Tort Reform Update

The WSJ delves into the latest in tort reform in Texas. It is remarkable in its scope.

When a recent U.S. Chamber of Commerce survey ranked state liability systems according to "fairness and reasonableness," Texas finished 46th. But thanks to a slew of tort reforms that passed the state legislature this week, Texans can expect their Lone Star to rise in future rankings.

Texas is not the first or the only state to do something about the heavy toll frivolous lawsuits are taking on everything from jobs to health-care accessibility. A bill sent last month to Missouri Governor Bob Holden and awaiting his signature would, among other things, allow for an immediate appeal of class-action certifications and put a $50 million limit on appeal bonds. It's a start.

In March, West Virginia passed a set of laws that caps medical malpractice non-economic damages and will reduce class-action filings. Lawmakers acted after a study showed that some 10,000 jobs were lost in 2001 as businesses either fled the state or entrepreneurs chose to set up shop in less antagonistic environs. South Carolina, Idaho, Utah, Colorado and several other states have all taken various steps in recent months to rein in the trial lawyers.

But even against this backdrop, Texas's omnibus bill stands out for its sheer scope. The reforms -- to be signed into law presently by Republican Governor Rick Perry -- cover everything from class-action certification and appeal bonds to product liability and proportionate responsibility.

The legislation limits multidistrict litigation, ends venue shopping (this was prohibited back in 1995, but plaintiffs' attorneys found loopholes) and establishes a single standard based on federal law for determining whether a case should be dismissed and tried in another state or country. A modified version of "loser pays" has even been included, the better to nudge litigants toward making and accepting reasonable settlement offers instead of pursuing costly trials.

Why is reform so necessary in Texas?

The numbers tell the story. Texas is down to three medical liability insurers. Fourteen of 17 have disappeared in the past two years alone. In some parts of the state, there are 300 lawsuits for every 100 doctors. No matter that 85% of these suits fail; at $20,000-$40,000 a pop to put up a defense, doctors can't afford the sky-high insurance rates. Thank the trial lawyers. Of the state's 254 counties, 154 have no obstetrician. Wide swaths of Texas, the nation's second most populous state, have neither a neurosurgeon nor an orthopedic surgeon.

That said, legal reform didn't happen in Texas because its politically powerful and well-heeled plaintiffs' attorneys developed a conscience. It happened in large part because Texans started putting Republicans in office. The Democratic Party/trial attorney co-dependency is well-known in Washington. But in Texas, their coziness is legendary. For decades the Texas tort bar had its way with the Democrat-controlled legislature and many courts around the state, which elects its judges.

Why is this legislation being passed now?

Things started to change some in the mid-1990s when George W. Bush replaced Democrat Ann Richards as Governor. It was the election last November, however, that finally made real tort reform possible. For the first time in 130 years, the GOP found itself in control of the legislature. A similar scenario has played out in other places, such as Arkansas and Georgia, where serious reform efforts have followed party changeover. Tort reform is now one of the sharpest dividing lines between our two major parties.

...Texas not only provides an example for other states but also for Republicans in Congress. The lesson is how the right leadership on an issue can change the political climate. Republicans in Washington, and especially in the filibustering Senate, need to display the same will as their state counterparts. President Bush says he's serious about federal tort reform. His party could help by giving him some bills to sign.