The Law Offices of Adrian Crane, P.C.
Texas Loser Pays Law
The “loser pays” law provides the basis for a new procedural vehicle for the disposal of cases and the award of attorney’s fees in Texas. The “Loser Pays” law amends the current Civil Practice and Remedies Code Chapter 42 provisions regarding the award of litigation costs after an offer of settlement. Litigants should be aware of these changes and adjust their tactics accordingly.
The “loser pays” law passed and was signed into law on May 30, 2011 and became effective on September 1, 2011. The intent of the law was to enhance defendants’ rights in litigation in Texas state courts.
Some of the procedural rules of Texas litigation were changed, and under certain circumstances, the law also allows for the recovery of attorney’s fees. Additionally, the law amends the current Civil Practice and Remedies Code Chapter 42 provisions regarding the award of litigation costs after an offer of settlement.
The law directs that new rules be adopted by the Texas Supreme Court to provide for the dismissal of causes of action that have no basis in law or fact on motion. On the court’s granting or denial, in whole or in part of a motion to dismiss, the court must award costs and reasonable attorney’s fees to the prevailing party.
The “loser pays” law amends the Texas Civil Practice and Remedies Code (“CPRC”) regarding offers of settlement. Chapter 42 of the CPRC allows for the award of litigation costs to an offering party incurred after a settlement offer is rejected and the judgment to be rendered is significantly less favorable (20% or more less favorable) to the rejecting party than was the settlement offer.
This new law changes the CPRC limit on the amount of litigation costs that may be awarded. Previously the maximum amount of litigation costs that could be recovered was computed by (1) determining the sum of: (a) 50% of the economic damages to be awarded to the claimant in the judgment; and (b) 100% of the non-economic and exemplary or additional damages to be awarded to the claimant in the judgment; and (2) subtracting from the amount determined under part (1) the amount of any statutory or contractual liens in connection with the occurrences or incidents giving rise to the claim.
The “loser pays” law amends the limit, providing that the litigation costs awarded under the Chapter 42 of the CPRC may not be greater than the total amount the claimant recovers or would recover before adding an award of litigation costs or subtracting an offset of litigation costs. This change increases the amount that can be recovered as litigation costs. Essentially, litigation costs can potentially be awarded to plaintiffs in an amount up to the total amount of the judgment (before litigation costs are added). Similarly, litigation costs can potentially be awarded to defendants in an amount up to the total amount of the judgment (before litigation costs are subtracted).
The current CPRC definition of “litigation costs” includes (1) court costs; (2) reasonable fees for not more than two testifying expert witnesses; and (3) reasonable attorney’s fees. The new law adds reasonable deposition costs to litigation costs. The procedure for making a settlement offer pursuant to the CPRC remains unchanged. A CPRC settlement offer must still: (1) be in writing; (2) state that it is made under Chapter 42 of the CPRC; (3) state the terms by which the claims may be settled; (4) state a deadline by which the settlement offer must be accepted; and (5) be served upon all parties to whom the settlement offer is made. The new law specifies that the parties are not required to file the settlement offer with the court.
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