Volume IV, No. 1

June 17, 2003

The Texas legislature recently passed significant tort reform legislation which has now been signed into law by Governor Perry. The purpose of the Tort Reform legislation is to limit the monetary recovery by plaintiffs. A constitutional amendment to allow caps on damages is set for an election on September 13, 2003. The goal of this newsletter is to provide you with a brief summary of the new legislative measures that affect claims. Some of these measures go into effect on July 1, 2003, others go into effect on September 1, 2003, and the rest are to be implemented on January 1, 2004. The provisions dealing with class actions are effective immediately.

I. THE LOSER PAYS THE WINNER'S ATTORNEY'S FEES IN LIMITED SITUATIONS IF THE CASE PROCEEDS TO JUDGMENT

The legislature amended the Civil Practice and Remedies Code allowing a procedure whereby the loser will pay the litigation costs "including attorney's fees, court costs, and fees of two testifying expert witnesses" if certain procedural requirements are met.

The new statutory provision provides that payment of litigation costs must be paid by the losing party if: (1) a settlement offer is made by the defendant in writing and rejected by the plaintiff and the judgment obtained by the plaintiff is less than 80% of the rejected offer; or (2) a settlement demand is made by the plaintiff in writing and rejected by the defendant and the judgment obtained by the plaintiff is more than 120% of the demand. The procedures for determining the point in the litigation that offers of settlement can be made as well as when an offer can be accepted will be promulgated by the Supreme Court by January 1, 2004, and will apply only to an action filed on or after January 1, 2004.

II. CONTRIBUTION OF DEFENDANTS; SUBMISSION OF EMPLOYER'S NEGLIGENCE IS NOW ALLOWED; DETERMINATION OF SETTLEMENT CREDIT HAS CHANGED

The contribution statute has now been amended to allow the submission of the negligence of the plaintiff's employer to determine the employer's responsibility for the plaintiff's accident. As a result, the subrogation claim of a worker's compensation carrier is reduced by the percentage of negligence found against the employer. In addition, the plaintiff's recovery is reduced by the percentage of fault assessed to the employer.

The new contribution statute also expands the deadline for a defendant to designate a "responsible third party". A defendant is allowed to designate any person or entity that has not been sued by the plaintiff as a responsible third party for the purpose of determining the percentage of responsibility of such party. If a defendant designates an entity or individual whom the plaintiff has not sued as a responsible third party the plaintiff can then sue the responsible third party even though limitations would otherwise bar the plaintiff's claim.

A defendant will no longer be able to claim as a credit on a judgment the sum of the dollar amounts of a settlement by the plaintiff. The plaintiff's recovery is now reduced by the percentage of negligence assessed by the jury against the settling party. This means that a defendant must be prepared to prove the liability of the settling party at trial. DTPA cases are also subject to the new contribution scheme so that the plaintiff's conduct in DTPA cases will be submitted to the jury. These provisions go into effect on July 1, 2003, and apply to cases filed on or after July 1, 2003.

III. A 15 YEAR STATUTE OF LIMITATIONS IS APPLIED TO PRODUCT LIABILITY CASES; STANDARDS TO ESTABLISH LIABILITY HAVE CHANGED

The standards for determining liability in a products liability case were substantively changed. The legislature has enacted a 15 year statute of limitations based on the date of the sale of the product by the defendant. However, if the plaintiff was exposed to a product before the expiration of the 15 year period but did not develop symptoms of a disease until after the 15 year limitations period the plaintiff can still maintain a cause of action.

The legislature also attempted to limit the liability of a product retailer; however, the legislation includes several exceptions for retailer liability, including establishing liability against a retailer when the manufacturer of the product is insolvent or when the manufacturer is not subject to the jurisdiction of the court. If the retailer in any way alters, modifies, negligently installs, or misrepresents the product, then retailer liability still applies.

The most significant modification of existing law deals with evidence of compliance with governmental standards. A manufacturer who proves that it complied with federal governmental standards in manufacturing a product creates a rebuttable presumption of non-liability for the plaintiff's injury. The plaintiff then has the burden of rebutting the presumption of non-liability by showing that the federal standards are inadequate or that the manufacturer misrepresented its product during the certification process with the applicable federal agency.

The products liability legislation becomes effective on July 1, 2003, and applies to cases filed on or after July 1, 2003.

IV. EVIDENCE THAT THE PLAINTIFF WAS NOT WEARING A SEAT BELT IS NOW ADMISSIBLE

The fact that the plaintiff was not wearing a seat belt at the time of the accident is now admissible in a trial. This provision goes into effect on July 1, 2003, and applies to cases filed on or after July 1, 2003.

V. INTEREST HAS BEEN MODIFIED

Prejudgment and post-judgment interest have now been modified. The "floor" of prejudgment and post-judgment interest is now 5%. The "ceiling" of prejudgment and post-judgment interest is 15%. Prejudgment interest on future damages is no longer allowed. This provision becomes the governing law on September 1, 2003, and applies to any case in which a final judgment is signed or subject to appeal on or after the effective date of this Act.

VI. EXEMPLARY DAMAGES REQUIRE A UNANIMOUS JURY VERDICT; PAST MEDICAL AND LOST WAGES IN THE FUTURE ARE LIMITED IN ALL CASES

Exemplary damages can only be awarded by a unanimous vote of a jury. Punitive damages are still limited to the greater amount of two times the actual damages plus non-economic damages not to exceed $750,000.00.

Economic damages have been limited for both medical expenses and future earning capacity. Medical expenses are now limited to the amount of medical expenses actually paid or incurred on behalf of the plaintiff. Future loss of earning capacity must now include the net loss after reducing the income tax payments that otherwise would be paid on such economic losses. This will obviously require the need for a CPA or an economist to testify on behalf of the plaintiff in cases involving future economic losses. These provisions are effective on September 1, 2003, and apply to cases filed on or after September 1, 2003.

VII. THE POTENTIAL LIABILITY OF DESIGN PROFESSIONALS MUST BE ESTABLISHED BY AFFIDAVIT WHEN SUIT IS FILED

Law suits against a registered architect or licensed professional engineer cannot be brought unless an affidavit is filed at the time suit is brought. The affidavit must be signed by another registered architect or licensed professional engineer who is competent to testify. The affidavit must provide a statement of the negligent act or omission upon which the claim is based. The affidavit must be filed by a registered professional engineer or architect who is licensed in Texas and actively engaged in the practice of architecture or engineering. This provision, which will obviously affect construction liability claims, is effective on September 1, 2003 and applies to cases filed on or after September 1, 2003.

VIII. CLASS ACTIONS

The procedure for awarding attorney's fees in class action suits has been changed. Attorney's fees must be based upon the "lodestar" method. This is an attempt to limit excessive attorney's fees. Furthermore, attorneys' fees cannot be awarded for "non-cash" benefits. This provision is effective September 1, 2003 for cases filed on or after September 1, 2003.

XI. VENUE; MULTI-PLAINTIFF CASES CAN BE ASSIGNED TO ONE COURT FOR PRE-TRIAL RULING

The legislature established a judicial panel on multi-district litigation. The Supreme Court is to adopt rules for the judicial panel on multi-district litigation. The multi-district litigation procedure is to be used for multiple plaintiff cases. A defendant can request the multi-district judicial panel to transfer a civil action to any district court for consolidated or coordinated pretrial proceedings. The court designated by the multi-district judicial panel shall conduct all pretrial proceedings including hearing summary judgments. Trial on the merits, however, will be in the county in which the original suit was filed. This provision will primarily affect multi-plaintiff claims filed in different counties.

The legislature also clarified the procedure for appealing from an order allowing the joinder of a plaintiff who does not establish venue in a multi-plaintiff case. These provisions are effective on September 1, 2003 and apply to cases filed after September 1, 2003.

X. MEDICAL MALPRACTICE CLAIMS ARE LIMITED; NON-ECONOMIC DAMAGES ARE CAPPED

The Medical Liability and Insurance Improvement Act was extensively re-written. In fact, the medical malpractice crisis served as the rallying point for most of the tort reform measures. The significant features of the revised Medical Malpractice Act are: (1) A ten year statute of repose will now be applied on any claims for medical malpractice. This means that minors or incompetents cannot bring suit more than ten years after the date of the occurrence that allegedly gave rise to the medical malpractice; (2) Damage limits on non-economic damages of $250,000.00 for each claimant against any health care provider and $250,000.00 for each claimant against any health care institution are imposed. The amount of non-economic damages that can be awarded against health care institutions if more than one health care institution is sued shall not exceed $500,000.00 per claimant; (3) Caps on wrongful death damages are limited in that "stacking" is not allowed against each health care provider. Wrongful death damages cannot exceed the statutory caps enacted by the legislature in 1977 (together with the increase as measured by the consumer price index). (4) The liability of an insurance company under the "Stowers Doctrine" has been limited to the amount of damages that have to be paid by a defendant. (5) All future damages are to be paid in an annuity. The obligation for payment of all future damages, except loss of earnings, will terminate on the death of the plaintiff. Any money left upon termination of the plaintiff's death will revert to the defendant.

Please feel free to call any of our partners or associates with any questions that you may have at 361-881-9217 or fax us at 361-882-9437.