The Corner

‘Loser Pays,’ Texas Small Business Wins

Gov. Rick Perry and the Texas state legislature want the rest of the country to hear this message loud and clear: The Lone Star State is open for business.

In a unanimous vote last week, the Texas senate adopted ‘loser pays’ tort-reform legislation, which says that a plaintiff must pay the winning party’s legal fees if their complaint is judged to be groundless. On Wednesday, the Texas house concurred. Governor Perry, who had championed the legislation from its inception, signed it Monday night.

The Wall Street Journal editorialized, “This Texas upgrade will build on reforms in 2003 and 2005 that have vastly improved the legal climate in what has not coincidentally become the country’s best state for job creation. Texas rewrote everything from class-action certification to product liability” — and I would add the state’s medical-malpractice reforms to that list.

No wonder the nation’s CEOs list Texas as the best state for business.

The success of ‘loser pays’ is destined to be viewed as a key victory for the Republican legislature over a group that once enjoyed almost limitless influence in the state: the Texas Trial Lawyers Association, which lobbied aggressively against the law. Prior to the reforms instituted in 2003 and 2005, Texas was an ambulance chaser’s paradise. Nowadays, even the $13 million the trial lawyers spent to defeat Perry and other pro-tort-reform Republicans in the 2010 election had little impact. In a stunning rebuke, Lt. Gov. David Dewhurst stared down the trial lawyer lobby and shepherded the measure through to a 31–0 vote in the Senate.

Perry is blazing an important trail for other governors such as South Carolina’s Nikki Haley, Pennsylvania’s Tom Corbett, Florida’s Rick Scott, Oklahoma’s Mary Fallin, and Alabama’s Robert Bentley, all of who ran and won while proposing similar legal-reform ideas.

Why are these types of reforms so important?

The cost of tort litigation is strangling the U.S. and small businesses in particular. According to Marie Gryphon of the Manhattan Institute, the cost of tort litigation topped $247 billion in 2006. The National Federation of Independent Business estimates that tort litigation costs small businesses over $105 billion annually, $35 billion of which comes out of their pockets, not insurance.

‘Loser pays’ reform will result in fewer frivolous lawsuits, lower litigation costs, and more expedient justice for legitimate claims. Just as important, the passage of loser pays is yet another example of how Texas has taken the national lead in job creation and the fostering of a strong business climate. Immediately following Perry’s earlier reforms, the number of physicians applying to practice rose by 60 percent, filling a increasing need across the state, according to the Journal. Likewise, by tossing off the threatening shroud of frivolous lawsuits, Texas is removing yet another barrier to small business expansion and job growth.

In a country groping in the darkness for ways to create more good-paying jobs, the nation’s governors should look to the aggressive reform agenda in Texas to light their path.

— Stephen DeMaura is the president of Americans for Job Security.

Most Popular

Politics & Policy

Basta La Vista, Baby

Dear Reader (And especially Martha McSally’s dog), As I often note, I increasingly tend to see the political scene as a scripted reality show in which the writers don’t flesh out the dialogue so much as move characters into weird, wacky, confrontational, or embarrassing positions. It’s a lot like The ... Read More
World

The Brexit Crisis

After what seem like years of a phony war, British and European Union negotiators finally agreed on the terms of Britain’s departure from the EU earlier this week, and Theresa May announced it in the House of Commons. The deal covers more than 500 pages of legal and bureaucratic prose, and few but the ... Read More
U.S.

Friends of Elmer

Do you know what scares an American outdoorsman more than a grizzly bear? Twitter. In the late summer and early autumn, the hunting world had its eyes on the courts: The Trump administration had issued new guidance that would permit the hunting of brown bears (popularly known as grizzly bears), including in ... Read More