One of the most attractive features on Rick Perry’s resume: a “loser pays” law that has rendered the governor toxic to trial lawyers.
Like most Americans I don’t yet know enough about Perry to judge what kind of president he might make. But I do know trial lawyers hate him. I admit that I like a guy who is hated by the trial lawyers.
Lawsuit reform was on the agenda of those who argued that incremental reform was more likely to deliver good services than the unbeloved behemoth known as Obamacare. Here is how the Texas form of loser pays, which grew out of an English law, works:
Under the current American legal system, each side in litigation typically retains financial responsibility for its own legal fees absent a prearranged agreement stating otherwise. Yet under the English rule, adopted by virtually every other legal system in the West, the responsibility for attorneys’ fees can be summed up in two words: Loser pays. When two sides enter into litigation, the losing side must pay the winning side any damages awarded, as well as compensation for legal fees incurred by the victor.
Mr. Perry made passage of a modified version of the English loser-pays rule a top priority during this year’s biennial session of the Texas Legislature. After emphasizing the need for such tort reform during his State of the State address in February, Mr. Perry made loser pays the law of the land in Texas by signing H.B. 274 in May.
As Mr. Perry remarked in his signing statement, loser pays “provides defendants and judges with a variety of tools that will cut down on frivolous and costly claims in Texas.”
The appeal of loser pays is that it mitigates unjustified lawsuits against individuals and businesses. Empirically, it has been shown that the loser-pays system incentivizes two conflicting parties to settle outside of court, meaning savings on attorneys’ fees for both sides as well as reduced costs for taxpayers caused by a less congested court system for the state and plaintiffs who have warranted cases.
Some people have argued that loser pays closes the courthouse door to some defendants. It will certainly do that, though, if you are bringing a valid case, you should not fear. There are several places in the proceedings when, if it appears that the suit lacks merit, the plaintiff can drop it without incurring expenses for both sides.
The loser pays law has had an amazing impact on the number of doctors in Texas. Since medical malpractice insurance becomes less prohibitively expensive, doctors can afford to be doctors. Josh Trevino of the Texas Public Policy Institute, a free-market think tank, told me the other day that loser pays is responsible for a huge influx of lawyers into the state. Some estimates put the number of new doctors in Texas at 27,000 since loser pays was adopted in 2003.
Loser pays is also credited with bringing other companies to Texas. Dallas Fed chairman Richard Fisher was recently quoted in the Dallas Morning News to the effect that John Deere and other large employers had come to the state because of tort reform. Let’s hope that we can talk about lawsuit reform and job creation instead of personal attacks during this campaign. Such a conversation would be valuable, especially if Obamacare is repealed or overturned and we need to know how to proceed for real reform.