The "Loser Pays" bill that was just ramrodded through the Texas House, without debate, should be called "Winner Pays." If this bill becomes law, the winner of the lawsuit may have to pay the loser's attorney's fees. There is no cap on the amount the winner has to pay. A plaintiff - and this includes a small business - can win a lawsuit and go bankrupt. The following scenario can actually happen:
1. Joe's Lawn Service ("Mom and Pop" small business) buys 10 Hodna (company name changed to protect...) tractors at a cost of $100,000.
2. The tractors do not work, costing Joe to lose most of his landscape business.
3. Joe sues Hodna for the $100,000 cost of the tractors plus $50,000 in lost profits.
4. Hodna offers Joe $80,000 to settle. Joe turns it down because he has lost $150,000.
5. Joe goes to trial and wins $60,000. The jury finds Joe had 40% of the use of the tractors, and the judge disallows Joe's lost profits claim on a technicality.
6. Because Joe won less than 80% of Hodna's offer, he has to pay Hodna's attorney's fees and litigation expenses.
7. Hodna's lawfirm has assigned one senior partner ($750/hour), one junior partner ($450/hour), two associates ($250/hour each) and a three paralegals ($100/hour each) to defend the case, and has run up $350,000 in legal fees and litigation costs.
8. Joe is awarded $60,000, less Hodna's $350,000 in legal fees. In other words, Joe has won his lawsuit but owes Hodna $290,000!
9. Joe files for bankruptcy.
This can really happen. The current Offer of Settlement rule, Civil Practice Code Section 42.004, subsections (d) and (g) limit the shifting of fees to a reduction of the plaintiff's damage award. Subsections (d) and (g) are repealed by HB 274 - making the amount of fees the winner has to pay the loser unlimited. Under HB 274, a plaintiff can win his lawsuit and end up financially destroyed.
The "tort reformers" seek to limit lawsuits for personal injuries and wrongful death. How do they explain this result to small business owners?
The moral of the story being told by the advocates of this bill is this:
If you have a claim against a big corporation, take whatever they offer, because if you dare to take them to a jury, you risk your economic life.
Call and email your state senator. Repealing CPRC 42.004 (d) and (g) turns "loser pays" into "winner pays." Tell your senator to oppose the repeal of CPRC 42.004 (d) and (g)!
"Winner Pays" is unfair for Texans!