Texas’ economy has never been stronger. With the Lone Star State responsible for more than a third of all job growth nationally over the past five years, Texas is showing the nation how to build a prosperous future.
This success is not an accident. Of course, the state’s abundant energy resources, low taxes and streamlined regulatory burden have all played their part. But Texas’ success today can also be traced to past progress on another crucial issue — legal reform.
In nearly every legislative session over the past 20 years, Texas has enacted meaningful reforms to protect individuals, businesses and health care providers from abusive lawsuits by plaintiffs’ lawyers. These laws have helped transform Texas from the lawsuit capital of the nation to the jobs capital of the nation. But Texas can’t rest on its laurels. To ensure this progress continues, Texas must continue to lead on legal reform in the 2015 legislative session.
It is important to remember the situation before reform. Homeowners could be held liable for injuries sustained by criminals trespassing on their property. Businesses faced lawsuits from healthy plaintiffs demanding compensation for medical costs that would never be incurred. Defendants that were found 15 percent liable in court could be forced to pay 100 percent of a judgment. And a medical liability crisis led to an acute shortage of physicians, particularly in rural counties and in crucial high-risk specialties like obstetrics and trauma care.
The reforms of the past 20 years have made a huge difference. Today, defendants are only responsible for their fair share of a judgment. Homeowners can’t be sued by trespassers. Businesses can’t be held liable for illnesses they didn’t cause or medical bills that don’t exist. And a 60 percent decline in medical liability premiums has contributed to the arrival of more than 28,000 new physicians to the state over the past decade — a near doubling. These reforms were so successful that the American Medical Association removed Texas from its list of states with a medical liability crisis — the only state ever to have achieved this status.
Clearly, legal reform works. But, to paraphrase President Ronald Reagan, legal reform is never more than one generation away from extinction. The legal environment is constantly shifting, with new theories of liability emerging each year. And plaintiffs’ lawyers are nothing if not entrepreneurial. They are always looking for new avenues to profit by suing businesses.
That’s the bad news. Fortunately, the Legislature can pass additional reforms in next year’s session.
Specifically, the Legislature should consider measures to bring more transparency to asbestos litigation. Currently, a plaintiff can sue and recover against solvent businesses in court for their alleged injuries. A plaintiff can also recover against bankrupt asbestos defendants through a network of compensation trusts created through the bankruptcy process. But because plaintiffs’ lawyers typically conceal their bankruptcy trust claims from businesses sued in court, those businesses cannot meaningfully defend themselves — especially when a plaintiff’s injury was caused by another product manufactured by a now bankrupt company. Concealing this information has resulted in “double dipping” that pads plaintiffs’ lawyer fees at the expense of job-creating businesses and legitimate victims, who will see a dwindling pool of finite resources to compensate them for their injuries.
To reform the system, Texas lawmakers should look next door to Oklahoma. In 2013, the state enacted common-sense legislation requiring plaintiffs’ lawyers to turn over their bankruptcy trust claims to solvent defendants sued in the Oklahoma courts. Other states have also enacted such reforms, and Texas should follow suit when the Legislature convenes next year.
Texas has made tremendous strides in improving its lawsuit climate. The reforms of the past 20 years are paying off today with record job growth and economic expansion. But the state must keep the momentum going. To ensure that Texas remains the jobs capital of the nation, the Legislature should continue to lead the nation on legal reform in 2015.
Rickard is president of the U.S. Chamber Institute for Legal Reform.
