“LOSER PAYS” LAW

Potential clients need to be aware of the fact that there has been much lawsuit reform enacted in the state of Texas. The purpose of the reform is to limit frivolous lawsuits. However, in doing so, Texas has made it increasingly difficult for plaintiffs (the party filing lawsuits) with legitimate claims to recover monetary damages. Texas Governor Rick Perry, a Republican, signed into law what is commonly referred to as the “Loser Pays”, effective September 1, 2011.

The “Loser Pays” law is multi-faceted. One provision of same mandates that the trial court grant or deny motions to dismiss within forty-five days of filing. It also provides for mandatory attorneys’ fees and costs to the prevailing party, including a plaintiff who successfully avoids dismissal. Texas has not had such an early dismissal requirement before the enactment of the “Loser Pays” law.

The “Loser Pays” law applies to cases such as personal injury cases and other types of cases taken on a contingency fee basis. Significantly, this law affects the amounts that parties may recover. Specifically, Texas Civil Practice and Remedies Code §42.004 addresses the award of litigation and states the following:

(a)  If a settlement offer is made and rejected and the judgment to be rendered will be significantly less favorable to the rejecting party than was the settlement offer, the offering party shall recover litigation costs from the rejecting party.

(b)  A judgment will be significantly less favorable to the rejecting      party than is the settlement offer if:

(1)  the rejecting party is a claimant and the award will be    less than 80 percent of the rejected offer; or

(2)  the rejecting party is a defendant and the award will be

more than 120 percent of the rejected offer.

(c) The litigation costs that may be recovered by the offering party under this section are limited to those litigation costs incurred by the offering party after the date the rejecting party rejected the settlement offer.

(d) The litigation costs that may be awarded under this chapter to any party may not be greater than the total amount that the claimant recovers or would recover before adding an award of litigation costs under this chapter in favor of the claimant or subtracting as an offset an award of litigation costs under this chapter in favor of the defendant.

 

Therefore, if a defendant offers a settlement of $100,000, but the plaintiff rejects the settlement offer and goes to trial and obtains a jury verdict of $80,000, then the defendant could collect attorneys’ fees and costs up to $80,000. Alternatively, if the plaintiff wins a jury verdict of $120,000, then the plaintiff could collect attorneys’ fees and costs but the amount would be limited to $120,000.

 

Leave a comment


Name*

Email(will not be published)*

Website

Your comment*

Submit Comment