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.

With a Republican majority in the Senate, passing the loser pays bill should be a no-brainer, but the trial lawyers will fight to the last man – or dollar – to stop it, and while their influence may be more limited than in times past, their wallet isn’t.    In Texas, the Lt. Governor also acts as the head of the Senate, so Dewhurst is tasked with ensuring that Perry’s pet legislation makes the cut.  While he has postponed making an official announcement about his candidacy for higher office until next month, Dewhurst is the clear front-runner for retiring U.S. Sen. Kay Bailey Hutchinson’s seat.  As the legislative session nears a close and the 2012 campaign season heats up, this is a key moment for Dewhurst as he has a chance to flex his political muscles and prove that he – not the trial lawyers – runs the Texas Senate.

With several Republican challengers already in the race, Dewhurst needs to be able to run on a strong record, and align himself with the popular Perry.  Already under fire for his handling of the budget process, it would be a major source of ammunition for primary challengers if he were seen as having dropped the ball on a key piece of the Republican agenda.  On the flip side, being able to tout his successful shepherding of what is surely to be a national model for tort reforms would be a huge bonus in the primary.

Not to mention, it would be a really good thing for small businesses and doctors, and a really bad thing for the trial lawyers lobby.

Section 2531, entitled “Medical Liability Alternatives,” establishes an incentive program for states to adopt and implement alternatives to medical liability litigation. [But]…… a state is not eligible for the incentive payments if that state puts a law on the books that limits attorneys’ fees or imposes caps on damages.

So, you can’t try to seek alternatives to lawsuits if you’ve actually done something to implement alternatives to lawsuits. Brilliant! The trial lawyers must be very happy today!

While there is debate over the details, it is clear that medical malpractive lawsuits have some impact on driving health care costs higher. There are likely a number of procedures that are done simply as a defense against future possible litigation. Recall this from the Washington Post: 

“Lawmakers could save as much as $54 billion over the next decade by imposing an array of new limits on medical malpractice lawsuits, congressional budget analysts said today — a substantial sum that could help cover the cost of President Obama’s overhaul of the nation’s health system. New research shows that legal reforms would not only lower malpractice insurance premiums for medical providers, but would also spur providers to save money by ordering fewer tests and procedures aimed primarily at defending their decisions in court, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, wrote in a letter to Sen. Orrin Hatch (R-Utah).”

Stay tuned. There are certainly many more terrible, horrible, no-good, very bad provisions in this massive bill.