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With the stroke of a pen on June 11, Gov. Rick Perry signed into law a comprehensive reform bill that could change the civil litigation landscape in Texas. Rep. Joe Nixon, a Houston Republican who authored House Bill 4, says he expects Texas to see less litigation because of the new law. “If we’ve done our job right, both plaintiffs and defense lawyers will have less work,” Nixon, a partner in Houston’s Phillips & Akers, says. But some don’t think H.B. 4 will decrease litigation. Plaintiffs attorney Mike Slack, a partner in Austin’s Slack & Davis, says, “It [H.B. 4] does nothing to address frivolous lawsuits – what originally was hailed as the reason for doing all this.” What H.B. 4 does do, Slack says, is “take the heart out of significant cases.” One area that H.B. 4 is expected to affect the most is medical malpractice, where non-economic damages will be capped in actions brought after Sept. 1, the effective date of a majority of the bill’s provisions. “I think it will revolutionize the way that medical-malpractice cases are screened, analyzed, prepared and tried,” Terry Tottenham, a med-mal defense attorney, says of the new law. But Tottenham, an Austin partner in Fulbright & Jaworski, predicts that the new law will face a number of court challenges. Years and years of litigation and court interpretations followed passage of the Texas Medical Liability and Insurance Improvement Act in 1977, he says. In 1988, the Texas Supreme Court held in Lucas v. United States that the caps created by the 1977 law violated the open court guarantees in Texas Constitution, Article 1, �13. State lawmakers kept Lucas in mind when they turned their attention to damage caps this year. A constitutional amendment to be submitted to voters on Sept. 13 authorizes the Legislature to set caps on damages. In the event the amendment fails, H.B. 4 has a “quid pro quo” provision — �74.302 of the Civil Practice and Remedies Code (CPRC) — designed to make the caps pass constitutional muster with the high court. Under that provision, the caps in the bill are applicable to health-care providers who carry certain minimum levels of liability medical-malpractice insurance coverage. The new law caps the total liability of all doctors or nurses individually named as defendants in a suit at $250,000. A second $250,000 cap will apply to a defendant hospital, nursing home or other health-care institution. A plaintiff potentially could recover $250,000 more if another health-care institution is sued, with total recovery limited at $750,000 under the new law. Nixon says he expects that, from a practical standpoint, non-economic damages will be capped at $500,000 in most cases because it’s unlikely that a plaintiff can show that an injury was the result of negligence by two institutions. Tommy Jacks, a plaintiffs attorney who specializes in med-mal cases, says the caps will force him to be even more cautious than he has been in the past about accepting cases. In addition to looking at whether a plaintiff can expect a recovery based on the facts of a case, he’ll be taking a close look at the amount of economic damages that could be recovered, says Jacks, a partner in the Austin office of Mithoff & Jacks. Figuring into the equation will be the costs of preparing and trying a med-mal case, Jacks says, noting that his firm spends, on average, a little more than $100,000 per case on things such as discovery and expert witnesses and some cases have cost as much as $300,000. Faced with those kinds of expenses and limits on recovery, some injured parties aren’t going to find lawyers to take their cases, plaintiffs and defense lawyers say. Spencer G. Markle, a former defense lawyer who now represents plaintiffs in health-care liability cases, says the new law discriminates against children, stay-at-home moms, the poor and the elderly, who aren’t going to have much, if any, economic losses. If a mother who doesn’t work outside the home is the victim of a physician’s alleged malpractice, her family can expect to recover only about $250,000, making it hard for an attorney to take the case, says Markle, managing attorney in the Houston office of Morgan & Weisbrod. “So that family is going to go without a remedy,” Markle says. Jacks says the caps may have unintended consequences for health-care providers. “There will be many cases where lawyers will be seeking to expand the number of defendants simply so they’ll have a shot at expanding the caps,” he says. Plaintiffs lawyers will take a closer look at their cases to see if a second hospital can be sued, Jacks says. When the injury alleged by a plaintiff involves a nurse’s mistake, Jacks says, the plaintiff typically has sued the hospital that employed the nurse, but not the nurse. Faced with the caps in H.B. 4, the plaintiff may sue the nurse as well as the hospital, he says. Richard Griffith, a med-mal defense lawyer and chairman of the health law section at Fort Worth’s Cantey & Hanger, says a plaintiff may be barred under H.B. 4 from recovering non-economic damages from a hospital and one of its nursing employees but that the same prohibition may not apply if the nurse is an independent contractor. Jacks and Markle predict the caps will cause more med-mal cases to go to trial because insurance companies won’t be worried about a penalty if they don’t settle. “It eviscerates the Stowers doctrine,” Markle says, referring to an insurance company’s liability to an insured under the Texas Supreme Court’s 1929 decision in G.A. Stowers Furniture Co. v. American Indemnity. Under Stowers, an insurance company that failed to accept a reasonable settlement offer can be held liable for a judgment in excess of the insured’s policy limits. Griffith says the caps probably will curtail some settlements, but he adds, “ Stowers may not be out of the picture.” The $250,000 cap on non-economic damages exceeds the policy limits for many physicians, who carry only $200,000 in coverage, he says. Tottenham says some plaintiffs attorneys are likely to seek ways to get around the caps by filing suits as something other then med-mal claims. “I’m sure there will be creative attempts to craft lawsuits that fall into a more traditional negligence claim,” he says. Limits on Discovery Plaintiffs lawyers face a new layer of red tape in conducting discovery in a med-mal case, Jacks says. Under H.B. 4, a plaintiff is allowed to take only two depositions before filing an expert witness report — a limitation that Jacks says will make it more difficult to develop a case. The law also requires the plaintiff to provide the report by the expert witness, whose practice must be in the medical field at issue in the claim, within four months of filing suit. Sen. Robert Duncan, a Lubbock Republican who worked on the bill in the Senate, says the limitations placed on prediscovery will force plaintiffs lawyers to be succinct in developing a case. “It’s pretty much been a fishing expedition in the past,” says Duncan, a defense lawyer and partner in Lubbock’s Crenshaw, Dupree & Milam. Rob Roby, a defense lawyer and partner in Dallas’ Gwin & Roby, says one provision in the new law could result in significant savings for a defendant in a med-mal case. H.B. 4 provides for the periodic payments of damages to provide for a plaintiff’s future care, but with the exception of lost future earnings, the payments will stop if the plaintiff dies. “That’s probably the most powerful portion of the bill as far as reducing [a defendant's] costs,” Roby says. Tottenham says H.B. 4 also could reduce the number of med-mal cases involving emergency medical care by broadening the Good Samaritan Law, CPRC Chapter 74, and requiring a higher standard of proof. Under the new law, a defendant can’t be held liable for emergency care — whether that care is provided in a hospital or on a roadside — unless it can be shown by a preponderance of the evidence — rather than clear and convincing evidence — that the defendant’s willful and wanton negligence harmed the plaintiff. Another major change in the law will allow defendants to shift responsibility for a plaintiff’s harm to a party who has not been sued. H.B. 4 amends Chapter 33 of the Civil Practice and Remedies Code to allow a defendant to designate a responsible third party, and the jury will determine the percentage of responsibility that party has for the plaintiff’s injury. “This opens the door to bankrupt parties being named [and] parties over which the court has no jurisdiction,” Slack says. It also opens the door for an injured worker’s employer to be assigned a percentage of responsibility for the worker’s injury, even if the employer has workers’ compensation coverage and is immune from being sued. Chapter 33 previously barred assigning a percentage of liability to an employer carrying worker’s comp coverage. Slack says the law makes no provision for plaintiffs to seek discovery from designated third parties. That creates “a huge hole” in Texas due process when a defendant can add another party to be considered for a percentage of liability, but the plaintiff can do no discovery to determine whether that party actually is liable, he says. But Griffith says he’s handled many cases in which “the real culprit” was not sued. The defense now will have the ability to designate a physician as a third party and ask the jury to determine how much responsibility that physician had for the plaintiff’s injury, Griffith says. “That certainly will cut down on the negligence percentage of your defendant,” he says. Griffith questions whether the new law’s statute of limitations provision affecting minors will pass muster with the courts. The law requires a health care liability claim to be filed within two years of the date of the care at issue in the claim, but minors under 12 have until their 14th birthday to bring a claim or have someone bring one for them. That provision appears to be at odds with the state Supreme Court’s 1983 decision in Sax v. Votteler, Griffith says. The court held in Sax that a two-year statute of limitations imposed on minors by �5.82(4) of the Texas Insurance Code violated the open courts provision in the state’s Constitution. According to the court in Sax, the Insurance Code provision denied due process to minors who can’t file a suit until they turn 18 and are dependent on others to take action for them. “Courts always have been extremely careful about the rights of minors,” Griffith says. Another major change under the proportionate responsibility provisions in H.B. 4 applies to toxic tort and hazardous substance claims. Under CPRC �33.013(c)(2), a defendant in a toxic tort or hazardous substance suit can be singled out to pay all the damages if it’s shown to be more than 15 percent responsible for the plaintiff’s injury. In other types of cases, it must be shown that a defendant is more than 50 percent liable before that defendant can be held wholly responsible for harming a plaintiff. H.B. 4 deletes the joint and several liability provisions for toxic torts and hazardous substances. Fred Baron, founding partner of Baron & Budd in Dallas and a recognized trailblazer in asbestos litigation, says there is no way scientifically to assign a percentage — even 15 percent — of responsibility for a plaintiff’s injury due to exposure to chemicals or asbestos. Baron says the new law will make it difficult to settle with anyone in a multidefendant toxic tort case because each of the other defendants will say it is not more than 50 percent liable. “We won’t be able to settle with anyone unless we settle with everyone,” he says. Smaller companies will end up paying a lot more money on such suits because they won’t be able to settle, Baron says. The law also adds “innocent retailer” provisions to CPRC Chapter 82 that provide liability protection to a seller who did not manufacture a product. The seller can’t be held liable unless the plaintiff can prove, among other things, that the seller had actual knowledge of a defect in the product that caused the plaintiff harm, Slack says. Other new provisions — CPRC �82.007 and �82.008 — establish a rebuttable presumption that certain defendants are immune from liability if they provided Food and Drug Administration-approved warnings about a drug or complied with federal standards in the formulation, labeling or design of a product that caused harm. Slack says those provisions will require a plaintiff prior to trial to put on evidence to challenge the adequacy of a government standard, increasing the expense of a case.

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