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Texas Lawyer:

By Quentin Brogdon

On May 30, Gov. Rick Perry signed into law a new omnibus civil justice bill, H.B. 274. Not since the debate over H.B. 4 in 2003 has a set of proposed changes stirred as much heated public debate. The dust has just begun to settle on the new law, but it's not too early for plaintiffs and defense lawyers to begin thinking about new tactical strategies in a post-H.B. 274 world.

Article 1 of H.B. 274 directs the Texas Supreme Court to adopt rules for the dismissal of causes of action that "have no basis in law or fact on motion without evidence." Courts "shall" award costs and attorneys' fees to parties who prevail on motions to dismiss filed under the new rules.

Commentary authored by Dallas Attorney Quentin Brogdon and published in Texas Lawyer

This could narrow the differences between federal court practice and state court practice. In federal court, a defendant can move for a dismissal because a plaintiff's pleadings do not state a cause of action. In Texas state court, on the other hand, simply moving for a dismissal for failure to state a cause of action without giving the plaintiff an opportunity to cure generally is considered to be a prohibited "general demurrer."

Did the Legislature intend for the new rules to enable a defendant to move for the dismissal of a plaintiff's case without any opportunity for the plaintiff to re-plead? I would argue no. H.B. 274 author state Rep. Brandon Creighton, R-Conroe, confirmed in an exchange on the House floor that the legislative intent of the bill is that plaintiffs would have an option to file a motion to re-plead in response to a defendant's motion to dismiss, according to a May 9 article on texaslawyer.com.

Article 2 of H.B. 274 directs the Texas Supreme Court to adopt rules to "promote the prompt, efficient, and cost-effective resolution of civil actions" in which the amount in controversy does not exceed $100,000. The rules must address the need for expediting these actions and lowering discovery costs.

Amendments to the Texas Rules of Civil Procedure in 1999 adopted a multitiered approach to discovery, depending upon the amount in controversy. It's not clear whether the Supreme Court will use this framework in promulgating rules under H.B. 274 or write completely different rules.

Article 3 of H.B. 274 expands a party's ability to pursue an interlocutory appeal, but only if the trial court enters a written order allowing the appeal and the court of appeals accepts the appeal.

Does Article 3 create new opportunities for plaintiffs or defense lawyers to shut down a case through interlocutory appeals? Sure, but only if the trial court and the appellate court enable the tactic by permitting the appeal.

Loser Pays

Article 4, the "loser pays" provision, probably is the heart of H.B. 274.

Since 2003, Chapter 42 of the Texas Civil Practice & Remedies Code has allowed a defendant to invoke an offer-of-settlement provision and a plaintiff to respond if the defendant opened the door. If the plaintiff rejected the settlement offer and the plaintiff's subsequent award was less than 80 percent of the rejected offer, or if the defendant rejected a counter-offer and the award was more than 120 percent of the rejected offer, the offering party could recover its "litigation costs."

These costs were defined to include court costs, reasonable fees for not more than two testifying experts and reasonable attorneys' fees. Chapter 42 capped these litigation costs at the sum of 50 percent of the economic damages to be awarded to the claimant and 100 percent of the non-economic damages, with any liens subtracted.

H.B. 274 amended Chapter 42 in two important ways. First "litigation costs" now explicitly include "reasonable deposition costs." Second, the cap is now raised to "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." In other words, a defendant could recover all of the plaintiff's award.

Since the implementation of Chapter 42's offer-of-settlement provision in 2003, a wide range of plaintiffs and defense lawyers with whom I have spoken have said defendants rarely invoke it. Will H.B. 274's expansion of a party's exposure for a rejected offer change that?

How the new law impacts lawyers will depend somewhat on the amount at stake in the case. Just as before the amendments, the likelihood of a defendant invoking Chapter 42 is much greater in a smaller case than in a larger case. A defendant can roll the dice with much less fear in a case where a plaintiff is looking at possible damages of $10,000 and attorneys' fees of $3,300 than in a case where those numbers are much higher.

Post H.B. 274, plaintiffs in smaller cases now may have an even greater incentive to take a settlement offer rather than risk having a recovery offset by litigation costs because of the increased odds that the plaintiff's recovery would be near the amount of the litigation costs.

Article 5, "Designation of Responsible Third Parties," repealed the savings clause of Chapter 33 of the Civil Practice & Remedies Code, which previously allowed a plaintiff to add a designated responsible third party to the suit within 60 days of the defendant's designation even if the statute of limitations had run as to the party.

Does this mean that defendants may now deliberately lay behind the log and wait to designate responsible third parties after the running of limitations? No. H.B. 274 prevents the designation if the defendant "failed to comply with its obligations, if any, to timely disclose that the person must be designated as a responsible third party under the Texas Rules of Civil Procedure."

Defendants should be careful about waiting, because a number of things arguably could create an "obligation" to disclose, including requests for disclosure, interrogatories, requests for production, deposition questions directed to party representatives or scheduling order deadlines.

Plaintiffs and defense counsel will need to study carefully the Texas Supreme Court's forthcoming rules, but it's not too early to begin thinking about new strategies in a post-H.B. 274 world. Only time will tell whether H.B. 274 changes the litigation landscape in the way that its proponents hope it will.

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