The Texas Senate’s State Affairs Committee plans to make changes to the loser-pays bill that passed the House on May 9, but the committee has yet to release its substitute bill.
The Senate committee version of House Bill 274 may include changes to provisions addressing early dismissal of claims, attorney’s fees for defendants in some offer-of-settlement situations, attorney’s fees for winners in breach-of-contract claims, and a provision broadening interlocutory appeals, according to comments by Sen. Joan Huffman, R-Southside Place, during the bill’s first public hearing on Monday.
Until the committee releases its substitute bill, the gauge of public support or opposition comes from the May 16 committee hearing in which 21 people testified on the house’s version of H.B. 274.
Three nonprofit groups voiced support for the loser-pays bill, and another 18 people registered their support but did not testify, according to the committee witness list. Thirteen people testified in opposition of H.B. 274, another 12 registered in opposition but didn’t testify, and three additional people opposed the bill in written testimony. Another five people spoke against last-minute House amendments to H.B. 274 but didn’t address the bill itself.
Support
“We think the bill adds efficiency to the litigation system,” said Dick Trabulsi, president of Texans for Lawsuit Reform, a tort-reform advocacy group in his testimony at the hearing.
Jeff Moseley, president and CEO of the Greater Houston Partnership, a business advocacy group, told the committee his group supports the bill, especially a provision that provides for early dismissal of suits in some cases, and another section about expediting suits if claims are less than $100,000.
Ryan Brannon of the Texas Public Policy Foundation, a research institute, also testified in support of H.B. 274.
The committee witness list shows many businesses registered to support the bill. Organizations also registered their support, such as the Texas Association of Manufacturers, the Associated Builders and Contractors of Texas, the Texas Civil Justice League and the Texas Oil and Gas Association, according to the witness list.
Opposition
Among those speaking against the bill were three attorney organizations: the Texas Trial Lawyers Association, Texas Family Law Foundation and the Texas Creditor’s Bar Association. Four licensed lawyers also voiced opposition: George Carson, a San Antonio solo; Grant Harpold of Vincent Lopez Serafino Jenevein in Houston; Robert Notzon, an Austin solo; and Paul Simpson of McGinnis Lochridge & Kilgore in Houston.
Brad Parker, Texas Trial Lawyers Association vice president of legislative affairs, said at the hearing that he opposes the entire bill. “This whole bill seems to be premised on the notion our courts are clogged,” Parker said.
Parker cited a 2007 Baylor University report that said 86 percent of judges surveyed thought Texas doesn’t have a problem with frivolous suits. He also mentioned a 2010 report by the Office of Court Administration that showed the number of civil filings decreased 16 percent over the past 20 years. Parker said the decline is significant given the state’s population increased 35 percent in that time.
But committee vice chairman Sen. Robert Deuell, R-Greenville, questioned the relevance of Parker’s statistics.
“It would seem to me the merits of a loser-pays suit would be unrelated to the number of cases in our courts,” Deuell said.
Linda Thomas, former chief justice of the 5th Court of Appeals in Dallas, testified on behalf of the Texas Family Law Foundation, an advocacy group for family law. Thomas said all family law cases should be exempt from all provisions of H.B. 274.
“They are exempt from certain provisions but not expedited cases. Nor are they exempt from the interlocutory appeals,” Thomas told the committee. She said over 370,000 family law cases enter the courts each year.
“If only 1 percent get by the trial courts, you’re looking at 3,700-plus cases,” Thomas said. From her experience, Thomas said appeals courts would struggle to handle so many more cases.
The committee may change H.B. 274 to prevent that from happening.
“We actually have that cleared up with some of the new language I’m working on for interlocutory appeals,” Huffman told Thomas after her testimony.
Craig Noack, president of the Texas Creditor’s Bar Association, said he opposed a provision in H.B. 274 that would award attorney’s fees to winning parties in all breach-of-contract claims. He said the provision would create conflict for businesses and borrowers, and he thinks the bill “casts too wide a net.”
In response, Huffman told him, “Don’t worry about it, it’s coming out.”
Paul Simpson, an oil and gas attorney, also spoke against the provision on attorney’s fees in breach-of-contract claims. He said many of his clients are regular property owners who sign mineral-rights lease contracts with oil and gas companies. When a company breaches a lease, Simpson said, a property owner’s only option to enforce his rights is to bring suit. That would be a risky proposition under H.B. 274.
“The first question they’re going to ask is: ‘Will I have to pay the other side’s fees?’ ” Simpson told the committee.
Huffman repeated her comment that the Senate version will change the breach-of-contract provision of H.B. 274.“It was never the intent to hurt an individual or small business that was wronged,” she said.
George Carson, a San Antonio solo, told committee members that although the American legal system is based on the English system — which has loser-pays rules — the authors of the U.S. Constitution specifically refused to implement loser pays for the United States because they saw the right to a jury trial as “essential to secure liberty,” Carson said.
“House Bill 274 is a barrier to our citizens to be able to have a right for a jury trial,” he said. He told committee members that loser-pays rules would “throw the Bill of Rights out the window.”
Robert Notzon said he feared “gamemanship” would result from one of H.B. 274’s provisions that entitles defendants to collect attorney’s fees after they file a declaration seeking settlement but the plaintiff later rejects the offer. Notzon said he thinks some defendants would undervalue settlement offers because they would formulate their offers based on the wealth of the plaintiff instead of the real value of the case.
Gutierrez amendment
Four people at Monday’s hearing spoke about an amendment to H.B. 274 that Rep. Roland Gutierrez, D-San Antonio, added on the House floor. The amendment would enable winning plaintiffs in suits challenging property appraisals to collect attorney’s fees from appraisal districts.
But when introducing his amendment on the House floor on May 9, Gutierrez told lawmakers that current law allows claimants to collect 10 percent of costs and attorney’s fees from appraisal districts after winning disputes. His bill would make all costs and attorney’s fees collectable.
“For the homeowners in my community, this amendment gives them relief. It gives them the security to know they’re not wasting their money going into a courtroom,” Gutierrez says in an interview.
H.B. 274 author Rep. Brandon Creighton, R-Conroe, on May 9 moved to table the amendment, but House members voted against his motion and proceeded to approve the amendment on a vote of 100-45.
Senate committee member Sen. Leticia Van de Putte, D-San Antonio, said at the May 16 public hearing she’s been “inundated” with calls from county commissioners, city council members and others who voice concern on the Gutierrez amendment.
Lauren Cook, spokeswoman for the Equity Center, an advocacy group representing school districts, cautioned the committee about consequences of the Gutierrez amendment.
“We do think the threat of high-cost litigation would lead appraisal districts to undervalue property,” Cook said, adding she thinks the effect would be exacerbated for commercial properties, which often have wealthy owners who can afford suits.
“We also think one thing that hasn’t been taken into consideration is the possible state impact of undervaluing property,” Cook told the committee.
Jim Robinson, chief appraiser of the Harris County Appraisal District, said the tax code already allows claimants to collect attorney’s fees from appraisal districts in some cases. He thinks current rules follow a “well-reasoned formula” that won’t bankrupt the system. He said he thinks more property appraisal disputes would go into litigation — even cases that could be resolved more easily — if the Gutierrez amendment passes into law.
Gutierrez, a San Antonio solo, says his amendment was meant to help his constituents gain access to the courts for property-appraisal disputes. He said he opposes the loser-pays bill — he voted against it in the House—because he thinks it denies some people access to the courts. His amendment is “the one good thing about loser pays,” Gutierrez says.
“I have significant concern on any tort-reform legislation; my amendment was trying to bring in some relief,” Gutierrez says.