Texas took yet another step this week that is certain to tighten its grip on the designation as the nation’s leading state for business. Governors in other states looking to improve their jobs situation should give serious consideration to mirroring the Lone Star State’s aggressive pro-jobs, pro-growth agenda.

On Tuesday the Texas Senate, under the leadership of Lt. Governor David Dewhurst and despite an aggressive lobbying effort by the Trial Lobby, voted unanimously in favor of “loser pays” tort reform legislation. On Wednesday, the House, which had passed a similar bill and was awaiting the Senate’s version, concurred with the Senate bill and passed it through. Gov. Rick Perry has said he will enthusiastically sign the bill into law.

‘Loser pays’ will require plaintiff’s to foot the bill of the winning party’s legal costs if a judge finds the case to be groundless. According to the Wall Street Journal, “This Texas upgrade would 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.”

Negotiations on the bill were highly contentious in recent weeks, mostly due to a well-funded lobbying campaign by the Trial Lobby, which, in Texas, is virtually synonymous with the Democratic Party. Nevertheless, there was a breakthrough over the weekend.

From the Austin Statesman:

By a unanimous vote, the Texas Senate has just given final approval to a once-controversial “loser pays” bill designed to make it easier to get meritless lawsuits tossed out of court.

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The expression ‘Everything is Bigger in Texas’ used to apply to ambulance chasing attorneys, frivolous litigation, and mega-payouts to plaintiffs.  The Lone Star state was known for attracting a robust tort bar and a less-than-thriving medical community, as physicians gave the state a wide berth to avoid sky-high malpractice insurance rates and the constant risk of getting hit with junk lawsuits where even the winner loses via punishing legal fees.

That all changed when the state enacted pioneering tort reform laws in 2003 and 2005 that overhauled much of the state’s legal system, with a focus on areas that act as magnets for low-merit litigation, such as class-action certification, product liability, and medical malpractice.  The new law also put a cap of $250,000 on non-economic damages, vastly reducing the average size of lawsuits.  The result?  In just a few years, Texas has become first in the nation in job creation, and seen the number of doctors applying for license to practice rise by 60 percent.

Texas Gov. Rick Perry is not content to stop there; the popular Republican and current RGA Chairman devoted a portion of his most recent State of the State address to promoting adoption of a ‘loser pays’ rule, which requires plaintiffs to pick up the tab for defendants’ legal fees if their suits are judged to be groundless.   Sometimes called the ‘English Law’ due to its origin in England, loser pays laws are in place in the legal systems of nearly every developed nation besides the U.S.  Incidentally, the U.S. is home to the world’s most complicated and costly legal system by far.  The Wall Street Journal reports that Americans now spend more per year on tort litigation than on new cars, with the total tort tab reaching $247 billion in 2006.  Coincidence?  Probably not – loser pays measures are known to clear the legal system of nuisance litigation, act as a deterrent against low-merit class action suits, lower overall litigation costs, and create a more expedient path to justice for meritorious claims.

The Texas House handed Perry a victory this month, handily passing their version of the loser-pays legislation.  Now, the tort reform battle looms in the State Senate, where their version of the loser-pays bill is in committee.  Lt. Gov. – and likely U.S. Senate candidate – David Dewhurst will be pitted against Texas Trial Lawyer honcho President Steve Mostyn, a sort of King of the Ambulance Chasers.  Mostyn has amassed a large personal fortune by obtaining jackpot settlements from the state in hurricane-related lawsuits, and coughed up almost $6 million (nearly half of what the trial lawyers spent in total) to defeat Perry and other pro-tort reformRepublicans in 2010.  Perry has made it clear he will sign any loser pays bill that crosses his desk, so the spotlight is on Dewhurst to play the rainmaker.

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