Chuck Norris may be able to beat the sun at a staring contest, yet even he has been victimized by meritless and costly lawsuits. Recently, two women sued Chuck Norris after they tried to tear each other’s hair out in the bathroom of one of his restaurants. The pugilistas based their lawsuit on the claim that a restaurant employee should have been present to stop the fight. It cost Chuck Norris $2,000 to pay them to drop their meritless suit—a resolution less expensive than litigating. Because exporting pain was a less than adequate expression of his frustration with a legal system that incentivizes such litigiousness, Chuck Norris recently co-authored an article in the Wall Street Journal, “A Texas Roundhouse for the Trial Lawyers,” in which he praised Texas’s new “loser pays.”
In his article, Chuck Norris points out that small businesses, which are the creators of 64% of American jobs, are usually the target of frivolous lawsuits, paying 81% of business tort liability costs in 2008. A small business earning $1 million must spend $20,000 annually on lawsuits, money that could have otherwise been spent on job creation or product development. Frivolous lawsuits also affect individual Americans; according to estimates, meritless lawsuits cost each American $838 a year. Additionally, groundless plaintiffs congest the legal system making the court system more difficult to navigate for those who have legitimate claims.
The “loser pays” law, Texas House Bill 274, becomes effective September 1, 2011. One of the most significant changes made by House Bill 274 is an instruction to the Texas Supreme Court to make rules for courts to dismiss meritless suits before hearing evidence on the claims. This is a landmark measure because Texas previously did not have a procedure to file a Motion to Dismiss; heretofore, the defendant had to endure costly discovery before disposing of the suit through a No-Evidence Motion for Summary Judgment. To prevail under the new Motion to Dismiss measure, the defendant must show the court that the suit has no basis in law or in fact.
The teeth behind Texas’s new Motion to Dismiss is that it encompasses mandatory fee shifting: the party who prevails on a Motion to Dismiss, whether it is the plaintiff or the defendant, will be entitled to have their attorney’s fees paid by the losing party. For example, if the defendant files a Motion to Dismiss that is ultimately denied because the claim is based in law or fact, the case will continue through litigation and the defendant must pay the plaintiff’s attorney’s fees and costs incurred in responding to the Motion to Dismiss. The fee shifting aspect of the new Motion to Dismiss measure thus creates risk for both plaintiffs and defendants. Plaintiffs are less likely to assert frivolous lawsuits, and defendants are unlikely to move to dismiss non-frivolous lawsuits.
Other changes made by House Bill 274 include: (1) raising the caps on attorneys’ fees required to be paid by those who reject reasonable settlement offers; (2) instructions to the Texas Supreme Court to make new rules to limit discovery costs and expedite suits with claims under $100,000; (3) prohibiting joinder of responsible third parties after the statute of limitations has expired; and (4) prohibiting defendants from designating responsible third parties after the limitations period has expired (unless they did not know of the responsible third party before the statute of limitations expired and they did not purposefully withhold such information).
With these significant changes, Texas is at the forefront of the effort to stop frivolous litigation and, in turn, to improve the economy by spurring job creation and product development. Come September 1, 2011, two old axioms will ring even more true: “Don’t press your luck with Chuck,” and “Don’t mess with Texas.” Those civil litigants who ignore these words of wisdom by filing frivolous lawsuits will be made to feel significant pain.