A recent Texas Tribune Story, “Loser-Pays Bill Clears Texas House” reports that Texas got one step closer today to becoming one of the few states with a rule that awards legal fees to prevailing parties in lawsuits.  The bill enacts a modified loser-pays rule that allows winning parties to recover attorney fees and expenses in breach of contract suits or if a judge grants a motion to dismiss.  It directs the Texas Supreme Court to create a procedure for early dismissal of certain civil claims and expedites the discovery process for cases with claims between $500 and $100,000.  The law only would apply if the parties didn’t have a previous agreement about attorney’s fees.

Most objectionable to some Democrats and the plaintiff’s bar, it contains a provision that awards attorneys’ fees to defendants if they make an offer to settle, and it’s turned down – if the jury finds for the plaintiff and makes an award less than 80 percent of the initial settlement offer.  Current law allows defendants to recover attorneys’ fees in that scenario – but it limits the amount defendants can recover to less than whatever the plaintiff finally wins.

For example, if a defendant made a settlement offer of $100,000 and the plaintiff rejected it, then went on to win the suit, but only with an award of $79,000, that would mean the plaintiff would have to pay the opposing party’s attorney fees – even if that added up to more than the final award.  That prompted Rep. Craig Eiland, D-Galveston, to dub the legislation the “loser pays and sometimes the winner pays, too” bill.

See also blog post, "Texas Proposes 'Loser-Pays' Fee-Shifting Civil Justice System"