March 11, 2010

Don’t Rollback Tort Reform in Texas: Oppose SB 1309

While well-intentioned, SB 1309 allows private bounty hunter plaintiffs to file lawsuits for “false” claims in the name of the State of Texas and undoes several civil justice reform measures passed in the last three legislative sessions.

If enacted in its current form, the bill will make Texas liability laws among the most extreme in the nation, reversing almost two decades of progress bringing Texas tort law into the mainstream. The bill is also much broader than similar federal statutes and an existing state law permitting such actions for Medicaid fraud.

  • The bill keeps a claim secret for up to eighteen months before notice of the claim must be given to the defendant. It thus allows for secret “star chamber” investigations of Texas citizens and businesses without the opportunity for due process of law. This type of secrecy is not befitting of a democratic form of government.
  • A person can be sued under the bill even if the person lacked actual knowledge of the information upon which the suit is based. The bill also lowers the legal standard of liability from a deliberate act to mere negligence. Under the federal statute, the defendant must act both deliberately and with actual knowledge of the information claimed to be false.
  • A person is not allowed to recover attorney’s fees and costs if the plaintiff’s claim is found to be frivolous or brought for purposes of harassment. The federal act and the Texas Medicaid statute both allow these protections for wrongfully accused defendants.
  • The bill overrides Texas limitations on punitive damages passed in 1995 and 2003. The bill also circumvents venue reforms passed in those sessions by allowing a suit to be brought anywhere that “any part of a false claim occurred.”
  • A private plaintiff may proceed with a lawsuit under this bill even if the plaintiff learned of the information from public sources, such as legislative or administrative hearings. The federal statue specifically bars such actions if they are already publicly known. Moreover, even if the defendant can show that the plaintiff based the action on publicly disclosed information, the defendant may not move to dismiss.
  • The bill overrides all statutes of limitations and applies retroactively to claims made before the effective date. It may be used to revive stale claims that are barred as a matter of public policy.

SB 1309 exposes any person—whether an individual, business, school district, or other local government or government official—to unlimited liability without notice and without the opportunity to recover at least their costs and attorney’s fees if victimized by a false claim. The bill has significant unintended consequences that override civil justice reforms designed to make the Texas court system fairer and more balanced.

SB 1309 sends a message that Texas is a bad place to do business.

June 16, 2008