it passed a products-liability law that prevents consumers from suing for damages caused by their use of ``inherently unsafe'' products like alcohol, tobacco, and firearms.
The law also says that only manufacturers and not merchants may be the target of product-liability lawsuits. And to succeed, plaintiffs must prove that the product could have been made according to a better, existing design.
Does the law do anything for plaintiffs? ``Not really. I guess that's the quickest way to say it,'' says Rick Freeman, president of the Texas Trial Lawyers Association. The trial lawyers, who can win large contingency fees, used to block passage of product-liability reform in the state senate. They lost that control when legislative districts were redrawn after the 1990 census. They negotiated last year's reform with a business lobby.
Reform will continue when the legislature convenes in 1995. ``Next session, everybody seems to be real hot on additional reform in punitive damage,'' Mr. Roberts says. A cap on punitive damages is likely. Joint and several liability is an issue that the TPPF would like to see reformed, Roberts says. A party who is held to be partially responsible in a lawsuit can be made to bear all the damage awards, if the other responsible parties cannot pay.
Nathan Hecht, a Texas Supreme Court judge who is running for re-election this year on his original platform of lawsuit reform, oversees a committee of lawyers who are designing important changes in the Texas Rules of Procedure.
THE rules have not changed in 50 years, Judge Hecht explains, but technology has. The pre-trial discovery process, during which each side shares evidence, has become hugely expensive as fax machines, word processors, and copiers remove the constraints of carbon paper and manual typewriters. ``You have a paper explosion and nothing to keep it from happening,'' he says.
The committee will most likely recommend arbitrary constraints on the discovery process, he says. And it will probably change the rules to make it easier to obtain a summary judgment when the other side has no evidence of its claim.
Those actions would make going to trial faster and cheaper. The court's caseload might actually go up, even as frivolous lawsuits are weeded out. Plaintiffs with small but valid claims would have a better chance to sue, and defendants against spurious but huge claims would not find it more economical to settle out of court, Hecht explains.