Commentary by
In Texas, both houses of the legislature are poised to pass a draconian law innocuously named “Loser Pays.” If your net worth is not in $100 million plus category, this new “reform,” would, almost overnight, effectively destroy all your rights. Better put, as the authors of the legislation are well aware, it would make your rights irrelevant, since you would not be able to exercise them. Besides the fact that this would amount to an extreme take away of rights, effectively shutting the vast majority of Americans out of “our” civil courts, the bill is down-right un-American. No kidding, and this is real.
Loser Pays, regardless of political party, and whether they realize it yet or not, is hugely important to citizens. My perspective is that of a practicing attorney. Except for a short stent in JAG in the U.S. Air Force, I have practiced civil law in Dallas, Texas for the last 38 years. I have tried many meritorious and important cases over such vital issues to citizens as breach of contract, defamation, age discrimination, race discrimination and sex discrimination.
Most of my clients have won these trials. But some, good people all, have lost, having fought the good fight. Our system allows both sides to have their say. Our system allows a judge to screen out deficient cases. Our system allows juries to decide disputed facts, governed by the law as stated by the judge, who in turn is guided by the higher courts and established “jury instructions.”
Not a single one of the people I have represented in trials, over 38 years of law practice mostly in Texas courts, have brought frivolous claims. But here is the terrifying point and prospect of pending Loser Pays legislation: None of those cases, not even those for the “winners” could have been brought if these citizens had faced a Loser Pays law. They simply could not, regardless of merit, have taken the risk of fighting the fight to prove the defendant broke the civil laws of the country or Texas or of a private contract. The stakes of the game would have simply been too high.
For example, the victim of the most illegal and brazen act of age discrimination, faced with a huge company that would easily spend a half million dollars or more on its defense, could not have taken the risk that a win by the defendant would shift the inflated legal bill of the corporate defendant to him and his family. The sad fact is that most citizens who need to fight a big company to enforce civil rights “granted” by federal or state law have enough trouble finding a lawyer who will take their case. They truly and surely cannot afford to pay two sets of lawyers – their own and the lawyers for the corporate defendant they are suing. Most seek a lawyer, usually on a contingent fee basis because of their lack of funds, at exactly the same time that they struggle to survive following termination from their jobs.
Now, more about Loser Pays: Loser Pays comes to us in the name of “reform.” We should know by now that when politicians use the word “reform,” we need to grab our wallets and watch out for our rights. In the name of “reform,” some would repeal the Constitution for which Americans have fought and died.
If the now-pending in Austin Loser Pays legislation passes:
1. Governor Perry will sign it; and
2. The practical effect of the law will be to shut down the civil court system to all but the top ½ of 1% of the richest citizens of Texas.
3. This take away could and would spread to other states.
Point 2 deserves some explanation. Here’s how the law works:
▪ The “American Rule” in civil litigation is that each side generally pays its own attorney’s fees. (There are exceptions, such as the winning plaintiff in a race, age, disability or sex discrimination case, who will recovery his/her fees. This is statutory).
▪ The “English Rule” (American won the war of independence in part to get out of this and other aspects of English law), is that the loser pays.
▪ Under the “English Rule” or Loser Pays, even when the losing party to a civil suit brought the suit in good faith and had a meritorious claim, upon losing, he/she is liable (and must pay) not just for court costs, but for the attorney’s fees incurred by the other side.
▪ For example, a plaintiff believes she was fired due to gender bias. She files and EEOC charge; the EEOC finds she has cause for her charge of discrimination; the defendant corporation refuses to settle; she files suit; discovery is taken; defendant files a motion for summary judgment; the Court denies the motion for summary judgment and permits the case to go to trial; after trial the jury is hung for 3 days (split), but on day 4 the jury rules against the plaintiff. Under Loser Pays, the plaintiff then must pay the winning defendant its attorney’s fees, a number that will generally be between $500,000 and $1,000,000.
The consequence of Loser Pays is the really big thing. It brings to mind the old saying that there is more than one way to skin a cat (my cat used to hate this phrase). In the 1960’s with Title VII and the Age Discrimination Act, and again in 1991 with the Americans with Disabilities Act, some people and some groups opposed the passage of laws protecting American workers from race, gender, national origin, age and disability discrimination. But those laws passed. If Loser Pays passes, all those laws are, for sure, effectively repealed.
Another possible consequence, bad also, is that under Loser Pays, apart from the truly very rich, civil litigants would consist of pro se plaintiffs (plaintiff’s who do not have a lawyer) who are judgment proof or litigation-prone individuals who are mentally unstable. The middle class, in other words, would be excluded from “our” civil court system, except for jury service, where they could watch others exercise the “rights” they once held. Meanwhile, suits by prisoners could continue. Prisoners are unaffected by Loser Pays “reform,” because they generally need not worry about judgments against them for attorney’s fees.
Loser Pays is, when thoughtfully considered and understood for what it is, pointed directly at meritorious cases that rich corporations and the wealthiest citizens do not want to face. Loser Pays does not curb frivolous cases, that are subject to sanctions (including court costs and attorney’s fees awards) under existing law.
Ironically, Loser Pays would make losers of almost all Americans, while making truly frivolous cases, those brought by mentally unstable people who do not care if they are hit with a judgment for hundreds of thousands of dollars for the defendant’s attorney’s fees, because they do not have and never expect to have any saving with which to pay such a judgment. Responsible Americans, the kind I see on a regular basis, and the kind who regularly sit on juries, who think the civil laws against age discrimination, race discrimination, sex discrimination, retaliation, disability discrimination, defamation, and breach of contract are good things and should be enforced, would LOSE. They would lose any effective chance of being protected by those good laws if someone breaks those laws.
Loser Pays can be understood, in a horrible way, by comparison to criminal law. Imagine how Americans would react if a group of criminals, such as The Mob, lobbied for legislation that would provide that crime victims must pay for the legal defense costs of any criminal defendant who is acquitted. Americans would understand that such a Loser Pays law would allow criminals to have their way. Crime victims could not afford to be witnesses against them.
The “reformers” who would put Loser Pays on the books in Texas are taking advantage of a common and understandable lack of knowledge about civil law. Most citizens want criminal laws enforced – and they generally are enforced with government prosecutors, paid for by the public. Most citizens want civil laws enforced. But enforcement of civil laws, as important as they may be, is generally not paid for with public funds. In this country (and in Texas), our civil rights, such as our rights against breach of contract, defamation, fraud, certain illegal forms of discrimination and retaliation are enforced, if at all, by getting a lawyer. A big part of the “good part” of life in this country is the fact that most of the time, most of our rights, contract and tort rights, are honored. Most citizens rarely if ever need to hire a lawyer. If they do, a simple demand letter, not a lawsuit, is generally enough. But in the ugly world of Loser Pays, demand letters can go in the garbage can when it is the little guy or gal or the small business up against the very rich. Indeed, in the ugly world of Loser Pays, even a “fair fight” between two parties or relatively equal wealth, is not an option. Only those with enough money to sanely afford to pay the other side’s lawyers if they lose their claim, regardless of how close they came to winning, can afford to seek to enforce their “rights.”
Loser Pays, ironically, could add to congestion of the civil courts. Many cases that would have settled before Loser Pays might not settle in the wake of high stakes Loser Pays legal battles. Those few people who are not too afraid of Loser Pays to bring suit will be faced with a defendant that instantly has a counterclaim for attorney’s fees. Defendants in a Loser Pays world would know that if the case does not settle, they could battle in court until the end, and that if they spend enough money on their lawyers they might win and stick the loser with their bills for attorney’s fees. Under Loser Pays, the stakes would go up on both sides, and the side with more money would have the incentive (and “reward”) of punishing the other party with a judgment of attorney’s fees if it can win, at any cost.
Meanwhile – how can a citizen (plaintiff or defendant), under Loser Pays, get a lawyer? Most, or maybe all, the “David and Goliath – good guy” lawyers will be out of business. Their clients – none of them – can afford to take the chance of litigating and being wiped out financially if they lose. This will leave citizens with only the biggest of the big law firms, the kind of law firms that do not handle “little guy” cases because they do not involve enough money or because their big business clients would see such legal representation as a conflict.
The poison from Loser Pays is even broader and worse than repeal of all employment rights laws. Loser Pays would mean the little guy, or the small business person loses, always. The American citizen who would like to sue some big company cannot. The small business that is sued by a giant corporation would lose, always. Why so? Small business people cannot bet the company. People cannot bet their family. They cannot bet their life savings. They cannot bet their children’s college education funds. They cannot bet their retirement nest egg.
So under Loser Pays, when the multi-billion dollar company breaks a contract with the small business person, the corporate giant gets to laugh and know there will be no lawsuit. When the beer truck runs over the non-billionaire pedestrian, there will be no lawsuit. When the nursing home drops your mother on the floor and breaks her back, there will be no lawsuit. The civil courts, in a stroke, are gone. Jury trials, in a stroke, are gone. The Seventh Amendment of the Constitution of the United States and the right to jury trial under the Texas Constitution, with this “Loser Pays” gambit, are irrelevant.
One more big picture thought: Loser Pays is actually an end around the legal system for the super-rich “Haves” in this country. The fuss about the Walmart suit now before the U.S. Supreme Court would become relatively unimportant in the wake of Loser Pays passage. Plaintiffs simply will not and cannot risk everything going up against Walmart. This “other way” of skinning the cat, will work.
Americans are fighters. Texans are fighters. There is a time to fight. Now is the time to get on the phone, to write letters, to spend time and money to save your rights, before you wish that you had them back.